Safe and adequate drinking water influences community health and economic prosperity. The Virginia Department of Health’s Office of Drinking Water (ODW) ensures the safety of drinking water by regulating the 2,864 waterworks serving nearly eight million Virginians. ODW protects the Commonwealth’s water 24 hours a day, 365 days a year, including when it is threatened by hazards ranging from hurricanes to pandemics. Through its six field offices and nine technical programs, ODW collaborates with owners, operators, and stakeholders to protect public health and the environment while ensuring compliance with applicable laws and regulations. ODW’s program has high compliance rates with water quality standards, and its effectiveness has been acknowledged by the United States Environmental Protection Agency. 

ODW accomplishes its mission through funds provided by three primary sources: regulant fees, federal grants, and general fund dollars. Regulant fees are capped per the Code of Virginia and the Appropriation Act. Federal grants require a state match and, like general fund dollars, have remained relatively flat over the past decade. As expenditures increase due to inflation and office improvement initiatives, ODW’s operational budget is often strained. It has been particularly strained, however, since experiencing a budget shortfall starting in FY22. 

A system of weak internal controls led to the budget shortfall.  Numerous interrelated factors included: the hiring of a new director who did not have adequate budgetary training, experience, or support; removal of ODW’s experienced business manager; reorganization and turnover of leads of supporting business units; miscommunication among programmatic and business staff, in part due to the COVID-19 pandemic; and inadequate quality assurance/quality control to prevent such a budget error. With this environment of weak internal controls, a budget analyst mistakenly advised that certain nongeneral fund balances in 2018 should be spent down or risk being lost. The error went uncorrected for approximately two years as ODW faced recurring, increased costs and relatively flat revenue.

The 2022 Virginia General Assembly appropriated funds to support ODW and avoid layoffs that would otherwise have been enacted in response to the budget shortfall and directed the Department of Health and the Department of Planning and Budget to study ODW operations, the reason for its budget shortfall, and options to reduce ODW costs and potentially enhance ODW revenues. ODW has undertaken recent, ongoing efficiencies to further mitigate the deficit. These include streamlining business processes, reducing rental costs, and modernizing databases. ODW continues to explore new opportunities for efficiency, including enhancing collaboration with local health departments and strengthening centralized delivery of services. Other efficiencies, such as office mergers, remain hindered by federal funding sources and emergency responsibilities.

In addition to existing challenges, emerging issues threaten ODW. Federal grant funds have recently been reduced, and a shortage of staff has been identified by an EPA strategic consulting firm. Additional funding is needed to sustain loans, monitoring, and oversight for the Commonwealth’s aging drinking water infrastructure. Other recommendations to support ODW and ensure another shortfall is prevented include reestablishing its business manager position, initiating a budget training program, and enhancing internal controls.