Detailed Information on the
Clean Water State Revolving Fund Assessment

EPA will focus on improving the quality and breadth of CWSRF performance data. EPA will improve quality of CWSRF environmental/health benefits reporting system data collected from all 51 state programs to improve program performance tracking. In particular, EPA will disseminate error-checking reports to the states to bolster their capability to perform data quality assessment and control.

Measure: Number of waterbody segments identified by States in 2002 as not attaining standards, where water quality standards are now fully attained.

Explanation:2002 Baseline: 0% of 21,632 waterbodies; 255,408 miles and 6.8 million acres.

Measure: Number of waterbodies restored or improved per million dollars of CWSRF assistance provided

Explanation:

Measure: Number of waterbodies protected per million dollars of CWSRF assistance provided

Explanation:

Measure: Percentage of all major publicly-owned treatment works (POTWs) that comply with their permitted wastewater discharge standards

Explanation:2002 Baseline: 97% of major POTWs. Measure includes discharge violations only (excludes administrative violations).

Measure: Fund utilization rate for the CWSRF

Explanation:2002 Baseline: 91%. Calculated as cumulative loan agreement dollars to cumulative funds available for projects.

Measure: CWSRF Long-Term Revolving Level ($billions/yr)

Explanation:Indicates the amount of funds available to be disbursed from the CWSRF program. The target is an average level of $3.4 B/year for the period 2015-2040. The revolving level was $4.6 billion in 2004 and $4.9 billion in 2005.

Is the program purpose clear?

Explanation: The CWSRF provides funds to states to establish state loan revolving funds that finance infrastructure improvements for public wastewater systems and other sources of water quality impairment. The CWSRF is essentially comprised of 51 state financing programs which are run in accordance with the federal statute and regulations. As such, each state establishes and funds its own highest priority eligible projects. The 51 CWSRF programs are a type of public bank intended to run in perpetuity to provide assistance for construction of publicly-owned wastewater treatment works and certain nonpoint source and estuarine projects.

Evidence: The program's authorizing statute (Water Quality Act of 1987, Pub.L. 100-4) and final rule (40CFR Part 35, subpart K) provide clear and consistent statements that the purpose of the CWSRF is to award grants to capitalize state revolving funds for the express purpose of providing loans and other forms of assistance (but not grants) for 1) wastewater treatment facility construction, 2) implementation of nonpoint source management plans, and 3) development and implementation of estuary conservation and management plans.

Does the program address a specific and existing problem, interest or need?

Explanation: The CWSRF provides a financial tool to address infrastructure construction needed to solve point and nonpoint sources of water pollution. The Agency released its report of the gap between funding and needs in FY2002. The CWSRF helps states provide an important tool to address the need and close the gap.

Evidence: The 1996 Clean Watersheds Needs Survey identified $139.5 billion of wastewater treatment needs through design year 2016. The most current needs survey, based on data collected in 2000, continues to document high levels of both traditional wastewater treatment needs and significant nonpoint source needs ($181.2 billion). See 1996 Clean Watersheds Needs Survey. 2002 Clean Watersheds Needs Survey. 2002 Gap Report. FY 2004 President's Budget. FY 2005 President's Budget.

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: The CWSRF is an innovative financing approach, which replaced the federal construction grants program and added eligibilities for projects to control sources of diffuse polluted runoff. The federal investment is designed to be used in concert with other sources of funds to meet water quality needs. The program precludes duplicative funding of projects through regulatory constraints and segmentation of multiple sources of funding within EPA.

Evidence: 40 CFR 35.3125 Limitations on SRF Assistance specifies the prevention of double benefit.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: The CWSRFs utilize loans plus a state match, rather than grants, to enable a sustainable source of funding. The program design provides significant flexibility to the states to help optimize the fund, for example, by leveraging through the issue of bonds. The design ensures short-term sustainability of a state's fund by requiring all repayments and interest earnings to be deposited in the fund. Based on the success of the CWSRF model to provide a sustainable source of financing, other US revolving loan programs were established to address safe drinking water needs and brownfields clean-up.

Evidence: EPA tracks the program's long-term average annual funding level to assess long-term sustainability. Loan repayments and interest earnings increased from $1.7 in 1998 billion to $2.8 billion in 2003 (a 73% increase or 15% annually). Council of Infrastructure Financing Authorities (CIFA) Monograph 11 finds significant savings in the SRF loan structure compared to grants.

Is the program effectively targeted, so that resources will reach intended beneficiaries and/or otherwise address the program's purpose directly?

Explanation: States receive grants which are allotted according to the allocation specified in the CWA. States must develop priority systems which give emphasis to projects needed for public health protection, compliance and economic need on a per household basis. During required annual reviews of state programs, EPA regional staff review records to ensure that the state is in compliance with program requirements.

Evidence: CWA Title VI, 40 CFR Part 35.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The agency has three long-term outcome perfomance measures that support the goals of: (1) Water Quality Protection, (2) Water Safe for Swimming, and (3) Safe Fish and Shellfish. These performance measures may be characterized as Level 6 on GAO's Hierarchy of Indicators (April 2000 review of EPA performance measures). The program also has a long-term output measure that assesses the program's long-term financial stability. Over the past year the program also developed a long-term outcome efficiency measure that tracks CWSRF funding per restored/improved waterbody.

Evidence: See measures tab.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: EPA's targets and timeframes for its long-term measures for waterborne disease and fish consumption are not ambitious, particularly since they represent the efforts of the entire clean water program.

Evidence: See measures tab.

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: Although the annual outcome measure does not capture water quality improvements that derive only from SRF-funded projects, it measures a key intermediate outcome for which the SRF program was designed. The annual output measure tracks the pace of loan fund distribution.

Evidence: See measures tab.

Does the program have baselines and ambitious targets for its annual measures?

Explanation: Outcome measure targets are not ambitious because the measure does not include minor systems, which comprise a large portion of SRF-funded projects. Also, the reporting system used for the measure does not report pathogens in the POTW discharge, a significant parameter associated with waterborne disease.

Evidence: See measures tab.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: No evidence available that States commit to reporting and tracking the program's long-term performance measures.

Evidence:  

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Existing GAO and IG evaluations support program goals for financial performance. None of these audits evaluate the project level data necessary to assess performance with respect to public health goals. Additionally, audit-based approaches do not meet the quality criteria for determing the impact of the program.

Evidence:  

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: The Agency estimates and budgets for the full annual costs of operating its programs, taking into consideration any changes in funding, policy and legislative changes. All spending categories and the resource levels and activities associated with them are included in the annual Congressional Justification. Presentation to Congress of the Agency's budget, including resources for the CWSRF program, include alignment to its Strategic Plan goals. For the CWSRF, EPA also utilizes a planning model to align the budget with the output goal of achieving a target long-term revolving level.

Evidence: Annual Congressional Justification, Budget Automation System (BAS) reports. The SRF planning model has been used by both OMB and EPA to evaluate the impact of changes in appropriations and economic factors on the long-term revolving level.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: EPA has taken steps to strengthen its oversight of States' management and use of the fund, and has developed several key measures of the programs financial performance. The agency has also worked closely with States over the past year to develop meaningful, appropriate environmental performance measures that all parties can support. However, in following years EPA will need to improve States' reporting on goals and/or projects.

Evidence: State-EPA SRF meetings

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: The Permit Compliance System (PCS) that collects information for the annual outcome measure has been cited by the IG and others for significant data quality issues. EPA should work to improve the data quality and breadth of PCS.

Evidence: OIG Memorandum Report No. 2003-M-00014, May 20, 2003.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: EPA has designated CWSRF program managers in all ten regional offices and at the national level. Additionally, federal regional grant project officers are held accountable for ensuring that all policies and procedures of the EPA Grants Administration Division are followed. Grantees are accountable through grant agreements with EPA for program costs. EPA regions' annual review of state performance under the grants and audit results can be used to adjust grant conditions. Additionally, the Office Director is held accountable for program performance and grants management through performance standards in his personnel evaluation.

Evidence: CWSRF program responsibilities are specified under performance standards in personnel performance appraisals. The final rule (40 CFR 35, Subpart K) specifies performance standards to be included in grant agreements.

Are funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: Federal capitalization grants must be awarded within two years after appropriation. Most states take their grants in the first year of availability (currently, about 40 states). EPA HQ issued two policy memorandums (SRF 99-05 & 99-09) clarifying its expectations of the timely and expeditious requirements of the CWA. Regions and states were advised that all funds (including interest & repayments) in the fund must be scheduled for use within one year of availability or a detailed plan showing a longer term course to using all the funds must be developed, approved, and implemented.

Evidence: As of June 30, 2003, only $3.5 of the $43.5 billion available in State CWSRFs remains uncommitted, which yields a 93% fund utilization rate. Given the lag time to complete construction, this is acceptable performance, and significantly better than the former constructions grants program. Timely and Expeditious Use memorandums. Pace Handbook.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: The CWSRF recently developed a long-term outcome efficiency measure. The CWSRF program also requires states to have a schedule with timing targets to ensure that federal grants are taken in a timely and efficient way. States have flexibility to adopt procedures to maximize effectiveness.

Evidence: See Measures tab. Operating agreements obtain state commitment schedules to commit and expend all funds as efficiently as possible. On a quarterly basis, EPA regional staff checks federal cash draw requests against negotiated payment schedules to ensure state compliance (documented in Performance Evaluation Reports).

Does the program collaborate and coordinate effectively with related programs?

Explanation: EPA has national agreements to maximize effectiveness of programs with the USDA Rural Utilities Service and HUD Community Development Block Grant programs, which also operate financing programs for wastewater treatment. Internally, the CWSRF coordinates closely with the 319 (Nonpoint source) and 320 (Estuary) programs to assure consistency between eligibilities. For instance, the CWSRF nonpoint source funding policy states explicitly that projects eligible for funding must also be eligible under guidance provided in the Nonpoint Source Grant Guidance. States are encouraged to coordinate funding sources to maximize availability of funds, minimize duplication of efforts, and to ensure affordability of projects. Many of the states which fund agriculture polluted runoff projects use USDA staff expertise to develop their CWSRF loan projects.

Evidence: Examples of coordination activties within states are documented in "One-Stop Shopping in the Clean Water State Revolving Fund Program." A recent report (8/03) by the EPA Environmental Finance Advisory Board (EFAB) indicates that coordination generally has been effective although there are state-specific issues impeding coordination.

Does the program use strong financial management practices?

Explanation: State CWSRF programs must follow Generally Accepted Accounting Principles, the Single Audit Act, OMB Circular A-133, and the Audit Compliance Supplement. In accordance with EPA's SRF Audit Program Plan, EPA's Inspector General audits states without independent audits (currently 8 states). EPA also conducted an assessment of erroneous payments and found only a few minor problems within the 51 state CWSRF programs. States conduct financial capability assessments of borrowers, as well as financial modeling, and those states with leveraged programs have AAA bond ratings.

Evidence: The final rule (40 CFA 35, Subpart K) specifies audit requirements for the program. See also, Fund Management Guidance.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: There is insufficient evidence that the Agency is effectively addressing the shortfalls of its critical data collection systems (e.g., PCS).

Evidence:  

Does the program have oversight practices that provide sufficient knowledge of grantee activities?

Explanation: Annually, data collection through CWSRF NIMS, site visits, program audits and performance evaluation reports (PERs) track how funds are used. EPA's integrated financial management system tracks federal outlays to grantees. EPA reviews and reports these results to Congress.

Evidence: Grantee activities and use of funds are documented in the CWSRF NIMS data reported by states.

Does the program collect grantee performance data on an annual basis and make it available to the public in a transparent and meaningful manner?

Explanation: EPA HQ collects data on grantee activities through CWSRF NIMS and makes them available to the public through its web site. State grantees must submit annual reports on meeting goals/objectives. EPA regions conduct annual reviews with each states. States are audited for proper practices.

Evidence: CWSRF NIMS data are available at: www.epa.gov/r5water/cwsrf. Many regions and states make their annual report information available on their web sites.

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: Outcome performance and efficiency measures were only recently developed. Progress toward the long-term output goal (revolving level target) is suggested by model projections.

Evidence: See measures tab.

Does the program (including program partners) achieve its annual performance goals?

Explanation: The annual outcome performance measure was only recently developed and does not capture significant aspects of the program's performance goals. However, the program does have results for the measure as accepted. The output performance results also indicate progress in key program activities.

Evidence: See measures tab.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: The program has several output efficiency measures and demonstrates improved efficiencies in meeting its financial management goals. The program worked closely with States to develop an outcome-based efficiency measure. EPA still needs to develop baselines and targets for this new measure.

Evidence: See measures tab.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: The CWSRF program provides more comprehensive assistance than any program whose purpose is solving water quality impairment problems. However, there is no evidence that it performs more effectively than other niche programs.

Evidence: GAO report on water funding sources discussed differences between different federal programs.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: Although evaluations have been performed, they do not meet the criteria for independence, scope and quality. The Inspector General (IG) conducts financial audits of selected state programs each year, and evaluates independent audits conducted within each state for consistency with financial accounting standards. No independent evaluations of program achievements with respect to outcomes or impact have been performed

Evidence: GAO last conducted a review in 1996.