State Water Resources

Control Board
It Lacks the Urgency Necessary to Ensure
That Failing Water Systems Receive Needed
Assistance in a Timely Manner

July 2022

REPORT 2021‑118
 CALIFORNIA STATE AUDITOR
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 Michael S. Tilden Acting State Auditor

July 26, 2022

2021-118

The Governor of California

President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814

Dear Governor and Legislative Leaders:

Our audit of the State Water Resources Control Board (State Water Board) focused on the board’s
efforts to help provide Californians with safe drinking water. Nearly a million Californians face possible
long-term, negative health outcomes—including an increased risk of liver and kidney problems, as well
as cancer—because they receive unsafe drinking water from a failing water system. The State Water
Board reported that more than 370 such systems, providing water to more than 920,000 people, were
not meeting water quality standards as of December 2021. More than two‑thirds of these systems are
located in disadvantaged communities with significant financial need.

The State Water Board has funding available to help these failing systems improve the quality of their
drinking water. Nonetheless, the board has generally demonstrated a lack of urgency in providing this
critical assistance. In fact, the time necessary for water systems to complete applications for funding
and for the State Water Board to approve and award that funding nearly doubled from 17 months in
2017 to 33 months in 2021.

The State Water Board’s lack of goals and metrics for its application process has likely contributed
to this lengthening time frame and has inhibited the board’s ability to identify aspects of its review
process that it could improve. The longer the board takes to fund projects, the more expensive those
projects become. More importantly, delays increase the likelihood of negative health outcomes for
Californians served by the failing water systems.

Because failing water systems often lack the expertise to plan and implement water improvement
projects, the State Water Board provides them access to contracted technical assistance providers.
However, it has yet to implement metrics to gauge the overall performance of these providers and
to  ensure that the water systems receive timely assistance. Further, the board needs to develop a
plan to ensure that its staff and its contracted providers do not duplicate their outreach efforts, thus
wasting limited resources.

Respectfully submitted,

MICHAEL S. TILDEN, CPA

Acting California State Auditor

621 Capitol Mall, Suite 1200 | Sacramento, CA 95814 | 916.445.0255 | 916.327.0019 fax | w w w. a u d i t o r. c a . g o v
iv California State Auditor Report 2021-118
July 2022

Selected Abbreviations Used in This Report

DWSRF Safe Drinking Water State Revolving Fund

EPA U.S. Environmental Protection Agency

MCL maximum contaminant levels

SADW Safe and Affordable Drinking Water

SAFER Safe and Affordable Funding for Equity and Resilience program
 California State Auditor Report 2021-118 v
July 2022

Contents
Summary 1

Recommendations 3

Introduction 7

Audit Results
Nearly a Million Californians Lack Access to Safe Drinking Water 17

The State Water Board Has Demonstrated a Lack of Urgency

to Provide Needed Assistance to Failing Water Systems 21

The State Water Board Needs to Better Monitor Its Technical

Assistance Providers to Ensure That They Are Providing
Effective Services 38

Although the State Water Board Is Expanding Outreach to

Water Systems, It Needs to Better Monitor These Efforts 41

Other Areas We Reviewed 43

Appendix A
Results of Our Survey of Failing Water Systems 47

Appendix B
Scope and Methodology and Assessment of Data Reliability 49

Response to the Audit

State Water Resources Control Board 53

California State Auditor’s Comments on the Response from

the State Water Resources Control Board 59
vi California State Auditor Report 2021-118
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 California State Auditor Report 2021-118 1
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Summary
Results in Brief Audit Highlights . . .

California is one of the most prosperous states in the country, Our audit of the State Water Board’s efforts
and yet, fundamental inequities still exist, including access to safe to help provide Californians with safe
drinking water. In fact, nearly a million Californians lack access to drinking water highlighted the following:
safe drinking water because they receive water from systems that
» More than 370 of the State’s water
do not meet water quality standards. The State Water Resources
systems, serving nearly a million
Control Board (State Water Board) regulates the operation of
Californians, exceed the maximum
roughly 7,400 drinking water systems throughout the State and
contaminant levels for substances that
disburses federal and state assistance to help them improve their
are harmful to human health.
water quality. As of December 2021, the State Water Board reported
that more than 370 water systems were classified as failing water • More than 150 of these systems have
systems because they exceeded the maximum contaminant levels been failing for at least five years.
for safe drinking water. These failing water systems provide water
to more than 920,000 people. Nearly 240 of these water systems • Hundreds of additional water systems
have been failing for at least three years, and more than 150 have are currently at risk of failing.
been failing for five years. Further, for 2022, the State Water Board’s
» The State Water Board has not prioritized
data show that an additional 432 water systems serving more than
the processing of water systems’ funding
1 million people are at risk of failing.
applications so that the systems can
improve their water quality.
The State Water Board has demonstrated a lack of urgency to
provide needed assistance to failing water systems. The State Water • Over the past five years, the average
Board provides funding and other assistance to water systems for length of time for water systems
drinking water projects that address or prevent public health risks. to complete their applications and
However, over the last five years, the average amount of time it took receive funding nearly doubled, from
for water systems to complete their applications for these funds, 17 months to 33 months.
and then for the State Water Board to review them and award
funding, has nearly doubled from an average of 17 months in 2017 • The State Water Board has not
to 33 months in 2021. A key reason for this trend is that in recent established performance goals or
years, because of a change in state law, the State Water Board’s metrics related to its cumbersome
focus has shifted to helping smaller, potentially less sophisticated, application process.
water systems. According to State Water Board staff, working » Although the State Water Board provides
with a greater number of smaller water systems has increased its water systems with technical assistance
application processing times. Even so, our survey of water systems to plan their improvements and
and observations from our review of a selection of applications apply for funds, it has not adequately
indicate that the State Water Board’s cumbersome application monitored the performance of the
process, and its lack of sufficient communication and follow‑up technical assistance providers with
with water systems, are also contributing factors to funding delays. which it contracts.
Further, the State Water Board has no performance goals or
metrics for measuring and improving its processes for reviewing » The State Water Board needs to better
applications and executing final project plans and agreements in ensure that its staff and its contracted
a timely manner. The longer the State Water Board takes to fund providers do not duplicate each other’s
projects, the more expensive the projects become and, more outreach efforts.
importantly, the greater the likelihood of negative health outcomes
for Californians served by failing water systems.
2 California State Auditor Report 2021-118
July 2022

Because failing water systems often lack the technical expertise to

plan and implement water improvement projects, the State Water
Board offers access to technical assistance providers that provide
project development and assistance with funding applications,
among other services. However, the State Water Board does not
sufficiently monitor the performance of its providers or track which
providers can take on additional assignments. For example, the
State Water Board assigned a high‑priority technical assistance
project for South Kern Mutual Water Company to one of its
providers in December 2019. However, the State Water Board
did not recognize until 10 months later that the provider had not
performed work on the project, and eventually the State Water
Board had to assign the project to another provider. Implementing
measures to gauge technical assistance providers’ workload and
performance would help the State Water Board ensure that failing
water systems are receiving needed assistance in a timely manner.

The State Water Board is making efforts to implement outreach

programs to water systems and the public to help ensure that they
are aware of concerns with their drinking water and are informed
of assistance the State may provide if their systems need financial
or technical assistance. For instance, in March 2022, the State
Water Board completed an outreach strategy that focuses on
improving community engagement to help failing water systems
return to compliance. However, as the State Water Board increases
its outreach efforts, it needs to better ensure that its efforts are
efficient. For example, although it contracted with one of its
technical assistance providers for more than $9 million to conduct
outreach to water systems at risk of failing, the provider conducted
outreach to several water systems that were already receiving
technical assistance, thus duplicating the efforts of other technical
assistance providers. The State Water Board agreed that it will
amend the agreement with the provider to ensure that the provider
does not waste time conducting outreach to water systems already
receiving technical assistance.

Agency Comments

Although the State Water Board disagreed with certain report

conclusions, it generally agreed with our recommendations and
stated it would work to implement them.
 California State Auditor Report 2021-118 3
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Recommendations
The following are the recommendations we made as a result of our
audit. Descriptions of the findings and conclusions that led to these
recommendations can be found in the Audit Results section of
this report.

Legislature

To provide transparency and accountability in the State Water

Board’s efforts to assist failing water systems, the Legislature should
amend state law to require the State Water Board by June 2023 to
include its timeliness goals and its performance in comparison
to those goals in the annual expenditure plans and reports it already
submits to the Legislature. The Legislature should also require the
State Water Board to include in those reports a list of drinking
water project applications that have exceeded the board’s timeliness
goals and a brief description of the reasons for delays, its strategies
for overcoming those delays, and its estimated time to execute
funding agreements.

State Water Board

To minimize the prolonged periods during which Californians suffer

without safe drinking water, the State Water Board should do the
following by January 2023:

• Streamline its application process by eliminating the need to submit

unnecessary application documents and financial information.

• Review and revise its credit review process, including the creation
of a limited credit review process for grant‑funded projects.

• Develop a process to fast‑track urgent water projects, particularly

for failing water systems affecting a large number of people
or serving a disadvantaged community. One option for doing
so would be to use state‑only funding that is not subject to
federal requirements.

• Establish expectations for how quickly its staff will review

initial applications, communicate to water systems about the
need for additional information or revisions, and wait for water
systems to respond before reaching out to determine the cause
of application delays. In addition, the State Water Board should
document and measure staff adherence to these expectations and
make adjustments to its review and communication processes
as necessary.
4 California State Auditor Report 2021-118
July 2022

• Establish and implement a process for project managers and staff

to document their communications with water systems.

• Develop metrics and performance benchmarks for key phases

of the application and funding processes, including the number
of days it should take to execute a funding agreement after it
receives a complete application. It should also review recent past
applications in light of these new metrics to identify common
reasons for delays—including an increase in consolidation
projects—and develop processes to overcome these delays.

• Determine whether to change the way it assigns staff to

projects, including whether to dedicate staff to working only on
applications or on monitoring projects under construction.

• Obtain input from its advisory group on the development and

execution of staff expectations, metrics, and benchmarks related
to its application and funding processes.

To increase transparency in the funding process and make its online

search tool more useful to water systems applying for funding, by
January 2023 the State Water Board should update its online search
tool for funding applications to include the following:

• A description of the additional information the State Water

Board needs from the water system to continue processing
its application.

• Any deadlines the State Water Board has issued to the water
system to provide additional information.

• The cause of any prolonged delays in the process, including the

need for reviews by external parties.

• The date the State Water Board expects to complete its reviews
and award funding to the water system.

To ensure that it has sufficient staff to process funding applications

in a timely manner, by July 2023 the State Water Board should
evaluate its progress in meeting its performance goals and assess
whether its current staffing levels are sufficient. If the State Water
Board finds that it needs additional staff to meet its goals or to
prevent a backlog of applications, it should request additional
funding from the Legislature to meet its staffing needs.

To ensure that it effectively manages technical assistance projects

and oversees technical assistance providers’ performance, by
January 2023 the State Water Board should establish performance
metrics and time frames for its review of technical assistance
 California State Auditor Report 2021-118 5
July 2022

providers’ deliverables to verify that the providers have addressed

water systems’ needs in an appropriate and timely manner. The
State Water Board should include its metrics and performance
expectations in all of its technical assistance provider agreements.

To ensure that it is maximizing the number of water systems that

are aware of available technical assistance and funding options,
including failing water systems and water systems serving
disadvantaged communities, the State Water Board should
immediately amend the contract with its current outreach provider
to coordinate with the State Water Board to ensure that the
provider does not work with systems already receiving technical
assistance. The State Water Board should also develop a plan by
January 2023 to avoid future outreach work that duplicates the
efforts of its providers or of its staff.

To address the funding gap identified in its needs assessment

report, the State Water Board should immediately work with the
Legislature, and with federal agencies to the extent possible, to
request the resources necessary to ensure that water systems can
meet drinking water standards, including repairing or improving
water treatment technologies, consolidating water systems, and
providing technical assistance.
6 California State Auditor Report 2021-118
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 California State Auditor Report 2021-118 7
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Introduction
Background

State law established a policy in 2013 that every Selected Types of Water Systems in California
person has the right to safe, clean, affordable, and
Public water systems: Provide water for 15 or more service
accessible water adequate for human consumption, connections—generally the point between the customers’
cooking, and sanitary purposes (safe drinking water). piping and the water system’s meter or service pipe—or
In 2014 state law transferred the responsibility for regularly serve a minimum of 25 people daily for at least
administering safe drinking water programs from the 60 days annually. Public water systems may be operated
California Department of Public Health to the State by public or privately owned entities and are primarily
Water Resources Control Board (State Water Board). regulated by the State Water Board. The State Water Board
The State Water Board’s mission is, in part, to identified about 7,400 public water systems in the State.
enhance the quality of California’s water resources State small water systems: Provide water for five to
and drinking water and to ensure proper water 14 service connections and do not regularly deliver drinking
resource allocation and efficient use. The State water to more than an average of 25 individuals daily
Water Board consists of five board members, each for more than 60 days out of the year. Counties typically
appointed to a four‑year term by the Governor and regulate these systems, and they may be operated by public
confirmed by the Senate. Additionally, there are or privately owned entities. However, effective January 2022,
nine regional water quality control boards, each of the State Water Board now has authority for some oversight
which consists of seven members also appointed by of these systems. The State Water Board has identified
the Governor and confirmed by the Senate. Along approximately 1,300 active state small water systems.
with its regional board offices, the State Water Board Domestic wells: Groundwater wells providing water for
had approximately 2,500 authorized positions for the domestic needs of an individual residence, or a water
fiscal year 2021–22. system that is not a public water system and has no more
than four service connections. The State Water Board may
California’s drinking water comes from surface order a domestic well that fails, or is at risk of failing, to be
water, such as rivers, or water obtained from consolidated with other water systems. The Department of
Water Resources reported approximately 273,000 domestic
underground. Households receive their water from
wells in the State.
different types of water systems, as described in
the text box. Public water systems, most often Source:  State law, Department of Water Resources website,
the State Water Board’s 2020 Annual Compliance Report, and
supplied by surface water or groundwater, generally State Water Board website.
provide drinking water to large cities, regional water
suppliers, small housing communities, businesses,
and schools, among other customers. In contrast,
some residents, typically single‑family homeowners, may receive
drinking water from domestic wells supplied by groundwater.

Federal and State Water Quality Standards

The State Water Board’s Division of Drinking Water implements

and enforces the federal and state Safe Drinking Water Acts,
monitors drinking water quality, and issues permits to the roughly
7,400 public water systems throughout the State. The State Water
Board establishes maximum contaminant levels (MCLs) for more
than 100 substances that are harmful to human health. It must set
these MCLs at levels that are at least as stringent as those adopted
by the U.S. Environmental Protection Agency (EPA) and must
8 California State Auditor Report 2021-118
July 2022

review its MCLs at least every five years to account for changes in

technology or treatment techniques that permit materially greater
protection of public health, or new scientific evidence that indicates
that substances may present a materially different risk to public
health than was previously determined. The State Water Board set
the current MCLs in 2018 and expects to update them in early 2023.

Federal and state laws require public water systems to annually

report on the level of contaminants in the drinking water. These
water systems must notify their consumers and the State Water
Board when their drinking water has exceeded any of the MCLs.
This notification must include a clear and understandable
explanation of the nature of the contaminant, its potential adverse
health effects, steps that the water system is taking to correct
the violation, and whether alternative water supplies should be
used. The Division of Drinking Water’s 25 district offices monitor
public water systems’ compliance with drinking water standards
by reviewing and evaluating analytical results of the water samples
collected by the water systems. When a water system exceeds MCL
standards, the Division of Drinking Water may take enforcement
actions, including fines if necessary.

Californians who rely on drinking water systems that exceed

MCLs are at risk for serious health complications. Figure 1 shows
common contaminants cited in the State Water Board’s 2020
Annual Compliance Report and the risk those contaminants may
pose from long‑term exposure. For example, the report identified
that 70 public water systems exceeded the MCLs for arsenic, which
can cause skin damage or circulatory issues and may increase an
individual’s risk of cancer. Another commonly found contaminant
in water is nitrate, which can result from fertilizer or sewage runoff
and is particularly dangerous for infants under 6 months of age.

California is experiencing a historic drought across the State, which

led the Governor to proclaim a statewide state of emergency in
October 2021 and issue an executive order in March 2022 ordering
state agencies to draft proposals for mitigating the effects of the
drought. Over time, droughts will lower the level of water in
reservoirs and groundwater basins. A study by the U.S. Geological
Survey concluded that a reduction in the level of groundwater
is associated with worsening groundwater quality. The study
found that contaminants present due to agricultural activity in
California’s Central Valley have penetrated to depths commonly
accessed for public drinking water. During drought conditions,
precipitation is often not sufficient to maintain water levels and
meet demand. These drought conditions can increase the rate at
which contaminated surface water is drawn down to levels accessed
for public drinking water, further reducing water quality levels.
 California State Auditor Report 2021-118 9
July 2022

Figure 1
Common Water Pollutants and Potential Health Effects

Common Contaminants in Potential Health Effects From

Drinking Water and Their Sources Long-Term Exposure Above the MCL

Nitrate: Runoff from fertilizer use or sewage; • Infants could become seriously ill and, if untreated, may die
erosion of natural deposits

Arsenic: Erosion of natural deposits, runoff from orchards • Skin damage

or glass and electronics production wastes • Circulatory problems
• Increased risk of cancer

Combined uranium: Runoff from fertilizer use • Increased risk of cancer

or sewage; erosion of natural deposits • Kidney toxicity

Total trihalomethanes: Runoff from fertilizer use • Liver and kidney problems
or sewage; erosion of natural deposits • Central nervous system problems
• Increased risk of cancer

Total haloacetic acids: Runoff from fertilizer use • Increased risk of cancer
or sewage; erosion of natural deposits

Fluoride: Water additive that, at safe levels, promotes • Bone disease (pain and tenderness of the bones)
strong teeth; erosion of natural deposits; discharge from • Children may get mottled teeth
fertilizer and aluminum factories

Microbiological contaminants: Human and animal • Short-term effects: Gastrointestinal illness, such as diarrhea,
fecal waste vomiting, and cramps
• Legionnaire's Disease, a type of pneumonia

• Short-term effects: Gastrointestinal illness, such as diarrhea,

E. coli: Human and animal fecal waste cramps, nausea, and headaches
• Special health risk for infants, young children, and people with
severely compromised immune systems

DBCP (1,2-Dibromo-3-chloropropane): • Reproductive difficulties

Runoff from soil fumigant • Increased risk of cancer

Source:  The State Water Board and EPA reports.

10 California State Auditor Report 2021-118
July 2022

Funding Sources for Safe Drinking Water Projects

From July 2016 through December 2021, the State Water Board’s

Division of Financial Assistance awarded about $1.7 billion in loan and
grant funding for water infrastructure projects—such as constructing
water sources, distribution systems, and treatment facilities—and
for technical assistance to water systems. For example, it awarded
$406 million to projects in fiscal year 2020–21 and $296 million for
projects in the first two quarters of fiscal year 2021–22. As Table 1
shows, the State Water Board awarded roughly half of all loans and
grants—$852 million of the nearly $1.7 billion awarded between
July 2016 and December 2021—to systems serving disadvantaged or
severely disadvantaged populations.1

Table 1
Distribution of Grant and Loan Funding Among Water Systems Serving Disadvantaged and Nondisadvantaged
Populations, July 2016 Through December 2021
(Dollars in Millions)

POPULATION TYPE PROJECT TOTAL LOANS GRANTS TOTAL FUNDING

Small severely disadvantaged 185 $27 2% $353 72% $380 23%
Large severely disadvantaged 4 20 2 5 1 25 1
Small disadvantaged 59 3 0.2 81 16 84 5
Large disadvantaged 8 321 27 42 9 363 22
Subtotals for Disadvantaged Populations 256 $371 31 $481 98 $852 51

Nondisadvantaged 41 808 69 12 2 820 49

Totals 297 $1,179 100% $493 100% $1,672 100%

Source:  State Water Board financial data.

Note:  Does not include $119 million the State Water Board awarded to entities other than water systems, including funding to technical
assistance providers.

The State Water Board relies on funding from several sources to

make these awards to water systems and support its safe drinking
water programs. For fiscal year 2021–22, federal and state funding
available for drinking water programs totaled $1.4 billion. Of that
amount, $650 million, or 46 percent, came from a State General Fund
appropriation for water system infrastructure. Another $330 million,
or 23 percent, came from the Safe Drinking Water State Revolving
Fund (DWSRF), and $240 million, or 17 percent, was from state general
obligation bonds, as Table 2 shows. The remainder of its funding is from
the Safe and Affordable Drinking Water (SADW) Fund, described below,
and additional appropriations from the State General Fund.

1 State law defines disadvantaged communities as those with a median household income that is less than
80 percent of the statewide annual median household income, and severely disadvantaged communities
as those with a median household income of less than 60 percent of the statewide average.
 California State Auditor Report 2021-118 11
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Table 2
Planned Availability of State Water Board Funding for Drinking Water Programs
Fiscal Year 2021–22

AMOUNT
FUNDING SOURCE
(MILLIONS)
State General Fund The State Water Board earmarked amounts from the State General Fund in 2021 for:
• Grants for drinking water projects. $650
(46 percent)
• Grants for water system administrators and for addressing issues related to $63
drought and certain contaminants. (5 percent)
DWSRF The DWSRF, funded by federal and state funds, is designed to provide low‑interest $330
loans and grants to public water systems for drinking water infrastructure projects. (23 percent)
General Obligation Bonds Propositions 1 and 68 provide grants and loans for public water system infrastructure
(Propositions 1, 68, and 84) projects as well as for operating and maintenance expenses, and technical assistance.
$240
Proposition 84 provides grants to fund urgent or emergency actions to ensure the
(17 percent)
availability of safe drinking water by, among other activities, providing alternative
water supplies—including bottled water—where necessary to protect public health.
SADW Fund State law established the SADW Fund in 2019 to provide, in part, a long‑term,
$130
continuous source of funding for the operation and maintenance of drinking water
(9 percent)
systems. Grants and loans from this fund prioritize disadvantaged communities.
Total $1,413

Source:  Federal and state laws and State Water Board planning documents and expenditure plans.

The DWSRF—federally funded with a 20 percent state match—is

one of the State Water Board’s sources of funding for drinking
water projects. This fund provides access to low‑interest loans and
some grants. The interest rates for these loans were 1.7 percent
in 2017, and 1.2 percent in 2021. To assist water systems serving
disadvantaged communities and public school districts that
cannot afford project costs, State Water Board policy requires it to
provide these water systems additional financial assistance, such
as principal forgiveness, interest‑free loans, and extended loan
repayment periods.

The State Water Board also has access to funding from state
bonds and from other special funds. For example, Proposition 84
(approved by voters in November 2006) provides loans and grants
that fund projects to assist local public agencies in meeting the
long‑term water needs of the State and infrastructure projects for
small community drinking water systems, among other projects.
Propositions 1 (approved by voters in November 2014) and
68 (approved by voters in June 2018) fund grants and loans
for public water system infrastructure projects, the operating
and maintenance expenses of existing water systems serving
disadvantaged communities, and technical assistance to water
systems serving disadvantaged communities. Further, in 2019 state
law established the SADW Fund, discussed in more detail below,
which provides a continuously appropriated source of funding
12 California State Auditor Report 2021-118
July 2022

for the operation and maintenance of drinking water systems, with

priority given to systems serving disadvantaged communities, among
other purposes. The State Water Board may also use these funds to
provide technical assistance to water systems.

Loan and Grant Application Process

Water systems are often eligible for funding from several sources.
They may apply for funding to assist in the planning and design
or construction of new infrastructure projects, or for operation
and maintenance of existing infrastructure. Planning and design
projects include evaluating alternative sources of drinking water,
conducting treatment pilot studies, drilling test well holes,
preparing environmental documents, and developing final plans and
specifications. The intent of such funding is to prepare for project
construction. Eligible construction projects include construction of
new infrastructure, such as water sources, distribution systems, and
treatment facilities, or replacing aged infrastructure. A project is
ready for construction when it has plans and specifications detailed
enough for potential developers to create bids for the work, has
completed environmental studies, and has obtained all necessary
permits and approvals. Water systems may apply for financial
assistance for both the design and the construction phases of
their projects.

Rather than requiring water systems to submit multiple applications

for different sources of funding, the Division of Financial Assistance’s
process is to match water systems’ needs to funding sources,
including determining whether to use state or federal funds for
loans and grants. Applications for funding require water systems to
provide the State Water Board with general project information, as
well as information about the project’s technical and environmental
aspects. The application must also include information about the
water system’s ability to repay the loan for the project.

Further, the State Water Board provides support and technical

assistance to water systems that need assistance with the application
process. Once a water system submits an application, a Division of
Financial Assistance project manager reviews it for completeness
and contacts the applicants to obtain any missing information.
Following its reviews of the project submittals, the State Water
Board determines the amount and source of funding to award the
water system. It then drafts a financing agreement for the projects.
Figure 2 shows the steps the State Water Board takes in reviewing
project applications.
 California State Auditor Report 2021-118 13
July 2022

Figure 2
The State Water Board’s Process for Reviewing Funding Applications

WATER SYSTEM NEED

A water system applies for financial assistance to get a project ready for construction,
or to build, install, or replace water infrastructure.

APPLICATION REVIEW
The water system submits an application for financial assistance.
Division of Financial Assistance reviews the application for completeness, then
performs a due diligence review on each of the four application packets.*

PROJECT SUBMITTAL REVIEW

Division of Financial Assistance staff conduct technical, environmental, and financial
reviews of the project submittal.

GENERAL TECHNICAL ENVIRONMENTAL FINANCIAL

Project description, Details on water California Environmental Quality Water rate study, projected annual
estimated schedule, system facilities and Act documents and exemptions, operations and maintenance costs,
and funding requested. impact of project. and federal environmental forms. financing amount, and requested terms.

FINANCING APPROVAL
Division of Financial Assistance determines whether the project can be best
financed through grants, loans, or other funds.

MASTER FILE AND DRAFT FUNDING AGREEMENT

Division of Financial Assistance compiles the project's master file. It then creates a draft
funding agreement between the State Water Board and the water system.

MASTER FILE AND FINAL AGREEMENT REVIEW

Legal and management review for approval.

FINAL AGREEMENT
The Division of Financial Assistance and the water system sign the agreement.

WATER SYSTEM PROJECT AWARD

The water system is awarded funding to design a solution to mitigate a water quality
issue, or it is awarded funding to build, install, or replace water infrastructure.

Source:  State Water Board procedure manual and website.

* This due diligence includes determinations of whether the proposed project provides the desired water quality improvements, is consistent
with permits, complies with federal and state environmental requirements, and, if for a loan, whether the water system has the ability to repay its
financial obligations.
14 California State Auditor Report 2021-118
July 2022

The State Water Board prioritizes funding for the projects in

the highest‑priority categories and readiness to proceed. For
certain projects, federal law requires that, to the maximum extent
practicable, the State Water Board prioritize funding for projects
that address the most serious risks to human health, are needed
to comply with federal drinking water standards, and assist
water systems most in need based on a per‑household basis of its
customers according to state affordability criteria. State law also
requires the State Water Board to prioritize funding for certain
projects that consolidate multiple water systems into one system
(consolidations). The State Water Board ranks the projects and
assigns each one a priority category based on these requirements.

Technical Assistance Program

Examples of Technical Assistance Services
Because some small, disadvantaged communities
Prevention efforts: Projects that help water systems may lack the capability to address their water
identify potential issues, such as leak detection, or that systems’ project development, the State Water
assess the technical, managerial, and financial capabilities of Board provides funding to these communities and
water systems serving disadvantaged communities.
access to technical assistance providers. Technical
Assessment efforts: Projects that help water systems assistance services include needs assessments,
address compliance issues, for example, by testing water water quality testing, project development, and
quality or preparing engineering reports. Also help to assistance with funding applications, among
complete funding applications for projects. others. The text box describes types of assistance
Source:  State law, EPA’s 2017 Drinking Water State Revolving the State Water Board may provide.
Fund Eligibility Handbook, and State Water Board website.
Proposition 1, which voters approved in
November 2014, provides up to $25 million for
technical assistance to address, in part, the State’s
deteriorating water infrastructure. In response to Proposition 1,
the State Water Board contracted with nonprofit organizations and
state universities to provide technical assistance to water systems.
As of February 2022, the State Water Board had contracted with
nine such organizations. These providers must submit to the State
Water Board a work plan for each assignment describing the nature
of the work they will perform for the water system and the cost
of providing the services, and must submit quarterly program
reports and invoices for payment. Between fiscal years 2018–19 and
2020–21, the State Water Board approved funding for 601 technical
assistance projects for 481 water systems. In December 2021,
the State Water Board published a request for qualifications to
identify potential new providers.2 As of June 2022, it approved
five new technical assistance providers and is evaluating six other
provider proposals.

2 The State Water Board will also require its existing technical assistance providers to reapply
under the request for qualifications once their current agreements expire, or if their scope of
work changes.
 California State Auditor Report 2021-118 15
July 2022

Water System Needs Assessment

In 2019 state law established the SADW Fund and

Primary Components of a Needs Assessment
directed the State Water Board to create an annual
expenditure plan for the fund. The expenditure Risk assessment: Identifies large and small water systems
plan, in part, prioritizes funding for disadvantaged that may be at risk of failing to provide an adequate supply
communities served by public water systems. of safe drinking water, with a focus on certain water systems
Further, state law requires the expenditure plan to and K–12 schools.
be based on a needs assessment, which the State Cost assessment: Estimates the funding needed for the
Water Board annually conducts to identify the SADW Fund for the next fiscal year based on anticipated
overall resources needed to bring failing water needs and available funding.
systems—those that are out of compliance with or
Affordability assessment: Identifies certain water systems
that consistently fail to meet state and federal safe
that serve disadvantaged communities that must charge
drinking water standards—into compliance with fees in excess of the affordability threshold established by
drinking water standards and prevent water systems the State Water Board in order to supply, treat, and distribute
that are at risk from failing, including public water potable water that meets federal and state drinking
systems, state small water systems, and domestic water standards.
wells. The assessment consists of three primary
Source:  State Water Board’s 2021 Drinking Water Needs Assessment.
components, as shown in the text box.

The 2021 needs assessment examined more than

2,700 public water systems, identifying more than 600 such systems
at risk of failing to provide an adequate supply of safe drinking
water. Together, these systems serve 400,000 people. The State
Water Board also reviewed state small water systems and domestic
wells and identified more than 600 state small water systems and
80,000 domestic wells at a high risk of accessing groundwater that
does not meet drinking water standards. Some examples of the
solutions identified by the State Water Board include consolidation
of smaller water systems into larger ones, contaminant treatment,
providing bottled water, and technical assistance. We discuss later
in this report a gap between the estimated cost of the solutions
to address the water system needs and the available funding to
implement those solutions.

The State Water Board has made several enhancements to the 2022
needs assessment, such as expanding the inventory of water systems
assessed for risk, revising indicators in the risk and affordability
assessment components, and incorporating risk indicators with a
drought‑related focus. For the 2022 needs assessment, the State
Water Board has changed its risk assessment to refine its ability
to predict which water systems are most at risk of failing. It has
also refined its efforts to better identify challenges associated with
drought conditions. For instance, in 2022 the State Water Board
included data on water systems’ reliance on bottled and hauled
water because they are unable to meet water demand use with
available water sources either because of water quality or capacity.
16 California State Auditor Report 2021-118
July 2022

Blank page inserted for reproduction purposes only.

 California State Auditor Report 2021-118 17
July 2022

Audit Results
Nearly a Million Californians Lack Access to Safe Drinking Water

Nearly a million Californians face possible long-term, negative

health outcomes—including an increased risk of liver and kidney
problems, as well as cancer—because they receive unsafe drinking
water from a failing water system. At the direction of its board,
in 2017 the State Water Board began compiling a list of failing
water systems with uncorrected drinking water quality violations.3
According to a branch chief in the Division of Drinking Water,
prior to 2017, the State Water Board monitored water systems
that violated safe drinking water standards but did not compile a
list of these systems. Since 2017 the total number of failing water
systems the State Water Board identified has remained higher
than 300, as Table 3 shows. To better align with state law, in 2021
the State Water Board expanded the criteria for its list of failing
water systems to include those that fail to properly treat drinking
water, as well as those that fail to properly monitor and report their
drinking water quality. The State Water Board also added new
criteria for E. coli violations. While the number of failing water
systems identified each year has varied, on average the State Water
Board has added about 70 new water systems to its list of failing
water systems and has removed about 50 systems that resolved
their water quality problems each year. In total, from January 2017
through December 2021, it identified 560 individual failing
water systems.

Table 3
Since 2017 the Number of Water Systems Classified as Failing Each Year Has
Remained Above 300

TOTAL NUMBER OF FAILING

YEAR
WATER SYSTEMS
2017 308
2018 386
2019 368
2020 337
2021 418

Source:  State law and State Water Board data on failing water systems.

3 The State Water Board’s list of failing water systems only includes water systems with 15 or more
service connections used by yearlong residents, or those that regularly serve at least 25 yearlong
residents, and water systems that serve schools and day‑care facilities and have 15 or more
service connections or regularly serve at least 25 people daily at least 60 days out of the year.
The list does not include state small water systems and domestic wells.
18 California State Auditor Report 2021-118
July 2022

Although the State Water Board identified a total of 418 failing

water systems in 2021, 371 failing water systems remained on
the State Water Board’s list at the end of December 2021. Most
of the people served by these failing water systems resided in
eight counties in the Central Valley, and San Bernardino and
Imperial counties, as Figure 3 shows. These failing water systems
provide water to more than 920,000 people, as Table 4 shows.
Moreover, nearly 240 of these water systems have been failing
for three years or more, and more than 150 have been failing
for five years. For example, the St. Anthony Mobile Home Park
(St. Anthony) water system in Riverside County has been on the
State Water Board’s list of failing water systems since April 2017
and has been providing its 340 residents with unsafe drinking
water contaminated with arsenic since at least 2012. Recent media
interviews with St. Anthony residents reported smelly, foamy water
and instances of children’s skin peeling while taking a shower. In
2016 the State Water Board awarded St. Anthony $251,000 for
a planning project to address its arsenic contamination, and in
2019 St. Anthony applied for $1 million in construction funding.
However, Riverside County ordered St. Anthony to permanently
consolidate its operations with the Coachella Valley Water District
(Coachella) by December 31, 2022, and the State Water Board
is currently reviewing Coachella’s application for a $24 million
consolidation project with St. Anthony. In the meantime,
St. Anthony residents are using water filters, hauling water in
buckets, or buying bottled water if they can afford it.

Communities with the greatest financial need often receive their

drinking water from systems that are failing or at risk of failing.
Of the 371 water systems Specifically, of the 371 water systems identified as failing as of
identified as failing as of the the end of December 2021, the State Water Board identified
end of December 2021, the State that 250 (67 percent) were serving disadvantaged communities
Water Board identified that with a total of more than 775,000 residents.4 For example, the
250 (67 percent) were serving Caruthers Community Services District (Caruthers), which serves a
disadvantaged communities with a disadvantaged community of about 2,500 people in Fresno County,
total of more than 775,000 residents. has been working with the State to find ways to address arsenic
contamination since at least 2010. According to a 2018 report from
the University of California, Davis, residents of disadvantaged
communities who rely on unsafe drinking water not only bear the
health consequences of using unsafe water but also typically pay
more for that water and must purchase more expensive bottled
water for drinking and cooking purposes.

4 According to state law, a disadvantaged community is a community with a median household

income that is less than 80 percent of the statewide annual median household income. For
example, in 2020 a California community considered disadvantaged would have a median
household income below about $63,000.
 California State Auditor Report 2021-118 19
July 2022

Figure 3
Of the 920,000 Californians Served by Failing Water Systems, the Majority Are in the Central Valley

DEL
Number of People in Each County
NORTE
SISKIYOU MODOC Served by Failing Water Systems

PER COUNTY TOTAL

60,001 to 200,000 66%
20,001 to 60,000 23
SHASTA LASSEN
HUMBOLDT TRINITY
10,001 to 20,000 6
1,001 to 10,000 4
1 to 1,000 1
TEHAMA
0
PLUMAS

BUTTE
GLENN SIERRA
MENDOCINO
Percentages show the share of the statewide total population
NEVADA served by failing water systems for each category. For example,
YUBA
COLUSA 66 percent of the people served by failing water systems live in
SUTTE

LAKE PLACER
the five counties indicated in dark red.
R

YOLO EL DORADO
SONOMA NAPA ALPINE
O
ENT AMADOR
RAM
SOLANO SAC
CALAVERAS
MARIN TUOLUMNE
CONTRA MONO
SAN
COSTA
SAN FRANCISCO JOAQUIN
ALAMEDA
SAN MATEO STANISLAUS MARIPOSA

SANTA
CLARA MERCED MADERA
SANTA
CRUZ

FRESNO
SAN
BENITO INYO

MONTEREY TULARE
KINGS

SAN LUIS OBISPO

KERN

SAN BERNARDINO
SANTA BARBARA
VENTURA LOS ANGELES

ORANGE RIVERSIDE

SAN DIEGO IMPERIAL

Source:  State law and State Water Board data on failing water systems.
Note:  Only includes water systems with 15 or more service connections used by yearlong residents, or those that regularly serve at least 25 yearlong
residents, and water systems that serve schools and day‑care facilities and have 15 or more service connections or regularly serve at least 25 people
daily at least 60 days out of the year. Does not include state small water systems and domestic wells. Data as of December 31, 2021.
20 California State Auditor Report 2021-118
July 2022

Table 4
Hundreds of Failing Water Systems Have Been Providing Unsafe Drinking
Water for Years

AMOUNT OF TIME
NUMBER OF FAILING SYSTEMS POPULATION AFFECTED
IN FAILING STATUS
Less than 1 year 82 158,600
1 to 2 years 23 69,900
2 to 3 years 28 10,700
3 to 4 years 71 436,600
4 to 5 years 12 9,100
5 years or longer 155 237,400
Totals 371 922,300

Source:  State Water Board data on failing water systems, as of December 31, 2021.

In addition, in 2022 the State Water Board’s data shows that

432 water systems serving more than 1 million people are at
risk of failing to meet state and federal water quality standards
(at risk), and nearly 280 of those at‑risk systems (65 percent)
serve disadvantaged communities. More than 85 percent of
the people served by at‑risk water systems in 2022 are located
in the Central Valley, Los Angeles County, and inland parts of
Southern California.

Restoring failing water systems to compliance, or preventing future

problems in an at‑risk water system, can involve a significant cost.
The State Water Board estimated it would cost nearly $10.3 billion
over a five‑year period to implement interim and long‑term water
quality solutions. However, the State Water Board also estimated
a $4.5 billion gap between the funds available and those needed
to address water quality, as we discuss later in this report. Water
systems that serve small or disadvantaged communities may not
have the financial means or expertise to address their present or
future water quality problems, causing more Californians to rely
on unsafe drinking water or depend on bottled water for longer
periods of time. To address this issue, the State Water Board
provides funding and other assistance that can help failing water
systems return to compliance. However, as we describe in the next
section, the State Water Board has not ensured that water systems
receive funding in a timely manner.
 California State Auditor Report 2021-118 21
July 2022

The State Water Board Has Demonstrated a Lack of Urgency to

Provide Needed Assistance to Failing Water Systems

Although the State Water Board has funding available to help failing
water systems, it has not made processing applications a priority. The
resulting delays have slowed the ability of water systems to address
poor water quality. Over the last five years, the average amount of
time it took for water systems to complete their applications, and
then for the State Water Board to review them and award funding,
was about two years. Further, for 55 of the nearly 300 projects
approved during that time, the process took three years or longer.
These lengthy delays in providing needed assistance put Californians’
health at risk and increases the amounts that water systems will
eventually need to spend to correct water quality problems.
Moreover, these funding delays are getting worse. As Table 5 shows,
in 2017 the average time between the State Water Board’s initial
acceptance of a water system’s application and its final execution of
the funding agreement was 17 months; in 2021 this same process
averaged 33 months, or almost twice as long. Although the State
Water Board is aware that the steps in the funding process shown
in Table 5 are taking longer to complete, it has not made adequate
efforts to measure and minimize these delays.

Table 5
Water Systems and the State Water Board Are Taking Significantly Longer,
on Average, to Complete Applications and Funding Agreements

PROJECTS FUNDED IN:

2017 2021 INCREASE
(MONTHS) (MONTHS) IN MONTHS
Total Time to Complete Application and Funding Agreement
Average time from initial application to
executed funding agreement. 17 33 16

Application Submission
Average time for water systems to complete
the applications for projects. 9 16 7

Application Review
Average time for the State Water Board to
review and approve the complete application. 3 8 5

Contract Development
Average time for the State Water Board to
approve financing and draft, review, and 5 9 4
execute the funding agreement.

Source:  State Water Board data.

22 California State Auditor Report 2021-118
July 2022

Addressing these delays is important to ensure that Californians

have access to safe drinking water and will become more imperative
in the coming years. The State Water Board received $650 million in
increased funding for drinking water projects in fiscal year 2021–22.
This new funding is a significant investment in California residents’
health and well‑being, and distributing that funding efficiently is
necessary to meet the goals of the investment. Moreover, California
is experiencing a persistent drought that is likely to worsen drinking
water quality—and availability—and could lead to the need for
additional funding for the State’s drinking water programs.

Water Systems Take a Long Time to Complete Funding Applications, in

Part Due to Complex Application Requirements and a Lack of Timely
Communication From the State Water Board

Water systems often struggle to complete their applications for

financial assistance and frequently take years to do so. In part,
these struggles are due to delays caused by the water systems
themselves. However, the State Water Board is also responsible
for a portion of these delays due to its cumbersome application
process and lack of timely communication with the water systems.
The average amount of time for The average amount of time for water systems to complete their
water systems to complete their applications increased from nine months in 2017 to 16 months
applications increased from in 2021, as shown in Table 5. According to the section chief for
nine months in 2017 to 16 months the DWSRF (section chief ), when water systems first submit
in 2021. application documents, they are often incomplete, and the State
Water Board must request additional information from the water
systems to meet state or federal requirements before it accepts
their applications.

For the 15 projects we reviewed in detail, we identified nine projects

in which the application took more than one year to complete.
As Figure 4 shows, lengthy delays occurred in both the initial
submission of applications and in the water systems’ completion
of the remaining parts of the application. As we describe in the
examples below, the State Water Board could not have avoided
all of these delays. However, the extensive back and forth in the
application process led to delays, some of which were due to
the complicated nature of the process—something both the State
Water Board and the water systems acknowledge. In other cases,
timelier communication by the State Water Board with water
systems could have surfaced concerns earlier in the process and
avoided some delays.
 California State Auditor Report 2021-118 23
July 2022

Figure 4
For Various Reasons Many of the Water System Applications We Reviewed Were Significantly Delayed

APPLICATION SUBMISSION PERIOD FOR SELECTED DRINKING WATER PROJECTS

The State Water Board was slow to respond after Yosemite failed to complete a necessary merger agreement with a nearby water system.
Yosemite Unified
School District

Santa Nella did not immediately complete its application after the amount of grant funding it was eligible for declined. Changes to State
Santa Nella County Water Board policy further
Water District delayed the application.
Lukins Brothers first undertook a planning project, which delayed the completion of its application for construction funding.
Lukins Brothers
Water Company

The State Water Board required Herlong to revise its financial and environmental application documents but could not show why
Herlong Public Herlong took so long to do so.
Utility District

The State Water Board directed Arvin to drill test wells as part of a planning project, which delayed Arvin's application,
Arvin Community although the State Water Board could not show
Services District
why it waited six months to direct Arvin to do so.
Jackson Valley experienced delays while completing a merger agreement with a nearby mobile home
Jackson Valley park, then updated its financial documents.
Irrigation District

The State Water Board's technical assistance provider failed to submit necessary financial documents.
City of
Manteca

The State Water Board took over a year to deem the environmental documents in Mountain Empire's application complete.
Mountain Empire
Unified School District

Jubilee waited five months to submit financial documents, then submitted them over a six-month period.
Jubilee Mutual
Water Company

Bridgeport Public
Utility District

Caruthers Community
Services District

Waukena Joint Union

Elementary School District

Lakeside Joint
School District

Water System Begins Submitting Documents and Completes Initial Application

Los Angeles
County Water System Completes Remaining Parts of Application

City of
Hughson*
0 6 12 18 24 30 36
Application Submittal Period (months)
Source:  State Water Board data.
Note:  For applications that took more than one year to complete, we provide some of the key reasons for the delays.
* The California Department of Public Health originally approved a $6.6 million loan to the city of Hughson for its construction project in December 2013.
However, Hughson did not proceed with its project and instead submitted a new application for grant funding to the State Water Board in August 2016.
The State Water Board deemed Hughson’s new application complete on the day the city submitted it.
24 California State Auditor Report 2021-118
July 2022

For example, the application for funding that the Yosemite Unified
School District (Yosemite) submitted took nearly three years to
complete. In May 2015, Yosemite applied for funding to address
uranium and other contaminants in the water supply for its high
school. In January 2016, a nearby water system agreed to provide
water to the high school. However, according to the project file,
in August 2017 the State Water Board determined that Yosemite
had not taken the actions needed to move the project forward. In
particular, Yosemite had not finalized an agreement with the nearby
The project file for Yosemite does water system to serve its high school. The project file does not
not indicate why the State Water indicate what follow‑up the State Water Board conducted between
Board took a year and a half to raise January 2016 and August 2017 or why the State Water Board took
its concerns about the project. a year and a half to raise its concerns. Once the State Water Board
identified the lack of progress, it was able to move the application
forward. It gave Yosemite two months to develop an action plan,
and in November 2017 communicated with the district about the
information that was missing. The State Water Board accepted the
first part of Yosemite’s completed application in January 2018. As
indicated in Figure 4, Yosemite completed the remaining parts of
the application a few months later.

The application from the Santa Nella County Water District

(Santa Nella) also took nearly three years to complete, much of
which can be explained by some extraordinary circumstances.
Santa Nella—a water system serving a disadvantaged community
in Merced County—submitted application documents requesting
funding for a new well, storage tanks, a treatment plant, and
pipelines to consolidate with another system in October 2017,
after the State Water Board identified it as a failing water system.
However, in February 2018 Santa Nella returned to compliance
with the State’s drinking water standards and was no longer
classified as a failing water system, which reduced the amount of
grant funding for which it was eligible. The State Water Board’s
project manager indicated that, because of this change in status,
Santa Nella expressed some misgivings regarding moving forward
with the project. As a result, the project became a lower priority
for State Water Board funding. Even so, Santa Nella did not
withdraw its application. In November 2018, the State Water Board
informed Santa Nella that it would have to update its application,
given that it was no longer classified as a failing water system, and
effectively placed the project on hold. In April 2019, Santa Nella
submitted a revised application, but—because of changes to the
State Water Board’s policy that affected how much funding it
was eligible for—did not complete all parts of its application until
August 2020. In another instance, Lukins Brothers Water Company
(Lukins Brothers) also took a significant amount of time to submit
its initial application documents for construction funding. However,
as we describe in Figure 4, Lukins Brothers first undertook a
 California State Auditor Report 2021-118 25
July 2022

planning project that delayed the completion of its initial application

but ultimately allowed it to quickly finalize the rest of its application
documents for the construction project.

In contrast, several water systems shown in Figure 4 were able

to submit their initial application documents quickly, but the
State Water Board took a significant amount of time to deem those
applications complete and could not fully explain the delays. For
example, it took two and a half years for the State Water Board to
deem the application by the Herlong Public Utility District (Herlong)
complete after it accepted Herlong’s initial application. According
to the State Water Board project manager for the project—which
involved the replacement of failing 60‑year‑old asbestos‑concrete
pipes from a water system with which Herlong had merged—
Herlong was slow to respond to the State Water Board’s requests
and submit the additional parts of its application. The State Water
Board project manager said that Herlong’s representative told him
it had other priorities at the time. However, the project manager
could not specify what those priorities were and could not recall
the details of the conversation—which he said took place in 2017
or 2018—or provide any documentation of his discussion with
Herlong. Although not quite as long, we found similar delays and a
similar lack of documentation explaining delays by the State Water
Board and by water systems for many of the other projects shown
in Figure 4.

Our survey of failing water systems revealed two likely reasons Our survey of failing water systems
for the lengthy application process: the complicated nature of revealed two likely reasons for
the applications and a lack of communication from the State the lengthy application process:
Water Board. Regarding the complexity and length of the the complicated nature of
State Water Board’s application process, multiple respondents to the applications and a lack of
our survey of failing water systems said the process had too many communication from the State
“hoops” and too much “red tape.”5 One also referred to the process Water Board.
as “a nightmare” and said “no one...can decipher what is required.”
Others suggested that the State Water Board needs to streamline
or simplify the process. One noted that its water system did not
have the technical expertise to complete the documentation and
questioned why it was being “held to the same requirements as larger
municipalities with the resources and ability to...complete needed
grant applications.” One respondent said that the water system “will
likely abandon the application due to the time frame proposed for
award.” According to the respondent, the timeline of more than one
year from application to awarding of funds will not allow the water
system to meet its deadlines to address the water contamination it is
experiencing. Finally, one respondent concluded that the State Water
Board “has not demonstrated any urgency” in providing funding.

5 Appendix A includes a summary of responses to selected survey questions.

26 California State Auditor Report 2021-118
July 2022

The State Water Board The State Water Board acknowledged that its application may
acknowledged that its application be more complicated than necessary and that there may be
may be more complicated than opportunities to streamline the process for some applicants. For
necessary and that there may be example, the State Water Board currently requires grant recipients
opportunities to streamline the to submit much of the same financial information as it requires of
process for some applicants. loan recipients, including their financial statements, budgets, and
information about their debt, even though it is not necessary for the
State Water Board to assess a grantee’s ability to repay the funds.
State Water Board policy allows the deputy director of the Division
of Financial Assistance (deputy director) to approve a limited credit
review for grant‑funded projects on a case‑by‑case basis, and as of
April 2022 the deputy director said he is working on how to waive
the credit review requirements for certain categories of projects,
although he was not specific as to what those categories might
be. Further, the application process is driven largely by federal
requirements, including federal prevailing wage laws, rules requiring
the use of iron and steel products produced in the United States,
and rules encouraging the use of disadvantaged business enterprises,
among others. However, with the recent increases in state funding
that the State Water Board can use for grants, there may be
additional opportunities to streamline the application and review
process for projects that will receive state‑only funding.

In addition, the State Water Board could look to other states for ways
to streamline its application process. According to an April 2022 report
from the EPA on best practices for funding drinking water projects,
several states have recently taken actions to streamline the drinking
water funding process. One such state is Colorado, which undertook
a systematic process improvement program that significantly reduced
the time it takes Colorado to process applications by reducing the
amount of incomplete and incorrect information on applications,
limiting the reworking of documents, and establishing deadlines and
timelines for application submittals, all issues that we identified in our
review of the State Water Board. According to the deputy director,
the State Water Board is already implementing changes to streamline
its application process and is continuing to review the process to
determine where else it can be simplified. For example, according to
a status document the State Water Board provided to us, it recently
established a preapplication process to better assist water systems
with their applications and connect them to technical assistance
providers. Further, it has begun assigning planning projects to its
technical assistance providers, eliminating the need for some small
water systems to apply for grant funding for planning. The State Water
Board has also begun eliminating the need for certain environmental
documents for projects receiving state‑only funding. However, the
status document indicates that its effort to update its application
process—which it hoped to complete by August 2022—is behind
schedule, and does not include a new estimated completion date.
 California State Auditor Report 2021-118 27
July 2022

Respondents to our survey of failing water systems also commented

on the lack of communication or follow‑up from the State Water
Board regarding the status of their applications. For example, the
Chatom Union School District, in Stanislaus County, stated that
there were long periods during which there was no communication
from the State Water Board about the status of its funding
application, and that it took two years from the time it submitted its
application to obtain a funding agreement. According to the Del Oro
Water Company, it applied for a planning grant in 2018 but, in its
response to our survey in February 2022, it indicated having not
received any communication from the State Water Board regarding
its application and its merger with the East Niles Community
Services District.

Because the State Water Board sets no schedules or deadlines for

submitting the required application documents, when a water system
does not respond to the State Water Board’s requests, the project
managers we spoke with said they simply have to move on to other
projects. In addition, the State Water Board’s policy prioritizes
monitoring funding already in place over reviewing applications. In
2020 the State Water Board began working with more small water
systems serving disadvantaged communities as part of its Safe and
Affordable Funding for Equity and Resilience (SAFER) program.
According to the State Water Board, the SAFER program is designed
to ensure that Californians who lack safe, adequate, and affordable
drinking water receive it as quickly as possible, and that the water
systems serving them establish sustainable solutions. The branch
chief for the Office of Sustainable Water Solutions (branch chief )
indicated that these smaller water systems tend to need more
assistance in completing their applications and are slower to respond
to the State Water Board’s requests for documents and information.
Further, project managers we spoke with at the State Water Board
said that water systems sometimes view these requests as intrusive
and do not understand them. The branch chief said that the State
Water Board asks smaller water systems to fill out a preapplication
form so that the State Water Board can evaluate their eligibility for
grants, as well as to determine whether the systems could benefit
from technical assistance. Nevertheless, the survey responses Survey responses strongly point to
strongly point to a need for the State Water Board to improve a need for the State Water Board to
communication with the water systems about the status of their improve communication with the
funding applications. Later in this report, we discuss the State Water water systems about the status of
Board’s technical assistance and outreach efforts, two avenues it their funding applications.
could use to improve communication.

A statutorily required advisory group has also indicated that the State
Water Board needs to communicate more often with water systems
about the status of their funding applications and intervene when
applications are delayed. The 2019 law that created the SADW Fund
requires the State Water Board to consult with an advisory group
28 California State Auditor Report 2021-118
July 2022

composed of specific representatives regarding its annual fund

expenditure plan that, among other purposes, explains how it plans
to spend drinking water funds. At its August 2021 meeting, most
advisory group members agreed that the State Water Board needed
more transparency in its funding process, and some members
recommended that the State Water Board identify and intervene
when applications experience overly long delays.

According to the deputy director, the State Water Board has begun
working on a process improvement program and intends to develop
some performance metrics, including a metric for the time it should
take for water systems to complete their applications once they start
them. The deputy director also said that to increase transparency
the State Water Board created an online search tool on its public
website in November 2017 for applicants to review the status
of their projects and that each month it posts an updated list of
drinking water projects the State Water Board has funded. However,
providing a search tool and posting monthly updates are no
substitute for direct communication with project applicants about
what information the State Water Board needs from them before
The State Water Board’s online it can review their funding applications. For example, the online
search tool does not give any search tool will show an applicant whether the State Water Board
indication of what additional has received its application, but it does not give any indication of
information the State Water Board what additional information the State Water Board may be waiting
may be waiting for, nor does it for, nor does it provide an estimate of when the State Water Board
provide an estimate of when the expects to approve the application. The deputy director said that the
State Water Board expects to State Water Board intends to work on identifying communication
approve the application. gaps and opportunities for improvement, but he was unable to
provide any specifics on these improvements or when the State
Water Board would make them.

Absent Clear Goals and Metrics, the State Water Board Has Allowed the
Average Time It Takes to Finalize Its Application Reviews and Funding
Agreements to More Than Double

The State Water Board is taking much longer to review completed

applications and execute funding agreements than it did several
years ago. We identified no state or federal requirements in the
law governing the DWSRF or the SADW Fund prescribing how
long this process should take. Until fiscal year 2019–20, the
State Water Board’s goal was to award funding for 95 percent of
eligible projects within nine months of receiving a completed
application. Although the State Water Board did not consistently
meet this nine‑month goal, in 2017 the State Water Board did
average eight months to review completed applications and award
funding for projects. However, by 2021 the amount of time the State
Water Board took to review applications and award funding had
more than doubled to 17 months, as indicated earlier in Table 5.
 California State Auditor Report 2021-118 29
July 2022

We reviewed 15 projects in detail to better understand the delays in

the State Water Board’s application review stage and its financing
approval and funding agreement (contract development) stage. As
Figure 5 shows, lengthy delays can occur in both processes, and
we identified eight projects for which the total time to complete
these two processes was more than one year. Sometimes the delay
is the result of steps the water system takes that are outside the
State Water Board’s control. For example, the application review
process for the Caruthers arsenic treatment facility project lasted
from December 2016 to August 2018. Caruthers was in the midst
of a project to construct a new well—which the State funded in
2013—when it started its application for construction funding for
the treatment facility in January 2016. According to the State Water
Board project manager, Caruthers had to wait for the water quality
results from the new well before it could complete the design and
specifications for its new treatment system. Because the new well
took longer to complete than expected, Caruthers did not submit
its final technical documents for review until July 2018, and the
State Water Board completed its review the following month in
August 2018.

In another case, the State Water Board took more than two years The State Water Board took more
to complete and execute a funding agreement with Los Angeles than two years to complete and
County, due in part to changes the county requested and also in execute a funding agreement with
part to the State Water Board’s cumbersome approval process. Los Angeles County, due in part to
Los Angeles County submitted its initial application in March 2019 changes the county requested and
and asked for multiple revisions to the project cost in the agreement also in part to the State Water Board’s
after it discovered that the work it needed to perform to repair a cumbersome approval process.
failed water system was more extensive than it originally believed.
According to State Water Board files, Los Angeles County began
construction in July 2019 using its own funds. In September 2019
the State Water Board sent funding agreement documents to
Los Angeles County, which the county signed. However, the
State Water Board did not request from Los Angeles County an
important legal document required with the agreement, which
prevented the State Water Board from executing the agreement.
The State Water Board was still waiting for that document when
Los Angeles County requested a funding increase in January 2020.
The State Water Board tentatively approved the funding increase
in February 2020, but it did not fully approve the increase until
March 2020. Then in August 2020, Los Angeles County reversed
course and rescinded its request for the additional funds. Once
again the State Water Board took two months to approve the
change, which it did in October 2020.
30 California State Auditor Report 2021-118
July 2022

Figure 5
Delays Occurred in Both the State Water Board’s Application Review and Contract Development

APPLICATION REVIEW AND CONTRACT DEVELOPMENT

PERIODS FOR SELECTED DRINKING WATER PROJECTS
Delays in constructing a new well led to delays in Caruthers submitting final plans for its treatment system.
Caruthers Community
Services District
The State Water Board did not inform Los Angeles about the requirement for an important legal document. Los Angeles then asked for
Los Angeles multiple cost revisions, which led to delays.
County
The State Water Board took 14 months to resolve questions about Herlong's eligibility for grant funding after Herlong
Herlong Public applied for both drinking water and wastewater funds.
Utility District
The State Water Board was slow to complete its environmental review becuase it had to consult with the U.S. Fish and Wildlife Service
Jubilee Mutual regarding endangered species and the State Historic Preservation Office.
Water Company
The State Water Board was late to realize that portions of the project were ineligible for funding and needed to be redesigned.
Yosemite Unified
School District
The State Water Board had extended technical review and unexplained delays during contract development.
Mountain Empire
Unified School District
The State Water Board was late to inform Lakeside that it needed to submit its plans to
Lakeside Joint the Division of the State Architect for approval.
School District
The State Water Board was slow to start Santa Nella's credit review, then delayed completing the draft contract.
Santa Nella County
Water District

City of
Manteca

Waukena Joint Union

Elementary School District

Arvin Community
Services District

Jackson Valley
Irrigation District

City of
Hughson

Bridgeport Public
State Water Board Reviews Application
Utility District
State Water Board Completes Contract Development
Lukins Brothers
Water Company
0 6 12 18 24 30 36
Application Review and Contract Development Period (months)

Source:  State Water Board data.

Note:  For applications review and contract development that took more than one year, we provide some of the key reasons for the delays.
 California State Auditor Report 2021-118 31
July 2022

According to the State Water Board project manager, these requests

required additional management approvals at the State Water
Board, lengthening the time it took to draft the funding agreement.
Nevertheless, even after the State Water Board approved the
second cost revision in October 2020, it was not until April 2021,
six months later, that it sent the revised funding agreement to
Los Angeles County. According to the State Water Board project
manager, it took some time after that for Los Angeles County’s
general counsel to review and approve the agreement. Los Angeles
County finally signed the agreement in August 2021 and the State
Water Board executed the agreement in September 2021. Although
Los Angeles County contributed to the delays for this project with
its multiple requests for cost revisions and the four months it took
to review and sign the agreement, the State Water Board did so
as well with the four months it took to approve the cost revisions
and the six months it took to revise the agreement after the second
revision request. But more importantly, if the State Water Board If the State Water Board had properly
had properly communicated its requirements to Los Angeles communicated its requirements
County by also requesting the legal document when it sent the to Los Angeles County by also
original funding agreement in September 2019, it is possible that requesting the legal document
the entire two‑year process that followed could have been avoided. when it sent the original funding
In this case, Los Angeles County chose to use its own funds to agreement in September 2019, it is
proceed with construction without a funding agreement, but small possible that the entire two-year
water systems serving disadvantaged communities do not have this process that followed could have
luxury, meaning that delays inherent in the State Water Board’s been avoided.
process will result in some Californians going longer without safe
drinking water.

In another example, Herlong was simultaneously applying for

funding for a drinking water project and a wastewater project,
and it planned to construct both at the same time to reduce
costs. According to State Water Board files, while the drinking
water project was eligible for 100 percent grant funding, the
wastewater project was not. Herlong completed its funding
application for the drinking water project in December 2019, but
the State Water Board placed the project’s credit review on hold
until it updated its annual funding policy document to specify the
type of projects that were eligible for 100 percent grant funding,
which the State Water Board did in June 2020. However, it was
not until October 2020 that the State Water Board resolved
the questions about Herlong’s eligibility for grant funding and
proceeded with its credit review, which it completed four months
later, in February 2021. Because of these delays, the project manager
indicated the State Water Board had to review some parts of the
application twice to ensure that it was still consistent with State
Water Board policy. Although the State Water Board may be able
to justify waiting for the policy update to complete its reviews, it
cannot justify the 14 months total that it took to do so.
32 California State Auditor Report 2021-118
July 2022

Delays also occur during the State Water Board’s contract

development process, when it approves financing, drafts funding
agreements, and awards funding to water systems. For example,
during the contract development process for Yosemite’s water system
upgrade project, the State Water Board determined that part of
the project was ineligible for federal funds, and the project had to
be revised, which delayed the funding agreement by eight months.
However, it only took two months to update the plans; the rest of the
eight‑month delay included two months for the State Water Board to
approve moving the project forward and three months for Yosemite
to sign the agreement to update the plans.

According to the State Water Board’s project manager for the

Lakeside Joint School District (Lakeside) water supply project,
the time it took to draft and review the funding agreement was
longer than usual because the construction project had to receive
additional state approvals. Specifically, because the project was on
school property, it required review and approval from the Division
of the State Architect (State Architect) within the Department of
General Services, which reviews plans for construction projects
at K–12 public schools to ensure that they comply with California
codes. Lakeside submitted plans to the State Architect in
August 2017, which the State Architect approved six months later
in February 2018. It was not until June 2018—four months after the
State Architect’s approval—that the State Water Board completed the
agreement and awarded the funding to Lakeside. During that time,
project costs increased from $400,000 to $700,000, and as a result
the State Water Board had to review the water system’s credit twice
more before awarding the funding. However, once the State Water
Board awarded funding for the project in June 2018, construction
bids came in much higher than expected, and the State Water Board
determined that it needed to review Lakeside’s credit twice more, in
July and September 2018, before it eventually approved $1.6 million
for the project.

State Water Board project The State Water Board project managers we spoke with expressed
managers expressed frustration frustration with the contract development process, during which as
with the contract development many as a dozen people—up to and including the deputy director—
process, during which as many as a review the project file and draft funding agreement (draft contract),
dozen people review the project file one person after the next. As we show previously in Table 5, the time
and draft funding agreement. it takes the State Water Board to complete this process increased
from an average of five months in 2017 to an average of nine months
in 2021. In Figure 5 we show how long this process took for the
15 projects we reviewed. As with the other parts of the State Water
Board’s review process, there are no schedules or deadlines for
how long the contract development process should take, and each
reviewer could spend days or weeks reviewing the draft contract.
One project manager said that he often has to track down where the
draft contract is, identify the concern or cause for delay, and try to
 California State Auditor Report 2021-118 33
July 2022

address the issue so that the draft contract can move to the next
reviewer. The project manager said that in some cases, he has found
that the draft contract has been with a reviewer for several weeks
with no evidence of progress, or that the draft contract is waiting
for a reviewer who is out of the office to return, and that no one else
can review it in that person’s absence. One project manager said
the contract development process frequently takes nine months or
more to complete, although for high‑priority projects it can take
less than half that time. Indeed, of the 72 projects with agreements
executed in 2021, the contract development process took longer
than nine months for 30 projects, or 42 percent.

In addition to delays unique to each project, the State Water Board

identified that the consolidation—or merger—of water systems
is one potential reason for the increasing time it takes to fund
projects. A 2019 change in state law required the State Water Board
to prioritize, in part, funding for projects that consolidate multiple
water systems into one water system. The branch chief stated that
consolidation projects typically take longer to execute because they
involve multiple water systems. Several of the projects we reviewed
were consolidation projects, including Herlong, Jubilee Mutual
Water Company, Yosemite, Santa Nella, the city of Manteca,
and Jackson Valley Irrigation District, and all of these projects
experienced a long application process, contract development
process, or both.

According to State Water Board data, the number of consolidation

projects increased from 23 in 2017 to 36 in 2021. Although
we acknowledge that the number of consolidation projects is
increasing, if the State Water Board believes that these projects
inherently take longer to approve, it should identify ways to
overcome those delays—including increased staffing or contract
personnel—so that water systems can complete their applications
and the State Water Board can review them and award funding in a
timely fashion.

Although each of the projects we reviewed—and the causes for its Although each of the projects we
delays—was unique, they all point to a larger and more fundamental reviewed—and the causes for its
issue: the State Water Board’s process for awarding funding to delays—was unique, they all point
failing water systems lacks urgency. According to the deputy to a larger and more fundamental
director, until recently the State Water Board required applicants to issue: the State Water Board’s
complete all parts of the funding application for both planning and process for awarding funding to
construction projects, regardless of the source of funding. However, failing water systems lacks urgency.
as the deputy director, the branch chief, project managers, and
respondents to our survey all acknowledged, small water systems
serving disadvantaged communities often struggle to complete
these applications, and a respondent to our survey questioned why
they were held to the same standards as larger water systems.
34 California State Auditor Report 2021-118
July 2022

According to the project managers According to the project managers we spoke with and State
we spoke with and State Water Water Board policy, helping water systems with their applications
Board policy, helping water is a lower priority than most of their other duties. The State
systems with their applications is Water Board’s solution to this problem has been to assign more
a lower priority than most of their technical assistance providers to help water systems complete their
other duties. applications, but as we describe in the next section, it is unclear
if that technical assistance is speeding up or delaying the process.
For at least one project we reviewed—the city of Manteca’s school
water supply project—the application was held up for more than
a year because the technical assistance provider submitted some
documents that were incomplete, and never submitted other
documents at all.

Further, the State Water Board’s application review process is prone

to errors, confusion, and inconsistencies. As we previously describe,
the application is cumbersome, with several parts and many
requirements. According to the section chief, when an application
is received, the assigned project manager has to identify which
specific documents the water system needs to submit—for example,
which technical or financial documents—and identify any missing
items. However, according to the branch chief, sometimes the
project manager may not identify missing documents until after the
application has been deemed complete, which creates delays. The
branch chief also stated that when water systems change their
plans, the review process is delayed because the State Water Board
has to request new information from the water systems and review
their application documents again. As we describe previously,
several of the projects we reviewed were delayed during the
application review process by incomplete or missing documents, or
by changes to the projects.

Moreover, as we describe previously, the State Water Board splits its

application into four parts, and different people review the different
parts. According to the State Water Board, having applications
with multiple parts allows the reviews to happen concurrently, and
water systems can submit documents related to the different parts
in any order. However, according to the section chief, staff will
sometimes delay completing their reviews—even if the application
is complete—if other parts of the review are not done, or if they
expect there might be changes to the project, thus defeating a
significant part of the purpose of splitting the application into four
parts. One project manager we spoke with explained that when
the scope of a project is clear and does not change, the State Water
Board can complete its reviews quickly. However, when the project
scope is unclear or changes, the State Water Board requires the
water system to submit new technical documents, which often
leads to cost changes and the need for new environmental and
credit reviews, setting up a process in which changes lead to more
changes, causing further delays and additional work for State Water
 California State Auditor Report 2021-118 35
July 2022

Board staff. Several of the projects we reviewed were delayed

because staff had to review the applications more than once.
The April 2022 EPA report on best practices identified excessive
reworking of documents as one of the factors that contributes to
excessive staff time in processing funding applications.

The State Water Board needs to overhaul and simplify its funding
process. While the State Water Board has a responsibility to While the State Water Board has a
ensure that drinking water funds are spent appropriately, it also responsibility to ensure that drinking
has a responsibility to ensure that all Californians have access to water funds are spent appropriately,
safe drinking water, and its process is not adequately balancing it also has a responsibility to ensure
those two needs. We spoke to the assistant deputy director of the that all Californians have access to
Division of Financial Assistance (assistant deputy director) and safe drinking water, and its process
the branch chief about ways that the State Water Board might is not adequately balancing those
change its funding process. For example, the assistant deputy two needs.
director suggested the possibility of having a different process for
simpler projects and assigning staff to projects based on their areas
of expertise. We also asked whether allowing staff to focus just on
applications or just on monitoring projects during construction
would allow for a greater degree of specialization and could speed
up the application process, because a staff member dedicated
to applications would not have to shift attention to project
monitoring. The assistant deputy director said the wastewater
program used to be organized that way, with different staff working
on different stages of each project—from planning and design to
construction to operations—and that the State Water Board might
consider that option for the drinking water program. He further
said the State Water Board intends to look at these and other ideas
during the coming fiscal year—when it also intends to implement
new performance metrics and benchmarks—with the goal of
implementing a streamlined funding process by July 2023. Until
the State Water Board streamlines its funding process to eliminate
its inherent delays and establishes a sense of urgency, Californians
served by failing water systems will continue to wait longer than
necessary for safe drinking water.

The State Water Board’s Lack of Goals and Metrics Contributes to Delays
in Processing Funding Applications

The State Water Board’s lack of goals and metrics for the length
of time it should take to fund projects contributes to its lack of
urgency for approving applications and inhibits its ability to identify
areas of the review process that it could improve. As noted above,
until 2020, the State Water Board had a goal of getting 95 percent
of applications through funding in nine months. It no longer has
this goal, but the deputy director agreed that such a benchmark
would be helpful in assessing the nature and extent of delays.
According to the deputy director, the State Water Board eliminated
36 California State Auditor Report 2021-118
July 2022

this performance metric after its transition to the State’s new

accounting system in 2019, which he stated slowed the State Water
Board’s processing of applications. Although we acknowledge
that the new accounting system has caused challenges for many
agencies, the implementation of the new accounting system does
not justify eliminating a goal that is directly tied to the public good
of providing safe drinking water to all Californians. Defining how
long each step in a process should take is critical to performing
work within time constraints, because such time frames help
an organization identify areas for improvement and lessen the
potential for a backlog of applications awaiting review.

However, even if the State Water Board successfully streamlines its

application process, it could have a growing backlog of applications
awaiting review. As we note previously, the State Water Board
identified hundreds of failing and at‑risk water systems in 2021.
Many of these water systems may be eligible for the millions of
dollars in increased funding the Legislature recently appropriated,
which could result in an increased backlog of funding applications
for the State Water Board to review. According to the branch chief,
the State Water Board has discussed implementing a goal for the
number of applications each project manager should complete in
a year, but it has not yet done so. The branch chief said the State
Water Board will consider this idea as part of the goals and metrics
it hopes to develop by the end of 2022.

If the State Water Board were to set If the State Water Board were to set a goal for how long it should
a goal for how long it should take take to process applications, as well as how many applications
to process applications, as well as its project managers should be able to process in a year, it could
how many applications its project determine the associated staffing levels it needs to meet those goals.
managers should be able to process It could then justify requests for additional resources if it believes
in a year, it could determine the it needs them. Otherwise, the number of funding applications for
associated staffing levels it needs to drinking water projects is likely to grow, which will increase the
meet those goals. amount of time the State Water Board takes to process applications.
In fact, in a December 2021 review of the State Water Board’s
administration of its programs, the EPA expressed concern that
as the work increases with the addition of new supplemental
funding programs, the State Water Board’s staff will be unable
to satisfactorily support the needs of the programs. The EPA
recommended that the State Water Board reassess staffing levels
and hire appropriately. It is important to note that the EPA was
concerned only with the State Water Board’s administration of
federal funds; given that the same staff members also work with
state funds, which are also increasing, this reassessment of staffing
is even more critical.

Since May 2020, State Water Board policy has included a list
of metrics that the State Water Board intends to develop goals
for, including the time from the start of an application to its
 California State Auditor Report 2021-118 37
July 2022

completion, and the time for a complete application to result in a

funding agreement. The deputy director agreed that establishing
benchmarks would help the State Water Board identify ways
to improve the efficiency, timeliness, and transparency of its
application process. He further stated that he intends to have
different metrics depending on the type of project—construction
or planning—and whether it will be funded by a loan or a grant.
The branch chief indicated that during the summer of 2022 the
State Water Board will begin developing performance targets
and metrics to track key milestones for each project in order to
identify which projects may be experiencing delays. She also stated
that the State Water Board will begin to track staff performance
and workload to determine whether the State Water Board has
a sufficient number of staff reviewing funding applications. The
deputy director indicated that the State Water Board could begin
using such metrics by December 2022. However, developing these
metrics and others has been included in State Water Board policy
for two years, and the State Water Board has not yet implemented
them. Further, the State Water Board did not have an estimated
date for when it expected to implement them until we suggested
that it establish one. The two years during which the State Water
Board failed to develop these metrics is yet more lost time that has
contributed to the delays for vulnerable Californians dependent on
failing water systems.

Delays in Funding Projects Will Lead to Increased Costs and Negative

Health Outcomes

The longer the State Water Board takes to fund projects, the more The longer the State Water Board
expensive the projects become and, more importantly, the greater takes to fund projects, the more
the likelihood of negative health outcomes for Californians served expensive the projects become
by failing water systems. According to the Department of General and, more importantly, the greater
Services, the annual inflation rate for construction costs increased the likelihood of negative health
from about 1 percent in 2018 to more than 13 percent in 2021 and is outcomes for Californians served by
expected to continue to increase in 2022. In fact, for the 15 projects failing water systems.
we reviewed, we identified nine in which project costs increased
during the funding process, including one for which costs increased
from $9.6 million in 2017 to $12 million in 2020, or a 25 percent
increase during that period.

Further, Californians who rely on drinking water from systems

that exceed MCLs are at serious risk for health complications. One
of the most common water contaminants affecting failing water
systems in California in 2020 was arsenic. According to the EPA,
exposure to arsenic in everyday use and drinking water causes
skin damage and circulatory problems, and leads to an increased
risk of cancer. Californians can decrease some of their exposure
to contaminants in water by purchasing bottled water and filters,
38 California State Auditor Report 2021-118
July 2022

but doing so can be expensive, and funding for this option is not
universally available. Unfortunately, as noted by firsthand accounts in
an April 2022 media report, some disadvantaged Californians simply
do not have the means to completely avoid using contaminated
water, and many of these people have reported experiencing serious
health consequences. The experiences of these Californians in trying
to obtain a basic human necessity—safe drinking water—necessitates
greater urgency from the State Water Board to process applications
and provide the funding water systems need in order to make
necessary improvements and repairs to ensure that their customers
have safe drinking water.

California is in the midst of a Moreover, as we describe in the Introduction, California is in the

historic drought, which will only midst of a historic drought, which will only increase the strain on
increase the strain on many many struggling water systems. For example, water systems that
struggling water systems. rely on groundwater for their supply may have to drill new wells
as aquifers dry up. Other water systems may find that their water
quality deteriorates as rain and snowfall decrease, reducing the
amount of fresh water entering rivers and streams and seeping into
groundwater basins. As their water quality worsens, or their water
dries up altogether, struggling water systems will urgently need
funding and solutions from the State Water Board. Any delays will
expose even more Californians to unsafe drinking water.

Finally, a lack of urgency could delay the distribution of new state

funds. The deputy director indicated that the State Water Board
is trying to shift away from a mentality in which it views funding
as scarce. The Legislature recently appropriated $650 million in
increased funding for infrastructure projects for drinking water.
Further, the deputy director noted that the State Water Board
recently approved changes that could make more projects eligible
for grant funding and said it is reaching out to systems currently
receiving funding that still have unfunded needs to see whether
the State Water Board can provide additional funds. However, the
State Water Board’s increasingly long processes for distributing
loans and grants will make it harder for it to distribute this new
funding in a timely fashion. Until the State Water Board addresses
the increasingly long period of time between initial application and
actual funding of a project, it will—despite the hundreds of millions
in newly appropriated funds—continue to delay addressing critical
needs for safe drinking water in communities throughout California.

The State Water Board Needs to Better Monitor Its Technical Assistance
Providers to Ensure That They Are Providing Effective Services

The State Water Board needs to improve oversight of its technical

assistance providers to ensure that they are providing effective
services. Because failing water systems often lack the resources to
 California State Auditor Report 2021-118 39
July 2022

navigate the process of applying for funding for water projects, the
State Water Board provides access to technical assistance providers
to help in this process. The State Water Board anticipates needing
additional technical assistance providers to expand the types of
services and coverage it offers, as well as to better distribute the
workload among providers. However, since inheriting the program
from the California Department of Public Health in 2014, the
State Water Board has yet to ensure that its technical assistance
program reduces the time required for water systems to implement
drinking water solutions. The State Water Board’s fund expenditure
plans reiterate that technical assistance should accelerate the
implementation of solutions, particularly for water systems
that appear to be struggling to make timely progress toward
resolving their drinking water needs. However, in a 2020 report In a 2020 report to the Governor,
to the Governor, the State Water Board recognized that it lacked the State Water Board recognized
knowledge regarding its technical assistance providers’ effectiveness that it lacked knowledge regarding
in carrying out their responsibilities. As a result, it established a its technical assistance providers’
goal to evaluate provider services, marketing, and activities through effectiveness in carrying out
water system surveys and input from State Water Board district their responsibilities.
offices by the second quarter of 2020, so that it could use these
results to improve providers’ effectiveness.

However, as of April 2022 the State Water Board had still not
conducted this survey. According to the supervising engineer of
the SAFER drinking water section (SAFER supervisor), the State
Water Board has not implemented the survey as intended because
it was instead focused on developing the statutorily required
needs assessment described in the Introduction and getting more
technical assistance providers.

Notwithstanding the importance of these tasks, both rely on

having competent providers to address any existing compliance
issues or future problems identified through the needs assessment.
When asked to rank technical assistance provider performance
on a scale from 1 to 10—with 1 being completely unsatisfied and
10 being completely satisfied—61 of our 97 survey respondents
ranked technical assistance performance with an average score of 5,
indicating a lack of satisfaction with the providers’ performance. As
an example of this frustration, one respondent indicated having to
tell a technical assistance provider “how to do many parts of [the]
standard construction documents and bidding process.” Given
these responses, the State Water Board should do more to prioritize
evaluating the performance of its technical assistance providers so
it can identify areas where providers can improve and determine
whether a provider’s performance justifies the amount the State
Water Board pays for its services.
40 California State Auditor Report 2021-118
July 2022

In fact, we noted some instances in which the State Water Board

could have reduced the amount of time required to restore
community drinking water to compliance had it conducted
better oversight. For example, the State Water Board assigned
as a high priority a technical assistance project for South Kern
Mutual Water Company (South Kern) to one of its providers
in December 2019. This project was a high priority because
South Kern exceeded multiple contaminant levels, among other
compliance issues, and was required to consolidate with another
water system. However, the State Water Board failed to recognize
until 10 months later that the provider had not performed any work
on the project. Correspondence between the State Water Board and
the provider indicated that there was not enough funding under the
provider’s agreement to complete the project and it was waiting for
the State Water Board to execute a new agreement before it started
work. The State Water Board subsequently reassigned this project
to a different provider, but as of June 2022 the project was still
ongoing. The State Water Board’s lack of awareness of its technical
assistance provider’s status on a project it considered a high priority
is unacceptable, especially considering that delays in providing
technical assistance projects can also delay access to safe drinking
water for residents.

Implementing performance metrics Implementing performance metrics to gauge the performance

to gauge the performance of of technical assistance providers will help the State Water Board
technical assistance providers will oversee the technical assistance program. When the nine current
help the State Water Board oversee providers submitted proposals in 2016 to provide technical
the technical assistance program. assistance under Proposition 1, they also submitted lists of goals
and outcomes they intended to achieve. For example, proposals
included working on 25 to 27 projects per year, conducting one
public meeting or workshop per month per project, and completing
projects on time and within budget. However, according to the
branch chief, the State Water Board did not use these goals and
outcomes to evaluate provider performance because it considered
them to be too general to be useful. Instead, it required providers
to develop work plans for each project, which would be more
specific to a water system’s needs. The branch chief added that the
State Water Board has been developing metrics and should have
them finalized by the end of 2022 but reiterated that even without
these metrics, staff review detailed quarterly reports and meet with
providers monthly to verify that providers are in compliance with
their agreements and work plans. These interactions are important
for managing individual projects; however, the lack of performance
metrics limits the amount of information available to the State
Water Board on the program as a whole. For example, such metrics
could help the State Water Board identify which of its providers
lack the resources to work on new assignments.
 California State Auditor Report 2021-118 41
July 2022

Although the State Water Board Is Expanding Outreach to Water

Systems, It Needs to Better Monitor These Efforts

The State Water Board conducts various outreach activities to

raise awareness about its services, to help water systems identify
potential drinking water solutions, and to keep projects on track by
proactively identifying potential risks, issues, or delays. Activities
can include public meetings, surveys, email blasts, and social media
posts, among other activities. However, the State Water Board
has not consistently conducted outreach to failing water systems,
particularly to those that serve disadvantaged communities. In our
survey of failing water systems, 49 of the 97 failing water systems
responded that neither the State Water Board nor a technical
assistance provider had reached out to discuss potential options
to help bring their water system back into compliance. However,
recent changes to state law enabled the State Water Board to put
more effort into outreach. According to the SAFER supervisor,
historically the State Water Board conducted outreach to water
systems only when explicitly required under state law—such as
communicating with ratepayers and residents when deciding
whether to order consolidation of water systems—and it did not
specifically target disadvantaged communities for outreach due
to a lack of financial and staffing capacity. However, the creation The creation of the SADW Fund
of the SADW Fund and the SAFER program in 2019 made funds and the SAFER program in 2019
available for the State Water Board to perform additional outreach. made funds available for the
According to the assistant deputy director of the Division of State Water Board to perform
Drinking Water, the board is increasing its efforts to reach out additional outreach.
to disadvantaged communities, including creating a new unit to
conduct outreach to isolated rural systems.

As the State Water Board increases its outreach, it needs to better

ensure that its outreach efforts are efficient. The State Water
Board entered into a four‑year agreement for more than $9 million
with one of its technical assistance providers to provide services,
including outreach to at‑risk water systems serving disadvantaged
communities, beginning in October 2020. However, this provider
appears to be duplicating the efforts of other technical assistance
providers. According to a State Water Board senior engineer, the
provider indicated that it tries not to conduct outreach to water
systems that are already receiving assistance for their water issues
from another technical assistance provider. However, we found that
eight of the 89 water systems the provider contacted in 2021 were
already receiving technical assistance from other providers. The
senior engineer stated that the provider contacted these eight water
systems to determine whether they were already receiving
technical assistance from another provider or needed assistance
beyond what they were already receiving. However, the provider
charged the State Water Board more than $8,000 for 174 hours to
make these contacts. Although not a large amount of money, the
42 California State Auditor Report 2021-118
July 2022

number of hours seems an unreasonable amount of work for such

fact‑finding at eight water systems. By duplicating these efforts,
the State Water Board may not be expanding its outreach to water
systems that are unaware of the assistance it provides, particularly
those serving disadvantaged communities. The senior engineer said
that the State Water Board will amend its agreement to require the
provider to develop an outreach plan in advance so that the State
Water Board can identify any systems that the provider intends to
contact that are already receiving technical assistance.

Further, the State Water Board has recently developed a community

outreach strategy. In its 2021 financial expenditure plan, the State
Water Board described how increased and early community
engagement through workshops and meetings helps keep projects
on track by proactively identifying potential risks, issues, or delays
and ensuring that proposed long‑term solutions have community
buy‑in. Therefore, in an effort to keep drinking water projects
The State Water Board’s Office of on track, the State Water Board’s Office of Public Participation
Public Participation implemented implemented a new outreach strategy for the SAFER program
a new outreach strategy for the in March 2022 designed to conduct outreach and engagement
SAFER program in March 2022 activities through partnerships with local experts who have a deep
designed to conduct outreach and understanding of community needs. The new strategy relies on
engagement activities through identifying and entering into agreements with funding partners that
partnerships with local experts will, in turn, identify, manage, and monitor community partners,
who have a deep understanding of who will develop and implement outreach and community
community needs. education activities. The Office of Public Participation anticipates
finalizing funding partner master agreements by December 2022
and then beginning the process of identifying the regions and
communities in need of engagement. The outreach strategy appears
reasonable to accomplish the State Water Board’s goals, provided
it carries out the planned community engagement activities. Such
outreach is essential to ensuring that communities are aware of
concerns with their drinking water, are informed of assistance
the State Water Board may provide if their systems need financial
assistance, and are engaged with and supportive of any changes that
come about as a result of that assistance.
 California State Auditor Report 2021-118 43
July 2022

Other Areas We Reviewed

State Water Board Funding for Drinking Water Projects

The State Water Board complied with its processes and applicable
funding requirements for drinking water projects, including
its processes for prioritizing projects to award funding and the
financial terms of those awards. As described in the Introduction,
the Division of Financial Assistance ranks completed applications
based on their priority and readiness to proceed. It prioritizes
funding for projects that address the most serious risk to human
health, are needed to comply with drinking water standards, and
assist water systems that are most in need on a per‑household basis.
The State Water Board also ranks a project higher if it benefits a
disadvantaged community. To determine whether the State Water
Board appropriately prioritized funding, we reviewed 15 projects
from 2017 to 2021 that it awarded funds. We determined that the
State Water Board properly scored and prioritized the applications
for these 15 projects.

We also found that the State Water Board awarded loan repayment
terms that are consistent with state and federal law and with its
policies. The interest rates for these loans were 1.7 percent in
2017 before increasing to 1.9 percent in 2019 and decreasing to
1.2 percent in 2021. To assist water systems serving disadvantaged
communities and public school districts that cannot afford project
costs, State Water Board policy requires it to provide these
water systems additional financial assistance, such as principal
forgiveness, interest‑free loans, and extended loan repayment
periods. In particular, federal law generally requires that loans
be for a period of not more than 30 years after the completion of
the project for which the loan was made; however, water systems
serving disadvantaged communities may qualify for extended
loan terms that span up to 40 years after project completion if the
extended loan term does not exceed the expected design life of the
project. We reviewed 10 loan projects that were awarded funding
between 2017 and 2021 and determined that the State Water Board
assigned interest rates and loan repayment terms in accordance
with its policies and applicable laws.

The State Water Board generally provides funding to areas of the

State that lack access to safe drinking water. We reviewed the
State Water Board’s list of failing water systems to identify where
Californians lack access to safe drinking water. We also reviewed
the funding it provided to benefit people in those areas. As Figure 6
shows, the majority of these failing systems are located in the
Central Valley and San Bernardino County. Further, most of the
funding for water projects went to counties with large numbers
of failing water systems or people served by failing water systems.
44 California State Auditor Report 2021-118
July 2022

For example, more than half of the population served by failing

water systems is located in five counties—Los Angeles, Kern,
Stanislaus, San Bernardino, and Tulare—and these five counties
received 40 percent of the funding awarded.

Figure 6
Drinking Water Project Funding Went to Counties With Large Numbers of Failing Water Systems
(July 1, 2016, Through December 31, 2021)

Number of Drinking Water Project

Failing Water Systems Funding Amounts (dollars in millions)
PER COUNTY TOTAL PER COUNTY TOTAL
DEL DEL
NORTE
SISKIYOU MODOC 30-74 235 42% NORTE
SISKIYOU MODOC $125-250 $1,040 60%
15-29 95 17 45-120 365 21
8-14 106 19 10-40 260 15
TRINITY
SHASTA LASSEN
0-7 124 22 TRINITY
SHASTA LASSEN
0-9 65 4
HUMBOLDT HUMBOLDT
Statewide: 560 100% Statewide: $1,730 100%
TEHAMA TEHAMA
PLUMAS PLUMAS

GLENN BUTTE SIERRA GLENN BUTTE SIERRA

MENDOCINO MENDOCINO
VADA VADA
YUBA NE YUBA NE
PLACER PLACER
SUT

SUT

LAKE COLUSA LAKE COLUSA

TER

TER

YOLO EL DORADO YOLO EL DORADO

SONOMA NAPA ALPINE SONOMA NAPA ALPINE
SACRA- SACRA-
MENTO AMADOR MENTO AMADOR
SOLANO CALAVERAS SOLANO CALAVERAS
MARIN MARIN
CONTRA SAN TUOLUMNE MONO CONTRA SAN TUOLUMNE MONO
SAN FRANCISCO COSTA JOAQUIN SAN FRANCISCO COSTA JOAQUIN
ALAMEDA AUS MARIPOSA ALAMEDA AUS MARIPOSA
SAN MATEO IS L SAN MATEO IS L
STAN STAN
SANTA SANTA
CLARA MERCED CLARA MERCED
SANTA CRUZ MADERA SANTA CRUZ MADERA

SAN FRESNO SAN FRESNO

BENITO INYO BENITO INYO

TULARE TULARE
MONTEREY KINGS MONTEREY KINGS

SAN LUIS KERN SAN LUIS KERN

OBISPO OBISPO

SAN BERNARDINO SAN BERNARDINO

SANTA BARBARA SANTA BARBARA
VENTURA VENTURA LOS
LOS
ANGELES ANGELES

ORANGE RIVERSIDE ORANGE RIVERSIDE

SAN DIEGO IMPERIAL SAN DIEGO IMPERIAL

Source:  State Water Board data.

Additional Funding Is Needed to Help Ensure That Water Systems Can

Meet Drinking Water Standards

The State Water Board identified a significant funding gap for

drinking water solutions for failing and at‑risk water systems. As
noted in the Introduction, in 2021 the State Water Board identified
more than 600 water systems at risk of failing to provide an
adequate supply of safe drinking water to about 400,000 residents.
Further, the 2021 assessment estimated that from 2021 through 2025
 California State Auditor Report 2021-118 45
July 2022

there would be a gap of approximately $4.5 billion between funding

needs and available loan and grant funding. For example, the State
Water Board estimated that eligible failing and at‑risk water systems
during that time frame would need $3.2 billion in grant funding but
that only $1.2 billion would be available, resulting in a $2 billion gap
between eligible grant funding needs and available grant funding.
In addition, the 2022 assessment estimated that small public water
systems and K–12 schools would need between $1.2 billion and
$4.8 billion to meet new drought infrastructure requirements,
such as having at least one backup source of water supply and an
adequate backup electrical supply.

Given the funding gap discussed above, the State Water Board
should work with the Legislature—and with federal agencies to
the extent possible—to identify solutions to address this funding
gap and request the resources necessary to help ensure that water
systems can meet drinking water standards. Doing so will further
the human right to water the State Water Board has made a priority
and will help address poor‑quality drinking water as California
endures its third consecutive year of dry conditions, resulting in a
continuing drought.

Please refer to the section beginning on page 3 to find the

recommendations that we have made as a result of these
audit findings.

We conducted this performance audit in accordance with generally accepted government auditing
standards and under the authority vested in the California State Auditor by Government Code
section 8543 et seq. Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions based on the
audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.

Respectfully submitted,

JOHN BAIER, CPA

Acting Chief Deputy State Auditor, Audits

July 26, 2022

46 California State Auditor Report 2021-118
July 2022

Blank page inserted for reproduction purposes only.

 California State Auditor Report 2021-118 47
July 2022

Appendix A
Results of Our Survey of Failing Water Systems

The Joint Legislative Audit Committee (Audit Committee)

requested that we assess the State Water Board’s efforts to
help provide Californians with safe drinking water. To gain
an understanding of the challenges that failing water systems
experience, we surveyed public water systems identified by the
State Water Board as failing to meet water quality standards during
2021. We notified these water systems about this survey by email
and collected their electronic responses. We excluded more than
100 water systems due to a lack of contact information, lack of a
representative available to complete our survey, or lack of response
to our contact, among other issues. Of the 300 failing public water
systems we surveyed, 97 (32 percent) responded. In Table A we
present aggregated responses to selected questions.

We invited the respondents to our survey to provide written

comments to give context to selected answers, although only some
opted to do so. In the survey, we asked questions on the State
Water Board funding and application process and its technical
assistance and public outreach. Comments on the State Water
Board’s funding and application process were generally negative.
Specifically, several water systems responded that the process is
very lengthy and takes a significant amount of time for approval.
Additionally, several water systems expressed frustration that more
grant opportunities were not available to smaller water systems that
were unable to afford large‑scale infrastructure changes. Comments
on the State Water Board’s technical assistance and public outreach
were mixed; a number of water systems reported that the technical
assistance provided by and communication with the State Water
Board was helpful and informative, but some expressed frustration
with the State Water Board and its general lack of communication.
The results of the survey suggest that the State Water Board could
improve its communications with water systems and revise its
application and funding process.
48 California State Auditor Report 2021-118
July 2022

Table A
Water Systems’ Responses to Selected Questions From Our Survey

PERCENTAGE OF RESPONSES
QUESTIONS YES NO

Questions Regarding State Water Board Application and Funding Process*

Are you aware that the State Water Board has funding available for loans or grants to help
89% 11%
bring public water systems into compliance with safe drinking water standards?
Have you applied to the State Water Board for funding to bring your public water system into
44% 56%
compliance with safe drinking water standards?
Did the State Water Board assist you during the application for funding process? 89%

79% of this 21% of this 11%

assistance was assistance was
sufficient insufficient

Questions Regarding Technical Assistance and Public Outreach*

Are you aware that the State Water Board contracts with organizations (known as technical
assistance providers) to provide technical assistance with tasks such as project coordination,
80% 20%
legal assistance, and environmental analysis to help bring your public water system into
compliance with safe drinking water standards?
Has the State Water Board or a technical assistance provider reached out to you to discuss 48%
what could be done to help bring your public water system into compliance with safe 85% of this 15% of this 52%
drinking water standards? assistance was assistance was
helpful unhelpful
Has the State Water Board or a technical assistance provider conducted outreach in the 28%
community your public water system serves to discuss issues related to your water system’s 93% of this 7% of this 72%
water quality or drinking water in general? assistance was assistance was
helpful unhelpful
Have you received technical assistance to help bring your public water system into
44% 56%
compliance with safe drinking water standards?
Did you receive adequate communication from your technical assistance provider? 90% 10%
Did you receive all the technical assistance you needed? 73% 27%

Source:  Auditor’s survey of failing water systems.

Note:  As part of our survey of failing water systems, we excluded more than 100 water systems due to a lack of contact information, lack of a
representative available to complete our survey, or lack of response to our contact letter, among other issues.
* Some questions did not receive a 100 percent response rate, and these figures reflect only the responses for each question.
 California State Auditor Report 2021-118 49
July 2022

Appendix B
Scope and Methodology

The Audit Committee directed the California State Auditor to

conduct an audit of the State Water Board regarding its efforts to
help provide Californians with safe drinking water. Table B lists the
objectives that the Audit Committee approved and the methods we
used to address them.

Table B
Audit Objectives and the Methods Used to Address Them

AUDIT OBJECTIVE METHOD

1 Review and evaluate the laws, rules, Reviewed relevant laws, regulations, and other background materials related to the State
and regulations significant to the Water Board and safe drinking water requirements.
audit objectives.

2 Evaluate the State Water Board’s efforts • Interviewed State Water Board staff, and reviewed State Water Board policies
to ensure that all Californians have access and procedures for awarding infrastructure funding and technical assistance to
to clean drinking water. Determine where water systems.
Californians lack clean drinking water and • Obtained State Water Board data on loans and grants, and data for water systems that
whether the State Water Board has provided consistently failed to meet the State’s safe drinking water standards.
adequate funding and assistance to benefit
people in those areas. • Reviewed the data to determine where Californians lack safe drinking water and the
funding the State Water Board provided to benefit people in those areas.

3 Evaluate the State Water Board’s outreach • Interviewed State Water Board staff and reviewed board policies and procedures for
efforts to promote and encourage conducting outreach to water systems.
participation in its program to help ensure • Obtained and reviewed agreements the State Water Board has with technical
Californians’ access to clean water. To the assistance providers for outreach efforts to determine what metrics it uses to
extent possible, evaluate the demand evaluate outreach efforts.
for clean water and drinking water from
disadvantaged communities throughout • Determined that the State Water Board did not conduct outreach specifically to
California and determine whether the State disadvantaged communities served by failing water systems.
Water Board’s outreach efforts appropriately
focus on communities most in need.

continued on next page . . .

50 California State Auditor Report 2021-118
July 2022

AUDIT OBJECTIVE METHOD

4 Analyze the State Water Board’s effectiveness • Interviewed State Water Board staff and reviewed State Water Board policies
in administering the Safe Drinking Water and procedures for awarding infrastructure funding and technical assistance to
State Revolving Fund, and any related water systems.
financial assistance programs, by doing • Obtained data from the State Water Board on loans and grants that it has provided to
the following: water systems for the past five years.
a. Evaluate the State Water Board’s processes
• Analyzed the data to determine the number and types of applications for funding
for awarding financial assistance for
assistance that the State Water Board received and the number and types of drinking
infrastructure needed to achieve or
water projects that it approved, including the amount of funding awarded, the portion of
maintain compliance with federal and
the funding that consisted of grants or loans, and the loan financing terms.
state clean water requirements.
• Determined the portion of drinking water funding that the State Water Board provided to
b. Assess the metrics the State Water Board
failing water systems and to disadvantaged communities.
uses to evaluate applications for financial
assistance, and determine whether it • Evaluated the timeliness and effectiveness of the State Water Board’s processing of
applies these metrics consistently. applications for financial assistance.
c. Evaluate the timeliness and effectiveness • Judgmentally reviewed 15 projects that the State Water Board awarded between 2017
of the State Water Board’s processing of and 2021, to determine whether the State Water Board properly used its metrics to
applications for financial assistance. evaluate applications and ensured that recipients used the funds in accordance with
d. Determine whether the State Water applicable requirements.
Board ensures that recipients of financial • Judgmentally reviewed an additional 10 projects between 2017 and 2021 to determine
assistance use funds in accordance with whether the State Water Board assigned financial assistance, including interest rates and
applicable statutes, State Water Board loan repayment terms, in accordance with its policies and applicable laws.
policies, and best practices.
e. Analyze data and information from the
last five years to determine how effective
the State Water Board has been in
providing financial assistance to support
access to clean water, including the
number and types of eligible applicants;
the number and types of projects;
financing terms, such as interest rate, loan
repayment, and principal forgiveness; and
any other relevant information.

5 Review the technical assistance program • Interviewed State Water Board staff and reviewed State Water Board policies and
that is available to address the water needs procedures for providing technical assistance to water systems.
of small, disadvantaged communities • Obtained and reviewed the State Water Board’s March 2022 outreach and engagement
throughout California to ascertain strategy to determine how the State Water Board intends to work with community
the following: partners.
a. Whether the technical assistance program
• Obtained data from the State Water Board on technical assistance projects that it
has coordinated effectively with other
approved between 2017 and 2021.
programs to meet the needs of these
small, disadvantaged communities. • Analyzed the data to determine the number and types of applications for technical
assistance that the State Water Board received and the number and types of projects that
b. How many communities have received
it approved. Due to the lack of sufficient data in the State Water Board’s data system, we
assistance from the technical assistance
were unable to determine how many small, disadvantaged communities have received
program and where they are located.
technical assistance.
c. Whether the State Water Board has
implemented the technical assistance • Identified the number of technical assistance providers the State Water Board currently
program effectively. uses and reviewed its efforts to increase the number of available providers.
• Reviewed the State Water Board’s policies and project agreements to determine its
processes for evaluating technical assistance providers’ performance.
• Reviewed 10 technical assistance projects the State Water Board approved between fiscal
years 2018–19 and 2020–21 and determined that the providers generally complied with
federal and state funding requirements.
 California State Auditor Report 2021-118 51
July 2022

AUDIT OBJECTIVE METHOD

6 Assess efforts by the SAFER program to • Interviewed State Water Board staff and reviewed board policies and procedures for
proactively identify, reach out to, and assist conducting outreach to water systems.
water systems in providing an adequate and • Obtained and reviewed the State Water Board’s plans to update its affordability
affordable supply of safe drinking water. assessment and determined how it intends to use this information.

7 To the extent possible, conduct a customer To gain an understanding of the challenges that failing water systems experience, we
survey of water systems or communities out surveyed public water systems identified by the State Water Board as failing to meet water
of compliance with clean water standards to quality standards during 2021.
determine why they are out of compliance
and whether the State Water Board or the
Legislature could make changes to help
ensure that all Californians have access to
clean water.

8 Review and assess any other issues that are Interviewed State Water Board staff and reviewed State Water Board processes for identifying
significant to the audit. water systems at risk of failing to provide safe drinking water and its goals to prevent these
systems from failing.

Source:  Audit workpapers.

Assessment of Data Reliability

The U.S. Government Accountability Office, whose standards

we are statutorily required to follow, requires us to assess the
sufficiency and appropriateness of the computer‑processed
information that we use to support our findings, conclusions, and
recommendations. In performing this audit, the primary data
and systems we relied on include the following:

Drinking Water and Technical Assistance Projects

We used the State Water Board’s project management data

to determine the number of drinking water and technical
assistance projects, the amounts and types of funding awarded for
these projects, dates for project initiation and reviews, and other
details of these projects, including the size of the water system and
if it served a disadvantaged community. To evaluate these data, we
performed electronic testing of the data, interviewed State Water
Board personnel knowledgeable about the data, and compared
some of the electronic information stored in the system with the
information recorded in hard‑copy project files for a selection
of projects. We determined that these data were not sufficiently
reliable due to missing records and inaccuracies. Nevertheless,
we used the data, as this was the best source of information for
the total population of the State Water Board’s projects. Although
this determination may affect the precision of the numbers we
present, there is sufficient evidence in total to support our findings,
conclusions, and recommendations.
52 California State Auditor Report 2021-118
July 2022

Failing and At‑Risk Water Systems

We also relied on the State Water Board’s data on failing water

systems and water systems at risk of failing to determine those
systems’ location in the State and the population they serve. We
performed dataset verification procedures and did not identify any
issues. Because we used these data for background or contextual
information that does not materially affect findings, conclusions, or
recommendations, we determined that a data reliability assessment
was not necessary.
 California State Auditor Report 2021-118 53
July 2022

State Water Resources Control Board

July 6, 2022

John Baier, CPA *

Acting Chief Deputy State Auditor, Audits
621 Capitol Mall, Suite 1200
Sacramento, CA 95814

STATE WATER RESOURCES CONTROL BOARD RESPONSE TO 2021-118 –

CONFIDENTIAL DRAFT AUDIT REPORT FOR REVIEW

Dear Mr. Baier,

Thank you for the opportunity to review the California State Auditor’s draft Report 2021-118.
The State Water Resources Control Board’s (Board’s) highest priority is advancing the human
right to water, and it will work to implement many of the report’s recommendations, where
feasible, especially those which build upon preexisting process improvements already
underway. My staff and I recognize the attention to detail your staff exhibited during the audit
process and your efforts to understand the variety of challenges we are confronting as we work
to deliver assistance to the communities most in need. These process improvements and
recommendations, when fully implemented, will promote greater efficiency, consistency, and
transparency for the Board’s efforts to support communities with providing safe and affordable
drinking water to all Californians.

The Board acknowledges that there are improvements that can be made, but respectfully
requests an adjustment to the inaccurate title of the report. The Board has demonstrated its 1
urgency by making substantial progress in its Safe and Affordable Funding for Equity and
Resilience (SAFER) Program over the past three years to provide safe and affordable drinking
water to the many Californians who previously lacked safe water. Since the Governor signed
SB 200 (Chapter 120, Statutes of 2019) on July 24, 2019, the SAFER program has:

• Reduced the population impacted by failing water systems from 1.6 million people to
934,000 -- a 40 % reduction in the first three years of a 10-year program. This means
that 650,000 Californians in 120 communities now have access to safe drinking water
that they did not have three years ago.
• Responded to frequent drought and water emergencies, providing $50 million in urgent
assistance to 9,456 households and 150 water systems experiencing water outages due
to drought, contamination, and failing infrastructure.
• Expanded assistance where needed most, by increasing the grant funding committed to
primarily small, disadvantaged communities1 by 84% compared to the three fiscal years
before the program began. Since July 2019, these communities have received

1
A disadvantaged community has a median household income of less than 80% of the state median household
income. A small, disadvantaged community system serves 3300 or fewer connections or 10,000 or fewer people.

*  California State Auditor’s comments begin on page 59.

54 California State Auditor Report 2021-118
July 2022

John Baier, CPA -2-

approximately $700 million in grants to meet interim, urgent drinking water needs,
support planning and system assessment through our technical assistance providers,
and fund projects that support long-term resilience and address compliance issues.
• Increased funding for critical technical assistance by over 150% compared to the three
fiscal years before the program; this assistance has accelerated projects in over
300 small, primarily disadvantaged communities.
___________________________________________________________________________________

Safe Drinking Water Background

Ten years ago, California became the first state to adopt the Human Right to Water, which
recognizes that “every human being has the right to safe, clean, affordable, and accessible
water adequate for human consumption, cooking, and sanitary purposes.” In 2019, Senate
Bill 200 established the Safe and Affordable Drinking Water Fund to address funding gaps and
provide solutions to water systems, especially those serving disadvantaged communities. Small,
disadvantaged communities often do not have the technical capacity to run sophisticated
treatment systems, the governance or managerial capacity to operate their water systems
effectively, or the financial capacity to support growing operation and maintenance costs.

Recognizing the significant challenges in fulfilling the human right to water for Californians in
small, disadvantaged communities, the State Water Board created the SAFER Drinking Water
Program. To advance solutions, the SAFER program employs a comprehensive approach that
includes enhanced data collection, sophisticated data analysis, deployment of multiple funding
sources, judicious use of regulatory authorities, innovative outreach and engagement strategies,
and robust multi-agency coordination.

From the time that SB 200 was signed in July 2019 through the end of June 2022, the State
Water Board has committed grants totaling approximately $700 million for drinking water
projects that primarily went to small, disadvantaged communities. The State Water Board also
has approved more than $27M for technical assistance work to assist small, primarily
disadvantaged, communities. We are managing approximately 200 active drinking water
funding agreements and approximately 540 drinking water technical assistance assignments.
The total number of planning agreements (either through technical assistance or direct financial
assistance) and construction agreements executed has increased from 54 in FY 19/20 to 83 in
FY 21/22. This over 50% increase in delivering planning and construction assistance occurred
despite the significant challenges that arise when working with water systems that lack
experience with managing complex projects.

Since the start of the SAFER Drinking Water Program, we have accomplished a great deal by
prioritizing four specific strategies: 1) proactively assessing water systems’ needs and reaching
out to failing and at-risk systems directly and through our technical assistance partners;
2) increasing emphasis on regulatory compliance; 3) supporting systems with financial and
technical assistance, where needed; and 4) expanding our outreach and community
engagement efforts. In addition to the points above, the Board’s SAFER Drinking Water
Program has:

• Provided construction funding to over 90 communities, approximately 75% of which went

to small, disadvantaged communities.
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John Baier, CPA -3-

• Completed consolidations of 73 water systems and the public process to appoint

Administrators to 13 water systems.
• Established a Process Improvement Work Group and completed 40 process
improvements to streamline application and reimbursement processes.
• Sent over 2,000 letters to water systems informing them of consolidation opportunities,
including the grant funding and technical assistance available to support consolidation.
• Held 19 water partnership workshops throughout the state to connect large and small
water systems to discuss potential regional consolidation efforts.
• Initiated discussions with 31 tribal water systems and held 55 meetings with tribal
representatives.
• Held 12 meetings of the SAFER Advisory Group and an additional 94 public meetings
and presentations.
We are especially proud of these accomplishments given the unprecedented disruption to our
work caused by the COVID-19 pandemic for the last 27 months, which limited or prevented us 2
from engaging in-person with our colleagues, stakeholders, and impacted water systems; forced
unprecedented changes to our workflow and processes; and required onboarding and training
of 54 new staff (filling existing and new positions) without the benefit of in-person interaction.
The impacts of COVID-19 have been especially acute because the SAFER Drinking Water
Program was created just months before the state transitioned to telework.

The COVID-19 pandemic also has had a major impact on the small communities that benefit
from our funding and technical assistance. We have had multiple instances of delays due
directly or indirectly to the pandemic, such as cost increases related to inflation and/or supply
chain problems that require amending agreements to increase budgets; consultants or water
systems with key staff out of the office due to COVID-19 health impacts; statewide or county
restrictions that limit travel or in-person meetings for required site visits. These delays
temporarily required our staff to turn their attention from working on new funding agreements or
technical assistance workplans to reviewing and processing amendments. Holding ourselves,
our funding recipients, and technical assistance providers accountable is critical; however,
determining whether delays are caused by major exogenous events (pandemic; global supply
chain problems) versus factors within our collective control has been very challenging.

Audit Recommendations
We have made great strides in improving how we do our work. We believe many of the
recommendations provided in the State Auditor’s report build upon the foundation we have
created and our culture of continuous improvement. The Board recognizes the report’s
recommendations are an opportunity to assess areas for further improvement, and we discuss
below the specific recommendations we are seriously considering for implementation. We will
continue to evaluate other recommendations not mentioned below and may, where necessary,
identify alternative actions that we believe will meet the objectives in a more effective, efficient
manner.
56 California State Auditor Report 2021-118
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John Baier, CPA -4-

Improve Application and Funding Processes

We appreciate the State Auditor’s recognition of the Division of Financial Assistance’s (DFA)
dedication to continuous process improvement. This dedication has resulted in 40 completed
process improvements with an additional 30 active process improvement efforts underway. The
Board supports the audit’s findings to continue streamlining efforts and establish clearer
expectations for staff reviewing applications. These efforts are focused on streamlining funding
approvals and making it easier for systems to implement projects, such as developing
processes for advanced payment. DFA has established procedures and regular meetings to add
and prioritize new improvement efforts. These efforts will continue to be a focus for DFA, and
key progress will be reported out quarterly as part of the Board’s Executive Director reports.

The Board is also supportive of the suggestions to develop and monitor performance measures
for the application process and to gather input from the SAFER Advisory Group on these
aspects of the program. As part of these efforts, DFA plans to create a funding dashboard to
allow the public and key stakeholders to monitor performance and progress.

The Board understands that the fundamental prioritization/urgency metrics for evaluating
progress in funding safe drinking water solutions are the number of solutions provided, the
number of systems removed from failing status, and the continued absence of those systems
from the failing list. This is why the Board removed the restriction on when funding applications
3 can be submitted and now accepts applications continuously. The Board does not prevent
submittal of applications - even when our funding capacity and staff capacity to process
applications are exceeded - because projects can be queued and ready to move forward once
capacity is available. We have found that the openness of our application process facilitates
higher application rates and, ultimately, more funded projects.

Since the drinking water program was transferred to the State Water Board in July 2014, we
have seen a significant increase in applications for funding. As reported in the FY 2014/2015
Drinking Water SRF Annual Report, there were 49 projects on the “Fundable List” of projects in
the Intended Use Plan; the FY 2017/2018 Drinking Water SRF Annual Report identified 123
projects on the “Fundable List” and the FY 2019/2020 Drinking Water SRF Annual Report
identified 250 projects on the “Fundable List.” The increased marketing and outreach the Board
has conducted, along with policy changes to invite applications for a wider variety of project
types (not just focused on public health projects, as was done previously), have resulted in this
significant increase. The increase has far outpaced our capacity and resources to hire new
staff, causing longer processing times, but it has also resulted in a substantial increase in
financial assistance delivered to communities.

Improve Delivery of Technical Assistance

The Board’s technical assistance programs provide vital support to help small, disadvantaged
communities apply for funding and comply with drinking water standards, and California is a
national leader in the amount and breadth of assistance we provide. The Board partners with
regional and statewide nonprofit organizations, as well as local universities, to work with
community water systems to address their most critical technical, managerial, and financial
capacity needs. Together, the Board and its technical assistance providers have worked with
hundreds of failing and at-risk systems, which are the initial focus of the SAFER Drinking Water
Program, and we are significantly expanding those efforts.
 California State Auditor Report 2021-118 57
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John Baier, CPA -5-

Generally, the Board provides a full suite of planning services via technical assistance providers
to out-of-compliance small systems. This approach streamlines the funding process because
systems do not need to separately apply for a planning grant to complete the planning and
design work necessary to support their construction application. Instead, a technical assistance
provider can work with the system to complete all planning work and apply for construction
funds.

The State Auditor's draft report raises concerns with the performance of technical assistance
providers. As discussed in the report, the Board's technical assistance program has been
sustained by a group of nine nonprofit providers for several years. These existing providers
have shared that they do not have enough capacity to meet increasing demands. Based on new
authorities in state law effective last fall that allow the Board to provide funding for technical
assistance to additional provider types, DFA staff recently initiated a Statement of Qualifications
process to qualify additional providers. As of June 2022, five new providers have been added to
the pool of qualified providers, and DFA is working to execute new agreements with them. This
will significantly increase the Board’s capacity to provide technical assistance.

The report also recommends establishing goals and performance measures for technical
assistance providers. The Board is supportive of this recommendation. DFA staff will develop
and implement performance measures that will flag delays to determine where intervention may
be needed, without creating disincentives for technical assistance providers to request
additional time or funding where appropriate. Ultimately, the primary goal is to see that system
needs are completely identified and appropriately addressed.

Engaging with communities and water systems

Proactive engagement with water systems and communities is a core aspect of the SAFER
Drinking Water Program. The Board supports the audit’s findings to continue expanding the
SAFER Drinking Water Program’s outreach and engagement efforts.

The report recommends technical assistance providers develop an outreach plan when first
establishing their workplans under SAFER. The Board is supportive of this recommendation.
However, in implementing this recommendation, it will be important to allow flexibility for
technical assistance providers to develop outreach and engagement plans that are responsive
to their community and water system needs. A standardized template for all communities and 4
water systems is not effective or appropriate.

The Board recently launched an outreach and engagement strategy to: increase early
community engagement with SAFER; keep local drinking water projects on track; identify
potential risks, issues, or delays; build local capacity; and create a path toward equitable and
resilient water governance. Through partnering with local trusted groups, we aim to catalyze
collaborative solutions in hard-to-reach communities.

In addition to our new outreach and engagement approach, we will continue to convene the
SAFER Advisory Group, which provides the State Water Board with advice on many
components of the SAFER Drinking Water program. The Advisory Group is composed of up to
19 appointed members that represent public water systems, technical assistance providers,
local agencies, non-governmental organizations, the public, tribes, and residents served by
community water systems in disadvantaged communities, state smalls, and domestic wells.
These meetings are opportunities for public input and are widely publicized and offered with
language interpretation services.
58 California State Auditor Report 2021-118
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John Baier, CPA -6-

Addressing Funding Gaps

The State Auditor’s draft report recommends that the State Water Board work with the
Legislature to appropriate the funds required to ensure water systems are meeting drinking
water standards. The Administration and the Board has worked with, and will continue to work
with, the Legislature to meet critical drinking water infrastructure needs and provide aid to small,
disadvantaged communities that struggle to provide their residents with safe, affordable drinking
water.

As recognized in the background of the draft report, the Administration, working with the
Legislature, has made significant investments in addressing funding gaps for drinking water
systems that are out of compliance. The Safe and Affordable Drinking Water Fund appropriates
$130 million annually for 10 years to primarily assist small, disadvantaged communities. The
Budget Act of 2021 included an additional $650 million for drinking water systems and
$400 million in funding to help meet federal match requirements for the State Revolving Funds.
This will allow California to access up to $2– $3 billion in federal drinking water funds over the
next five years as authorized by the Infrastructure Investment and Jobs Act.

It is also important to recognize that funding for capital improvements and for sustainable
operation and maintenance of water systems primarily comes from water systems’ rate payers.
Two important strategies for addressing funding gaps are to help water systems establish rate
structures that put them on a path toward long-term sustainability and to assist small systems
with efforts to consolidate with larger water systems.

The ideas and recommendations expressed in the State Auditor’s draft report align with the
SAFER Drinking Water Program’s model of continuous improvement and offer invaluable
considerations for our ongoing efforts to ensure that Californians who lack safe and affordable
drinking water receive it as quickly as possible, and that the water systems serving those
Californians establish sustainable solutions. In addition, the report reflects the collective
responsibility that is integral to SAFER’s success: water systems, non-profit organizations,
governments, the community advisory board, and other stakeholders working together to
develop and implement solutions. Through this collaboration, we uphold California’s Human
Right to Water and minimize the disproportionate environmental burdens experienced by some
communities by advancing the fair treatment of people of all incomes, races, and cultures.

Sincerely,

Joe Karkoski Digitally signed by Joe Karkoski

Date: 2022.07.06 14:54:03 -07'00' for
Eileen Sobeck
Executive Director
State Water Resources Control Board
 California State Auditor Report 2021-118 59
July 2022

Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE
STATE WATER RESOURCES CONTROL BOARD

To provide clarity and perspective, we are commenting on the

response to our audit report from the State Water Board. The
numbers below correspond to the numbers we have placed in the
margin of the State Water Board’s response.

We stand by the report title. Audit standards require that we base our 1
conclusions on sufficient and appropriate evidence. The evidence we
cite in the section starting on page 21 related to the growing length of
time the State Water Board is taking to process applications, points to
a lack of urgency, as does the board’s lack of goals and metrics related
to processing applications, which we describe beginning on page 35.
We acknowledge that the State Water Board has made considerable
effort to implement the SAFER program. On page 10 of the report
we describe the substantial funding the State Water Board has
provided to help communities address contaminated drinking water.
In Table 1 on page 10 we detail the fact that much of the funding has,
indeed, gone to disadvantaged communities. The increasing amount
of funding available for safe drinking water, which we discuss on
pages 22 and 38, gives the State Water Board an opportunity to make
a significant impact on water systems, especially in disadvantaged
communities. However, our report demonstrates that the State Water
Board’s process for providing this funding is taking far too long and
the State Water Board has not made sufficient efforts to address
this problem.

We agree that the pandemic may have inhibited the State Water 2
Board’s ability to process applications quickly. Nevertheless, the fact
that the time to process applications and fund projects has nearly
doubled between 2017 and 2021 means that some Californians will
have to spend more time going without safe drinking water. Therefore,
we make recommendations on pages 3 and 4 to the State Water Board
to streamline its process for funding applications and to establish
expectations for how long the process will take.

We appreciate the State Water Board’s policy to allow water systems 3

to apply at any time, even when funding or staff capacity are exceeded.
However, as we note on page 36, it is important to recognize that
establishing metrics would allow the State Water Board to justify
hiring additional staff, a step which would likely help it reduce the
amount of time it takes to process applications. Further, as we note
on pages 22 and 38, the State Water Board has received hundreds of
millions in additional funds for drinking water projects. Getting those
funds distributed quickly could also require additional staff.
60 California State Auditor Report 2021-118
July 2022

4 We do not recommend that the State Water Board create a

standardized template for conducting outreach. Instead, as we
recommend on page 5, the State Water Board should develop a
plan to avoid future outreach work that duplicates the efforts of its
providers or of its staff.