Rural Water Infrastructure: Improved Coordination and Funding Processes Could Enhance Federal Efforts to Meet Needs in the U.S.-Mexico Border Region
Released: 2010-01-19T00:00:00

Letter

Background

The U.S.-Mexico border extends more than 2,000 miles, from the Gulf of Mexico to the Pacific Ocean. As can be seen in figure 1, portions of four states—Texas, New Mexico, Arizona, and California—encompassing 97 counties and 44 U.S. federally recognized tribal nations make up the border region.

The region includes a wide range of community types, from large cities— such as Los Angeles, California, population 3.8 million—to small, rural communities—such as Spofford, Texas, population 75. Of the 44 tribal nations in the region, 30 are in California, 8 in Arizona, 1 in New Mexico, 2 in Texas, and 3 in both California and Arizona. The tribal nations range in population from 1 household in the Jamul Indian Village in California to 3,572 households in the Tohono O’odham tribal nation in Arizona, whose tribal land covers an area approximately the size of Connecticut.

History of Water and Wastewater Infrastructure in the Border Region

Throughout the border region, a lack of safe drinking water and adequate wastewater treatment has been a continuous problem exacerbated by large gains in population associated with rapid industrial growth that has occurred over the past three decades. Part of this population increase has occurred in communities now commonly referred to as colonias. Initially, colonias emerged as developers sold small plots of residential land to individuals without providing water or wastewater infrastructure. Residents often placed a trailer or similar structure on the land or built their homes themselves, many starting with just one room and adding on periodically as they were able to afford it. Numerous news articles during the 1980s and 1990s described colonias, with one referring to colonias as “pockets of poverty” with conditions similar to those generally associated with “third-world” conditions. When colonias first began to emerge, they were often located in remote areas outside of incorporated cities where developers sold land as residential without adhering to the ordinances and regulations of the cities; however, more recently many local governments have begun to classify entire cities or subdivisions within a city as colonias.

Since water and wastewater infrastructure were lacking when they bought their lots and built their homes, many residents in colonias relied on on- site alternatives. For example, to obtain water, some used contaminated wells, while others hauled and stored water in barrels or tanks. For wastewater disposal, residents used methods such as septic tanks or cesspools. Septic systems can treat waste safely, but they can also contaminate drinking water with sewage and organic matter if they are not installed and maintained properly. Effective septic systems require that the type and amount of soil be sufficient to absorb wastewater, and that the systems not be located too close to groundwater or surface water. In contrast, cesspools can pose a risk of contamination because they do not treat wastewater and are merely holes in the ground for the disposal of sewage. Problems associated with failing septic systems are not restricted to colonias. Rural households throughout the region can experience difficulties maintaining proper on-site wastewater treatment. Figure 2 compares proper septic system function with improper cesspool disposal.

In response to public health concerns in the border region caused by a lack of clean drinking water and adequate sewage treatment, Congress established various programs with dedicated funding. For example, in the early 1990s, Congress established dedicated funding for water and wastewater projects to benefit residents of colonias. These funds have been used for a number of projects to provide colonia residents safe drinking water and adequate sewage disposal, yet some colonias continue to lack these basic services. Appendix II provides additional information on the establishment of federal funding to assist colonias.

Colonias are still found throughout the border region, though their characteristics vary widely. Present-day colonias are communities of all types and sizes, both incorporated and unincorporated. For example, a colonia can be a tribal reservation, a fast-growing retirement community, or a high-poverty subdivision. Moreover, not all colonias have the same level of need. For example, a town in Arizona that already had water and wastewater service was designated a colonia in 2008 because the local water utility did not have the funds to address routine repairs, and believed that the designation would increase its ability to receive federal funds. In contrast, residents of the El Conquistador colonia in Hudspeth County, Texas, have lived without access to water and wastewater service for over 20 years.

Agencies That Provide Assistance in the Region

To help communities and households throughout the border region obtain safe drinking water and adequate wastewater treatment, seven federal agencies provide grants, loans, and technical assistance under separate programs and congressional authorizations. These include the following: EPA, which has funding for drinking water and wastewater systems that is complementary to its regulatory and enforcement authorities under the Safe Drinking Water Act and the Clean Water Act. EPA provides grants for water and wastewater infrastructure in the border region through several different programs including the U.S.-Mexico Border Water Infrastructure Program. EPA’s binational program provides grants to water and wastewater facilities within 62 miles of the border. EPA allots most of these funds to the Border Environment Cooperation Commission (BECC) and the North American Development Bank (NADB). These organizations then administer these funds to implement project development activities and construction. In addition to the funds administered by BECC and NADB, EPA provides grants to tribal nations within the border region.

Colonias Wastewater Treatment Assistance Program (CWTAP). EPA awarded grants to the state of Texas from fiscal years 1993 through 1999 for the purpose of funding the construction and improvement of water and wastewater systems in colonias. The state of Texas obligated this funding, along with a state match, to public entities during fiscal years 2000 through 2008.

Drinking Water and Clean Water State Revolving Fund Programs. EPA annually provides grants to states to help finance local drinking water and wastewater projects nationwide through the Drinking Water and Clean Water State Revolving Fund Programs. The states use this funding, along with a required 20 percent match, to capitalize their state revolving funds. The funds provide low-cost loans or other financial assistance for a wide range of water infrastructure projects. In addition, EPA provides funds from the Drinking Water and Clean Water Revolving Fund Programs to tribal nations throughout the United States for water and wastewater projects.

USDA, which provides grants, loans, and technical assistance for rural water and wastewater projects through its Water and Environmental Program. The department can provide assistance for various activities, such as construction of water treatment and sewage collection facilities, connection of single-family homes to water distribution or wastewater collection lines, and training for the operation of water and wastewater utilities. While the program is available to eligible entities nationwide, USDA has been required by annual appropriations acts to set aside a portion of this funding—up to $25 million annually—for water and wastewater systems that benefit colonia residents (referred to as the Section 306C Colonia funds).

HUD, which disburses grants to states and local governments through the Community Development Block Grant (CDBG) Program to fund housing, infrastructure, and other community development activities. The annual appropriation for CDBG is split according to HUD formulas so that 70 percent is allocated among eligible metropolitan cities and counties (referred to as entitlement communities) and 30 percent among the states to serve cities with populations of fewer than 50,000 and counties with populations of fewer than 200,000 (referred to as nonentitlement communities). Each border state is required to use up to 10 percent of total funds for projects to meet the water, sewage, and housing needs of colonia residents (referred to as the Colonia Set-aside). According to a HUD official, HUD determines each state’s Colonia Set-aside amount annually based on input from state officials and other colonia stakeholders, such as nonprofit organizations. For fiscal years 2000 through 2008, HUD established a 10 percent annual set-aside amount for Texas, New Mexico, and Arizona and a 5 percent annual set-aside for California. Additionally, HUD provides CDBG funds to tribal nations that can be used for any eligible CDBG activity, including water or wastewater projects.

IHS, which constructs water and wastewater projects through its Sanitation Facilities Construction (SFC) Program. This assistance is available to tribal nations within the United States, and through the program, IHS constructs various projects, including distribution and collection lines, treatment facilities, and home connections.

EDA, which provides grants to economically distressed areas through its Public Works and Economic Development Program. The funds are used for construction of public facilities, including water and wastewater facilities.

The Corps, which has provided assistance for water and wastewater projects in the border region as directed by Congress. Congress has authorized and appropriated funds for the Corps to provide assistance for a number of projects, including projects to benefit colonias in need of water or wastewater infrastructure.

Reclamation, which has been directed to provide assistance for drinking water or wastewater treatment projects in response to individual project authorizations but does not have an established program for such assistance. However, in 2006, Congress passed the Rural Water Supply Act, directing Reclamation to develop a rural water supply program.

Entities that can seek assistance from most of these federal agencies include local units of government, tribal nations, water or wastewater utilities or similar entities, nonprofit organizations, or individual homeowners. Each federal program has its own application process but generally involves the following steps: Pre-application meeting. Federal agencies generally require the entity seeking assistance to meet with agency officials prior to submitting an application. During this meeting, officials and the potential applicant discuss program eligibility, the type of assistance needed, and application requirements.

Submission of application. After the pre-application discussion, the entity seeking assistance prepares an application that can include information such as financial, engineering, and environmental studies that describe the project plan and its costs. Some agencies require additional documentation, such as evidence of public support for the project and documentation that the entity cannot obtain commercial credit at a reasonable rate.

Review and evaluation of application. Once an agency receives an application, officials review it for eligibility. After the agency determines that an application meets program eligibility requirements, it may be further evaluated, depending on whether the assistance being requested is from a competitive or a noncompetitive program. For competitive programs, agencies generally score each application according to established criteria and then rank the applications so that the projects with the highest scores will receive priority for available funds. For noncompetitive programs, agencies will generally obligate funding as applications are deemed eligible until all available funds are depleted.

Federal Agencies Provided at Least $1.4 Billion over 9 Years for Water and Wastewater Infrastructure in the Border Region

We found that seven federal agencies obligated at least $1.4 billion for drinking water and wastewater projects in the U.S.-Mexico border region from fiscal years 2000 through 2008. USDA and EPA obligated 78 percent, or about $1.1 billion, of the total $1.4 billion. The remaining 22 percent, or $309 million, came from HUD, the Corps, IHS, EDA, and Reclamation. Table 1 provides additional data regarding federal funds obligated to the border region for water and wastewater projects by agency and program.

Details about the funding provided by each of the seven federal agencies to the border region from fiscal year 2000 through 2008 include the following: EPA obligated at least $568 million in grants, or 41 percent of the total federal funding provided to the region. Of that, about $471 million was obligated through programs targeted to the border region, while just over $98 million was obligated through nationwide programs. Of the $471 million targeted to the border region, EPA obligated $298 million in grant funds through the U.S.-Mexico Border Water Infrastructure Program, and $173 million in grant funds through the Colonias Wastewater Treatment Assistance Program. Of the $98 million from nationwide programs, $61 million was congressionally directed in EPA’s State and Tribal Assistance Grant (STAG) account appropriations, according to data provided by EPA. The remaining nationwide program funds were obligated to tribal nations through the Drinking Water and Clean Water Revolving Fund Programs (about $36 million). Appendix V provides additional data on the obligations from EPA in the border region. In addition, state-administered revolving loan funds partially capitalized by EPA provided approximately $3.4 billion in loan financing to water and wastewater projects in the border region through the Clean Water and Drinking Water State Revolving Fund Programs from fiscal years 2000 through 2008. For example, the California Department of Health obligated about $1.7 million for repairs to the drinking water distribution system in Imperial County, California. Appendix VI provides additional data on the obligations from the Drinking Water and Clean Water State Revolving Fund programs in the border region.

USDA obligated about $509 million, or about 37 percent of the total federal funding. Of the $509 million, it obligated $208 million in grant funds through its Section 306C Colonia funds. The remaining $302 million—$209 million in loan funds and $93 million in grant funds—was obligated through its nationwide Water and Environmental Program. Of the $509 million total, USDA obligated about $502 million (98 percent) to public utilities or similar entities for construction or improvements to water and wastewater infrastructure. For example, USDA obligated $2.9 million in grants and almost $1 million in loans to the city of Truth or Consequences, New Mexico, for improvements to the wastewater treatment plant and extension of collection lines. It obligated over $7 million to individuals in the border region for household projects, such as installing indoor plumbing. Appendix IV provides additional data on the obligations from USDA funds in the border region.

HUD obligated about $218 million, or 16 percent of the total federal funding provided to the region. Almost all of the funds, $217 million, were obligated as grant funds through the Community Development B Grant Programs. The remainder, $925,000, was obligated from HUD’s Economic Development Initiative Special Project account, according to lock officials. Of the $217 million in CDBG grants, $51 million of this was identified by states in HUD’s database as obligated for water or wastewater projects in a colonia. For example, New Mexico obligated about $265,000 to extend water distribution lines to 20 residents of a colonia in Sierra County. Additional funds from the Colonia Set-aside Program may have been used in colonias for water and wastewater projects, but we were unable to determine the total amount because HUD does not comprehensively distinguish in its data system which of the CDBG obligated funds are under the Colonia Set-aside. Of the $217 million in CDBG grants, HUD obligated $2.6 million through its Indian CDBG program to two tribal nations—the Salt River Pima-Maricopa Indian Community and the San Pasqual Band of Mission Indians. Appendix VII provides additional data on the obligations from HUD in the border region.

IHS obligated about $45 million for the construction of sanitation facilities on tribal nations in the border region. For example, IHS obligated about $8 million to provide basic sanitation services to residents of the Tohono O’odham tribal nation by participating in a modular bathroom program. Through this effort, residents living in traditional adobe structures that lack indoor plumbing are able to attach a modular bathroom to the home and then connect to a wastewater distribution line. Appendix VIII provides additional data on federal obligations made to each tribal nation in the border region.

EDA obligated about $39 million in grant funds for public infrastructure projects that included water or wastewater activities. These funds were obligated for 29 projects. For example, EDA obligated $3.2 million in grant funds for a water system project in San Bernardino, California. This project included land acquisition for new water wells, well drilling, new pipeline, a booster pump, obtaining water rights, an engineering and environmental assessment, and removal of an elevated water tank.

The Corps obligated just over $4 million in assistance to projects within the border region. The assistance was used for 6 congressionally directed projects in New Mexico, and 3 projects to assist colonias in Texas conducted under the Water Resources Development Act of 1992, which authorized the Corps to assist communities with water and wastewater needs.

Reclamation obligated almost $4 million in grant funds for 5 water supply projects, for which Congress specifically authorized and appropriated funds, according to agency documents. Reclamation currently funds projects only in response to specific congressional directives, but it was authorized in 2006 by the Rural Water Supply Act to establish a rural water supply program. We reported in 2007 that Reclamation planned to develop programmatic criteria to determine eligibility for participation in this program and to assess the status of authorized rural water supply projects and other federal programs that address rural water supply issues, as the act required, by December 2008. As of September 2009, agency officials told us that the establishment of the program is still a priority, but it has been delayed by the change of Administration and by efforts to develop a strategy for implementation of the American Recovery and Reinvestment Act funds. Agency officials stated they hope to have the program established by the end of calendar year 2009.

Of the 97 counties in the border region, 94 received some assistance, and 3 received no assistance during fiscal years 2000 through 2008. Figure 3 shows the amounts provided to the 94 counties that received some assistance, which ranged from a low of just under $260,000 provided to Reagan County, Texas, and to a high of almost $130 million provided to Cameron County, Texas.

Appendix III provides further data on each county, including its rural- urban classification and the funding obligated by federal agencies.

Federal Efforts Have Not Been Effective in Meeting the Water and Wastewater Needs of the Border Region

Federal efforts have not effectively addressed the drinking water and wastewater needs in the border region because agencies (1) have not comprehensively assessed the needs of the region, (2) lack coordinate policies and processes, and (3) in some cases have not complied with statutory requirements and agency regulations.

Agencies Have Not Comprehensively As Water and Wastewater Conditions, Hampering Their Ability to Meet the Needs of the Region

O ver the years, some federal agencies have conducted assessments to identify water and wastewater conditions in the border region, but non these assessments either individually or collectively provides a comprehensive picture of the needs of the region. We identified following assessments that either have been conducted by federal agencies or are ongoing: EPA commissioned a study to set a baseline, as of December 2003, for its U.S.-Mexico Border Water Infrastructure Program by estimating the number of households without basic water and wastewater service in area served by the program. While the data collection effort was used by the agency to establish performance measures and strategic goals, the agency did not establish a process to update the data to reflect current conditions. Without such a process, the accuracy and usefulness of the data are limited. In addition, the study did not distinguish between home with appropriate septic systems and homes without them.

In addition, EPA has reviewed applications received from both the U.S. and Mexico sides of the border through its U.S.-Mexico Border Water Infrastructure Program in 2004, 2006, and 2008 to determine the total amount of funding requested from the border region. The requests for assistance ranged from $590 million to over $1 billion in project construction costs. During the most recent solicitation, over 130 projects on the U.S. side of the border requested assistance representing $800 million in total project cost, according to EPA officials. While EPA told this effort provides the agency with a snapshot that reflects the existing needs in the region, it acknowledges this snapshot is not a comprehensiv assessment of need in the region and captures only the need from those entities that seek assistance from the U.S.-Mexico Border Water Infrastructure Program.

Further, EPA conducts the nationwide Clean Watersheds Needs Survey every 4 years to identify the funds needed to address problems with wastewater treatment facilities. Similarly, the agency conducts an assessment every 4 years to identify the funds needed for existing d water facilities to comply with safe drinking water quality standards. However, on the basis of information provided by agency officials, we not believe that either of these efforts provides the agency with a comprehensive assessment of the border region. For example, acc to officials, these assessments have not traditionally been successful in collecting data from small communities. Officials told us that the 2004 Clean Watersheds Needs Survey had a 36 percent response rate from wastewater systems that serve small communities (those with fewer th 10,000 wastewater customers). In addition, officials told us the 2007 drinking water assessment includes data for all existing utilities servi ng over 100,000 customers, but only a sample of small community systems are included in the assessment—600 of the approximately 33,000 such systems nationwide. Because many of the communities in the border region are small, we do not believe that they would be captured by the survey.

In 2008, USDA, reported on the amount of funds directed to colonias in each of the four border states and the amount of unfunded applications the agency received for the program in fiscal year 2008. This report was i response to a request from the Senate Agriculture Committee to, among other things, provide a report that “identifies where additional resources are most needed.” According to our review of USDA’s report, the department did not identify where additional resources are needed simply reported its backlog of applications from each state. For exampl e, the report stated that the department had a pre-application and application backlog of approximately $117 million—with pre-applications accounting for $108 million and applications accounting for $9 million. As with EPA’s assessment of applications submitted to the U.S.-Mexico Border Water Infrastructure Program, these figures represent only those entities that have contacted USDA for assistance, and therefore do not provide a complete assessment of those areas where resources are most needed.

HUD has provided funds for local governments to identify colonias and the water and wastewater conditions within them. From 1992 through 2008, HUD-funded assessments were completed for 43 of the 67 Texas counties in the border region. For example, a 2008 assessment for Dimmitt County, Texas, found that 113 housing units lacked centralized water service. However, as some assessments were conducted more than a decade ago or longer, they may not reflect current conditions. HUD also provided funds to the U.S. Geological Survey (USGS) to collect data on infrastructure in colonias for 6 counties in Texas. The dataset, released in 2007, includes information such as number of households, source of potable water, and whether wastewater collection is available.

Since 1989, IHS has collected data on the water and wastewater infrastructure conditions for each tribal reservation in the United This information is available through its Sanitation Deficiency System and is updated annually. As a result, IHS can select projects that target the greatest need and report on effectiveness to meet the water and wastewater needs of tribal nations, including those within the border region.

States.

In 2007, BECC began efforts to identify the water and wastewater infrastructure needs within the 62-mile region north of the U.S.-Me xico border. The study is expected to compare the number of existing water and wastewater connections with the total number of homes and is expected to identify gaps in access to centralized services. According BECC officials, data collection and analysis were completed for New Mexico in the first quarter of 2009 and are currently being conducted f Texas, California, and Arizona. BECC expects to complete all data collection and analysis and issue the study by the end of 2010.

Rural communities may also lack the financial resources to hire a consultant who can help them design a project and prepare the app materials, including the preliminary engineering and environmental documents. According to several officials that we spoke to, engineer and environmental reports can cost from $30,000 to $100,000. A prior federal study has identified this high initial cost as a major obstacle to providing federal assistance for water and wastewater service in the region. While federal assistance to help offset this high initial cost is available through some programs, such as EPA’s U.S.-Mexico Border Water Infrastructure Program, the overall federal assistance provided such activities is minimal—from fiscal years 2000 through 2008, the program provided funds to 62 projects in the border region represent about $15 million in grant funds.

Although few federal agencies have made efforts to build institutional capacity in border communities, we did find some efforts by state programs and nonprofits. For example, the Texas Colonias Initiative Program has colonia ombudsmen who assist communities with basic infrastructure needs. In 1999, the state of Texas established a Colonias Initiative Program to advance efforts to connect colonia residents’ homes to water and wastewater services. The program’s ombudsmen work in counties in the border region with the highest colonia populations— Hidalgo, El Paso, Starr, Webb, Cameron, Nueces, and Maverick Counties. The role of the ombudsmen includes the following: serving as liaisons among colonia residents, federal and state agencies, local governments, and utility companies; facilitating effective communication among colonia stakeholder groups to improve living conditions for colonia residents; mediating among interested groups to resolve situations that prevent the provision of water and wastewater service; serving as conduits for information by conducting community outreach and facilitating community meetings with colonia residents; and monitoring the different phases of projects to ensure progress and project completion.

State and local officials told us that the ombudsmen had helped communities overcome obstacles to obtaining service and had provided valuable information on colonia conditions to state and federal agencies.

Agencies Lack Coordinated Policies and Processes for Providing Federal Assistance in the Border Region

The federal agencies that provide most of the funding for water and wastewater projects in the border region—EPA, USDA, and HUD—have not developed comprehensive coordinated policies and procedures, resulting in administrative burdens for applicants, duplication of efforts, and inefficient use of resources. However, the agencies have long recognized the need for improved coordination, and in 1997 these agencies issued a joint memorandum to encourage cooperation among federal, state, and local funding agencies. The memorandum states that the agencies will foster coordination efforts by establishing a uniform application, standardizing requirements, coordinating funding cycles, and collaborating in project selection to improve program delivery to small and rural communities, including those in the border region.

USDA-Rural Utility Service, Department of Housing and Urban Development, and U.S. because the engineer had to complete two separate sets of engineering documentation for EPA and USDA. The applicant could have saved thesefunds had EPA and USDA established uniform engineering requirements. In addition, because most federal programs have no process by which to coordinate and share information on projects they have selected for funding, we found examples where agencies made inefficient use of limited resources. both provided funds to design wastewater projects that would serve t same communities in Hidalgo County, Texas. EPA provided funds to design the project as an expansion of service from an existing utility, whil USDA provided funds to design the project as a new wastewater treatmen facility. The community elected to build the new facility, thus eliminat ing the need for the EPA design work and resulting in a waste of those federal funds. In another example, HUD provided a utility in Hudspeth County, Texas, over $860,000 in grant funds from 2004 to 2006 to extend water distribution and waste collection lines for residents of a colonia. However, as of September 2009, the distribution lines remain unused because the utility does not have enough water to serve the additional households. T he utility intended to use funding from USDA to construct a new well, but the funding obligated by the agency was not enough to cover project costs.The utility has been unable to obtain the additional assistance from federal agencies, and no additional water supply has been acquired in the 3 years after the HUD funds were provided to construct the distribution lines, resulting in a $900,000 investment of federal funds in distribution lines that are not usable. We received conflicting reports about this project from USDA and utility officials. Specifically, a USDA official in the state offic told us that the agency could provide loan funds only to complete the project and that the agency advised the utility against applying for assistance because the utility could not handle any additional loan burden In contrast, USDA headquarters officials told us that the agency orally offered a loan to the utility to complete the project, but the utility d submit an application to officially request the assistance, and a representative of the utility told us that the utility did meet with USDA officials and it was discouraged from submitting an application.

For example, we found a case where EPA and USDA .

EPA’s U.S.-Mexico Border Water Infrastructure Program recently adopted a process to coordinate with federal agencies that are providing funding for a project the program may fund.

In contrast, federal and tribal officials told us that the collaborative relationship between EPA’s tribal programs and IHS is a model that has been beneficial for tribal nations. The agencies have created a pr coordinate project selection and development in which EPA uses data o the needs of tribal nations from IHS to select projects. According data, IHS administers almost all jointly funded projects, and as a result applicants need to deal with only one federal point of contact.

Furthermore, we found examples of states in the border region that have made efforts to better coordinate funding for water and wastewater projects among federal, state, and local agencies and thereby make the application process easier, maximize the use of funds, and reduce complications during project development. The following are ex coordination within the states: Texas has developed a coordination group for the state and federal agencies that provide funding to colonias, and for representatives from s of regulatory agencies. This group meets quarterly to discuss the statu ongoing projects in colonias and any impediments to their completion.

California organizes “funding fairs,” where several state and federal agencies come together in communities throughout the state to prov information on potential assistance that may be available.

Arizona has developed a committee that consists of several state and federal agencies that conduct meetings throughout the state. According to state officials, these meetings provide communities the opportunity t discuss their needs with the officials and to determine which funding agency could best meet their needs.

New Mexico, through executive orders, established an initiative to, am other things, increase collaboration among state agencies that fund water infrastructure. As a result of the initiative, the state developed a single application process for entities seeking assistance with water and wastewater infrastructure to complet e and submit to one state office through a Web-based portal that then disseminates the application to numerous other state and federal agencies for review. The state has also developed a single set of engineering requirements that state and some federal agencies agreed to accept. In addition, a workgroup of state and federal officials meets biweekly to review the applications and identify the combination of programs that would best meet the needs of individ ual applicants. Federal participation includes the New Mexico USDA Rura Development office, and state participation includes the New Mexico s agencies administering the HUD CDBG Program and the Clean Water and Drinking Water State Revolving Fund Programs.

Our past work on issues that cut across multiple agencies, such as rural water infrastructure, has shown that agencies face numerous challenges For example, we have found that their efforts to improve coordination. agency missions may not be mutually reinforcing or procedures and processes may be incompatible. However, we found that without a coordinated approach, programs can waste scarc overall effectiveness of the federal effort. In order to overcome significant differences in agency missions, cultures, and established ways of doing business, collaborating agencies must have a clear and compelling rationale to work together. The compelling rationale for agencies to collaborate can be imposed externally through legislation or other directives or can come from the agencies’ own perceptions of the be they can obtain from working together. In either case, among the key practices that can help agencies enhance and sustain their collaborative efforts, include the following: e funds and limit the defining and articulating a common outcome; agreeing on roles and responsibilities; establishing compatible policies, procedures, and other means to operate across agency boundaries; identifying and addressing needs by leveraging developing mechanisms to monitor, eva luate, and report on results.

Agencies Have Not A Ensured Compliance with Statutory Requirements in Implementing Programs for the Border Region

We found that USDA, HUD, and the Corps have not always ensured compliance with statutory requirements and regulations concerning the eligibility of applicants or projects or the prioritization of funds from programs targeted at the border region.

Agencies Are Not Ensuring Compliance with Statutory Eligibility Requirements

HUD and the Corps are not ensuring compliance with eligibility requirements set by Congress when they distribute federal assistance. Specifically, we found the following: HUD. Under the Cranston-Gonzalez Act, the states of Arizona, Californi New Mexico, and Texas shall each ma to meet the needs of the residents of colonias in the State relating to water, sewage, and housing,” a specified percentage of CDBG funds they receive. Under the act, the term “colonia” means any identifiable community that, among other things, is determined to be a colonia on basis of objective criteria, including lack of potable water supply; lack of adequate sewage systems; and lack of decent, safe, and sanitary ho using. In short, the act requires grants to be made for projects meeting the needs of colonias residents, which must be related to water, sewage, and housing. ke available, “for activities designed We found that HUD has not developed guidance for determining wh constitutes a colonia, has not made such determinations, and has not reviewed states’ determinations. Lacking guidance and direction from HUD, states have applied the requirement differently. For example, in California and New Mexico most colonias are designated as communit with substandard housing and a lack of either potable water or adequat sewage systems. In Arizona, designations use any one of the three statutory criteria. In Texas, designations are made for areas with substandard housing that lack either adequate water or wastewater treatment, and which are unincorporated, criteria not found in the act. HUD officials said that the CDBG Program relies on states to make decisions that make the most sense for the particular state, and officials e do not agree that varying interpretations by states suggest that the guidance is problematic. However, officials stated that in the future, will issue guidance that reportedly will include information on the documentation needed by states to support that a colonia meets stat requirements.

HUD officials also told us that the agency interprets the statute as authorizing colonia funds to be spent on any currently eligible CDB activity. However, the statute expressly limits the Colonia Set-aside to activities relati ng to water, sewage, and housing. As the agency has not limited state use of the funds, grants have been obligated for numerous activities. Arizona obligated only about 32 percent of the Colonia Se funds for water, wastewater, or housing activities, and the remainder w used for other activities not consistent with the limitations in the act, including about $560,000 for a neighborhood job center and almost $180,000 for a garbage collection vehicle. HUD officials did not say whether the guidance the agency intends to issue in the future will discuss eligible activities.

Corps. The Water Resources Development Act of 1992, as amended, authorizes the Corps to provide assistance for wastewater treatment facilities, water systems, and related structures for colonias in the United States along the Un ited States-Mexico border. Although the act does not define colonias, the legislative history for the program shows that colonias were considered to be rural settlements in the border region that lack adequate basic water and sewer facilities, specifically stating that most these communities rely on outhouses or substandard septic tanks. We foun that the Corps has not defined “colonia” for the purposes of the act, or developed any guidance for use of these funds. The Corps recognizes that unlike other Section 219 projects, which have specifically identified pro s locations (e.g., congressionally directed), the colonias Section 219 project i essentially a programmatic authority. Nonetheless, Corps officials stated the orps program was too small for the agency to develop guidance. While the C s states that it independently verifies that the assistance it provides under thi provision is going to colonias, Corps officials acknowledged that the agency does not have criteria for identifying eligible colonias, and it is unclear by what basis the Corps has verified the communities are colonias as meant in ject the authorizing statute. As a result, the Corps cannot ensure that its assistance is going to colonias.

Agencies Do Not Ensure Funds Intended for Use in the Border Region Are Provided to Those with the Greatest Need

USDA and HUD do not ensure that funds intended for use in the border region comply with statutory requirements for establishing project priorities in the border region. Further, the Corps has not established any guidance to ensure funds are targeted to those projects with the greatest need. Specifically, we found the following: USDA. The Consolidated Farm and Rural Development Act, as amended, directs USDA to provide financial assistanc e for water supply and waste facilities and services to communities whose residents face significant health risks, because the community’s residents do not have access to such facilities. The act states that USDA must give preference to entities “that propose to provide water supply or waste disposal services to the residents of those rural subdivisions commonly referred to as colonias are characterized by substandard housing, inadequate roads and drainage and a lack of adequate water or waste facilities.” Thus, the provision requires USDA to give preference to water and waste projects in colonias where other infrastructure and housing are also inadequate.

We found that USDA has no process in place to ensure that entities “propos to provide water supply or waste disposal service colonias are given preference. Instead, USDA told us it views an entity ment proposing to assist any community the relevant state or local govern has designated as a colonia as qualifying for the preference. USDA does not attempt to independently verify whether these entities meet the threshold eligibility requirement (proposing to serve communities in which most residents lack access to adequate water or waste facilities), or that th e areas to be served meet the statutory definition of “colonia.” The age ncy also has failed to provide any guidance elaborating on the meaning of an “adequate” water or waste disposal system, or of “colonia.” Despite the lack of guidance, USDA told us that it considers as inadequate a system with a ny violation of the Safe Drinking Water Act or Clean Water Act, as appropria te.

As a result of these issues, we believe that USDA has no assurance that entities proposing to serve eligible colonias with the required characteristics have received the required statutory preference. For example, we found that USDA gave an entity proposing a water utility improvement project in New Mexico the colonia preference and obligated $700,000 from the colonia funds. The improvements to the water utility included a new well, tank, and related infrastructure. Rather than reserving the colonia preference to projects that serve areas living without these basic necessities, the agency provided the same preference to this project, which was intended to serve new development, according to the USDA project summary. By awarding the same preference to projects that benefit communities with existing infrastructure, the agency is failing to give preference to those entities proposing to “provide water supply or waste disposal services” to colonias that have the statutory characteristics and live without basic necessities.

HUD. The Cranston-Gonzalez Act requires Colonia Set-aside grants to be made in accordance with a distribution plan having the greatest need for such assistance. To do so would require a state to at a minimum identify colonias, discuss the relative needs of colonias, and select projects reflecting the colonias with greatest needs. However, we found that HUD has failed to ensure that state distribution plans reflect that priority is given to the colonias with the greatest need. Instead, HUD officials told us that it is up to the states to determine the needs-based gran t priorities and the agency does not believe it has the authority to direct states on how to distribute the funds as long as it is in accordance with a distribution plan. We believe that without direction and oversight from that gives priority to colonias HUD, states may not be meeting the statutory requirements. For example, one state does not distinguish between Colonia Set-aside funds and CDBG funds and does not actually “set aside” the colonias funds to distribute based on priority of needs. Instead, the state splits the available funds among the regional Councils of Governments, which then determine how to distribute the funds to local projects. The distribution proces vary by region—e.g., one region rotates eligibility among the eligible entities in the county, providing each eligible entity an equal distribution of the funds. The state later adds up the total of the projects that it considers qualifying as colonias to justify the set-aside amount. While HUD officials may believe states are identifying the colonias with the greatest needs, w do not agree that this complies with the act, which requires the agency to take the necessary steps to ensure that the states are doing so. In a July 20 report, the HUD Inspector General also recommended that HUD address this issue, and HUD agreed to issue guidance to assist states to “more clearly articulate the priorities” in developing their method of distribution. As of November 2009, the agency had not yet issued this guidance, but officials told us the agency still intends to issue the guidance in the near future.

In July 2008, the HUD Inspector General issued a report auditing the Colonias Set-aside program, including HUD actions to ensure compliance and detailed review of uses of funds by states. Our findings are consistent with those reported by the Inspector General. HUD, HUD’s Community Development Block Grant Set-Aside for Colonias Was Not Used for Its Intended Purposes, 2008-FW-0001 (Washington, D.C.: July 29, 2008). assist the community on the entity’s readiness to enter into the req cost-sharing agreement. By using this approach, the Corps is failing to ensure limited funds are provided to those with the greatest need.

Appendix II provides additional information on the establishment of federal funding to assist colonias and GAO’s analysis of legal requir related to eligibility and project priorities.

Conclusions

Meeting the drinking water and wastewater needs of the border region is a difficult undertaking. Among other things, the remoteness of many communities can make it difficult to identify residents in need of water and wastewater services. In addition, the program differences resulting from separate mandates and project eligibility requirements for the various federal programs add to the complexity of coordinating funding needed to complete projects in the region. The ultimate success of providing these basic services to residents of the border region hinge several factors, of which a well-coordinated implementation approach based on a comprehensive assessment of the region’s existing water wastewater needs is key. Federal agencies have obligated more than $1.4 billion in recent years to fund numerous projects that provided water an d wastewater service to residents in the border region. However, despite th extensive efforts that have gone into these projects and the agencies’ recognition over a decade ago of the benefits from coordinated policies and procedures, the lack of (1) an overall needs assessment for the region, (2) comprehensive coordinated policies and procedures, and (3) compliance with all statutory and program requirements is undermining the effectiveness of the federal efforts. We believe that the impact of these deficiencies has limited the availability of federal assistance, crea administrative burden for applicants, delayed project completion, and failed to ensure that federal funds are used effectively and directed according to the criteria established in federal statutes. In a time of constrained resources, continuing to provide an uncoordinated federal response is not the most effective use of federal resources to meet the drinking water and wastewater needs in the border region.

Matters for Congressional Consideration

In order to better address the needs of the region, Congress may wish to consider establishing an interagency mechanism or process, such as a task force on water and wastewater infrastructure in the border region that includes the federal agencies that administer programs in the region. Congress may wish to direct any task force, in partnership with state and local officials, to leverage collective resources to identify needs within the border region— including the identification of the water infrastructure status within colonias, and the extent to which the lack of institutional capacity has impeded communities within the border region from seeking assistanc in light of these ne coordinated policies and procedures across relevant agencies, such as a coordinated process for the selection of projects, and standardized applications and environmental review and engineering requirements the extent possible; eds, establish a framework for compatible and evaluate the degree to which there are gaps in the programs and what resources or authority would be needed to address them; and provide periodic status reports regarding the progress made in deve this strategic and coordinated approach.

Congress may also wish to consider reemphasizing the priorities for use of nds Colonia Set-aside funds by specifically requiring HUD to make these fu available only for grants related to the three existing statutory and by directing HUD to report annually to Congress on the purposes for which such funds were used and the steps it is taking to ensure that the funds are being used for the required purposes.

Recommendations for Executive Action

We are making the following three recommendations for executive action.

To ensure that funding established to meet the needs of colonias is used in ways that are consistent with statutory and regulatory requirements, we recommend that he Secretary of Agriculture direct Rural Development to revise its process of determining eligibility to ensure that the agency only provides Section 306C colonia funds for projects that benefit colonias, as defined by federal statute, and to revise its priority process to better target limited funds to those projects meeting the statutory preference criteria.

The Secretary of Housing and Urban Development ensure that state agencies provide Colonia Set-aside funds only for projects that benefit colonias, as defined by federal statute, and to promptly establish guidance to ensure states follow a method of distribution that results in the prioritization of Colonia Set-aside funds to those colonias with the great need. Further, the Secretary should monitor the states’ uses of all Colonia Set-aside funds as a distinct component of CDBG monitoring. est If the Corps continues to assist communities with water and wastewa related activities through the colonia program, the Secretary of Defense direct the Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers to develop eligibility criteria and a standard pro cess to review and select activities for funding that targets the assistance to those with the greatest need. The process should comply with all applicable regulations and include verification of eligibility.

Agency Comments and Our Evaluation

We provided the U.S. Department of Agriculture (USDA), the Environmental Protection Agency (EPA), the Department of Housing and Urban Development (HUD), and the U.S. Army Corps of Engineers (Corps) with a draft of this report for their review and comment. In addition, we sent relevant portions of the report to the Department of Commerce’s Economic Development Administration, the Department of Health and Human Service’s Indian Health Service, and the Department of the Interior’s Bureau of Reclamation for their review and technical comment.

In its written comments, USDA provided several observations on the report’s findings but disagreed with the report’s recommendation. Specifically, USDA agreed that our report accurately reflects the assistance that has been provided in the border region and stated that more work and additional funding are needed to continue the progress being made. USDA also agreed with our report’s finding that there is comprehensive federal assessment of the region’s water and wastewater systems. However, USDA questioned whether a federal level comprehensive assessment is needed to effectively address water syst inadequacies or whether a locally based federal presence that leverages local knowledge of local conditions might not be more effective. W agree that local knowledge of local needs is an important element that help inform decision makers, we continue to believe that without a comprehensive assessment of the region, federal agencies providing assistance to the region lack necessary information on the magnitude of the problem and on how best to prioritize and target limited resources. Additionally, USDA stated that it believes the examples presented in our report where coordination would have improved the project outcome are rare instances and that the examples of state level coordination in our report demonstrate that effective coordination is occurring amongst the programs. While we agree that some level of coordination is occurrin disagree that the examples cited in our report are rare instances. Dur our review, we contacted numerous officials in the border region— including local, state, and tribal officials; engineers and other consultant nonprofit representatives; water and wastewater utility representatives; and residents—and these officials consistently provided us with numerous s; examples of the type of concerns they have experienced due to ineffect coordination among the federal agencies. Moreover, while state efforts to coordinate funding for water and wastewater projects are beneficial; we found that these efforts are not consistent throughout the region and can not replace the need for coordination of policies and procedures among federal agencies. We therefore continue to believe that without a coordinated approach federal programs continue to place additional burden on applicants, waste scarce funds, and limit the overall effectiveness of the federal effort. Finally, in its comments, USDA disagreed with our recommendation that it should revise its process of determining eligibility to ensure that Section 306C colonia funds are only provided to those projects that benefit colonias, as defined by federal statute, and to revise its priority process to better target limited funds to those projects meeting the statutory preference criteria. Specifically, USDA stated that its current process complies with statutory requirements and that preference is given to entities that propose to provide water or waste disposal services to colonias. In explaining its position, USD that the characteristics of a colonia to be given preference per the statute do not constitute a definition. We disagree with USDA’s interpretation of the statute and continue to believe that USDA must determine that an area proposed for assistance has these characteristics before the agency provides preference to an entity for funding decisions. Our recommendation would allow entities that propose to provide water and wastewater disposal services to colonias that match the statutory characteristics to receive preference for limited federal funds and ensure that the agency is providing federal funds to those with the greatest need. USDA’s letter can be found in appendix IX.

In its written comments on the draft report, HUD provided several clarifications about its disagreement with our interpretation of the statutory requirements for the CDBG program and also commented on ou recommendations, although it did not state whether it agreed or di with them. For example, with regard to our recommendations that state agencies only provide colonia set-aside funds for projects that benefit colonias, as defined by federal statute, and th ensure that states follow a method of distribution that results in the prioritization of Colonia Set-aside funds to those colonias with the g reatest need, HUD stated that it will issue guidance to the states that will ad dress the proper administration of the Colonia Set-aside funds. HUD stated that this guidance is currently being finalized, but did not provide a timetable for its release or specify how the guidance would address the issues GAO identified. With regard to our recommendation that HUD should take additional actions to monitor the states’ use of Colonia Set-aside funds, HUD stated that it already monitors distinct components of the state at HUD establish guidance to CDBG program and as part of this process also monitors a portion of the Colonia Set-aside funds. HUD stated that it has recently developed a new monitoring exhibit specifically to assist in the review of Colonia Set-aside funds. Because HUD has not finalized its guidance we believe that our recommendation remains valid. The Department of Housing and Urban Development’s letter can be found in appendix X.

In its comments on the draft report, DOD stated that it believes that th Corps’ current method of determining which communities receive assistance under its Section 219 program is appropriate; however, DOD partially concurred with our recommendation, and stated that should he Congress direct additional funds to the colonias Section 219 program, t Corps will develop written guidance on eligibility criteria and the process’s agreement with the for selection of activities. While we appreciate DOD need for a formal process and written guidance, we continue to be concerned about the Corps ad hoc selection process for these colonias to water and wastewater projects. This is because such a process fails ensure that limited funds are provided to those colonias with the greates need—which GAO has found to be a key factor in federal program effectiveness. The Department of Defense’s letter can be found in appendix XI.

The U.S. Environmental Protection Agency, the Department of Commerce’s Economic Development Administration, the Department of of Health and Human Service’s Indian Health Service, and the Department the Interior’s Bureau of Reclamation provided technical comments, which we incorporated throughout the report as appropriate. e date of this report. At that time, we will then provide copies of this arties. We will also send copies to the Secretaries of Agriculture, Housing As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution of it until 30 days from th report to the appropriate congressional committees and other interested p and Urban Development, and Defense, and the Administrator of the nvironmental Protection Agency. In addition, this report will be available E at no charge on GAO’s Web site at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (202) 512-3841 or mittala@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this repor Key contributors to this report are listed in appendix XII. t.

Appendix I: Scope and Methodology

Determining How Much Federal Funding Was Provided to the Border Region

To determine how much federal funding was obligated to rural households and communities in the border region for water and wastewater projects, we identified seven agencies with programs that may have provided assistance to these areas. We then collected and analyzed obligation and project location data from each of the seven agencies—the U.S. Department of Agriculture (USDA), the Environmental Protection Agency (EPA), the Department of Housing and Urban Development (HUD), the U.S. Army Corps of Engineers (the Corps), the Department of Health and Human Service’s Indian Health Service (IHS), the Department of Commerce’s Economic Development Administration (EDA), and the Department of the Interior’s Bureau of Reclamation (Reclamation)—from fiscal years 2000 through 2008. We collected data from each agency for the 97 counties that are within 150 miles of the border region. We geographically located the data using MapInfo. We assessed the reliability of the data we used by reviewing information about the underlying database systems, reviewing the data to identify outliers and inconsistent or missing values, and discussing the data with knowledgeable agency officials. We present more details about the data, their limitations, and how we addressed these limitations below. On the basis of these efforts, we determined that the data were sufficiently reliable for the purposes of this report.

Environmental Protection Agency

The Border Environmental Cooperation Commission and the North American Development Bank provided grant and loan obligation data for all projects that received funds from EPA’s U.S.-Mexico Border Water Infrastructure Program. The reports are based on data tracked by the agency’s financial systems and program management data. As U.S.-Mexico Border Water Infrastructure Program grant funds are obligated to entities in both the United States and Mexico, we filtered the data to include only projects that were located in the United States. Additionally, we included only water and wastewater projects in our review.

EPA provided grant obligation data for congressionally designated projects from the Special Appropriation Act Projects (SAAP) database. We filtered these data to include only projects whose primary purpose was designated as drinking water or wastewater. The SAAP database does not include county-level data, so we identified the county for each project based on location data EPA was able to provide. After the county was identified for each project, we filtered the data to include only projects in counties within 150 miles of the border.

EPA provided grant obligation data on tribal programs from spreadsheets used to track projects. EPA provided data for those tribal nations it determined to be within 150 miles of the border region.

State agencies from Arizona, California, New Mexico, and Texas provided loan obligation data for the Drinking Water State Revolving Fund and Clean Water State Revolving Fund programs.

U.S. Department of Agriculture

USDA provided grant and loan obligation data for all water and wastewater utility programs from its Community Program Application Processing (CPAP) system. For some projects that were within the areas of our site visits, we obtained additional information, such as copies of the original applications and project summary data. USDA provided grant obligation data for the single-family programs from the Rural Development Data Warehouse. A number of records in the dataset did not include physical addresses. However, all records did include at least county and state data.

We did not include one of USDA’s Section 504 single-family programs in our review. The Section 504 program provides funds to individual households for numerous activities, including water and wastewater projects—such as repairs to septic systems or water wells—but the funds can also be used for other household repairs not related to water or wastewater. USDA does not centrally track how the funds were utilized, and we could not determine what portion of the funds was relevant for our review.

Department of Housing and Urban Development

HUD provided grant obligation data from its Integrated Disbursement and Information System (IDIS). HUD was not able to extract data by county, but rather provided data for all water and wastewater activities in counties eligible to receive Community Development Block Grant funding in Texas, New Mexico, Arizona, and California. We then reviewed the project location data and determined the county in which each project was located, and we imported the data into a geographic information system and extracted only those activities conducted in the 97 counties included in our review.

Within the IDIS, HUD tracks project activities through matrix codes. We obtained data for matrix code 03J—water and sewer improvements, and matrix code 14A—rehab, single-family residential units. HUD also provides funds for planning purposes—matrix code 20—some of which may have been used for water and wastewater activities. However, we found the data for matrix code 20 often did not include enough information to determine whether the project included a water or wastewater component. We did not include these projects in our review.

Furthermore, although we requested data from fiscal years 2000 through 2008, HUD could not ensure that all funds for fiscal year 2008 were included in our data. At the time HUD extracted the data, the agency had not verified that all states had finished inputting data into the database. However, officials stated that they believe most, if not all, of the data were included.

Indian Health Service

IHS provided grant obligation data from its Project Data System. We obtained data for all water and wastewater projects in Arizona, California, New Mexico, and Texas. We then reviewed and filtered the data by tribal name and included only the funds obligated to tribal nations located within 150 miles of the U.S.-Mexico border. We determined the tribal nations located in the border region using data provided by EPA, IHS, and the Bureau of Indian Affairs. IHS also provided needs data from the Sanitation Deficiency System.

Economic Development Administration

EDA provided grant obligation data from its Operations Planning and Control System. Agency officials identified and provided data for those projects with a water or wastewater component. We reviewed the data and excluded several projects from our review as they were not directly related to the provision or improvement of water or wastewater systems, and thus outside the scope of our review.

U.S. Army Corps of Engineers

The Corps provided data from its P2 Project Management System. Corps officials identified and provided data for drinking water and wastewater projects that received assistance in the border region. We did not collect data for regulatory permits or projects conducted on military installations in the region.

Bureau of Reclamation

Reclamation identified and provided data for water and wastewater projects. We determined that several projects were not directly related to the provision or improvement of drinking water or sewage treatment systems, and were thus outside the scope of our review. Specifically, we did not include obligations for activities related to storm water runoff, water recycling, or desalination studies.

Rural Areas Identified Using a System Based on Population and Commuting Patterns with Census Tracts

The federal government has not established a formal or consistent definition of what constitutes a rural area. The term “rural” is defined differently by Congress and each federal agency according to agency guidelines and individual project or program authorizations. Depending on the agency, rural areas may be defined as ranging from fewer than 2,500 to fewer than 50,000 persons. Some agencies and programs that fund water and wastewater projects in the border region do not focus on serving rural or urban areas but instead provide funds to eligible applicants from any location.

We determined that, for purposes of this report, the best system for differentiating rural from urban areas would be based on ZIP codes rather than on counties. Because the number of ZIP codes in the nation is so much larger than the number of counties, classification systems based on ZIP code measures offer a more precise means of identifying rural areas than county-based systems. However, because of data limitations and the multiple ZIP codes often served by projects, we could not reliably track funding to the ZIP code level; we chose to use the dominant Rural Urban Commuting Area (RUCA) system, developed by the Washington State Office of Community and Rural Health in 2001. The system relies on both population and commuting patterns of census tracts to classify each county as rural or urban based on the counties’ dominant commuting patterns. The dominant RUCA system is based on the 10-tiered subcounty RUCA system developed by ERS in conjunction with the Department of Health and Human Services in the late 1990s. The rural-urban continuum system does not explicitly define “rural.” However, the rural-urban continuum codes can be combined to create rural and urban designations for counties.

Effectiveness of Federal Efforts

To assess the effectiveness of federal efforts, we based our review on key evaluation criteria identified in previously published GAO reports. Our review did not assess the benefits of individual projects; rather, we determined the effectiveness of the collective federal effort of the programs. Specifically, to determine the effectiveness of the federal effort, we identified whether the agencies with programs targeted to the border region had (1) comprehensively assessed the needs they seek to address; (2) developed cooperative policies, procedures, and requirements; and (3) adhered to all statutory and regulatory requirements, including those that ensure assistance is targeted to those with the greatest need.

In order to determine whether federal agencies have comprehensively identified the drinking water and wastewater needs of the region, we reviewed existing assessments and interviewed federal officials regarding their assessment efforts. To determine agencies’ efforts to enhance and sustain collaboration with other agencies, we reviewed coordination documentation, such as memorandums of agreement; reviewed program requirements; and interviewed federal officials. To determine if agencies’ programs comply with statutory requirements, we reviewed applicable authorizing statutes, appropriations acts, regulations, and agency policies and guidance. We also reviewed program policies and procedures to solicit and accept applications, and interviewed federal officials regarding their practices. In addition, we reviewed key legislative history for key statutes and any relevant case law. Furthermore, we asked agency attorneys and program officials for explanations where we found noncompliant practices.

We conducted site visits to colonias, tribal nations, and other communities in Texas, New Mexico, and Arizona. During the site visits, we observed water and wastewater conditions in the border region and federally funded projects. We also interviewed local, state, tribal, and federal officials; engineering consultants; nonprofit representatives; urban planners; water and wastewater utility representatives; and residents regarding their experiences applying for or receiving assistance from federal agencies. In selecting our site visit locations, we considered a number of factors, including (1) geographic location, (2) proximity to identified colonias, (3) proximity to tribal nations, (4) location of federally funded water and wastewater projects, (4) location of federal agency field offices, and (5) recommendations from state and local officials of areas that either lacked basic services or have received the services as a result of receiving federal funds. While the results of the site visits cannot be generalized to all sites or projects, the results do reflect a range of geographic diversity and water and wastewater needs. In addition to the site visits, we conducted telephone interviews with local, state, tribal, and federal officials, and nonprofit representatives in Texas, New Mexico, Arizona, and California not located within the areas where we conducted site visits to obtain additional information on water and wastewater conditions in their communities and their experiences with federal assistance.

Furthermore, we attended two interagency coordination meetings in which various federal and state agency representatives discussed the status of ongoing drinking water and wastewater projects in the border region and the challenges they face completing them.

Appendix II: Additional Information on Eligibility and Prioritization Requirements for USDA, HUD, and Corps Programs Targeted to the Border Region

This appendix provides additional information on GAO’s analysis of legal requirements related to eligibility and project priorities for targeted USDA, HUD, and Corps programs. This information includes relevant history of the program’s original authorizing legislation, and additional details and citations.

Legislative History of the USDA, HUD, and Corps Colonias Programs

The federal government’s role in assisting colonias was primarily established when the 101st and 102nd Congresses established dedicated funding—in programs administered by USDA, HUD, and the Corps—to address the needs of colonias. These agencies were directed to establish programs dedicated to assisting these communities. The legislative histories of the program authorizations emphasize that the key concern over colonias was public health impacts stemming from the lack of clean drinking water and the inadequate disposal of sewage; for example, one particular concern was that the inadequate systems in use, combined with flooding conditions, would result in human waste in the roads. Statements throughout the Congresses consistently depict colonias as areas that lack safe drinking water and sewage disposal facilities, and the colonias were sometimes likened to areas with “third world” conditions. ewer Substandard housing is also mentioned, but the lack of water and s are the predominant characteristics. For example, the sponsor of the administered Colonia Set-aside explained, “These citizens do not have sewer, they do not have sewage systems, they do not have running water, and I think that is a travesty in America, that American citizens do not have the basic necessities of life.” Another representative, when introducing amendments to the USDA program legislation, stated “here are hundreds of individuals that live in the colonias that will suffer from a lack of adequate water and sanitation facilities. This situation is truly dangerous in terms of sanitation and health hazards from the lack of proper water and sewer systems.” Finally, when the provision authorizing the Corps’ colonias assistance was added to the Water Resource and Development Act bill, a representative explained: “Colonias are rural settlements along the United States-Mexico border which lack or have inadequate basic water and sewer facilities. All of the colonias to receive funding under this amendment are located in the United States . . . . Most of the inhabitants of these communities use outhouses or substandard HUD- septic tanks for their waste disposal. A set-aside for these areas is particularly crucial from a health standpoint. Because of substandard water resources, contagious diseases pose a particular threat to people living in colonias.”

The Consolidated Farm and Rural Development Act, as amended, directs USDA to provide financial assistance for water supply and waste facilities and services to communities whose residents face significant health risks, because the communities’ residents do not have access to such facilities. The act states that USDA must give preference to entities “that propose to provide water supply or waste disposal services to the residents of those rural subdivisions commonly referred to as colonias that are characterized by substandard housing, inadequate roads and drainage, and a lack of adequate water or waste facilities.” Thus, the provision requires USDA to give preference to water and waste projects in colonias where other infrastructure and housing are also inadequate.

We found that USDA has no process in place to ensure that entities “propos to provide water supply or waste disposal services” to these colonias are given preference. USDA officials explained that the agency considers the funding for colonias to be a set-aside, and therefore only considers entities proposing to assist colonias for this funding. However, in implementing the program, USDA told us it views any entity proposing to assist an area that the relevant state or local government has designated as a colonia as qualifying for the preference, and awards funds to them on a first-come, first-served basis. USDA does not attempt to independently verify whether these entities meet the threshold eligibility requirement (that they propose to provide service to areas where most residents lack access to adequate water or waste facilities), or that the areas to be served meet the statutory definition of “colonia.” While agency regulations repeat the statutory requirement for threshold eligibility and define “colonia”, the agency has failed to provide any guidance elaborating on the meaning of an “adequate” water or waste disposal system, or how to identify those colonias with the statutory preference characteristics. Despite the lack of guidance, USDA told us that it considers as inadequate a system with any violation of the Safe Drinking Water Act or Clean Water Act, as appropriate. Furthermore, the agency simply accepts local designations of colonias to satisfy the regulation and the statute.

As a result, USDA has no assurance that entities proposing to serve colonias with the required characteristics have received the required preference. By allowing colonia funds to be used for projects that benefit communities with existing infrastructure, the agency is failing to give preference to those colonias that have the statutory characteristics and live without basic necessities.

Under section 916 of the Cranston-Gonzalez National Affordable Housing Act, the states of Arizona, California, New Mexico, and Texas shall each make available, “for activities designed to meet the needs of the residents of colonias in the State relating to water, sewage, and housing,” a specified percentage of CDBG funds they receive. Under the act, the term “colonia” means any identifiable community that, among other things, is determined to be a colonia on the basis of objective criteria, including lack of potable water supply, lack of adequate sewage systems, and lack of decent, safe, and sanitary housing. The act requires grants to be made in accordance with a distribution plan that gives priority to colonias having the greatest need for such assistance. In short, the act requires grants to be made for projects meeting the needs of colonias residents, which must be related to water, sewage, and housing, and which give priority to the colonias with greatest need.

With respect to the meaning of “colonia,” HUD told us the agency has not developed guidance regarding interpretation of the definition or determination of eligible entities. HUD’s sole written interpretation of the definition, issued in a 2003 notice, asserts that all three criteria must be met; nonetheless, HUD officials also stated that the agency allows states to interpret the definition as requiring only one of the three criteria to be met. Finally, HUD officials told us that as they give grants to the states for distribution to colonias, the states are ultimately responsible f determining eligible entities; to do so, the states rely on formal “designation” of colonias. Without guidance from HUD, states have applied the requirement differently. For example, in California and New Mexico, most colonias are designated as communities with substandard housing and a lack of either potable water or adequate sewage systems. In Arizona designations use any one of the three statutory criteria. In Texas, designations are made for areas with substandard housing that lack either adequate water or wastewater treatment, and which are unincorporated, a criterion not found in the act. While interpreting colonias as those designated by states may have been the correct interpretation of the Cranston-Gonzalez Act until 1992, in that year Congress repealed a provision requiring that a colonia must be designated as such by the state to be eligible for funds. process was changed so that a colonia can be qualified for this program without regard to a state or county action. We believe that HUD’s reliance on the states in carrying out section 916 fails to give effect to this A committee report explains that the designation change in law. HUD officials said that the CDBG Program relies on states to make decisions that make the most sense for the particular state, and officials do not agree that varying interpretations by states suggest that thelack of guidance is problematic. However, officials stated that HUD will be issuing guidance, which they say will include information on the documentation states need to support that a colonia meets statutory requirements.

Housing and Community Development Act of 1992, Pub. L. No. 102-550, § 810 (Oct. 28, 1992).

HUD officials also told us that it is up to the states to determine the needs- based grant priorities. However, under the act, states must distribute the colonia funds according to distribution plans that give priority to the colonias in the greatest need of assistance. To do so would require a state to at a minimum identify colonias, discuss the relative needs of colonias, and select projects reflecting the colonias with the greatest needs. However, we found that HUD has failed to ensure that state distribution plans reflect priority given to the colonias with greatest need. Instead, HUD officials do not believe the agency has the authority to direct states on how to distribute the funds as long as it is in accordance with a distribution plan. Without direction and oversight from HUD, states may not be meeting the statutory requirements. While HUD officials may believe states are identifying the colonias with the greatest needs, section 916 requires the agency to not just rely on mere belief, but take such steps as required to ensure it is doing so.

HUD officials also told us that the agency interprets the statute as authorizing colonia funds to be spent on any currently eligible CDBG activity. However, the statute expressly limits the set-aside to activities relating to water, sewage, and housing. Lacking guidance and direction from HUD, states have applied the requirement differently.

Finally, HUD officials said they are required to give states “maximum feasible deference” in interpreting statutory requirements related to the Colonia Set-aside. HUD regulations establish the maximum feasible deference policy; however, the regulations provide for deference only to states’ interpretations of CDBG requirements under the Housing and Community Development Act of 1974 and certain HUD regulations. The Colonia Set-aside requirement, however, was established by section 916 of the Cranston-Gonzalez National Affordable Housing Act, which stands alone and is not an amendment to the Housing and Community Development Act of 1974. Thus, HUD’s maximum feasible deference regulation by its terms does not encompass state interpretations related to the set-aside. Even if it were applicable, the regulation limits deference to state interpretations that “are not plainly inconsistent with the Act and the Secretary’s obligation to enforce compliance with the intent of the Congress as declared in the Act.” As outlined above, HUD has not taken steps to ensure state interpretations related to funding of set-aside projects, such as which activities are eligible, are in accordance with law.

The Corps

The Water Resources Development Act of 1992 authorized the Corps to provide assistance to colonias. The colonias authorization is unique among WRDA section 219 projects, which are otherwise specific earmarked projects; that is, Congress has not directed the funds to particular colonias projects. The authorization limits grants to “colonias in the United States along the United States-Mexico border,” but does not define colonias. While limited, the legislative history shows that colonias were understood to be “rural settlements along the United States-Mexico border which lack or have inadequate basic water and sewer facilities,” and that “ost of the Inhabitants of these communities use outhouses or substandard septic tanks for their waste disposal.” In addition, Congress has elsewhere defined colonias as “based on objective criteria, including lack of potable water supply, lack of adequate sewage systems, and lack of decent, safe, and sanitary housing.” Nonetheless, the Corps has never developed a definition, an interpretation, or guidance for staff to use in determining whether an assistance recipient is a colonia eligible for the program. Although the Corps recognizes that the colonias section 219 project is essentially a programmatic authority, nonetheless, Corps officials stated the program was too small for the agency to develop guidance. The Corps claimed to independently verify in letter reports, which are brief project reports that the Corps prepares before providing assistance to an entity, that the assistance it provides under this provision is going to colonias; however, the Corps acknowledged that it does not have criteria for identifying eligible colonias. Thus, while these letter reports describe the areas, it is unclear by what basis the Corps has verified they are colonias as meant in the authorizing statute. As a result, the Corps cannot ensure that its assistance is going to colonias.

Appendix III: Total Obligations and Rural-Urban Categories for Water and Wastewater Projects in the Border Region, Fiscal Years 2000-2008, by County

USDA Water and Environmental

USDA Water and Environmental

Appendix IV: Total USDA Obligations for Water and Wastewater Projects in the Border Region, Fiscal Years 2000-2008, by County

The following figure displays the ranges of USDA funding obligated to counties in the border region for water and wastewater projects.

Appendix V: Total EPA Obligations and Rural- Urban Categories for Water and Wastewater Projects in the Border Region, Fiscal Years 2000- 2008, by County

The following figure displays the ranges of EPA funding obligated to counties in the border region for water and wastewater projects.

Appendix VI: Total Obligations from Clean Water and Drinking Water State Revolving Funds and Rural-Urban Categories for Water and Wastewater Projects in the Border Region, Fiscal Years 2000-2008, by County

Rural-urban continuum codeRural (7)

Rural (6)

Urban (2)

Rural (8)

Rural (6)

Rural (7)

Rural (9)

Rural (6)

Rural (7)

Urban (3)

Rural (9)

Urban (2)

Rural (6)

Rural (7)

Rural (8)

Urban (3)

Urban (2)

Rural (8)

Urban (3)

Rural (9)

Rural (6)

Urban (4)

Rural (6)

Urban (1)

Rural (9)

Urban (4)

Rural (7)

Rural (9)

Urban (4)

Rural (6)

Rural (6)

Rural (9)

Rural (9)

Urban (5)

Rural (8)

Urban (1)

Rural (8)

Appendix VII: Total HUD Obligations and Rural- Urban Categories for Water and Wastewater Projects in the Border Region, Fiscal Years 2000- 2008, by County

The following figure displays the ranges of HUD funding obligated to counties in the border region for water and wastewater projects.

Appendix VIII: Total Obligations for Water and Wastewater Projects in the Border Region, Fiscal Years 2000-2008, by Tribal Nation

IHS Sanitation Facilities Construction

PA, USDA, an ata.

Appendix IX: Comments from the Department of Agriculture

The following are GAO’s comments to the Department of Agriculture’s letter dated December 8, 2009.

GAO Comments

Appendix X: Comments from the Department of Housing and Urban Development

The following are GAO’s comments to the Department of Housing and Urban Development’s letter dated December 10, 2009.

GAO Comments

water, sewage, and housing. We did not make any change to our rep in response to HUD’s further explanation. . Our report recognizes that HUD has stated its intent to issue guidance to assist states to more clearly articulate the priorities in developing their method of distribution. However, during the course of the engagement, we asked HUD for a draft version of the guidance or other documentation so that we could review the contents of the guidance and assess whether it would adequately address our concerns. Because HUD did not provide us with any documentation, we have made no modifications to the report in response to this comment. 4. We disagree with HUD’s characterization of our discussion regarding the interpretation of the colonia definition. As stated in our report, HUD has failed to provide guidance on the interpretation of colonia. During our review, the only documented definition we found that H issued in relation to the Colonia Set-aside is in a HUD Office of Community Planning and Development Notice, which as HUD indicates in its response, is not followed by the agen considered to be an official interpretation of the statute. We continue to believe that to ensure compliance with statutory guidance; HUD should undertake a review of the statute and issue clear guidance to states concerning its interpretation of the definition. We did not revise the report in response to this comment. cy, and is not 5. During our review, we conducted interviews with numerous state a local officials throughout the border region—including officials representing the state agencies that administer HUD’s CDBG funds.

However, our review focused on the federal efforts to meet needs in the U.S.-Mexico border region and not the state efforts. We made no changes in response to this comment. 6. We have modified the report and clarified that the total funding HUD obligated (about $218 million) is a combination of CDBG funds (about $214 million), Indian CDBG funds (about $3 million), and funds provided through the Economic Development Initiative Special Account (about $1 million). 7. Our report already recognizes the changes HUD intends to make to its data system. However, we have added an additional statement to our discussion that the change will allow HUD to verify that all projects funded with Colonia Set-aside funds are located within a colonia.

8. We disagree with HUD’s characterization that our report suggests that HUD still requires the states to formally designate colonias, or that HUD should be the party to designate colonias. Our report clearly states that we believe that HUD should be conducting activities as necessary to ensure that the states’ use of funds is compliant with the law. As stated in the report, soon after the enactment of the law that established the Colonia Set-aside requirement, Congress amended law to remove a requirement that a colonia be designated by the s or county, and as a result we recognize that no formal designation is required. Yet, in implementing the program, states are informally designating colonias, HUD is deferring to the state determinations as though they were formal designations, and HUD has not provided guidance concerning state implementation of the Colonia Set-aside as to how eligible colonias are to be identified. We have made no revisions to the report in response to this comment. 9. The report does not include any information that would indicate that the project in Hudspeth County, Texas has been closed. The rep clearly states that HUD provided a utility over $860,000 in grant from 2004 to 2006 to extend water distribution lines and waste collection lines for residents of a colonia; and that as of September 2009, the distribution lines remain unused because the utility does n have enough water to serve the additional households and the utility has not been able to obtain the funding needed to construct a new well. We made no changes to the report in response to this comment.

Appendix XI: Comments from the U.S. Army Corps of Engineers

The following is GAO’s comment to the U.S. Army Corps of Engineer’s letter dated December 10, 2009.

GAO Comment

Our report recognized that the Corps had prepared letter reports, which are brief project reports that the Corps prepares before providing assistance to an entity, prior to undertaking each project. However, our report clearly states that the Corps does not have criteria for identifying eligible colonias. Therefore, while these letter reports are prepared, it is unclear by what basis the Corps has verified they are colonias as meant in the authorizing statute. We made no changes to the report in response to this comment.

Appendix XII: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition t o the individual named above, Sherry L. McDonald, Assistant Director; Elizabeth Beardsley; Virginia Chanley; Bernice Dawson; Teague Lyons; Benjamin Shouse; and Jay Spaan made significant contribu this report.