TORONTO - Ontario's drinking water is among the safest in the world despite a small number of municipalities and facilities such as schools, daycares and hospitals returning positive results for the deadly E. coli bacteria, chief drinking-water inspector Jim Smith said Thursday.

Smith's second annual report on Ontario's drinking water found that more than 99 per cent of water-quality tests passed safety standards between April 1, 2005 and March 31, 2006.

Still, there were still 64 tests that came back positive for E. coli and a total of about 2,300 exceedances of standards.

"The drinking water supplied by municipalities in this province is among the safest in the world, but fostering continuous improvement can make it even safer,'' Smith said.

Although the number of problems remain too high for his liking, Smith said Ontario has a safety net in place to respond to any water-quality issues before they result in safety concerns.

"You do get issues that occur, but we have very comprehensive testing. We have notification requirements that are immediate and corrective actions that are immediate,'' he said.

Twenty-three, or three per cent, of municipal drinking water systems reported E. coli levels that exceeded provincial standards in 30 samples, states the report which adds, "the effective response to E. coli exceedances demonstrates that the safety net is working.''

Overall, about 99.84 per cent of tests of residential water came back clean.

Fourteen out of the 1,279 water systems at so-called designated facilities like schools, daycares and hospitals also reported E. coli test results that exceeded standards.

Still, 99.42 per cent of the water quality tests conducted at designated facilities met provincial standards.

In May 2000, seven people died and thousands fell ill when the southern Ontario town of Walkerton's water supply became contaminated with E. coli. Water-quality issues have been at the forefront on Ontario's environmental agenda since.

Thursday's report also found that nine out of 10 municipalities rated 90 per cent or higher in meeting 130 regulatory standards, while about a third were 100 per cent compliant.

Convictions for water offences doubled from the previous year up to 35, and fines of $296,400 were meted out.

The report also identifies 10 areas where residential water systems could be improved, including problems with improperly installed equipment, non-compliance with orders, and refusals to meet monitoring requirements set out by legislation.

The non-compliance rates ranged from four per cent to 13 per cent across the province.

Smith said it's not likely the next report will come back with perfect scores although he's hoping for steady improvement in the next few years.

"Obliviously, I'd like to say we'll get 100 per cent but I think it will be a climb,'' he said. "I'm confident, I believe there can be continuous improvement, there's more that can be done.''

Two weeks ago, Ontario announced it was making schools, daycares and municipalities regularly test their drinking water after almost half of the 36 communities tested for lead revealed elevated levels.

Smith said he wasn't alarmed by those results.