Both the Clean Water and Drinking Water SRF programs authorize EPA to provide states and local communities with independent and sustainable sources of financial assistance. This assistance is typically in the form of low- or no-interest loans, for projects that protect or improve water quality and that are needed to comply with federal drinking water regulations and protect public health. Repayment of these loans replenishes the funds and provides the ability to fund future loans for additional projects. The Clean Water SRF program was established in 1987 under the Clean Water Act, which was enacted to protect surface waters, such as rivers, lakes, and coastal areas, and to maintain and restore the physical, chemical, and biological integrity of these waters. The Drinking Water SRF program was established in 1996 under the Safe Drinking Water Act, which was enacted to establish national enforceable standards for drinking water quality and to guarantee that water suppliers monitor water to ensure compliance with standards. The Recovery Act provided $6 billion for EPA’s Clean Water and Drinking Water SRF programs. This amount represents a significant increase over the federal funds awarded to the non-Recovery Act, or base, SRF programs in recent years. From fiscal years 2000 through 2009, annual appropriations averaged about $1.1 billion for the Clean Water SRF program and about $833 million for the Drinking Water SRF program. In addition to increasing funds, the Recovery Act included some new requirements for the SRF programs. First, projects funded with Recovery Act SRF program funds had to be under contract—ready to proceed— within 1 year of the act’s passage, or by February 17, 2010. Second, states had to use at least 20 percent of these funds as a “green reserve” to provide assistance for green infrastructure projects, water- or energy- efficiency improvements, or other environmentally innovative activities. Third, states had to use at least 50 percent of Recovery Act funds to provide “additional subsidies” for projects in the form of principal forgiveness, grants, or negative interest loans. Uses for these additional subsidies can include helping economically disadvantaged communities build water projects, although these uses are not a requirement of the act. With some variation, Congress incorporated two of these requirements— green projects and additional subsidies—into the fiscal year 2010 and 2011 base SRF program appropriations. In addition to meeting requirements from program-specific provisions, water projects receiving Recovery Act funds have to meet requirements from the act’s Buy American and Davis-Bacon provisions. The Recovery Act generally requires that all of the iron, steel, and manufactured goods used in a project be produced in the United States, subject to certain exceptions. Federal agencies can issue waivers for certain projects under specified conditions, for example, if using American-made goods is inconsistent with the public interest or if the cost of goods is unreasonable; the act limits the “unreasonable cost” exception to those instances when inclusion of American-made iron, steel, or other manufactured goods will increase the overall project cost by more than 25 percent. Furthermore, recipients do not need to use American-made goods if they are not sufficiently available or not of satisfactory quality. In addition, the Recovery Act applies Davis-Bacon provisions to all Recovery Act-funded projects, requiring contractors and subcontractors to pay all laborers and mechanics at least the prevailing wage rates in the local area where they are employed, as determined by the Secretary of Labor. Contractors are required to pay these workers weekly and submit weekly certified payroll records. To enhance transparency and accountability over Recovery Act funds, Congress and the administration built numerous provisions into the act, including a requirement that recipients of Recovery Act funding— including state and local governments, private companies, educational institutions, nonprofits, and other private organizations—report quarterly on a number of measures. (Recipients, in turn, may award Recovery Act funds to subrecipients, which are nonfederal entities.) These reports are referred to as “recipient reports,” which the recipients provide through one Web site, www.federalreporting.gov (Federalreporting.gov) for final publication through a second Web site, www.recovery.gov (Recovery.gov). Recipient reporting is overseen by the responsible federal agencies, such as EPA, in accordance with Recovery Act guidance provided by the Office of Management and Budget (OMB). Under this guidance, the federal agencies are required to conduct data quality checks of recipient data, and recipients can correct the data, before they are made available on Recovery.gov. Furthermore, additional corrections can be made during a continuous correction cycle after the data are released on Recovery.gov. A significant aspect of accountability for Recovery Act funds is oversight of spending. According to the federal standards of internal control, oversight should provide managers with current information on expenditures to detect problems and proactively manage risks associated with unusual spending patterns. In guidance issued in February 2009, OMB required each federal agency to develop a plan detailing the specific activities—including monitoring activities—that it would undertake to manage Recovery Act funds. EPA issued its first version of this plan in May 2009, as required, and updated this document as OMB issued new guidance. Nationwide, the 50 states have awarded and obligated the almost $6 billion in Clean Water and Drinking Water SRF program funds provided under the Recovery Act and reported using the majority of these funds for sewage treatment infrastructure and drinking water treatment and distribution systems, according to EPA data. In the nine states we reviewed, the states used these funds to pay for infrastructure projects that help to address major water quality problems, although state officials said that in some cases, Recovery Act requirements changed their priorities or the projects selected for funding. The nine states also used their Recovery Act funding to help economically disadvantaged communities, but state officials indicated that they continue to have difficulty helping these communities. As of March 30, 2011, states had awarded funds for contracts and obligated the $4 billion in Clean Water SRF program funds and $2 billion in Drinking Water SRF program funds provided under the Recovery Act. As we reported in May 2010, EPA indicated that all 50 states met the Recovery Act requirement to award Recovery Act funds to projects under contract by February 17, 2010, 1 year after the enactment of the Recovery Act. In the 2 years since the Recovery Act was passed, states have drawn down from the Treasury approximately 79 percent, or $3.1 billion, of the Clean Water SRF program funds and approximately 83 percent, or $1.7 billion, of the Drinking Water SRF program funds. Across the nation, the states have used the almost $6 billion in Recovery Act Clean and Drinking Water SRF program funds to support more than 3,000 water quality infrastructure projects. As shown in figure 1, the states used the majority of their Recovery Act Clean Water SRF program funds to improve secondary and advanced treatment at wastewater treatment plants, as well as projects to prevent or mitigate sanitary sewer overflow. In Montevallo, Alabama, for example, the state provided Clean Water SRF program funds to upgrade an outdated wastewater treatment plant in Shelby County that served a population of about 5,000. The upgrade added two large settlement basins to hold and treat wastewater, replacing a series of small basins (see fig. 2). The additional treatment is expected to remove nutrients, such as nitrogen and phosphorus, to help the county meet higher standards in the nearby waterways receiving the plant’s discharged water. As shown in figure 3, the states used about half of their Recovery Act Drinking Water SRF program funds to construct projects to transmit and distribute drinking water, including pumps and pipelines to deliver water to customers. States used about 40 percent of their funds for projects to treat and store drinking water. In Baltimore, Maryland, for example, the state provided funds to the city to cover one of its treated water reservoirs at the Montebello drinking water treatment plant. Before it was covered, the reservoir was open to birds and other sources of contamination, and city water managers used a mesh-like material to try to keep birds from landing on or using the water. When the project is complete, the reservoir will be a huge, cement tank buried under soil and vegetation (see fig. 4 for the project under construction in December 2010). According to EPA data, all states met the requirement to use at least 20 percent of their Recovery Act funding for green projects, with $1.1 billion of total Clean Water SRF program funds going to green projects and $544 million of total Drinking Water SRF program funds going to green projects. According to EPA, the goal of supporting green projects is to promote green infrastructure, energy or water efficiency, and innovative ways to sustainably manage water resources. Green infrastructure refers to a variety of technologies or practices—such as green roofs, porous pavement, and rain gardens—that use or mimic natural systems to enhance overall environmental quality. In addition to retaining rainfall and snowmelt and allowing them to seep into groundwater, these technologies can mitigate urban heat islands, and sequester carbon. Figure 5 shows the amount of Clean Water and Drinking Water SRF program funds that states awarded to green projects by type of project. In Annapolis, Maryland, for example, city officials used Clean Water SRF program funds to construct a green parking lot, a project that helped retain and filter storm water runoff. (See fig. 6.) In Los Alamos, New Mexico, city officials used Clean Water SRF program funds to install facilities to recycle water at the city’s wastewater treatment plant; the recycled water will be used as washwater—water that is used in the plant to clean equipment (see fig. 7). Because New Mexico is an arid state, the reuse of water saves operating costs for the plant, as well as scarce water resources.