After the 2005 storm and the subsequent floods, Congress approved a $29 billion relief package that included $1 billion to the Louisiana Road Home Program, designated toward helping hurricane victims fortify and elevate their homes to protect against future floods.
The investigation found nearly 70 percent of the Louisiana Road Home program funds were unaccounted: 24,000 homeowners who accepted $30,000 grants were unable to show how the money had fixed their homes.
"We have $700 million that we can't account for and that certainly did not go to elevating homes and preventing future damage from storms," said David Montoya, the inspector general of the Department of Housing and Urban Development.
"There is fault all the way around," Montoya told ABC News.
"Clearly the homeowner accepting up to $30,000 to elevate their home is at fault for not using the money that it was intended for. Clearly the state's at fault for not doing a better job of due diligence if you will for ensuring that these homes were being elevated."
He said the likelihood of recovering the funds, however, was "slim, at best."
For its part, Louisiana officials said they are making the attempt at tracking down the missing money and encouraging the homeowners to use make the intended repairs.
Pat Forbes, who oversees disaster recovery for the state said 5,000 of the recipients have fixed their homes, and the state is "working aggressively with HUD to get the remaining 19,000 homeowners in compliance."
HUD said it has already implemented tighter regulations over the relief funding after Hurricane Sandy last year.