Bedford County in Tennessee narrowly escaped the devastating floods that pummeled its neighbors beginning in late April and led to a major disaster declaration by President Obama. But if the residents of Bedford had suffered a darker fate as a result of the catastrophe, trouble with corruption that surfaced in the county’s emergency management office two years ago raises questions about whether authorities would have been adequately prepared to save them.

A profile of Tennessee was among the dozens we compiled for an interactive map of the United States documenting the use and misuse of $30 billion in preparedness grants handed out by the federal government since Sept. 11, 2001. As we wrote of Tennessee, auditors found something other than a commitment to readiness and homeland security when they arrived at the offices of the Bedford County Emergency Management Agency during 2008.

Bank accounts showed a cash shortage of $117,000, and after sifting through financial records, according to a November 2008 report, investigators learned that more than two-dozen checks were used to cover a series of personal loans obtained by an agency deputy director named Eugene Nichols. He allegedly forged the agency chief’s signature on 13 of them. Auditors couldn’t determine the legitimacy of another $33,000 in payments signed to Nichols “for various reimbursements, overtime or payroll advances.”

There were also purportedly bogus invoices sent to the Tennessee Emergency Management Agency, which oversees the state’s use of federal anti-terrorism and preparedness grants, for the purchase of safety gear and services. The report didn’t say for certain how much money was involved, but county officials vowed in response that they would examine records to find out.

The report did, however, cite a $37,000 payment made to a computer company for surveillance cameras that were supposed to be mounted on towers, but the equipment was never received.

In response to the report, the county said its own employees were the ones to alert authorities when they became suspicious of Nichols, although officials conceded that the alleged misconduct “spanned approximately four years over the tenure of two BCEMA directors.” Investigators said a lack of oversight and internal controls led the misappropriation of funds. County leaders said that Bedford’s finance department had since been placed in charge of the emergency management agency and “a repeat of this finding should not recur.”

As for Nichols, a grand jury indicted him on multiple counts of theft and forgery in late 2008, and he pleaded guilty to embezzlement last year before being sentenced to nine years in prison.

Meanwhile, the state’s comptroller found separate issues with the Tennessee Emergency Management Agency in 2007, as we wrote in our profile of the state. A report concluded that money from one federal homeland security grant was not handed out based on which counties faced the most risk. The cash was instead distributed according to regional wish lists, and counties held only “informal discussions” with state officials about the funds rather than applying for them formally.

“There is little documented objectivity on record to support TEMA’s decisions or to suggest that the grant funds are being disbursed most effectively to meet the state’s emergency management goals and needs,” the report determined then.

The state answered by promising to establish an assessment tool that would enable it to rank counties based on risk and past performance. Watchdogs like the Government Accountability Office in Washington have long argued that risk evaluations and other factors are critical for determining how readiness grants should be awarded, because as the storms in Tennessee show, the potential for catastrophe and ability to respond vary from one area of the country to the next.

Elsewhere, the Department of Homeland Security’s inspector general released the report below last year after looking at how Memphis, which was included in the May 4 disaster declaration, handled federal storm assistance resulting from severe weather in 2003. Auditors questioned nearly $2 million from charges “that were ineligible and non-disaster related, excessive, covered by insurance, unsupported, and duplicative.”

IG audit of Memphis disaster spending

Flickr photos of recent flooding in Nashville by Eric Hamiter and Les DeFoor

G.W. Schulz is a reporter for Reveal, covering security, privacy, technology and criminal justice. Since joining The Center for Investigative Reporting in 2008, he's reported stories for NPR, KQED, Wired.com, The Dallas Morning News, the Chicago Tribune, the San Francisco Chronicle, Mother Jones and more. Prior to that, he wrote for the San Francisco Bay Guardian and was an early contributor to The Chauncey Bailey Project, which won a Tom Renner Award from Investigative Reporters and Editors in 2008. Schulz also has won awards from the California Newspaper Publishers Association and the Society of Professional Journalists’ Northern California Chapter. He graduated from the University of Kansas and is based in Austin, Texas.