The Diamondhead Water and Sewer District (District), received a Federal Emergency Management Agency (FEMA) grant award of $49.3 million from the Mississippi Emergency Management Agency (Mississippi) for damage resulting from Hurricane Katrina in 2005. We had concerns because it took the District about 10 years to break ground on its new wastewater treatment plant. We also wanted to determine whether FEMA accurately applied its “50 Percent Rule.” we identified $1.5 million of improper procurement, unsupported costs, duplicate insurance benefits, and uncompleted project costs that FEMA should disallow to the District. These problems were largely the result of Mississippi not fulfilling its grantee responsibility to ensure the District properly managed FEMA funds. Mississippi is responsible for monitoring subgrant activities, and is compensated with Federal funds to support subgrant management and oversight. It is FEMA’s responsibility to hold Mississippi accountable for proper grant administration.