Rural Water Projects:

Federal Assistance Criteria

RCED-98-204R: Published: May 29, 1998. Publicly Released: Jun 8, 1998.

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Pursuant to a congressional request, GAO provided information on the proposed legislation that would authorize the Bureau of Reclamation (BOR) to finance three rural water projects, focusing on: (1) the criteria for participation in specified programs of the Department of Agriculture (USDA), the Environmental Protection Agency (EPA), and BOR for funding rural water projects; (2) how the characteristics of the individual projects align with the criteria of the identified programs; and (3) the views of officials of the three agencies as to the appropriateness of their being tasked with these projects.

GAO noted that: (1) both USDA and EPA have programs under which rural communities that meet specific criteria may receive grants or loans for the construction of rural water projects, but BOR has no program for funding rural water projects and therefore has no eligibility criteria; (2) USDA's Rural Utilities Service program reviews projects according to various eligibility requirements, such as economic feasibility, population limits, and need; (3) EPA's Drinking Water State Revolving Fund provides grants to the states, which in turn provide loans and other assistance as allowed by law to eligible public water systems; (4) EPA requires the states to apply various criteria to the potential projects and to set priorities for projects on the basis of public health risks and need; (5) both USDA and EPA require that recipients demonstrate the ability to repay the loans provided to them; (6) despite its lack of eligibility criteria, BOR, which has concentrated its activities in 17 western states, does have a long-standing policy on reimbursement for its contributions to local projects; (7) the characteristics of the Lewis and Clark, Fort Peck, and Fall River projects do not meet some of the criteria for participation in the USDA and EPA programs; (8) specifically, all three projects would rely on grants rather than loans and so do not meet the criteria for economic feasibility without exceeding standard federal spending assistance limits; (9) in addition, the Lewis and Clark project has a city with a population larger than the maximum number allowed by the criterion of the USDA program; (10) the same population limit is applicable to EPA's provision for setting aside funds for rural projects; (11) furthermore, the Fall River project was rejected by USDA officials on the basis of several eligibility factors, including an insufficient number of water users to make the project economically feasible; (12) the Fall River project does not meet EPA's current criteria because it is not an existing public water system; (13) none of the three projects is consistent with BOR's long-standing policy that users repay 100 percent of a project's costs; (14) although officials of the three agencies agreed that the projects would meet real needs in their communities, they expressed concerns about project construction costs for two of the three water projects--Lewis and Clark and Fort Peck; and (15) also, they noted that all three projects envision federal funding at cost-share levels above that provided by the programs of all agencies.

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