Available data on damage estimates were analyzed to determine whether disasters met the statewide financial criteria for recommending a disaster declaration and estimated how the use of other financial measures of State fiscal capacity would affect declaration recommendations. Applicable laws, regulations, and past reports by the General Accounting Office, FEMA’s Inspector General, and others were examined. Agency officials were interviewed to determine whether FEMA’s procedures ensured that projects met eligibility requirements. Relevant documentation and data from the agency’s National Emergency Management Information System (NEMIS) were reviewed. Results showed that the current criteria for approval of disaster declarations were not necessarily indicative of a State’s ability to pay for the damage because substantial differences in States’ financial capabilities to respond when disasters occurred were not considered. As a result, Federal funds may be provided when they are not needed. Problems that occur when determining individual projects’ eligibility are: (1) the staff who make eligibility decisions are temporary and may not have the skills and training needed to make appropriate decisions; (2) the review process does not ensure that all projects are reviewed by the most knowledgeable officials; and (3) FEMA lacks centralized, quantified information that would be useful for managing the Public Assistance program. Recommendations include developing criteria that more accurately reflect State and local governments’ capability to respond to a disaster; improving processes for reviewing proposed disaster projects to better ensure they meet eligibility requirements; and assigning a higher budget priority to implementing a credentialing and training program for Federal disaster staff. It is recommended that FEMA establish a plan to identify recurring problems and take appropriate actions. 2 figures, 27 footnotes, 3 appendices