FEMA's Progress in Clarifying its "50 Percent Rule" for the Public Assistance Grant Program

Applying FEMA’s 50 percent repair or replace rule correctly can be very difficult and susceptible to error, misinterpretation, and manipulation. Our audit results have demonstrated that millions of dollars are at risk from incorrect 50 percent repair or replace rule decisions. In fiscal years 2012 and 2013, we recommended FEMA disallow over $100 million of costs that resulted from questionable 50 percent repair or replace decisions in five audits. In those audits, FEMA made the replace decisions based on collective 50 Percent Rule estimates of $31 million for repairs and $50 million for replacements (based on FEMA’s application of its policy). Due to various problems we identified, we ultimately recommended that FEMA should have paid $226 million to repair facilities, instead of $327 million to replace them. In our discussions with FEMA officials, they acknowledged the difficulties involved in reversing replacement decisions after they had communicated those decisions to grant recipients.