24-E-0022
February 27, 2024

At a Glance

Perspectives on Capacity: Managing Drinking Water State Revolving
Fund infrastructure investment and Jobs Act Funding

Why We Did This Evaluation

To accomplish this objective:

The U.S. Environmental Protection Agency
Office of Inspector General conducted this
evaluation to identify (1) drinking water state
revolving fund agencies' perspectives on their
capacity to manage Infrastructure Investment
and Jobs Act funds and (2) obstacles that
drinking water state revolving fund agencies'
administrators believe limit their capacity to
manage Infrastructure Investment and Jobs
Act funds.

The Drinking Water State Revolving Fund
Program is a financial assistance program
that helps states to finance critical water
infrastructure projects that further the health
protection objectives of the Safe Drinking
Water Act.

We used a survey to identify state agencies'
perspectives on their capacity to manage
Infrastructure Investment and Jobs Act funds.
Capacity, as addressed in this report, has
three relevant dimensions: organizational,
financial, and human capital. A lack of
capacity within any of these dimensions can
adversely impact a state agency's ability to
effectively manage federal grant funding,
such as Infrastructure Investment and Jobs
Act funding, and may result in unspent funds.

To support this EPA mission-related
effort:

•	Ensuring clean and safe water.

To address these top EPA management
challenges:

•	Overseeing, protecting, and investing in
water and wastewater systems.

•	Managing grants, contracts, and data
systems.

Address inquiries to our public affairs
office at (202) 566-2391 or
OIG.PublicAffairs@epa.gov.

What We Found

The Drinking Water State Revolving Fund, or DWSRF, Program, has provided
billions of dollars in financial assistance to public water systems and has helped
communities across the United States complete over 17,000 infrastructure projects.
Yet, across the country, water infrastructure is aging and in need of repair. The
Infrastructure Investment and Jobs Act, or IIJA, appropriated an unprecedented
amount of funding for various environmental and infrastructure needs, including
drinking water infrastructure needs. The state DWSRF agencies' capacity to
effectively manage federal DWSRF grants is crucial to the success of the program.

In response to our survey, most state DWSRF administrators agreed that their
agencies had the organizational capacity necessary to manage the DWSRF IIJA
funds awarded to their states. A few state DWSRF administrators expressed
concerns related to financial capacity. Specifically, state DWSRF administrators cited
concerns about meeting state financial matching requirements and identifying
projects that are eligible for DWSRF IIJA funding. State DWSRF administrators
indicated that it was particularly difficult to identify projects eligible for lead service
line replacement funds.

A few state DWSRF administrators disagreed that their agencies had enough staff
and sufficient guidance to manage DWSRF IIJA funds. State DWSRF administrators
reported workforce management and insufficient federal guidance as common
obstacles that limit their agencies' capacity to manage DWSRF IIJA funds. State
DWSRF administrators specifically noted insufficient guidance related to the Build
America, Buy America Act provisions of the IIJA. In addition, a few state DWSRF
administrators cited a lack of coordination with the EPA as an obstacle. Obstacles
that affect state DWSRF agency capacity may result in decreased investment in
critical water infrastructure projects.

While we make no recommendations based on this evaluation, the EPA has an
opportunity to work with state DWSRF agencies to address the obstacles presented
in this report.

The state DWSRF agencies' capacity to effectively manage federal

DWSRF grants is crucial to the success of the DWSRF Program.

Obstacles that affect state DWSRF agency capacity may result in

decreased investment in critical water infrastructure projects.

List of OIG reports.


-------