Capitalization Grants for Drinking Water State Revolving Funds

Published on AidPage by IDILOGIC on Jun 24, 2005

Administered by:

US Federal Government Agency (see all agencies)
Environmental Protection Agency , Office of Water
CFDA #: 66.468

Purpose of this program:

Grants made to States capitalize their Drinking Water State Revolving Funds (DWSRFs) which will provide a long-term source of State financing for the costs of drinking water infrastructure. Funding Priority: The funding priority established by the SDWA are for projects that are needed to achieve or maintain compliance with SDWA requirements, protect public health, and assist systems with economic need. A State may also use the grant funds for programs that emphasize preventing contamination problems through source water protection and enhancing water system management. States determine priorities for funding within their state in accordance with SDWA. The program supports the Agency's strategic goal of ensuring Clean and Safe Water.

Possible uses and use restrictions...

Capitalization grants are available to each State for the purpose of establishing a DWSRF for providing assistance to drinking water systems for infrastructure improvements. The capitalization grant is deposited in the State's DWSRF, and is used to provide loans and other types of financial assistance to eligible public water systems. A State may elect to use up to 31 percent of the capitalization grant for other eligible activities, including 4 percent for administration of the program. States may also elect to transfer up to one-third of the DWSRF capitalization grant to the Clean Water State Revolving Fund (CWSRF) or an equivalent amount from the CWSRF to the DWSRF program.

Who is eligible to apply...

States and the Territory of Puerto Rico are eligible to receive capitalization grants. The District of Columbia, Territories excluding Puerto Rico, and Indian tribes are eligible for direct grants from the program.

Eligible Applicant Categories:
Eligible Functional Categories:

To receive a capitalization grant, a State enters into an agreement with the EPA Regional Administrator which shall include, but not be limited to, the requirements set forth in Section 130 of the SDWA. Recipients must follow OMB Circular No. A-87, "Cost Principles for State, Local and Indian Tribal Governments."

Note:This is a brief description of the credentials or documentation required prior to, or along with, an application for assistance.

About this section:

This section indicates who can apply to the Federal government for assistance and the criteria the potential applicant must satisfy. For example, individuals may be eligible for research grants, and the criteria to be satisfied may be that they have a professional or scientific degree, 3 years of research experience, and be a citizen of the United States. Universities, medical schools, hospitals, or State and local governments may also be eligible. Where State governments are eligible, the type of State agency will be indicated (State welfare agency or State agency on aging) and the criteria that they must satisfy.

Certain federal programs (e.g., the Pell Grant program which provides grants to students) involve intermediate levels of application processing, i.e., applications are transmitted through colleges or universities that are neither the direct applicant nor the ultimate beneficiary. For these programs, the criteria that the intermediaries must satisfy are also indicated, along with intermediaries who are not eligible.

How to apply...

Application Procedure:

The standard application for EPA non-construction grant assistance (Standard Form SF-424 A and B) is submitted to the appropriate Regional Office. The State must certify that it has the legal authority to receive a capitalization grant and that it has the legal authority to operate the program. The State must provide the assurance in its application that it has the legal, managerial, technical and operational capabilities to administer the DWSRF program competently and that will comply with all applicable Federal cross-cutting authorities and Federal statutes. EPA grant regulations (40 CFR Part 31 apply to States receiving capitalization grants. Establishment of the DWSRF is a prerequisite for a grant award.

Note: Each program will indicate whether applications are to be submitted to the Federal headquarters, regional or local office, or to a State or local government office.

Award Procedure:

A grant application is reviewed by the appropriate Regional Office, and if approved, the grant is awarded by the Regional Administrator under a delegation of authority from the Administrator of EPA. EPA Headquarters retains the authority to review certain applications or parts thereof.

Note: Grant payments may be made by a letter of credit, advance by Treasury check, or reimbursement by Treasury check. Awards may be made by the headquarters office directly to the applicant, an agency field office, a regional office, or by an authorized county office. The assistance may pass through the initial applicant for further distribution by intermediate level applicants to groups or individuals in the private sector.

Deadlines and process...


Applications should be submitted to the appropriate Regional Office no later than June 30 of the year following the year of appropriation to allow sufficient time for review and processing prior to the September 30 reallotment deadline.

Note: When available, this section indicates the deadlines for applications to the funding agency which will be stated in terms of the date(s) or between what dates the application should be received. When not available, applicants should contact the funding agency for deadline information.

Range of Approval/Disapproval Time

Approval time averages 45 days.

Preapplication Coordination

An applicant (State) should seek preapplication assistance from the appropriate EPA Regional Office. The State is required to prepare and provide for public comment on a plan identifying the intended uses (Intended Use Plan, or IUP) of the funds in the DWSRF and how those uses support the goals of the DWSRF. The IUP is to be submitted no later than the application. An environmental impact statement is not required prior to grant award; however, a State environmental review process must be applied to all subsequent State assistance for drinking water systems. This program is eligible for coverage under E.O. 12372, ?Intergovernmental Review of Federal Programs.? An applicant should consult the office or official designated as the single point of contact in his or her State for more information on the process the State requires to be followed in applying for assistance, if the State has selected the program for review.

Note: This section indicates whether any prior coordination or approval is required with governmental or nongovernmental units prior to the submission of a formal application to the federal funding agency.


As described in EPA's Regulation 40 CFR Part 31, Subpart F.

Note: In some cases, there are no provisions for appeal. Where applicable, this section discusses appeal procedures or allowable rework time for resubmission of applications to be processed by the funding agency. Appeal procedures vary with individual programs and are either listed in this section or applicants are referred to appeal procedures documented in the relevant Code of Federal Regulations (CFR).


For those portions of the State program that do not change from year to year, a subsequent grant application may incorporate by reference relevant portions of the previous year's application which have not changed and are placed in its operating agreement.

Note: In some instances, renewal procedures may be the same as for the application procedure, e.g., for projects of a non-continuing nature renewals will be treated as new, competing applications; for projects of an ongoing nature, renewals may be given annually.

Who can benefit...

States are the primary beneficiary of assistance from EPA. States use funds awarded to them to provide loans and other types of financial assistance to eligible public water systems - which are publicly and privately owned community drinking water systems and non-profit non-community drinking water systems (including water systems owned by Indian Tribes and Alaska Native Villages).

About this section:

This section lists the ultimate beneficiaries of a program, the criteria they must satisfy and who specifically is not eligible. The applicant and beneficiary will generally be the same for programs that provide assistance directly from a Federal agency. However, financial assistance that passes through State or local governments will have different applicants and beneficiaries since the assistance is transmitted to private sector beneficiaries who are not obligated to request or apply for the assistance.

What types of assistance...

Formula Grants

Allocations of money to States or their subdivisions in accordance with distribution formulas prescribed by law or administrative regulation, for activities of a continuing nature not confined to a specific project.

How much financial aid...

Range and Average of Financial Assistance

For FY 03: $8,004,100 to $81,966,200; $15,000,000.

Note: This section lists the representative range (smallest to largest) of the amount of financial assistance available. These figures are based upon funds awarded in the past fiscal year and the current fiscal year to date. Also indicated is an approximate average amount of awards which were made in the past and current fiscal years.


FY 03 $844,475,000; FY 04 $844,984,700; and FY 05 est. $850,000,000.

Note: The dollar amounts listed in this section represent obligations for the past fiscal year (PY), estimates for the current fiscal year (CY), and estimates for the budget fiscal year (BY) as reported by the Federal agencies. Obligations for non-financial assistance programs indicate the administrative expenses involved in the operation of a program.

Account Identification


Note: Note: This 11-digit budget account identification code represents the account which funds a particular program. This code should be consistent with the code given for the program area as specified in Appendix III of the Budget of the United States Government.

Examples of funded projects...

Drinking Water State Revolving Fund; drinking water projects addressing treatment, storage, source, transmission, distribution and consolidation.

About this section

This section indicates the different types of projects which have been funded in the past. Only projects funded under Project Grants or Direct Payments for Specified Use should be listed here. The examples give potential applicants an idea of the types of projects that may be accepted for funding. The agency should list at least five examples of the most recently funded projects.

Program accomplishments...

All 50 states and the Territory of Puerto Rico have established and are implementing DWSRF programs through receipt of a capitalization grant. During FY 03, states made 585 loans to systems for a total of $1.3 billion dollars. Of the total loans, 71% went to small water systems that serve 10,000 persons or fewer. In FY 04, it is anticipated that states will make approximately 600 loans to systems.

Criteria for selecting proposals...

Grants are awarded to States that satisfy the requirements outlined in the application procedure section.

Assistance considerations...

Length and Time Phasing of Assistance

Funds are available for EPA's obligation to the State during the fiscal year in which they are allotted and during the following year. The State must agree to enter into binding commitments with loan recipients to provide financial assistance from the DWSRF in an amount equal to the sum of Federal assistance, less amounts used by the State for eligible set-aside purposes, and the State match. The State is also required to agree to commit and expend all funds in the DWSRF as efficiently as possible, and in a timely manner.

Formula and Matching Requirements

The Regional Administrator may award capitalization grants for DWSRFs from funds appropriated for this purpose. Allotments to the States are based on a formula, approved by the Administrator, that allocates the funds based on the proportional share of the State needs identified in the most recent needs survey conducted, except that each State and the District of Columbia will receive a minimum of one percent. The required State match is 20 percent of the amount of the capitalization made to the State. States must also provide a match or demonstrate a credit for State funded eligible activities to receive Federal funds for certain program support activities.

A formula may be based on population, per capita income, and other statistical factors. Applicants are informed whether there are any matching requirements to be met when participating in the cost of a project. In general, the matching share represents that portion of the project costs not borne by the Federal government. Attachment F of OMB Circular No. A-102 (Office of Management and Budget) sets forth the criteria and procedures for the evaluation of matching share requirements which may be cash or in-kind contributions made by State and local governments or other agencies, institutions, private organizations, or individuals to satisfy matching requirements of Federal grants or loans.

Cash contributions represent the grantees' cash outlay, including the outlay of money contributed to the grantee by other public agencies, institutions, private organizations, or individuals. When authorized by Federal regulation, Federal funds received from other grants may be considered as the grantees' cash contribution.

In-kind contributions represent the value of noncash contributions provided by the grantee, other public agencies and institutions, private organizations or individuals. In-kind contributions may consist of charges for real property and equipment, and value of goods and services directly benefiting and specifically identifiable to the grant program. When authorized by Federal legislation, property purchased with Federal funds may be considered as grantees' in-kind contribution.

Maintenance of effort (MOE) is a requirement contained in certain legislation, regulations, or administrative policies stating that a grantee must maintain a specified level of financial effort in a specific area in order to receive Federal grant funds, and that the Federal grant funds may be used only to supplement, not supplant, the level of grantee funds.

Post assistance requirements...


Beginning the second fiscal year after receiving payments the State shall provide a biennial report to the Regional Administrator in accordance with the schedule established in the grant agreement (generally not later than 90 days after the end of the second fiscal year during which the payments were received). The biennial report shall describe how the State has met the goals and objectives for the preceding two fiscal years as identified in its intended use plans for those periods, including identification of loan recipients, loan amounts, and loan terms and similar details on other forms of financial assistance provided from the DWSRF.

Note: This section indicates whether program reports, expenditure reports, cash reports or performance monitoring are required by the Federal funding agency, and specifies at what time intervals (monthly, annually, etc.) this must be accomplished.


A State must comply with the provisions of the Single Audit Act Amendments of 1996, and the OMB Circular No. A-133 and Compliance Supplement. States are also encouraged to conduct annual independent audits. The audit of the fund to be prepared by the State or an independent auditor must be in accordance with the standards of the General Accounting Office (known as the Generally Accepted Government Auditing Standards). To the extent that the set-asides are used for project purposes that must be repaid, or are directly related to the DWSRF (e.g., administration) or are revolving funds themselves, they must be part of an audited opinion(s). The audits must provide an auditor's opinion on the DWSRF financial statements, a report on internal controls and a report on compliance with laws and regulations. Those set-aside funds that are not loaned out may be audited in conjunction with audits conducted under the Single Audit Act, as described in OMB Circular No. A-133 and OMB's Compliance Supplement for Single Audits of State and Local Governments. In accordance with the provisions of OMB Circular No. A-133, "Audits of States, Local Governments, and Non-Profit Organizations," nonfederal entities that receive financial assistance of $300,000 or more within the State's fiscal year shall have an audit made for that year. The Office of Management and Budget (OMB) Circular No. A-133, "Audits of States, Local Governments, and Non-Profit Organizations," was published in the Federal Register on June 30, 1997. The Circular implements the Single Audit Act amendments of 1996. The Circular requires nonfederal entities that expend more than $500,000 in Federal award dollars, to have an audit conducted in accordance with the Circular's provisions. With the revised Circular, the previous OMB Circular No. A-128 for single audits of State and local governments was rescinded and the single audit requirements for these entities were incorporated among the provisions of OMB Circular No. A-133.

Note: This section discusses audits required by the Federal agency. The procedures and requirements for State and local governments and nonprofit entities are set forth in OMB Circular No. A-133. These requirements pertain to awards made within the respective State's fiscal year - not the Federal fiscal year, as some State and local governments may use the calendar year or other variation of time span designated as the fiscal year period, rather than that commonly known as the Federal fiscal year (from October 1st through September 30th).


As part of the annual review conducted by the agency to assess the State's performance against activities identified in the intended use plan and biennial report, and to determine compliance with the terms of the capitalization grant agreement, the State or assistance recipient shall make available to EPA such records as the Regional Administrator reasonably requires to review and determine State compliance with the requirements of the SDWA.

Note: This section indicates the record retention requirements and the type of records the Federal agency may require. Not included are the normally imposed requirements of the General Accounting Office. For programs falling under the purview of OMB Circular No. A-102, record retention is set forth in Attachment C. For other programs, record retention is governed by the funding agency's requirements.



Safe Drinking Water Act (SDWA) Amendments of 1996, Section 130; Public Law 104-182.

Note: This section lists the legal authority upon which a program is based (acts, amendments to acts, Public Law numbers, titles, sections, Statute Codes, citations to the U.S. Code, Executive Orders, Presidential Reorganization Plans, and Memoranda from an agency head).

Regulations, Guidelines, And Literature

Final program guidance was issued February 28, 1997. Regulations include 40 CFR Part 31 and DWSRF regulations 40 CFR Part 35, Subpart L. Additional program information is available online.

Contact information...

Web Sites
Regional Or Local Office

See EPA Regional Offices listed in Additional Contact Information - FMR Help, or online.

Note: This section lists the agency contact person, address and telephone number of the Federal Regional or Local Office(s) to be contacted for detailed information regarding a program such as: (1) current availability of funds and the likelihood of receiving assistance within a given period; (2) pre-application and application forms required; (3) whether a pre-application conference is recommended; (4) assistance available in preparation of applications; (5) whether funding decisions are made at the headquarters, regional or local level; (6) application renewal procedures (including continuations and supplementals) or appeal procedures for rejected applications; and (7) recently published program guidelines and material. However, for most federal programs, this section will instruct the reader to consult the so-called Appendix IV of the Catalog due to the large volume of Regional and Local Office Contacts for most agencies. This information is provided in Additional Contact Information (see below).

Headquarters Office

Peter Shanaghan, Infrastructure Branch (4606M), Drinking Water Protection Division, Office of Groundwater and Drinking Water, U.S. Environmental Protection Agency, 1200 Pennsylvania Avenue, NW, Washington, DC 20460. Telephone: (202) 564-3848, FAX: (202) 564-1836, E-mail:

Note: This section lists names and addresses of the office at the headquarters level with direct operational responsibility for managing a program. A telephone number is provided in cases where a Regional or Local Office is not normally able to answer detailed inquiries concerning a program. Also listed are the name(s) and telephone number(s) of the information contact person(s) who can provide additional program information to applicants.

Additional Contact Information (Appendix IV)

Due to the large volume of regional and local office contacts for most agencies, full contact information is also provided separately here in a PDF format: