Chemical spills, rotting fish, dumped rubbish and bird droppings are among contaminants found in Victorian water supplies.
Traces of the potentially deadly faecal bacteria E.coli were also discovered in 95 water samples taken in 2007/08.
Goulburn-Murray Water was one of the worst water authorities, failing six major compliance standards, according to an annual report on drinking water quality.
The report found the authority failed to provide detailed risk management plans to guard against pathogens, including E.coli and giardia.
There were 64 environmental incidents in the catchment, most had the potential to affect drinking water supplies and "posed a risk to human health".
"The most commonly reported incidents were oil and chemical spills or contaminations, muddy or discoloured water, illegally dumped rubbish and dead fish and other wildlife," the report said.
Goulburn Valley Water twice recorded levels of the Enterococci bacteria in a water tank, attributed to bird droppings washed or blown into the water.
The tanks has since been replaced.
E.coli readings were also found in spring water at Hepburn Springs and townships in the Grampians Wimmera Mallee and North East Water authority catchments.
Myrtleford, Mount Beauty and Tawonga, in the state's northeast, were all issued boil water advisories and have since committed to treatment plant upgrades.
Residents in Minyip, in the Wimmera, also were told to boil their water after a chlorinator broke down.
Yarra Valley Water customers between Woori Yallock and Warburton, on Melbourne's eastern fringe, were on boil orders for a month after a storm in June 2007 turned water cloudy.
The water authority received more than 3,000 complaints for the year, mainly due to high levels of sediment.
During 2007/08 there were 195 water quality notifications made to the Department of Human Services (DHS).
None was believed to have made anyone sick.
"The notifications were generally minor in nature and principally consisted of the sporadic detection of Escherichia coli (E.coli) bacteria, elevated levels of disinfection by-products and turbidity, and blue green algae," the report said.
Of the 11 water authorities audited, five failed to comply with risk management plans.
They were Parks Victoria, Goulburn-Murray Water, Grampians Wimmera Mallee Water, Southern Rural Water and Westernport Water.
The remaining 14 water authorities will be audited in next year's report.