County Mismanagement Leads to Staggering FEMA Debt
Henderson County, Ill. failed to comply with all federal regulations during management of Public Assistance projects and is now faced with a staggering $471,791 debt to FEMA.
In 2008, Illinois was hit with historic flooding. One of the counties impacted–Henderson County, Ill.–received federal funding through the Public Assistance program.  However, a Department of Homeland Security audit in 2011 revealed that the county received $3.7 million in ineligible funds from FEMA due to its failure to comply with the federal laws and regulations in completing the work (not necessarily that the work itself was ineligible for funding).  The county was able appeal and reduce the debt significantly to $471,791; however, that is still a sizable debt for the County of approximately 7,000 residents and a $49,612 to repay.  In an effort to try and buy the county time, the County’s Board decided to deplete two emergency reserve funds, bringing the debt down to $316,791.
What is unclear is exactly why, but if the County does not pay the debt back by June 2017, the county faces the loss of several vital agencies such as the Health Department, Sheriff’s Office, and Transportation Services. What concerns the board is that after making this “good faith payment”, the county may not have the funds to respond to the next looming flood.
This case looks like a great example of a successful 1st Appeal–despite what it looks–reducing the County’s debt to FEMA 89%. The County is trying to use it’s elected representatives to find ways to further reduce the struggling community’s debt, find sources to pay the debt, and keep vital services open. What else could the County do? They could possibly work out a payment plan or do a 2nd Appeal to FEMA. A 2nd Appeal may or may not yield better results though. Additionally, counties can actually file for bankruptcy under Chapter 9 of the U.S. Bankruptcy code. If they do so, it would likely just be a reorganization of the debt, rather than a charge-off. 
No matter how this case pans out, it will be one to follow and watch the outcome of.
 Elizabeth Meyer, County Depletes Two Emergency Reserve Funds as Good-Faith Effort at Denting FEMA Debt, The Hawk Eye (Sept. 28, 2016). See generally Fed. Emergency Mgmt. Agency, Disaster Declarations for Illinois, (Sept. 29, 2016) https://www.fema.gov/disasters/grid/state-tribal-government/55?field_disaster_type_term_tid_1=All (Three major disaster declarations were declared in 2008 for Illinois for Severe Storms and Flooding: 1800 in Oct. 3, 2008; 1771 in Jun. 24, 2008; and 1747 in Mar. 7, 2008).
 Elizabeth Meyer, County Depletes Two Emergency Reserve Funds as Good-Faith Effort at Denting FEMA Debt, The Hawk Eye (Sept. 28, 2016).
 Henderson Cty., Henderson County EDC Demographics, (2008) http://www.hendersoncountyedc.com/About-Henderson/Demographics.
 See 11 USCA §901 et seq; U.S. Courts, Chapter 9 – Bankruptcy Basics, (2016), http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-9-bankruptcy-basics (noting that the definition of a municipality under Chapter 9 of the Bankruptcy code is broad enough to include a County Government).