(a) There is hereby established the Water Pollution Control 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 allotted to the state for capitalization of the revolving loan fund, state matching funds where required, and loan principal, interest, and penalties shall be deposited as required by the terms of the federal grant directly in the revolving loan fund. Money 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 for the construction or rehabilitation of public wastewater treatment facilities; to secure principal and interest on bonds issued by the authority if the proceeds of such bonds are deposited in the revolving loan fund to the extent provided in the terms of the federal grant; to purchase debt incurred by public bodies for wastewater treatment 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. Money not currently needed for the operation of the revolving loan fund or otherwise dedicated may be invested and all interest earned on such investments shall be credited to the revolving loan fund.

(b) The revolving loan fund shall be administered by the department, as agent for the authority, which is authorized to establish procedures and adopt such regulations as may be required to administer the revolving loan fund program in accordance with the Federal Clean Water Act and state 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 and loan recipients will be on the state needs list or otherwise satisfy Clean Water Act requirements. The department shall provide an annual report on the revolving loan fund program to the United States Environmental Protection Agency as required by the Clean Water Act and to the Governor.