Private voluntary organizations (PVO's) are the major force in the development of water supply and sanitation (WSS) in rural areas of the Third World, spending annually about three times as much as do the World Bank or UNICEF. PVO activities are generally rural-oriented, innovative, complementary to official development programs, and low cost; generally, weak PVO administrative/management structures and a desire to work independently preclude the establishment of coordinated, country-wide WSS programs. The proportion of U.S. Government funds channeled to the 50-100 PVO's involved in WSS is also relatively small. Water and Sanitation For Health project staff prepared this report for A.I.D. on the effectiveness of PVO's in the WSS sector. The report briefly outlines PVO activity in WSS, naming key PVO's involved, and assesses PVO effectiveness in relation to the four "pillars" of A.I.D. development policy, giving examples of noteworthy PVO projects. Several ways, beyond increased funding, in which the U.S. Government could best improve PVO effectiveness are suggested in conclusion.