This has been used for decades in the low tech wastewater treatment system known as waste stabilization ponds. They are common in Africa and there are also many in the Americas. I think China is about to become significant users too.
Search RG or Google for "facultative pond" or "waste stabilization pond".
Article RETRACTED ARTICLE: Comparison study on the efficiency of tre...
You might find this very recent paper useful: Microalgae-based agro-industrial wastewater treatment: a preliminary screening of biodegradability. Journal of Applied Phycology 2014, Volume 26, Issue 6, pp 2335-2345
Biological Oxygen Demand (BOD) is mainly because of contaminants rich in C, N, O which can be utilised by algae as a substrate for its growth which ultimately leads to the drop in BOD.
In the pond system the biological degradation of organic matter and algae growth occur in the same tanks and there is a synergy between the processes.
Algae photosynthesis produces a very high oxygen concentration in the water which increases the biodegration. We regularly measured >350% saturation equal to a partial pressure of >0.7 bar in a pond in Tanzania.
Mineralisation of the organic matter in turn provideshigh concentrations of ammonium, phosphate, iron and H2CO3/CO2 that are required for the algae to grow without nutrient limitation.