The City of Tuscaloosa, Alabama (City) received a $40.4 million grant, of which insurance covered all but $10.1 million. The Public Assistance grant was for damages from severe storms, tornadoes, straight-line winds, and flooding that occurred in April and May 2011. We audited $4.2 million of the $10.1 million net amount awarded. The City did not always account for and expend Federal Emergency Management Agency (FEMA) funds according to Federal regulations and FEMA guidelines. These issues occurred primarily because the grantee (Alabama) did not ensure that the City understood and complied with Federal procurement requirements and the process for applying actual insurance proceeds to reduce eligible costs.