This is a good question and relatively easy to explain using what has happened here in Louisiana.

I'm going to keep this very short and generic because the only way to calculate any potential harm you might cause or harm that may fall on your shoulders depends on your state and local municipal governments' long-term recovery assistance enforcement methods.

FEMA NFIP Flood insurance purchase requirement 44 CFR 206.110(k)(3)

The FEMA Federal Agency doesn't audit you. Your state and local municipal governments will do the audits if they are in the FEMA Community Assistance Program, which allows you to purchase NFIP insurance instead of being told to find your own private flood insurance.

FEMA conducts what we call a "Community Program Visit," which is actually an audit. It typically takes about 1 to 2 years on average, but in our case, FEMA took 5 years to audit our parish (county) and began with a sample audit that ended up as a full audit.

This is when your municipality starts sending out Notices of Violation (NOV) for everything they find, from not requesting permits to not paying your NFIP that you agreed to.

Here's the part you might be most interested in:

What are the Ramifications of My Actions for Not Paying into the NFIP Because I Can't Afford It at This Time?

Listing the Obvious:

• Loss of Future Federal Assistance: Without flood insurance, you may not qualify for future disaster aid.
• Increased Risk: You risk losing your home to future disasters if the damage cannot be mitigated, and your local municipality may determine your home is uninhabitable.
• Community Impact: Your failure to pay will lower your community's participation in the NFIP, which can penalize any possible discounts. (This is just a fact, not meant to imply guilt.)
• Legal Actions: Local government can take legal actions, which may include fees and penalties. These will stress your household but should not bankrupt you or place liens on your property.

Important Steps:

• Document Everything: Spend the grant funds on their intended purpose and document everything with date-time stamped pictures, receipts, estimates, canceled checks, credit card payment records, and bank records. Make sure to scan the front and back of everything.
• Organize Your Documents: Place all these documents in a box labeled "My NFIP Audit." Add your tax returns and create a spreadsheet called "Living on Percentages (xlsx)" to show your discretionary funds. This can help you plead hardship during the rebuilding phase of your disaster recovery.
• Understand the Burden: Many households are currently dealing with disaster debt burden, realizing their discretionary income didn't cover as much as they thought. Savings accounts are often locked post-disaster due to deductibles you will face.

On the upside, no jail time as of today.

If you spend the grant money incorrectly and your floodplain managers find out during an NFIP insurance audit, they will forward your case to your state's attorney general. If you didn't spend the money correctly and wisely, the attorney general will pursue a recapture lawsuit for the full amount of the grant plus interest and legal fees. Here in our great state, I reviewed hundreds of homeowners from 2005 who were found guilty because they received FEMA grants for elevation but applied the grants to repairs of the house. It's important to follow the letter. I believe FEMA will end up paying off their debts, as does HUD when it comes to Louisiana SBA loans, but that's another story.

So right now, focus on your repairs and getting your home back in order.

The fact that you can't pay shouldn't mean you go homeless, and FEMA acknowledges that as well. That's why FEMA will also allow you time to search for other means to pay for your NFIP policy.

In closing:

1. Keep all your receipts, take pictures, and document proof that you spent the FEMA IHP Home Repair Assistance Grant funds on structural components of your home as shown in the CFRs listed at the bottom of this article, which points out some items for you: FEMA Individual and Households Program IHP Grants explained Part 1 of 2 .
2. Document your hardship using HUD's method that FEMA accepts. Examples include hardship due to housing cost burden and hardship due to loss of employment or reduction in income. (Other types of financial hardship)
3. Use the hardship documentation to secure additional grants from HUD CDBG-DR to pay for at least 1 year of NFIP. Then it's up to you to budget the additional costs. FEMA has made changes this year to allow for monthly payments, though I don't know the details.
4. You will be applying for additional grants for the next 3 years, so there's no need to worry about the NFIP at this point. However, be aware that once your home has had its final inspection, your local floodplain managers will start looking, and those NOVs will start arriving.

I wish I could be more specific with your case details. If you are in a Special Flood Hazard Area (SFHA), also known as Flood Zone A, AO, AH, A1-30, AE, A99, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, VO, V1-30, VE, and V where it's a requirement enforced by your city or county. You can also look at grants that assist you with mitigation, which will reduce your debt burden for flood insurance. I elevated my home, and it cut my yearly cost by 50%, while my neighbors' costs went up by the same percentage for not doing anything. The New Risk Management 2.0 helps more, and this year (2024), the cost share for mitigation is 90/10 instead of 75/25.

Good luck, Ask Questions!