According to a recent audit performed by the Environmental Protection Agency’s (EPA) Office of Inspector General (OIG), some states are not maximizing the use of Drinking Water State Revolving Funds (DWSRFs), resulting in “missed opportunities” to improve water system infrastructure.

OIG performed the audit to determine whether the EPA has effectively identified unused (“unliquidated”) DWSRF assistance funds. EPA has a goal of maintaining unliquidated DWSRFs at a level below 13 percent of grants awarded. The audit looked at the use of DWSRFs in five states – California, Connecticut, Hawaii, Missouri and New Mexico – and found that all five of these states executed small numbers of loans each year and did not maximize the use of their DWSRF resources. As a result of their failure to properly project the DWSRF resources that would be available and to anticipate the projects able to be financed with those resources, the report states, “$231 million of capitalization grant funds remained idle, loans were not issued, and communities were not able to implement needed drinking water improvements.”

No penalties were imposed as a result of the OIG’s findings, but the OIG did propose that EPA require states with unliquidated obligations exceeding the 13 percent cutoff goal to better project future cash flows to ensure funds are spent more efficiently. It also recommended that EPA develop guidance for states on what should be included in lists of projects to be funded by DWSRFs.

To view the full report, click here.