There is hereby established the State of Alabama Drinking Water Revolving Loan Fund, which shall be maintained in perpetuity and operated by the department as agent for the authority for the purposes stated herein. Grants from the federal government or its agencies allocated, allotted or paid to the state for capitalization of the revolving loan fund, state matching funds where required, and loan principal, interest, and penalties and interest income and all other amounts at anytime required or permitted to be paid into the revolving loan fund shall be deposited therein. Proceeds of bonds issued by the authority, proceeds of capitalization grants, funds appropriated by the state, loan principal and interest payments, interest income and all other funds of the authority shall be deposited with one or more banks designated by the authority to act as depository or trustee with respect to such funds. The authority may establish one or more accounts or sub-accounts in the revolving loan fund in connection with the issuance of bonds, the receipt of capitalization grants or any other funds. Amounts in the revolving loan fund shall be expended in a manner consistent with terms and conditions of the federal capitalization grants and may be used to provide loans to public bodies to pay costs of projects; to secure principal and interest on bonds issued by the authority; to purchase debt incurred by public bodies for projects; to fund other programs which the federal government may allow in the future through its grants; to fund the administrative expenses of the department relating to the responsibilities and requirements of this chapter; and to provide for any other expenditure consistent with the federal grant program and state law. Amounts on deposit in the revolving loan fund may be invested in permitted investments and all interest earned on such investments shall be credited to the revolving loan fund and to one or more accounts or sub-accounts therein established by the authority.

The revolving loan fund shall be administered by the department, as agent for the authority, and the department is authorized to establish procedures and adopt such regulations as may be required to administer the revolving loan fund program in accordance with applicable law and to enter into contracts and other agreements in connection with the operation of the revolving loan fund, including but not limited to, contracts and agreements with federal agencies, public bodies, the authority, and other parties to the extent necessary or convenient for the implementation of the revolving loan fund program. Acting as agent for the authority, the department shall maintain full authority for the operation of the revolving loan fund in accordance with applicable federal and state law. The department shall provide an annual report on the revolving loan fund program to the United States Environmental Protection Agency as required by the federal act and to the Governor.