EPA Audit Finds More Than $1 Billion in Water Earmarks Unawarded

More than $1 billion in congressionally directed water-infrastructure funding had not been awarded and used for its intended purpose as of September 2025, according to a final EPA inspector general audit that identified staffing and grant-management weaknesses.

The audit, issued July 21, 2026, as EPA Office of Inspector General report 26-P-0043, reviewed fiscal 2022 and 2023 water earmark grants. Congress directed approximately $2.3 billion for 1,198 projects involving drinking-water, wastewater and stormwater infrastructure and water-quality protection.

As of September 2025, approximately 44% of the earmarked funds had not been awarded. The OIG said that meant more than $1 billion had not been awarded and used to achieve the intended purpose of improving public health and environmental protections. The delay affected 510 of the 1,198 projects.

Why the awards were delayed

EPA told the OIG that progress was slowed by several factors: The agency initially did not have an earmark program in place, it faced significant personnel shortages, and many recipients had limited experience managing federal grants.

Those are EPA’s stated explanations for the slow progress. The OIG separately found that EPA had not established a goal for how quickly the current earmarks should be awarded, lacked effective central tracking of pre-award documents and had not provided clear guidance on when tribal consultation applied to individual grant awards.

The report also found incomplete grant records in the files it reviewed. The OIG said missing documentation, unclear policy and guidance, limited training and incomplete compliance reviews could impair transparency and the agency’s ability to safeguard funds and verify that awards were used for their intended purposes.

What the delay means for communities

The audit does not say that every affected project serves a community with unsafe drinking water or an active public-health emergency. It does mean that communities named for the earmarks may still be waiting for formal awards, approvals or usable project funds.

That delay can be especially consequential for smaller water systems and rural communities that must coordinate several federal and state funding sources. A June 23, 2026 report from the Government Accountability Office identified 28 USDA and EPA programs that can assist rural communities with water infrastructure. GAO said varying application deadlines, eligibility rules and funding restrictions can make assistance difficult to access, and that delays from one funding source can jeopardize other grants or the project itself.

EPA’s broader water-financing programs illustrate the scale of the national infrastructure challenge. The agency says its WIFIA loan program has supported $51 billion in projects serving an estimated 67 million people. Those figures describe WIFIA loans, not the earmarked grants reviewed in the audit.

What EPA has agreed to do

The OIG made five recommendations. They include developing strategies and expectations for timely awards, clarifying tribal-consultation requirements, improving grant-records policy, training personnel on records management and strengthening Region 5 controls over pre-award requirements.

According to the audit, EPA completed corrective actions addressing the recommendations on timely awards, tribal consultation and Region 5 controls. The agency agreed to corrective actions on grant-record clarification and training; those recommendations were resolved with corrective actions still pending.

What the audit did not find

The report does not allege that the money was stolen, permanently lost or canceled. It also lists zero questioned costs and zero funds recommended for better use. The central finding is that funds had not been awarded and used as intended by September 2025, alongside weaknesses in EPA’s systems for managing the grants.

The findings follow an April 15, 2026 OIG review of water earmark drawdown documentation. That review examined 291 active grants awarded by September 30, 2024. It found that 169 had not drawn down awarded funds within 180 days of the award date, and that 123 of those files did not document why the funds had not been drawn down. The review said those grants were valued at approximately $269 million, while also noting that recipients may have been delayed by permitting or construction issues.

What to watch next

The next accountability questions are whether EPA follows through on the remaining corrective actions, publishes clearer award-timing information and improves its tracking of pre-award records. Communities and taxpayers should also watch for updated award data and any congressional oversight of projects that remain delayed.

Sources

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