Rural Water Infrastructure: Additional Coordination Can Help Avoid Potentially Duplicative Application Requirements
Published: 2012-10-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Many rural communities with populations of 10,000 or less face challenges in financing the costs of replacing or upgrading aging and obsolete drinking water and wastewater infrastructure. EPA and USDA oversee the three largest federally funded drinking water and wastewater funding programs for these communities. In response to Pub. L. No. 111-139, which directs GAO to identify and report on duplicative goals or activities in the federal government, this report examines the (1) potential for fragmentation, overlap, and duplication between EPA and USDA drinking water and wastewater infrastructure programs and (2) extent to which these agencies coordinate at the federal and state level to fund community water infrastructure projects. GAO analyzed relevant laws and regulations and program data and documents. GAO also visited five states based on high rural funding needs and geographic location (Colorado, Montana, North Carolina, Pennsylvania, and South Dakota) to meet with federal, state, and community officials and visit projects. GAO recommends that EPA and USDA complete guidelines to help states develop uniform preliminary engineering reports, develop guidelines to help states develop uniform environmental analyses, and reemphasize the importance of statelevel coordination. EPA neither agreed nor disagreed with GAO's first two recommendations and concurred with the third. USDA neither agreed nor disagreed with the recommendations.
section_title: What GAO Found
paragraphs: Funding for rural water and wastewater infrastructure is fragmented across the three federal programs GAO reviewed, leading to program overlap and possible duplication of effort when communities apply for funding from these programs. The three federal water and wastewater infrastructure programs--the Environmental Protection Agency's (EPA) Drinking Water and Clean Water State Revolving Fund (SRF) programs and the U.S. Department of Agriculture's (USDA) Rural Utilities Service (RUS) Water and Waste Disposal program--have, in part, an overlapping purpose to fund projects in rural communities with populations of 10,000 or less. For the 54 projects GAO reviewed in the five states it visited, this overlap did not result in duplicate funding, that is funding for the same activities on the same projects. However, GAO identified the potential for communities to complete duplicate funding applications and related documents when applying for funding from both agencies. In particular, some communities have to prepare preliminary engineering reports and environmental analyses for each program. GAO's analysis showed--and community officials and their consulting engineers confirmed--that these reports usually contain similar information but have different formats and levels of detail. Completing separate engineering reports and environmental analyses is duplicative and can result in delays and increased costs to communities applying to both programs.
EPA and USDA have taken some actions to coordinate their programs and funding at the federal and state levels to help meet the water infrastructure needs of rural communities, but GAO's review in five states showed that their efforts have not facilitated better coordination at the state level in more specific ways. EPA and USDA signed a joint memorandum in 1997 encouraging state-level programs and communities to coordinate in four key areas: program planning; policy and regulatory barriers; project funding; and environmental analyses and other common federal requirements. As of July 2012, EPA and USDA had taken action at the federal level to help the states coordinate better and make programs more efficient for communities applying for funding. For example, EPA and USDA had formed a working group to draft uniform guidelines for preliminary engineering report requirements, but this effort is not yet complete. However, the agencies have not taken action to help states develop uniform environmental analysis requirements, as called for in the 1997 memorandum. Without uniform requirements, communities face a continuing burden and cost of applying for federal and state funds to improve rural water and wastewater infrastructure. Coordination in the four key areas varied across the five states GAO visited. For example, state and federal officials in Montana created a drinking water and wastewater working group to coordinate project funding and to resolve regulatory barriers such as different funding cycles between the programs. In addition, state and federal officials in Pennsylvania coordinated to develop uniform environmental analysis requirements. However, in North Carolina and Colorado, state-level programs did not coordinate well initially about project funding, which resulted in the state-level programs planning to pay for the same projects. The programs were able to avoid paying for the same projects, but state-level RUS programs have or expect to deobligate almost $20 million committed to these projects and return the funding to USDA. Further delays in coordinating programs could prevent funds from reaching needy communities.
section_title: What GAO Recommends
paragraphs: GAO recommends that EPA and USDA complete guidelines to help states develop uniform preliminary engineering reports, develop guidelines to help states develop uniform environmental analyses, and reemphasize the importance of state-level coordination. EPA neither agreed nor disagreed with GAOs first two recommendations and concurred with the third. USDA neither agreed nor disagreed with the recommendations.

section_title: Letter
paragraphs: Many communities with populations of 10,000 or less face significant  challenges in financing the costs of replacing or upgrading aging and  obsolete drinking water and wastewater infrastructure. The demand for  such drinking water and wastewater infrastructure projects in these  communities, many of which are considered rural, is estimated by federal  agencies to be more than $100 billion in the coming decades. For  example, communities may need to upgrade basic wastewater systems,  which treat wastes by allowing them to settle out in ponds or lagoons,  with more sophisticated equipment that mechanically and biologically  removes solids and contaminants. Or, communities may need to upgrade  to more expensive filtration equipment to remove contaminants, such as  arsenic or excess nutrients, as regulations become more stringent for  drinking water quality and wastewater. Communities typically pay for  drinking water and wastewater infrastructure through the rates charged to  users of the drinking water and wastewater systems. In some cases,  however, these communities do not have the number of users needed to  spread the cost of major infrastructure projects and still maintain  affordable user rates. In addition, unlike larger, urban communities that  can issue their own public bonds to pay for major water and wastewater  infrastructure improvements, it can be difficult for rural communities to  independently finance such major improvements. In many cases, rural  communities have limited access to financial markets, restricting their  ability to issue bonds to raise capital. As a result, these communities  depend heavily on federal and state grants and subsidized loan programs  to finance their water and wastewater infrastructure projects.
The Environmental Protection Agency (EPA) and the U.S. Department of  Agriculture (USDA) oversee the three largest federally funded drinking  water and wastewater infrastructure assistance programs. EPA  administers the Drinking Water State Revolving Fund (SRF) program,  which provides annual funding to states to finance projects for publicly  and privately owned drinking water treatment plants, and the Clean Water  SRF program, which provides funding to states to finance projects for  constructing, replacing, or upgrading publicly owned municipal  wastewater treatment plants. EPA allocates its funding in the form of  capitalization grants to revolving fund programs administered by each  state, and state officials in turn distribute loan funding for qualified  drinking water and wastewater infrastructure projects in local  communities. Communities of any size can apply for assistance. When  allocating funds to community projects, state officials consider  environmental factors, such as the projects’ impact on the communities’  compliance with federal and state regulations for drinking water and clean  water. Over the long term, the state SRF programs are intended to be  sustained through communities’ repayment of loans, creating a continuing  source of assistance for priority drinking water and wastewater  infrastructure projects. In fiscal year 2011, the Drinking Water and Clean  Water SRF programs received $963 million and $1.5 billion in federal  appropriations, respectively.
USDA’s Rural Utilities Service (RUS) administers the Water and Waste  Disposal program, which provides funding for both drinking water and  wastewater projects in low-income rural communities of 10,000 or less.  In fiscal year 2011, the program received $516 million in appropriations,  which was then allocated to USDA offices located in each state, using a  formula based on the state’s rural population, number of households in  poverty, and rate of unemployment. Each USDA state office reviews  project applications and approves funding for communities. If the USDA  funds allocated to each state office are not fully obligated, they are pooled  by USDA headquarters and redistributed to states that have projects  ready to fund.
We have previously reported that fragmentation and overlap among  government programs can lead to duplicative program requirements.  Fragmentation occurs when more than one federal agency, or more than  one organization within an agency, is involved in the same broad area of  national need. Overlap occurs when multiple agencies and programs  have similar goals, engage in similar activities or strategies to achieve  them, or target similar beneficiaries or recipients. Fragmentation can lead  to overlapping programs and can create the potential for inefficiencies  such as duplication. Duplication occurs when two or more agencies or  programs are engaged in the same activities to provide the same services  to the same recipients; however, in some instances, duplication may be  warranted because of the magnitude or nature of the federal effort. We  have also reported that federal programs contributing to the same or  similar outcomes should coordinate or collaborate on their efforts. For  example, in August 1997, we reported that federal programs contributing  to the same or similar outcomes should be closely coordinated,  consolidated, or streamlined, as appropriate, to ensure that goals are  consistent and that program efforts are mutually reinforcing.  Furthermore, we have identified practices that can help enhance and  sustain collaboration among federal agencies. In this report, we do not  distinguish between the two terms coordination and collaboration.
EPA and USDA have long recognized the potential for fragmentation,  overlap, and duplication in their drinking water and wastewater  infrastructure programs and the need for coordination to avoid these  outcomes. Together with the Department of Housing and Urban  Development (HUD), EPA and USDA issued a joint memorandum in  1997 that emphasized cooperation and coordination on jointly financed  drinking water and wastewater infrastructure projects to, among other  things, foster cooperation among the organizations that administer these  programs and minimize duplication of planning efforts. However, in  December 2009, we reported that EPA, USDA, and other agencies that  fund drinking water and wastewater infrastructure for rural communities  along the U.S.-Mexico border lacked coordinated policies and processes  and did not efficiently coordinate their programs, priorities, or funding. To  better address the needs of the region, we suggested Congress consider  establishing an interagency mechanism to coordinate programs and  funding, such as a task force on water and wastewater infrastructure or  other mechanism, in the border region.
In 2010, Pub. L. No. 111-139 directed that GAO identify and report on  federal programs, agencies, offices, and initiatives—either within  departments or governmentwide—that have duplicative goals or  activities. Accordingly, the objectives of this report examine (1) the  potential for fragmentation, overlap, and duplication among programs  administered by EPA and USDA to address drinking water and  wastewater infrastructure needs in rural communities and (2) the extent to  which these agencies coordinate at the federal and state level to help  meet the water infrastructure needs of rural communities.
To address both objectives, we reviewed relevant statutes, regulations,  guidance, budgets, and other documents; interviewed officials from EPA  and USDA and representatives from engineering firms, local  communities, and relevant nonprofit organizations; and obtained financial  and other information about projects funded by at least one of the three  programs from fiscal year 2007 through fiscal year 2011. To assess the  extent of overlap between the programs, we compared annual funding  data from EPA and USDA. We assessed the reliability of these data by  interviewing EPA and USDA officials about the quality of the data and  determined it to be reliable for our purposes. We visited a  nongeneralizable sample of five selected states—Colorado, Montana,  North Carolina, Pennsylvania, and South Dakota—to observe federally  funded projects and discuss with state and local officials their experiences  in disbursing and applying for funding from the EPA and USDA  programs. From our analysis of EPA and USDA project needs data  compiled by state each year, the five states we visited have high levels of  drinking water and wastewater infrastructure needs for communities with  populations of less than 10,000, in comparison with other states. We  assessed the reliability of EPA’s data by reviewing its quality control  reports. We assessed the reliability of USDA’s data by interviewing RUS  officials on the quality control steps used in gathering the data. We  determined the data were reliable for our purposes of selecting states. In  addition, to determine the extent to which agencies coordinate at the  federal and state level to help meet the water infrastructure needs of rural  communities, we met with federal and state officials and considered  EPA’s and USDA’s efforts to promote the guidance established in the  1997 joint memorandum. Furthermore, we discussed the levels of  coordination among federal and state agencies with local community  officials who applied for and received funding from one or the other of the  programs. To identify leading practices for coordination, we reviewed our  prior work on practices that can help enhance and sustain collaboration  among federal agencies. A more detailed description of our objectives,  scope, and methodology is presented in appendix I.
We conducted this performance audit from September 2011 to  September 2012 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Rural communities often have small or aging drinking water and  wastewater systems. The need for a water project can arise for multiple  reasons, including replacing or upgrading outdated or aging equipment  that does not treat water to meet water quality standards and systems  that do not produce water to meet new treatment standards. For example,  arsenic is often present naturally in groundwater, and to meet new federal  arsenic standards for drinking water, many rural communities using  groundwater as a drinking water source will have to improve their drinking  water systems to remove arsenic. EPA estimates that drinking water and  wastewater infrastructure for small communities over the next several  decades could cost more than $100 billion.
This section describes (1) federal funding for drinking water and  wastewater infrastructure projects in rural communities; (2) the process  for applying for these federal funds, including the requirements state and  federal agencies must ensure rural communities meet under the National  Environmental Policy Act; and (3) our prior work on coordination among  federal agencies and rural water infrastructure programs.
subsections: section_title: Federal Funding for Rural Water Infrastructure Projects
paragraphs: The federal government administers a number of programs that assist  rural communities in developing water and wastewater systems and  complying with federal regulations, with EPA’s drinking water and clean  water SRF programs and USDA’s RUS program providing the most  funding. Communities typically pay for drinking water and wastewater  infrastructure through the rates charged to users of the drinking water and  wastewater systems. Large communities serve many people and can  spread the cost of infrastructure projects over these numerous users,  which makes projects more affordable. Small or rural communities have  fewer users across which to spread rate increases, making infrastructure  projects less affordable and these communities more reliant on federal  funding to help lower the cost of projects through lower interest rates or  grants that do not need to be repaid.
The Safe Drinking Water Act and the Clean Water Act authorize the  Drinking Water SRF and Clean Water SRF programs, respectively, as  well as EPA’s authority to regulate the quality of drinking water provided  by community water supply systems and the discharge of pollutants into  the nation’s waters. Under the Safe Drinking Water Act, EPA sets  standards to protect the nation’s drinking water from contaminants, such  as lead and arsenic. In 1996, amendments to the act established the  drinking water SRF program to provide assistance for publicly and  privately owned drinking water systems. Under the Drinking Water SRF  program, states make loans and are required to provide a certain  percentage of funding in loan assistance to communities of less than  10,000. The Clean Water Act is intended to maintain and restore the  physical, chemical, and biological integrity of our surface waters, such as  rivers, lakes, and coastal waters. In 1987, amendments to the Clean  Water Act established the Clean Water SRF program to provide  assistance to publicly owned wastewater treatment facilities. Using the  federal funds EPA provides to capitalize the state SRF programs, states  provide loans to communities for drinking water and wastewater treatment  projects. In order to qualify, states must contribute an amount equal to 20  percent of the federal capitalization grant. States that qualify for funding  are responsible for administering their individual SRF programs, and  communities of any size can apply for assistance. Loans are generally  provided at below-market interest rates, saving communities money on  interest over the long term. As communities repay the loans, the states’  funds are replenished, enabling them to make loans to other eligible  drinking water and wastewater projects, and creating a continuing source  of assistance for communities. See figure 1 for a description of the state  Drinking Water and Clean Water SRF program funding sources.  Nationwide, there are almost 52,000 publicly and privately owned drinking  water systems and 16,000 publicly owned wastewater treatment facilities.
USDA’s RUS administers a water and wastewater loan and grant  program for rural communities with populations of 10,000 or less. The  program is designed to address public health concerns in the nation’s  rural areas by providing funding for new and improved drinking water and  wastewater infrastructure. RUS provides a mix of loan and grant funding  to communities that have been denied credit through normal commercial  channels. Like the SRF programs, the RUS program makes loans at  below-market rates to save communities interest over time but, unlike the  SRF programs, the RUS program can make loans for up to 40 years,  which helps lower communities’ annual repayment costs. In addition,  communities do not need to repay funds received as grants, further  helping to reduce the overall financial burden they incur upon a water  project’s completion. To determine the amount of loans and grants a  community receives, RUS assesses the potential increase in the water or  sewer user rate needed to repay the loan. RUS provides grants to  communities when necessary to reduce user rates to a level that the  agency determines to be reasonable.
Other federal agencies have programs that provide funds for drinking  water and wastewater infrastructure, including HUD’s Community  Development Block Grant program and the Department of Commerce’s  Economic Development Administration’s Public Works and Economic  Development Program. Under HUD’s program, communities use block  grants for a broad range of activities to provide suitable housing in a safe  living environment, including water and wastewater infrastructure. Thirty  percent of block grant funds are allocated by formula to states for  distribution to communities of 50,000 or less. Drinking water and  wastewater needs compete with other public activities for funding and,  according to HUD officials, account for about 10 percent of all block grant  funds nationally. Economic Development Administration’s Public Works  and Economic Development Program provides grants to small and  disadvantaged communities to construct public facilities, including  drinking water and wastewater infrastructure, to alleviate unemployment  and underemployment in economically distressed areas. In addition, the  U.S. Army Corp of Engineers and the Department of the Interior’s Bureau  of Reclamation provide financial assistance for some large drinking water  and wastewater projects, but these projects must be authorized by  Congress prior to construction.
In addition to these federal programs, some states have created their own  programs to provide assistance for drinking water and wastewater  infrastructure. For example, the North Carolina Rural Economic  Development Center provides infrastructure loans for communities in the  state’s rural counties. In Montana, the Treasure State Endowment  Program provides grants to make drinking water and wastewater projects  more affordable for the state’s communities.
section_title: Application Process and National Environmental Policy Act Requirements
paragraphs: The state SRF programs and the RUS program each have their own  application process through which communities can apply for funding,  although the application processes generally include similar steps: (1)  completing an application that asks for, among other things, basic  demographic, legal, and financial information associated with the project;  (2) developing a preliminary engineering report that provides basic design  specifications and other technical information for the project; and (3)  conducting an environmental analysis that considers the environmental  effects of the proposed project and alternatives. The state agencies  responsible for EPA’s SRF programs and USDA state offices review  these documents, prioritize the projects based on agency-determined  criteria, provide comments to communities on how their applications can  be improved, and ultimately approve or reject the request for funding.  Communities can choose to apply for funding to different federal and  state programs at any stage during the process. In some cases, the SRF  and RUS programs will work together to jointly fund the same project if  the project is too large for one agency to fund, or if it will make the project  more affordable for the community. If their requests are approved,  communities design the projects, obtain construction bids, contract to  build the projects, and are reimbursed by the funding agency.  Communities usually hire a consulting engineer to develop the preliminary  engineering reports and conduct the environmental analyses for a project.  In addition, EPA and USDA pay for technical service providers that  communities can use to help them understand and apply for their  programs. Communities can also get assistance from local planning  districts, which are voluntary associations of county and municipal  governments that provide development assistance to their membership.
A preliminary engineering report describes the proposed project, including  its purpose, features of the proposed location, condition of any existing  facilities, alternative approaches considered, design features, and costs.  Figure 2 shows the application process and timeline that is generally  followed for both EPA and RUS programs.
The state SRF and RUS state-level programs review the likely  environmental effects of projects they are considering funding using  different levels of environmental analysis. These reviews occur either  under the National Environmental Policy Act of 1969 (NEPA) for the RUS  program, or for the SRF programs, under a state environmental review  process similar to NEPA. EPA regulations define the necessary elements  of these state “NEPA-like” reviews. Typically, a proposed water or  wastewater project is subject to an environmental assessment or, in the  rare case that the project is likely to significantly affect the environment, a  more detailed environmental impact statement. If, however, the agency  determines that activities of a proposed project fall within a category of  activities the agency has determined has no significant environmental  impact—a determination called a categorical exclusion—then the project  applicant or the agency, as appropriate, generally does not have to  prepare an environmental assessment or environmental impact  statement. Because many community water and wastewater  infrastructure projects either upgrade or replace existing infrastructure,  projects rarely result in significant environmental impacts, and NEPA  requirements can be satisfied through an environmental assessment or a  categorical exclusion. In addition, in some cases, the funding agency may  help complete the environmental analysis documents for a planned  project.
section_title: Federal Agencies’ Coordination for Rural Water Infrastructure
paragraphs: Our previous work has raised questions regarding sufficient coordination  between drinking water and wastewater infrastructure funding programs,  despite federal efforts to improve coordination at the state and local level.  In December 2009, we reported that EPA, USDA, and other agencies that  fund drinking water and wastewater infrastructure for rural communities  along the U.S.-Mexico border, lacked coordinated policies and processes  and did not efficiently coordinate their programs, priorities, or funding.  Specifically, without efficient coordination, applicants faced significant  administrative burdens that, in some cases, resulted in project delays  because the programs required separate documentation to meet the  same requirements and did not consistently coordinate in selecting  projects. For example, an engineer in Texas told us that one community  applying for funding had to pay $30,000 more in fees because the  engineer had to complete two separate sets of engineering  documentation for EPA and USDA. As we stated in our December 2009  report, the applicant could have saved these funds had EPA and USDA  established uniform engineering requirements. To resolve such  inefficiencies, we suggested Congress consider establishing an  interagency mechanism, such as a task force, of federal agencies  working in the border region. One of the responsibilities of this task force  would be to work with state and local officials to develop standardized  applications and environmental review and engineering documents, to the  extent possible, for the federal and state agencies working in the border  region.
Similarly, our October 2005 report discusses collaboration and practices  that federal and state agencies can engage in to enhance and sustain  interagency collaboration. In the report, we define collaboration as any  joint activity that is intended to produce more public value than could be  produced when organizations act alone. According to the report, agencies  can enhance and sustain interagency collaboration by engaging in one or  more of the following practices:    define and articulate a common outcome;    establish mutually reinforcing or joint strategies;  identify and address needs by leveraging resources;   agree on roles and responsibilities;    establish compatible policies, procedures, and other means to operate    develop mechanisms to monitor, evaluate, and report on results;  reinforce agency accountability through agency plans and reporting;  and  reinforce individual accountability for collaborative efforts through  performance management systems.
For a number of these practices, the report states that nonfederal  partners, key clients, and stakeholders need to be involved in decision  making. Additionally, a number of important factors, such as leadership,  trust, and organizational culture, are necessary elements for a  collaborative relationship.
Consistent with the findings of our October 2005 report, the 1997 joint  memorandum signed by EPA, USDA, and HUD encourages cooperation  in developing strategic plans for each agency’s program and encourages  cooperation among program managers at the state level to remove as  many barriers as possible in program regulations or policy. In addition,  the memorandum encourages the development of common practices  across agencies, including regularly communicating and leveraging funds  to make the most efficient use of available resources. Moreover, the  memorandum encourages the signing agencies to prepare common  documents, including one environmental analysis per project, that meet  all the federal and state agencies’ requirements. This memorandum is  similar to governmentwide NEPA regulations and various guidance  issued by the Council on Environmental Quality, which emphasize the  need for coordination among federal and state agencies on environmental  and other requirements. Most recently, the council issued a March 2012  guidance that encourages federal agencies to cooperate with state, tribal,  and local governments so that one document satisfies as many applicable  environmental requirements as practicable. In addition, the guidance  encourages federal agencies to enhance coordination under NEPA by  designating a lead agency responsible for conducting an environmental  analysis. Furthermore, according to the guidance, a federal agency  preparing an environmental analysis should consider adopting another  federal agency’s environmental analysis if it addresses the proposed  action and meets the standards for an adequate analysis under NEPA  and the adopting agency’s NEPA guidance.
section_title: Fragmentation and Overlap in EPA and USDA Programs Can Result in Potential Duplication of Community Efforts to Apply for Funding
paragraphs: Drinking water and wastewater infrastructure funding is fragmented  among the three programs we reviewed—EPA’s Drinking Water and  Clean Water SRF programs and USDA’s RUS program. As a result,  overlap can occur when communities with populations of 10,000 or less  apply to one of the SRF programs and the RUS program. For the 54  projects we reviewed in the five states we visited, this overlap did not  result in duplicate funding or funding for the same activities on the same  project. Specifically, for 42 projects that we reviewed, the state SRF  programs or the RUS program funded the projects individually, and for  the remaining 12 projects that we reviewed, the state SRF and RUS  programs each contributed a portion of the overall project cost because  none of the programs could cover the full cost individually, according to  community officials. However, we identified potentially duplicative efforts  by communities to complete funding applications and related documents  for both agencies.
subsections: section_title: The SRF and RUS Programs Provide Overlapping, but Not Duplicative, Funding to Communities with Populations of 10,000 or Less
paragraphs: Overlap can occur among the state SRF and RUS programs because  they can each direct funding to communities with populations of 10,000 or  less. As a result, these communities are eligible to apply for funding from  more than one of these programs. For example, communities of 10,000 or  less can apply to the state Clean Water SRF and RUS programs for funds  to install or upgrade wastewater treatment plants and sewer lines. In  addition, communities of 10,000 or less can apply to the state Drinking  Water SRF and RUS programs for funds to install, repair, improve, or  expand treatment facilities, storage facilities, and pipelines to distribute  drinking water.
The state SRF and RUS programs have funded projects in communities  with populations of less than 10,000 in recent years, according to our  analysis of SRF and RUS data from July 1, 2007, through June 30, 2011.  Specifically, over this time frame, communities with populations of 10,000  or less received $3.2 billion, or 36 percent of total Drinking Water SRF  funding. Similarly, such communities received $6.3 billion, or 24 percent  of total Clean Water SRF funding. In accordance with its mission, the  RUS program has directed all of its funding for drinking water and  wastewater infrastructure projects to such communities, for a total of $11  billion from October 1, 2006, through September 30, 2011. The amount of  program funding overlap between the state SRF and RUS programs  varies among the states, with some states showing greater overlap than  others. State Drinking Water SRF program funding overlap with the RUS  program ranged from 7 percent in Rhode Island to 93 percent in Virginia,  and state Clean Water SRF program funding overlap with the RUS  program ranged from 8 percent in California to 74 percent in  Pennsylvania. Additional information about variations in program funding  overlap is provided in appendix II.
Overlap in program funding could lead agencies to fund the same project,  resulting in the potential for duplication. However, for the state SRF and  RUS programs, the majority of projects we reviewed in the five states  were funded by either one of the SRF programs or the RUS program, in  conjunction with other federal or state program funds, such as HUD’s  Community Development Block Grant program, Montana’s Treasure  State Endowment Program, and programs from the North Carolina Rural  Economic Development Center. Table 1 shows the funding awards for  community projects in states we visited. In the five states we visited— Colorado, Montana, North Carolina, Pennsylvania, and South Dakota—42  of the 54 projects we reviewed received funding from the SRF or RUS  programs, in addition to other sources.
In addition to the 42 projects that were separately funded by the state  SRF or RUS programs, 12 projects we reviewed received funding from  both the SRF and RUS programs (see table 2 for funding details). Our  analysis of these projects showed the programs did not pay for the same  activities with their funding, and according to state and community  officials, the joint funding for a community’s project was beneficial and  warranted. Specifically, according to federal, state, and community  officials we interviewed, jointly funded projects tended to be relatively  expensive projects that exceeded one or the other agency’s ability to fund  independently or that needed additional funding to make the project  affordable for community residents. Following are examples:    Washington, Pennsylvania, population approximately 3,500, sought  funding from both the Clean Water SRF and RUS programs, and  other programs, for its nearly $21 million sewer project to install over  200,000 feet of sewer lines. The community initially sought funding  from the Clean Water SRF program, but then decided to seek  additional funding from the RUS program after realizing the project  exceeded available funding from the SRF program, according to the  consulting engineer the community used. The Clean Water SRF  program provided $10.3 million, and the RUS program provided $5.5  million.   Hertford, North Carolina, population approximately 2,200 sought  funding from the Drinking Water SRF and RUS programs for its  project to expand drinking water capacity by drilling wells, installing  water supply lines, expanding the water treatment plant, and  constructing an elevated storage tank. Similar to the Washington,  Pennsylvania, project, community officials said that the Hertford  project was too expensive for a single agency to fund. The Drinking  Water SRF program provided $2.6 million toward the project, and the  RUS program provided $772,000.   Faulkton, South Dakota, population approximately 800, sought  funding from the Drinking Water SRF, the RUS program, and the  Community Development Block Grant program to replace water  pipelines and install a water tower. The town applied to multiple  programs to receive grants to help ensure that the project would be  affordable to its residents. The Drinking Water SRF program provided  a loan in the amount of $500,000 and immediately forgave the  balance of the loan, effectively providing these funds at no cost to the  community. The RUS program provided $2.1 million in funds to this  project, including grant funds, which helped keep the project  affordable. The Community Development Block Grant program  provided approximately $519,000 in additional funds, and the  community put forth $149,000.
Program overlap among the state SRF and RUS programs can result in  potential duplication of communities’ efforts to prepare funding  applications and related documents, including preliminary engineering  reports and environmental analyses, according to our analysis of project  documents and interviews with engineers and community officials in the  five states we visited. In these states, as with others, the state SRF and  RUS programs require the communities to submit a preliminary  engineering report and an environmental analysis as part of their loan  applications.
Preliminary engineering reports submitted by communities to the SRF  and RUS programs contained many of the same components, but the  format and the level of detail required varied. Table 3 shows the similar or  common components included in these preliminary engineering reports of  four projects we reviewed. We judgmentally selected an example from  one community in each state that had at least one jointly funded project or  that had applied to both programs for funding, and that prepared  preliminary engineering reports.
As table 3 shows, the preliminary engineering reports for both programs  asked for similar information such as project location, community growth  and population, existing facilities, alternative approaches to the project,  and environmental and technical details of the project. The preliminary  engineering reports prepared for the RUS program also included  information on debt service and short-lived assets—those assets that  have a planned life less than the repayment period of the loan—while the  SRF engineering reports did not include such information.
Engineers and community officials we interviewed in some states told us  that they prepare separate preliminary engineering reports for each  agency when a community applies for funding from both agencies, which  can increase costs to the communities. Specifically, officials and  engineers in some states told us the requirements for USDA’s RUS  preliminary engineering report are generally more rigorous. They stated  that these reports contain similar information but with different formats  and levels of detail. Examples are as follows:  In North Carolina, engineers and a technical service provider we  interviewed told us that the state SRF and RUS formats for the  preliminary engineering reports differed significantly in format but  contained much of the same information. State officials told us the  state SRF programs do not typically accept preliminary engineering  reports completed for the state-level RUS program because they try to  maintain a common format to enable efficient review. Similarly, the  state-level RUS program officials said that they do not accept reports  completed for the state SRF programs.
In Colorado, an engineer for several projects we reviewed told us that  the engineering firm had to complete preliminary engineering reports  for both the state SRF programs and the RUS program even though  the reports had similar formats and information.
In South Dakota, engineers told us that to minimize effort, time, and  cost to the community, they prepare preliminary engineering reports to  meet state SRF, RUS, and other program requirements even if the  community does not initially seek funds from all of these programs.  These engineers said doing so helps minimize the additional effort it  would take to revise the report at a later time if the community decided  to seek additional funds. According to another engineer, if the  preliminary engineering report is completed to meet just the SRF  programs’ requirements, the firm will require additional time and  money to meet the additional preliminary engineering report  requirements necessary to apply for funding through the RUS  program.
Montana and Pennsylvania take a different approach than the other three  states we visited as follows:    Montana has a uniform preliminary engineering report accepted by  most federal and state agencies. Engineers said that the agencies ask  for some different information, which they gather in amendments to  the report instead of having communities submit similar information  multiple times.
In Pennsylvania, officials from state SRF and state-level RUS  programs said they encourage communities to apply to either the SRF  or RUS programs and do not often jointly fund projects. Officials from  both programs told us that when they do fund projects jointly, they try  to accept one another’s documents to avoid duplicating them.
We also found similarities in the environmental analyses submitted by  communities to the SRF and RUS programs for four of the projects in the  states we visited. According to our review of environmental analyses  submitted to the state SRF and RUS programs—we judgmentally  selected one in each of four communities and states that had jointly  funded projects or applied to both programs for funding—each  environmental analysis followed a similar overall format and contained  many of the same components, but the level of analysis and the level of  detail needed to satisfy federal and state requirements varied. Table 4  shows the overall format and similar components for these environmental  analyses. The agencies ask for information on many of the same  components, including purpose and need, alternatives analysis, and  environmental consequences.
The extent to which communities duplicate their environmental analyses  for each program varies by state, depending on the extent to which water  and wastewater infrastructure programs in the state accept each other’s  work or use each other’s documents. In Colorado, North Carolina, and  South Dakota, the communities can submit the final approved  environmental analyses prepared for the RUS program to the SRF  programs, which eliminates one of the documents they have to prepare.  However, in these states, the state-level RUS program will not typically  accept the analysis prepared for the SRF program because the state  analyses are less rigorous, according to RUS officials. In Pennsylvania,  the state programs have agreed to uniform environmental requirements,  and the communities therefore submit the same document to both  programs. Communities may be required to submit additional information,  as needed, to meet requirements specific to each program. In Montana,  the state SRF programs prepare an environmental analysis for the  community that is primarily based on information that the community  submits in the preliminary engineering report, but the community prepares  the environmental analysis that it submits to the state RUS program.
Furthermore, in some cases, the state programs may require the same  type of environmental analysis for a project but, in other cases, the state  programs may require different levels of environmental analysis—such as  a categorical exclusion. For example, for a single wastewater project, the  town of Conrad, Montana, completed an environmental analysis for the  state-level RUS program, while the state SRF program completed the  environmental analysis for the town. In contrast, Pagosa Springs,  Colorado, submitted an environmental checklist to the state SRF program  for its wastewater project and received a categorical exclusion but had to  submit an environmental analysis for the application it submitted to the  state-level RUS program for the same project. Variation exists across  states despite NEPA regulations stating that federal agencies should  eliminate duplication with state and local procedures by providing for joint  preparation of environmental analyses or by adopting appropriate  environmental analyses. According to state SRF officials, state-level RUS  officials do not always accept state analyses because NEPA regulations  under the RUS program are rigid and because some state RUS officials  are not flexible in their interpretation of the requirements for  environmental analyses. State RUS officials, however, told us that  environmental analyses by some state environmental programs are not  sufficient to meet federal NEPA standards, making it difficult for them to  accept these environmental analyses.
Potentially duplicative application requirements, including preliminary  engineering reports and environmental analyses, may make it more costly  and time-consuming for communities to complete the application process.  For example, if consulting engineers have to provide similar, or even the  same, information, in two different engineering reports or environmental  analyses, their fees to the community may be higher. Engineers we  interviewed estimated that preparing additional preliminary engineering  work could cost anywhere from $5,000 to $50,000 and that the cost of an  environmental analysis could add as little as $500 to a community’s costs  or as much as $15,000. Moreover, having to complete separate  preliminary engineering reports or environmental analyses may delay a  project because of the additional time required to complete and submit  these documents. State officials in Montana told us that coordination  between federal and state programs and the implementation of uniform  application requirements could reduce the time it takes an applicant to  complete a rural water infrastructure project by up to half.
section_title: Federal and State Actions Have Not Fully Facilitated Coordination for Funding Communities’ Projects
paragraphs: Our review of five states and local communities in those states showed  that EPA and USDA have taken some actions to coordinate their  programs and funding at the federal and state level to help meet the  water infrastructure needs of rural communities, but not others specified  in the 1997 memorandum. Because these federal programs are  implemented at the state level, efforts to coordinate between the agencies  primarily occur among state officials managing the SRF and other water  infrastructure programs, the RUS state-level offices, and the communities  whose projects they fund. In some cases, inconsistent coordination at the  state level has led to potential duplication for communities applying for  funding and inefficiencies in program funding. EPA and USDA, at the  federal level, and the state SRF and RUS state-level offices, have taken  some actions to coordinate but have not taken others that could help  avoid duplication of effort by communities applying for project funding.
subsections: section_title: Agencies Have Taken Some Actions to Encourage Coordination at the State and Community Level but Not Others
paragraphs: Recognizing the importance of coordinating the SRF and RUS programs  at the state level, EPA and USDA agencies have taken some actions at  the federal level to encourage coordination between the state-level  programs and communities but not other actions specified in the 1997  memorandum. The 1997 joint memorandum signed by EPA and the  USDA sought to improve coordination among federal and state agencies  as they help fund community projects. It identified four major actions that  state and state-level federal offices can take to improve coordination and  reduce inefficiencies and potential duplication of effort. These actions are  consistent with several of the leading practices we identified in our  October 2005 report on interagency collaboration. These actions are as  follows:  Cooperate in preparing planning documents. The memorandum  encourages state SRF and RUS programs to cooperate in preparing  planning documents, including operating, intended use, and strategic  plans that are required under each agency’s programs. The  memorandum says that the federal and state programs should endeavor  to incorporate portions of each agency’s planning documents to minimize  duplication of planning efforts. This action is consistent with two leading  practices for interagency collaboration identified in our previous work— defining and articulating common outcomes and developing joint  strategies—through which partner agencies can overcome significant  differences in agency missions and cultures, and align their activities and  resources to accomplish common goals.
Cooperate to remove policy and regulatory barriers. The memorandum  states that agencies should cooperate in removing as many barriers to  coordination as possible in program regulations or policy by, for example,  coordinating project selection systems and funding cycles. This action is  consistent with a leading practice for interagency collaboration identified  in our previous work—promoting compatible policies and procedures.
Cooperate on project funding. The joint memorandum encourages state  SRF and state-level RUS officials to meet on a regular basis to cooperate  in determining what projects will receive funding and which program  should fund which project, and to discuss the possibility of jointly funding  projects when necessary. This action is consistent with two of the leading  practices for interagency collaboration identified in our previous work— agreeing upon roles and responsibilities and leveraging resources.  Through such actions, federal and state agencies funding water and  wastewater infrastructure can clarify which agencies will be responsible  for taking various steps and for organizing joint and individual agency  efforts and thereby obtain benefits that they would not have realized by  working individually.
Cooperate in preparing environmental analyses and meeting other  common federal requirements. The joint memorandum states that,  whenever possible, agencies should cooperate on federal requirements  that are common across agencies—environmental analyses and other  common documents, such as preliminary engineering reports—in order to  create one comprehensive application package per project. This action is  consistent with our leading practice for interagency collaboration of  establishing compatible policies and procedures for operating across  agency boundaries. Through such an action, federal and state agencies  would seek to make policies and procedures more compatible.
In February 2012, EPA, USDA, and several other federal and state  agencies created a working group to examine the feasibility of developing  uniform guidelines for preliminary engineering report requirements. The  group plans to develop a draft outline for uniform preliminary engineering  report guidelines by September 2012 and has received numerous  examples and comments from participating states. According to RUS  officials, however, once the draft outline is developed it must be reviewed  by participating state and federal agencies before it is considered final,  and the final outline could be delayed if agency review and response  times are slow. In addition, EPA and USDA have taken action at the  federal level to help the states coordinate better and make programs  more efficient for communities applying for funding. Specifically, EPA and  USDA coordinate at the federal level to encourage states to emphasize  coordination between their SRF programs and RUS, as well as with local  communities. According to EPA and USDA officials, to inform state  officials and communities about the programs and funding opportunities  available in their respective states, the federal agencies participate in  conferences and workshops, conduct Webinars, and sponsor training.  The federal agencies also issue guidance to their programs. For example,  EPA issued a report in 2003 providing case studies and innovative  approaches on how state SRF programs could better coordinate with  other programs with similar purposes. In addition, in June 2011, EPA and  USDA signed a Memorandum of Agreement to work together to help  communities implement innovative strategies and tools to achieve short-  and long-term water and wastewater infrastructure sustainability. Among  other things, the memorandum encourages the agencies to share and  distribute resources and tools to communities that promote long-term  sustainability and to provide training and information that encourages the  adoption and adaptation of effective water infrastructure management  strategies.
The actions that EPA and USDA have taken to date, such as providing  guidance in the 1997 memorandum, have helped states and state-level  federal agencies to coordinate generally but have not facilitated better  coordination at the state level in more specific ways. In particular, the  federal agencies have not taken actions, highlighted in the 1997  memorandum, to develop common documents for communities to apply  to different funding programs. For example, EPA and USDA have not  created a working group or taken similar action to work with other federal  and state officials to develop a uniform environmental analysis. Making  environmental analyses more compatible would be consistent with the  March 2012 Council on Environmental Quality guidance on eliminating  duplication in federal NEPA efforts. Similar to the 1997 joint  memorandum, Council of Environmental Quality NEPA regulations and  guidance encourage coordination between state and federal agencies in  preparing environmental documents to reduce the time and cost required  to make federal permitting and review decisions while improving  outcomes for communities and the environment. According to agency  officials, the agencies have not taken such action because they believe  they have coordinated sufficiently. According to EPA officials, the states  conduct NEPA-like analyses but are not required to meet the same NEPA  requirements as federal agencies, and EPA cannot therefore dictate what  documents the states use. In addition, USDA officials said that the RUS  program’s NEPA guidance documents already encourage state-level  RUS offices to coordinate with the state SRF programs to accept RUS’s  environmental analyses, as appropriate and consistent with guidance  from the Council on Environmental Quality. Without agreement to use  common environmental analyses, however, rural communities could  continue to spend more effort and resources to meet application  requirements for improving their water and wastewater infrastructure.
section_title: State-Level Programs Took Varied Actions to Coordinate in Five States We Visited
paragraphs: In the five states we visited, the state-level programs varied in the actions  they took to coordinate their water and wastewater infrastructure  programs consistent with the 1997 joint memorandum. In some states,  the state SRF and RUS programs have developed innovative ways to  coordinate and remove barriers to coordination consistent with the 1997  memorandum but, in other states, the state SRF and RUS programs have  been less successful, leading to potential duplication for communities  applying for funding and inefficiencies in program funding. Table 5 shows  the extent of actions to coordinate taken by the state SRF programs and  state-level RUS programs in the five states we visited. Some community  officials we met with suggested that, for the drinking water and  wastewater infrastructure programs, good coordination among state  officials would involve meeting on a regular basis to cooperate in  determining what projects would receive funding, thereby leveraging  agency funds that are increasingly limited.
In the five states we visited, the state SRF and state-level RUS programs  varied in the number and types of action they had taken to coordinate, as  described in the memorandum. However, the state-level programs did not  take actions to cooperate in preparing planning documents. The extent of  actions taken by the five states consistent with the memorandum are as  follows:  Cooperate in preparing planning documents. In the states we visited,  state SRF and RUS programs do not regularly coordinate when  developing agency-specific planning documents. State SRF officials  identify the projects that apply to their program in planning documents  called intended use plans. In these plans, the states rank projects using  state-determined criteria following EPA guidance, such as environmental  and health concerns. Similarly, state-level RUS officials develop funding  plans in which they separately rank projects applying to their program  using national criteria that focus primarily on economic development, as  well as environmental and health concerns.
Cooperate to remove policy and regulatory barriers. The state SRF and  RUS programs in three of the states we visited had cooperated to remove  policy barriers to coordination, such as differences in funding cycles.  Specifically, in those states, federal and state officials meet regularly to  ensure funding cycles are aligned to avoid unnecessary project delays.  For example, in South Dakota, the state’s SRF and other state water and  wastewater infrastructure funding programs have the same funding cycles  and application timelines, which are administered by one agency. State  and local officials told us that having the state funding programs aligned  made it easier to navigate differences in funding cycles with RUS and  other federal funding programs operating in the state. In addition,  Montana officials created a working group to share information across  state water and wastewater infrastructure programs and coordinate  funding cycles. State and local officials in Montana said that regular  coordination between federal and state officials on individual projects  helped manage programmatic differences, such as differing funding  cycles, to avoid lengthy delays in funding projects. Officials and engineers  in both states said that the benefits of these joint efforts included  reductions in community costs and administrative burdens for submitting  applications and related documents, as well as reductions in the federal  and state agencies’ time in reviewing the documents. Other states have  not worked to remove policy and regulatory barriers to coordination. For  example, state and local officials in North Carolina told us that differences  in application processes and funding cycles for the federal and state  programs, including state SRF programs and the RUS program,  increased the complexity and cost of applying for funding. Multiple  agencies in the state that fund drinking water and wastewater  infrastructure projects, including the SRF programs, have different  funding cycles, so that communities have to apply separately to each  program and at different times to make the project affordable. State and  local officials in Colorado told us that they faced similar barriers.
Cooperate on project funding. Officials in all the states we visited meet at  various times during the year, although some meet more frequently and  discuss project funding in greater detail. Officials in Montana and South  Dakota told us that they meet regularly to discuss upcoming projects,  project applications, and coordination of funding, when possible. For  example, officials from federal and state drinking water and wastewater  funding programs in the Montana working group share information and  discuss current projects and communities applying for funding.  Community representatives said that state SRF program officials hold  monthly meetings between the applicant and other state and federal  funders to ensure that adequate funding is available to keep the project  moving forward and to resolve any differences between the community  and the federal and state programs providing funding. Similarly, in South  Dakota, officials for the state SRF and RUS programs told us that they  discuss project applications routinely and work closely with officials from  local planning districts who, in turn, use their expertise working with  federal and state programs to help communities apply for funding. In  Pennsylvania, the state SRF and state-level RUS programs coordinate  early in the application process by (1) conducting joint outreach sessions  with communities interested in applying for drinking water and wastewater  project funding and (2) directing communities to the program that better  fits their needs, according to state officials we spoke with. State-level  officials and engineers we spoke with identified improvements in the  efficiency and effectiveness of the programs because the officials direct  communities to the program that best fits their needs or provides the best  opportunity for a successful application.
Officials in Colorado and North Carolina also meet but do not regularly  discuss project funding or the communities that have applied for funding,  and said that they have experienced lapses in program efficiency and  effectiveness, such as loss of federal funding for the state. Officials in  both states told us coordination is complicated by communities not  disclosing that they have applied to other state or federal programs for  funding. Specifically, according to federal and state officials, in some  cases, communities and the consulting engineers representing them will  sign a funding agreement with either the state SRF or state-level RUS  program but continue to seek additional grant or subsidized loan funding  from other state and federal programs to get additional grant funding or  better loan terms. State SRF and state-level RUS program officials in  North Carolina and Colorado told us that not disclosing multiple funding  sources can lead to inefficiencies when state SRF program officials and  state-level RUS officials are unaware that a community has applied to  both programs. Specifically, state-level officials who administer the RUS  program in North Carolina and Colorado reported having to or expecting  to deobligate a total of more than $20 million that they had committed to  fully fund projects because they were unaware that the state SRF  programs had committed to fully fund the same projects. The state-level  RUS program in North Carolina expects to have to deobligate funding for  three projects totaling about $4.9 million in loan and grant funding, and  the RUS program in Colorado had to deobligate funding for seven  projects totaling $15.6 million. The two RUS state offices could not meet  internal agency deadlines to fully obligate their available funds and, as a  result, had to return these funds to the RUS headquarters pool. State  officials in North Carolina recently developed a uniform cover sheet for all  state drinking water and wastewater funding program applications that  asks communities to disclose other sources of funding. However, in our  review of the uniform cover sheet, applicants are not asked to provide  information on funding requested from RUS and other federal drinking  water and wastewater funding programs.
Cooperate in preparing environmental analyses documents and other  common federal requirements. In our visits to Montana and Pennsylvania,  we learned that federal and state programs, including the state SRF and  RUS programs, have coordinated to streamline the application process in  their states. For example, in Montana, these programs coordinated to  develop uniform application materials and preliminary engineering report  requirements that are accepted by all federal and state water and  wastewater infrastructure programs in the state. Similarly, in  Pennsylvania, program officials agreed upon uniform environmental  analyses that are accepted by all programs, which reduce the cost and  time for completing applications. Other states we visited have not agreed  on uniform application requirements. According to federal and state  officials in Colorado, North Carolina, and South Dakota, the state SRF  and RUS programs have not developed documents with common formats  and requirements for drinking water and wastewater infrastructure  projects because of difficulty in integrating multiple program requirements.  Specifically, state and local officials said that much of the information  required in the environmental analyses was the same, but that agencies  could not agree on a standard format and level of detail. For example,  state SRF and RUS program officials in Montana told us they had tried,  but were unable, to develop a uniform format for the presentation of their  environmental analyses even though they had done so for their  preliminary engineering reports. Furthermore, officials in Colorado and  North Carolina expressed concern that having uniform documents that  incorporated both state SRF and RUS program requirements would slow  the application processes for all three programs and make them more  costly. Specifically, officials administering both of the state SRF programs  were concerned that, by adopting a format compatible with RUS policies  and procedures, they would make the state SRF application process  more onerous.
section_title: Conclusions
paragraphs: Rural communities rely on federal grants and loans to meet their water  and wastewater infrastructure needs and to keep their drinking water and  sewer user rates affordable. It is therefore important to make the most  efficient use of limited federal funds to help as many communities as  possible and to eliminate potential duplication of effort by communities  when they apply for funds. EPA and USDA recognized in a 1997  memorandum that it is necessary to more effectively and efficiently  coordinate the SRF and RUS programs at the state level through four  major actions: in preparing planning documents, removing policy and  regulatory barriers, meeting regularly to discuss project funding, and  preparing common environmental analyses and other common federal  requirements. In addition, EPA and USDA have taken actions to  encourage states to improve coordination over the past 15 years.  Specifically, recent actions by EPA and USDA, such as their efforts to  inform state officials and communities about the programs and funding  opportunities by participating in conferences and workshops, conducting  Webinars, and sponsoring training, as well as creating a working group to  examine the possibility of developing guidelines to assist states in  developing uniform preliminary engineering reports to meet requirements  for federal and state programs, are encouraging and will help  communities. However, the guidelines have not yet been completed, and  EPA and USDA have not initiated a similar effort to develop guidelines for  uniform environmental analyses that can be used to meet federal and  state requirements. Without uniform documents, rural communities face a  continuing burden and additional costs when applying for federal funds to  improve their water and wastewater infrastructure. The state-level  programs in the five states we reviewed varied in the number and types of  actions they had taken to coordinate across the four key areas in the  1997 memorandum. Some state-level programs have developed  innovative ways to coordinate and remove barriers to coordination, but in  other states, the programs have been less successful, warranting  stronger federal attention. Moreover, the state-level programs did not take  actions to cooperate in preparing planning documents in any of the  states. Until the state-level programs are regularly coordinating across the  four key areas in the 1997 memorandum, including when developing  planning documents, they will continue to risk potential program  inefficiencies. Additional delays in taking actions to help improve such  coordination could prevent EPA and USDA from more effectively and  efficiently providing limited resources to needy communities.
section_title: Recommendations for Executive Action
paragraphs: To improve coordination and to reduce the potential for inefficiencies and  duplication of effort, we recommend that the Secretary of Agriculture and  the Administrator of EPA take the following three actions:    ensure the timely completion of the interagency effort to develop  guidelines to assist states in developing their own uniform preliminary  engineering reports to meet federal and state requirements;   work together and with state and community officials to develop  guidelines to assist states in developing uniform environmental  analyses that could be used, to the extent appropriate, to meet state  and federal requirements for water and wastewater infrastructure  projects; and    work together and with state and community officials through  conferences and workshops, Webinars, and sponsored training to  reemphasize the importance of coordinating in all four key areas in  the 1997 memorandum.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided EPA and USDA with a draft of this report for their review and  comment, and both agencies provided written comments. EPA neither  agreed nor disagreed with our first two recommendations but concurred  with the third. USDA neither agreed nor disagreed with any of our  recommendations. EPA’s comments are provided in appendix III and  USDA’s comments are provided in appendix IV. Both agencies made  technical comments that we incorporated as appropriate. In addition, we  sent relevant portions of this report to state or federal officials responsible  for administering the state SRF programs and state-level RUS programs  for their review and technical comment.
In its comments on our first recommendation, that the agencies complete  their efforts to develop uniform requirements for preliminary engineering  reports, EPA stated that it supported the intent of the recommendation but  noted it does not have the authority to require states to adopt a required  format and that some states may not utilize it. EPA recommended that we  replace the word “requirements” with the word “format.” USDA also  indicated that EPA and HUD have no authority to require state  governments to use a particular preliminary engineering report outline  and requested that we therefore change the word “requirements” to the  word “guidelines.” We recognize and agree that states have discretion to  develop their own requirements for their SRF programs. In making our  recommendations, we did not intend to limit states’ discretion in adopting  their own preliminary engineering report requirements. However, we  continue to believe that the federal agencies could do more to help states  identify common requirements for their own uniform preliminary  engineering report documents. We changed our recommendation to  reflect that the states do have discretion and that the federal agencies  should develop guidelines to help the states develop uniform preliminary  engineering report requirements.
In its comments on our second recommendation, to develop uniform  requirements for environmental analysis documents, EPA stated that in  principle it agreed with our recommendation but said it is not realistic to  develop a one-size-fits-all approach. EPA said that developing the  “essential elements” for environmental analyses should achieve the same  outcome and requested that we change the word “requirements” to  “essential elements.” USDA stated that it did not necessarily disagree  with the intent of the recommendation but noted that EPA has limited  authority to dictate specific requirements to states implementing the SRF  program.  It also identified several procedural and policy hurdles including  the fact that USDA’s NEPA requirements are typically more stringent than  the reviews under the SRF programs. USDA stated that it would work  with EPA to discuss the concept of unified reviews and identify what  would be required to achieve such reviews. USDA suggested that the  Council on Environmental Quality could be called on to facilitate a  working group between federal water and wastewater infrastructure  funding programs on NEPA implementation. In making our  recommendation, we did not intend to limit states’ discretion in adopting  their own requirements for environmental analyses. We changed the  wording of our recommendation to clarify that the agencies would develop  guidelines to assist states in developing common requirements for  environmental analyses. We also note that USDA’s suggestion for the  Council on Environmental Quality to facilitate a working group seems  reasonable but did not make this part of our recommendations because  we did not review the Council on Environmental Quality as part of our  work.
EPA concurred with our third recommendation, that the agencies work  together and with state and community officials in all four key areas of the  1997 memorandum, while USDA neither agreed nor disagreed with the  recommendation. EPA said that our report showed that little overlap  existed between the programs but that state-level coordination should be  encouraged more broadly. USDA said that it had no control over  communities that choose to change funding sources to a state SRF  program after accepting funding from the state-level RUS programs. We  understand that communities have the discretion to change funding  sources if better loan and grant terms are available, but strong  coordination can help the agencies know when communities are applying  to other programs and what other communities might need funding. Such  coordination, envisioned in the 1997 memorandum, can avoid the loss of  funds from states with high needs and other inefficiencies identified in this  report. Furthermore, as EPA confirmed in its comments, state-level  coordination can be encouraged more broadly to help other state and  federal water and wastewater infrastructure funding programs better  leverage limited state and federal funds.
Finally, in its general comments on the draft report, USDA commented on  GAO’s use of a relatively small sample of states for this review and that  the RUS programs in those states were experiencing a transition in  leadership and had not had time to develop relationships and learn other  agencies’ programs. We selected states that had high rural water and  wastewater infrastructure needs and a range of experience coordinating  their water and wastewater infrastructure funding programs. We clearly  state in the report that the sample is small and that our results cannot be  generalized to all states. We recognize that the experience and trust  established through long-term relationships is critical to the establishment  of good coordination between federal and state programs. However,  given the amount of time the memorandum has been in place, we believe  that if good coordination between state SRF and state-level RUS  programs had been established prior to the transition in state-level RUS  leadership, it would have facilitated a smoother transition, and many of  the challenges identified in our report may have been avoided.
We will send copies of this report to the Administrator of EPA, the  Secretary of Agriculture, the appropriate congressional committees, and  other interested parties. In addition, the report will be available at no  charge on the GAO Web site at http://www.gao.gov. If you or your staff  members have any questions about this report, please contact me at  (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of this report examine (1) the potential for fragmentation,  overlap, and duplication between the Environmental Protection Agency’s  (EPA) Drinking Water and Clean Water State Revolving Fund (SRF)  programs and the U.S. Department of Agriculture’s (USDA) Rural Utilities  Service (RUS) Water and Wastewater Disposal program, both of which  address water and wastewater infrastructure needs in rural communities,  and (2) the extent to which these programs coordinate with each other at  the federal and state level to help meet the water infrastructure needs of  rural communities. We selected these programs for this review because  they provided the highest amount of federal funds to water and  wastewater infrastructure projects, which include projects in rural  communities—defined for this report as communities with populations of  10,000 or less—in fiscal year 2011. The federal government has not  established a formal or consistent definition of what constitutes a rural  community; however, RUS defines a rural community as having a  population of 10,000 or less. EPA, although it does not define  communities as rural, gathers data on funding to communities of various  sizes, including communities with populations of 10,000 or less. For both  agencies, communities can include entities such as towns, cities, or  counties, which make the decision whether to apply for funding from the  programs. In some cases, regional water utilities or other utility  associations can apply on behalf of a community or a group of  communities. Using this definition allowed us to obtain and analyze  similar data from both agencies.
To address both objectives, we reviewed government reports, statutes,  regulations, guidance, budgets, and other relevant documents to identify  federal support for rural water infrastructure programs and specifically the  support provided by the Clean Water SRF, Drinking Water SRF, and RUS  programs. In addition, we interviewed officials from EPA and USDA and  from relevant nonprofit organizations, including the environmental finance  center at Boise State University and the Council of Infrastructure  Financing Authorities to collect financial and other information on the  extent of fragmentation, overlap, duplication, and coordination among  these rural water funding programs, as well as the current challenges  facing rural communities. We then selected a nongeneralizable sample of  five states to visit—Colorado, Montana, North Carolina, Pennsylvania,  and South Dakota—to review the extent of fragmentation, overlap, and  duplication among the EPA and USDA programs and the extent of  coordination among the programs at the state level. The information from  this sample cannot be generalized to all states but provides illustrative  examples of their experiences in applying for funding from the EPA and  USDA programs. We conducted site visits to these states to observe  federally funded projects, discuss the funding process, and discuss  community experiences applying for funding from the EPA and USDA  programs. In each state, we judgmentally selected a nongeneralizable  sample of communities to visit and projects to observe by analyzing lists  of water and wastewater infrastructure projects we obtained from state  SRF and state-level RUS program officials, and obtaining  recommendations from officials we interviewed. We used the lists of  projects to identify communities and projects that had applied for or  received funding from the state SRF and RUS programs, or both. We  reviewed a total of 54 projects in a total of 31 communities across five  states, all of which had experience in applying for funds for a drinking  water or wastewater project, or both, from the SRF or RUS programs. As  with the state sample, the information from the communities and projects  we selected cannot be generalized to other communities and projects but  provide illustrative examples.
To address the first objective, we assessed fragmentation between the  Clean Water SRF, Drinking Water SRF, and RUS programs by examining  statutes, regulations, and guidance relevant to the programs. To  determine overlap between the programs, we calculated the proportion of  SRF funding that was allocated to communities with populations of  10,000 or less for state fiscal years 2007 through 2011 (state fiscal years  generally start in July and end in June). We used data from EPA’s  National Information Management System (NIMS), which collects and  summarizes data on Clean Water and Drinking Water SRF program  funding directed to communities of populations of all sizes, including  communities with populations of 10,000 or less by states—the same size  of communities toward which RUS directs its funding. We conducted  interviews with EPA officials to assess the reliability of the NIMS data and  found it reliable for our purposes of identifying state SRF funding for  communities with populations of 10,000 or less. We compared this  proportion of SRF funding with total RUS funding provided from USDA’s  accounting system. We interviewed RUS officials about how these  funding data are maintained and determined that it was reliable for our  purposes of identifying USDA funding for communities with populations of  10,000 or less.
To determine the potential for duplication at the project and activity level,  we collected funding data for projects that had been funded by the state  SRF programs, the state-level RUS programs, or both, as well as funding  data from the communities we visited or whose officials we spoke with. In  addition, we spoke with state SRF, state-level RUS, and community  officials and consulting engineers to assess the extent to which projects  were funded separately by state SRF or state-level RUS programs, or  were jointly funded by these programs, and what activities were  conducted. Duplication occurs when two or more agencies or programs  are engaged in the same activities or provide the same services to the  same recipients; however, in some instances, duplication may be  warranted because of the magnitude or nature of the federal effort.  Further, we collected and analyzed application materials—preliminary  engineering reports and environmental analyses—from communities if the  community had a project that was jointly funded by both the SRF and  RUS programs or had applied to both programs for the same project. On  the basis of this criterion, we obtained preliminary engineering reports for  four projects in four states and environmental analyses for four projects in  the same four states. To analyze the documents, we identified the  components of each document and compared them with the others to  determine those that were similar and different. We spoke with consulting  engineers in those communities to determine whether the communities  were required to submit separate documents with similar information to  both programs. Because of the limited size of each sample, the results of  our analysis are not generalizeable to all such documents.
To address the second objective, we reviewed documents and initiatives,  including a 1997 joint memorandum signed by EPA and USDA promoting  better coordination between the state SRF and state-level RUS programs  and interviewed headquarters officials at EPA and USDA to identify  national efforts to encourage better coordination at the state level. To  analyze whether EPA and USDA efforts and initiatives incorporated  leading practices for interagency collaboration, we compared guidance in  the 1997 memorandum with our prior work on practices that can help  federal agencies enhance and sustain collaboration. In the states we  visited, to determine how closely the state SRF and state-level RUS  programs coordinate and whether their efforts to coordinate are  consistent with the 1997 memorandum, we reviewed state-level guidance  and documentation from state coordinating bodies and interviewed state- level SRF and RUS program officials, community officials, consulting  engineers, and technical assistance providers. We identified actions  taken by states that were consistent with actions identified in the 1997  memorandum and assessed whether these fulfilled the actions identified  in the memorandum using “yes” to indicate the action was fully taken, “no”  to indicate that it was not taken at all, and “partial” to indicate the action  had not been fully taken.
We selected the five states we visited using a multistep process and  several sources of information: funding needs for rural areas; geographic  location; and level of coordination between state and community partners.  We first narrowed the number of states we could visit to 15 states by  analyzing EPA and USDA data on funding needs. To do so, we  determined the relative level of funding needed in each state using the  following data, by state, for communities with populations of 10,000 or  less: (1) per capita needs for drinking water infrastructure, (2) per capita  needs for clean water infrastructure, (3) drinking water infrastructure  needs as a percentage of total state drinking water needs, (4) clean water  infrastructure needs as a percentage of total state clean water needs, (5)  the number of backlogged RUS water and wastewater infrastructure  project requests, and (6) the total amount of RUS loan and grant funding  requested for the backlogged projects. We obtained and analyzed these  six categories of data from EPA’s Drinking Water and Clean Water Needs  Assessment reports, and USDA’s data on backlog of funding applications.  To assess the reliability of EPA’s data, we reviewed the agency’s quality  control efforts over the data. To assess the reliability of the USDA data,  we interviewed RUS officials on how they obtained and verified the data.  We determined that both sets of data were sufficiently reliable for our  purposes of selecting a sample of states to visit. Because not all states  had complete data, we created three groups of states for analysis: 35  states had full data, or data for all 6 categories; 11 states had partial data,  or data for 4 of the 6 categories; and 4 states had mixed data that we  determined was not sufficient to analyze. Because the amount of data  varied for each group, we determined that we would sample from each  group separately.
Next, for the 35 states that provided complete data, we ranked the states  from highest to lowest (numbering the highest 1 and so on) within each of  the six categories, basing the ranking on either percentage or dollars,  depending on the category. We then identified the top 10 states in each  category, selected the 10 states that appeared in three or more of the six  categories and added the scores across the six categories for each state.
We then conducted a very similar process for the 11 states that had  partial data, except that we identified the states with the top five highest  values in each of the four categories of data and then selected the three  states that appeared in at least three of the four categories. This parallel  analysis gave us 10 states from the full data group and 3 states from the  partial data group. We then selected 2 states from the third group of  states, which had mixed data available, on the basis of their physical size  and the fact that they had the most data available in the group.
We further narrowed down the number of states we could visit using  geographic dispersion as a criterion. We located the 15 states selected  through our analysis of funding data in six Department of Census  divisions and selected five that were ranked first according to the six  categories. We also selected 2 states from the partial-data group and  one state from the mixed-data group, for a total of 8 states.
From the eight remaining states, we selected Colorado, Montana, North  Carolina, Pennsylvania, and South Dakota to visit based on the extent of  coordination among the state SRF and RUS programs and the  communities they served. We called the state SRF and RUS state-level  officials to discuss whether the programs met and how frequently they  jointly funded projects. We considered the range of coordination in each  of the eight states to judgmentally select the five states we visited.
We conducted this performance audit from September 2011 to  September 2012 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
section_title: Appendix II: Drinking Water and Clean Water State Revolving Fund Program Funds Provided to Communities with Populations of 10,000 or Less
paragraphs: Table 6 provides information on the percentages and amounts of funding  provided, by state, through EPA’s Drinking Water and Clean Water SRF  programs to communities with populations of 10,000 or less.
section_title: Appendix III: Comments from the Environmental Protection Agency
section_title: Appendix IV: Comments from the U.S. Department of Agriculture’s Office of Rural Development
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual above, Susan Iott, Assistant Director; John  Barrett; Elizabeth Beardsley; Mark Braza; Elizabeth Curda; Richard  Johnson; Micah McMillan; Sara Ann Moessbauer; Dan Royer; Tina  Sherman; Carol Herrnstadt Shulman; and Kiki Theodoropoulos made key  contributions to this report.