New Orleans will get to keep $2 billion it received from FEMA to repair streets, and water, sewer and drainage systems Hurricanes Katrina and Rita damaged.

The U.S. Department of Homeland Security’s Office of Inspector General last July recommended FEMA take back the money after a report claimed the damage was not eligible for federal disaster funding. The department, however, overruled that suggestion.

"I believe Acting Deputy Secretary (Claire) Grady made the right decision in directing the Office of the Inspector General to close the recommendations without additional action,” Mayor LaToya Cantrell said in a prepared statement. “I am glad to have the matter resolved."

The IG's report said “evidence shows that the infrastructure was old and in poor condition even before the hurricanes."

"Eligibility for FEMA funding requires that damages be the direct result of the declared disaster, and it is the applicant’s responsibility to show that the damages are disaster-related,” the report continued.

FEMA shot back at the time, saying there was no doubt the flooding that followed the storms caused the damage, saying it provided detailed documentation that the storms “significantly damaged” the city’s infrastructure and that repairs are eligible for federal funding.

FEMA first awarded the city and Sewerage & Water Board $785 million and later $1.25 billion.

That sum is the majority of the money the city and S&WB have on hand for a massive infrastructure-repair project with an ultimate price tag of $9 billion.

U.S. Red. Cedric Richmond (D-New Orleans) on Friday said the decision was the right one since the storms undoubtedly caused major damage to the city’s infrastructure.

“I said all along that the OIG’s conclusion was simply wrong,” Richmond said in a prepared statement. “I’m glad that the department agreed with what countless experts, local officials, and my colleagues in Congress knew instead of Monday-morning quarterbacks who showed up years after the disaster”

Danny Monteverde can be reached at