Yes, it is called reclaimed wastewater, though its use is limited. Before you start to feel ill, no, it is not used further down the line as drinking water. It is most often used for irrigation and for water parks and golf courses.
First let's talk about what E. coli is. It is a type of bacteria commonly found in the intestines of animals and humans. The presence of E. coli in water is a strong indication of recent sewage or animal waste contamination.