OIG Releases Report on State Capacity to Manage IIJA Funding

On February 27, EPA’s Office of Inspector General (OIG) released a report evaluating Drinking Water State Revolving Fund (DWSRF) programs’ perspectives on their capacity to manage funding from the Infrastructure Investment and Jobs Act (IIJA). OIG sent a survey to all 51 DWSRF administrators to determine their programs’ capacity to manage IIJA funds based on three dimensions:

  • Organizational – the degree to which a state agency is prepared to manage and implement federal grants,
  • Financial – the extent to which a state agency has sufficient financial resources to administer or implement federal grants, and
  • Human capital – degree to which a state agency has sufficient staff with the knowledge and technical skills needed to manage its federal grants effectively.

The report found that of the 46 administrators who responded to the survey, most agreed that their agencies had the organizational capacity necessary to manage the IIJA funds. A few state DWSRF administrators expressed concerns related to financial capacity, specifically regarding meeting state financial matching requirements. Additionally, DWSRF programs noted that identifying projects that are eligible for DWSRF IIJA funding, especially projects eligible for lead service line replacement funds, is a challenge. A few state DWSRF administrators stated that their agencies did not have enough staff or sufficient guidance to manage DWSRF IIJA funds. The survey found workforce management and insufficient federal guidance to be common obstacles that limit their agencies’ capacity to manage DWSRF IIJA funds, in particular guidance related to the Build America, Buy America Act provisions. Additionally, a few state DWSRF administrators cited a lack of coordination with the EPA as an obstacle.

The report has no recommendations, and therefore, EPA’s Office of Ground Water and Drinking Water, which oversees the DWSRF program, is not required to respond.