Along the Rio Grande, more than 400,000 mostly poor people live in ramshackle neighborhoods where sewage runs in open ditches. Although the U.S. Congress has set aside $300 million to improve sanitation, more than a quarter of that has gone unspent, a federal audit shows.

The need for better hygiene was obvious during a recent afternoon rainstorm, when brothers Angel and Salvador Badillo sat under a tin roof with a couple of friends, sipping beers as the open drainage ditch in front of their clapboard house filled like a moat.

Soon, neighbors' septic tanks could begin to overflow, creating a smelly and potentially disease-ridden mess.

The homes in Grande Acres — a colonia, or slapped-together neighborhood, on low-lying land 12 miles north of the Rio Grande — were supposed to get sewer service years ago through a nearly $4 million grant from the Environmental Protection Agency. But the city of Santa Rosa, of which Grande Acres is a part, failed to take advantage of the money, and the 2002 grant expired.

At least $78 million of the $300 million appropriated by Congress during the 1990s to improve Texas' colonias has gone unspent, according to a recent EPA audit. And with construction costs and other expenses soaring, numerous colonias have had to scale back or give up on some projects.

Over 400,000 people in Texas live in colonias on unincorporated land close to the border. The colonias consist of shacks, trailers and some well-kept frame houses. Many lack safe drinking water, sewer systems or electricity. During the 1990s, as cities looking for tax revenue began to annex colonias, and their residents gained citizenship and voting power, state and federal politicians began dispensing millions to lift colonia residents out of their squalor.

Lionel Lopez, founder of the South Texas Colonia Initiative, a nonprofit organization that works to improve conditions in colonias, said he was shocked to learn there was so much money sitting unspent.

"To me it's mind-boggling," Lopez said. "The bottom line is the little people are the ones who are going to be hurt."

In Santa Rosa, Javier Mendez, the former city administrator, said the sewer project was foiled by a delay in land acquisition and confusion over the new housing codes the city was supposed to adopt. Also, turnover in the city attorney's office resulted in conflicting interpretations of the rules governing the project, Mendez said. The grant finally expired.

Santa Rosa annexed Grande Acres about six years ago and brought the Badillo brothers and other residents city water service a few years ago. The Badillos, ages 61 and 60, were told three years ago that sewer service would follow.

"We really need it," Angel Badillo said. His brother recalled flooding that forced them to drive their pickup truck right up to the door of their house so that they would not have to wade through contaminated water.

A new Santa Rosa city administrator is seeking new funding for sewers. But soaring costs for such things as pipe and concrete have forced the city to scale back the project dramatically.

EPA officials overseeing the colonias wastewater program say they have started keeping closer tabs on projects and have set the end of 2010 as the goal for spending the remaining money.

"When this effort is complete, 150,000 folks will have received a benefit from this program," said Susan Spalding, an EPA official in charge of water projects for the region. "The funds will not go away."

Six miles south of Santa Rosa, grant money has brought sewer service to out 2,000 people in eight colonias in and around La Feria. But La Feria decided to delay the next phase — a new wastewater treatment plant — because of climbing construction prices. Bids requested by the city two months ago came back double what was originally planned, said City Manager Sunny Philip.

So the city has requested an additional $6.3 million.

"It's not a lack of projects or interest from the communities — the need is here," Philip said. "This is one of the key elements of improving the health standards."

Back at Grande Acres, Jose L. Rico, a 39-year resident, pointed with disgust at two holes filled with a fetid stew above his septic tanks in the center of his otherwise neat backyard. It costs $80 to pump out each hole after heavy rains swamp his tank.

"The city says there's no money," Rico said. "All these waters are going to come and we'll be battling."