Katrina's harsh lessons: sometimes there's more to a day's work than you can possibly imagine.

Those of us who lived through Hurricane Katrina's devastation in the Gulf states also experienced countless acts of kindness. We want to acknowledge that tremendous outpouring of support. We regret we don't have the space to recognize individually the thousands of stories of helpfulness and courage.

--Grady Hazel, executive director, Society of Louisiana CPAs

Like thousands of her former neighbors, CPA Geralyn Suhor, president of the New Orleans chapter of the Society of Louisiana CPAs, is a Hurricane Katrina refugee. The sole practitioner from the New Orleans suburb of Chalmette was lucky to be out of the state with her family when Katrina slammed into the Gulf Coast on August 29, 2005, submerging her home and office under nine feet of water. Among her losses were electronic backups of her business files.

Although she was able to retrieve some soggy papers from an auxiliary office in nearby St. Bernard, La., what she recovered was incomplete--and even that took weeks of photocopying to make usable. A colleague offered her workspace in Metairie, La., a western suburb of New Orleans, where Suhor remained when tax season rolled around.

KINDNESS OF STRANGERS

For many people, Hurricane Katrina means lingering images of disaster: unimaginable winds, flooding, death and destruction, stunned survivors huddled in overcrowded and undersupplied shelters. The numbers are horrific: more than 1,000 people dead, nearly 284,000 homes destroyed, 71,000 businesses shut down--some temporarily, some gone forever. On returning home a month after the storm, Suhor says, "Besides every bush or tree being dead, what struck me was that there was no sound--of birds or squirrels or any natural wildlife."

Fortunately, Suhor also has other, more hopeful memories: the fellow CPA who opened her closet and invited her to take any clothing she needed; the stranger who handed her sister a frozen turkey while the two of them inched along in a carpool line; the countless CPAs across the country who offered the use of their offices so Katrina refugees could begin rebuilding their practices. Still touched by those who stepped forward, Suhor says, "The storm opened the hearts of so many"

BASIC NEEDS CAME FIRST

That greatness of heart helps to explain, in part, how so many CPAs from communities hammered by Katrina have found the spirit to begin rebuilding. "Some folks are crawling into a hole and pulling the hole in after them," says CPA Jim Boyle, whose Mandeville, La., office escaped major damage but had no electrical power and other basic services for two weeks, "but others see this as the greatest opportunity they'll ever have."

Those CPAs who are rebuilding have new awareness of what a major catastrophe can do to their personal and professional lives and ideas for working through disasters in the future. They understand, in a visceral way the rest of us can only hope we'll never experience, that the top priorities following a disaster have little to do with business.

"In the first month, the last thing anybody was thinking about was their tax return," says CPA Jerry Levens, partner in charge of audit and attestation at Alexander, Van Loon, Sloan, Levens & Favre PLLC in hard-hit Gulfport, Miss. "It was, 'How am I going to get water and food? Where am I going to take a bath?' Those first weeks you're just grateful to be alive." "Our first contact with clients wasn't 'What do you need for your business?'" says CPA Angela Pannell, who fled to Starkville, Miss., after flooding wiped out her home and the CPA practice that had employed her for 21 years. "It was, 'Are you okay? Where are you now?'" Pannell is among those who chose not to resume life in the devastated area.

TRUE GRIT

Yet even as they tended to families, friends and colleagues dispersed by Katrina, many CPAs went to extraordinary lengths to get their practices up and running and to help clients start on the road to recovery. In Gulfport, Levens and his partners took turns sitting on a chair in the front doorway of their unusable office building in case any clients did show up. The dress code was "hurricane casual," Levens recalls, "a T-shirt, shorts and a baseball cap." Soon, employees joined them on the front porch in sweltering heat--punching numbers into handheld calculators hooked up to a generator, processing payrolls for businesses still able to meet them. For a restaurant client, Levens even had his son, who works in construction, retrieve a large safe from amid a pile of debris, deliver it to his front yard and unload it with a track hoe. There, a locksmith got the safe open, giving the client access to two days' worth of cash receipts.

In Pascagoula, Miss., CPA Ed Jones, who runs his own practice, talked his way into a hospital's cardiac care unit to visit a client who had just had open-heart surgery It was the only way he could get the client's permission to divulge personal information needed by the man's insurance adjustor. Meanwhile, to maintain contact with other clients during two weeks without office phones, Jones periodically drove 40 miles to Hammond, La., where he could pick up a sporadic cell phone signal. Back in Mandeville, Boyle found a big part of his job had become providing traumatized clients with a figurative shoulder to lean on.

With their cash flow disrupted, CPAs who were able to drew on reserves to pay employees in the weeks they couldn't work. CPA Lindsay Calub, partner of the New Orleans firm of Duplantier, Hrapmann, Hogan & Maher LLP, and chair of the Louisiana state society's Peer Review Committee, estimates his 50-person firm used half a million dollars in cash reserves to pay its people in the weeks immediately after the hurricane. The practice had been headquartered on the 20th floor of a downtown New Orleans office building that started to come back in November, but by then the firm already had relocated to a Baton Rouge space owned by a client.

Coping required many CPAs to put in extraordinarily long hours. Boyle, who used his firm's three-month cash reserve to pay his two employees through the crisis, commuted to Houston for a month to work for a friend's CPA firm and keep some cash flowing. "It was frustrating to leave my disabled child and pregnant wife," but it also was not the time to pressure his clients to pay bills, he explains. "I went to Houston twice a week, while my staff worked in the office once it was able to reopen. I kept in touch with them by e-mail during lunch hours and in the evenings."

Remarkably, some CPAs say they expect their practices to rebound fairly quickly, While some clients have gone out of business for good, others have come along, including companies needing help to apply for disaster-recovery loans from the Small Business Administration and newly formed building and recovery enterprises. But many CPAs face daunting challenges. Most of Suhor's two dozen or so business clients survived, and she's back in touch with about 75 of her 100 individual tax clients. They were mainly from hard-hit St. Bernard Parish east of New Orleans, where there isn't a house that's livable. Many of them found her after she made signs with her name and Web address and displayed them on consenting clients' lawns.

ESSENTIALS: DATA, COMMUNICATION AND COVERAGE

The Katrina survivors have new insights into what it means to prepare for a worst-case scenario. Suhor strongly urges CPAs to develop preparedness and recovery plans in conjunction with their clients, particularly for data protection (see "Every Business Needs a Plan," page 55). "Now we have to decide whether to use Internet storage or to exchange and store backup information with another CPA firm in a location that is much farther away," she says. "Clients who run small businesses out of their homes or have rental properties need copies of their records. They have to think hard about a truly safe place to store them."

Levens stresses communications in the recovery process (see "Survivors and Rescuers Offer Tips," page 59). Even though his firm had a complete list of emergency phone numbers, after Katrina it was days before he was able to reach any employees by telephone, and phone service for his office was not restored until November. Levens and his four partners are considering setting up a third-party answering service in a remote location, and then advertising that phone number to clients and employees at the beginning of each hurricane season.

Besides fallback communications capability, Levens says CPAs and their clients should review their insurance policies to understand precisely what is and isn't covered and to plug any important gaps. His office got only about six inches of water, for example, but it was unusable for seven weeks. Flooding and resulting mildew necessitated replacing everything in the building within four feet of the floor, including walls and wiring. Because it was not in a flood zone, he didn't have flood insurance. Boyle, too, says a comprehensive and well-thought-out insurance program is key "It's tough to fight a claim with an insurance company," he concedes, "but it's even tougher to sit around and wait for the government to do something."

TIED IN KNOTS

The early response of both the federal and state governments to Hurricane Katrina has been widely reported and sharply criticized. Suhor credits the National Flood Insurance Program, run by the Federal Emergency Management Agency, with paying some claims quickly But even though Congress let FEMA borrow to pay for hurricane-related claims, delays have frustrated recovery.

Many CPAs remain critical of the SBA, which has been slow to process loans aimed at helping homeowners and small businesses recover. As of November 15 the agency said it had approved only 1,078 small-business loans for property damage or economic losses across the Gulf Coast, while denying 1,945 applications. The agency said 24,268 business-related loan applications were still being processed, equal to about a four-month backlog at the then-current pace. "SBA lending is like UFOs," remarks Boyle. "Many believe in it, but most of us have not seen any."

Months later, the agency has made some headway. As of March 29, an SBA spokeswoman said it had approved 17,136 disaster loans for businesses totaling $1.6 billion. It had denied 17,942 loan requests and was still processing 6,599. In addition, it had approved more than 84,600 loans for homeowners and renters totaling $5.4 billion, putting its total loan approvals just over $7 billion. The previous largest disaster in SBA history was the 1994 Northridge Earthquake 20 miles northwest of Los Angeles, which triggered slightly more than $4 billion in SBA loans.

CPAs laud the efforts of their profession, including the AICPA, local chapters and state CPA societies, which listed job openings and assistance programs on their Web sites and otherwise helped to disseminate useful information. The Louisiana state society held seminars around the state for CPAs, businesses and the general public on insurance, tax issues and recovery procedures. Representatives from the Internal Revenue Service and the Louisiana Department of Revenue participated. The New Orleans chapter of the Louisiana state society held a four-hour seminar for CPAs in December on the Katrina Emergency Tax Relief Act of 2005, which pushed back tax-filing deadlines for those affected and removed deductibility limits on their personal casualty and theft losses (for more information on the act's provisions, see "Surviving Katrina," JofA, Feb.06, page 58).

Levens's firm flew in a tax trainer from Georgia to educate staff on IRS rules for reporting casualty losses. "He was so touched by what had happened he refused to charge us one penny and asked us to give the fee to our employees who lost everything," says Levens.

For practitioners whose communities were torn apart and whose personal and professional lives were disrupted by Hurricane Katrina, that sort of compassion has made it somewhat easier to undertake the extraordinary work of recovering from what is generally acknowledged to have been the most destructive and costly natural disaster in U.S. history.

Every Business Needs a Plan

Whatever the size of your firm or company, your organization needs a business continuity/disaster recovery plan to prepare for the possibility of a natural or manmade calamity. The goal of a plan is to ensure the life of the business if all or part of its offices and data systems become unusable. It provides for an orderly recovery by instructing survivors in how to keep operational under highly abnormal conditions. Documented, it is a road map of procedures for replacing or working around any or every part of a system (people, tools, buildings) that may be lost.

Developing a comprehensive continuity/recovery plan involves more than off-site storage or backup processing, although these are important (see "Before the Deluge--and After," JofA, Apr.03, page 57). It requires management to analyze in intimate detail what a firm or company's people do individually and interactively, the tools they use, the support systems they rely on and--for firms--the client-liaison process. Making a plan that identifies, documents and tests all the critical operations and functions of the business is a costly and time-consuming exercise, so management must be committed.

The basic continuity/recovery process. To start, designate a disaster-planning champion to develop a plan in-house if your firm is small, or hire a consultant for a large one. The coordinator or consultant will document the major steps your employees follow when fulfilling the firm's engagements. Use a standard format to gather information by niche. It helps if you put the same kind of data in the same order.

Divide responsibilities for one or more functional areas of the organization among your recovery team. Cover administrative functions, facilities, logistics, user support, computer backup, restoration and other important areas. Each area needs an assigned manager and a backup alternate. Everyone gets a job to do in a recovery situation. Management will make the final decisions in setting priorities, policies and procedures, but contingency roles may differ from everyday hierarchy. Fortunately for small firms, brainstorming to create disaster scenarios, assess recovery needs and work out solutions can be as useful as a final written document.

Run through your plan once a year or more to make sure that in a crisis you will be able to locate your staff, obtain equipment and support, access client and operational data from system backups and put people to work in an alternate location (see "The Best-Laid Plans," JofA, May04, page 46). Check that leases and contracts for backup facilities and suppliers are in order and that your contingency plans are compatible with your outside technology services providers'. Use simulations as well as checklists. "Businesses that held practice sessions to prepare for hurricane season last year got their operations going again more quickly than those that didn't," says Mark Vanston, director of business continuity solutions at Hewlett-Packard.

Bill VanSchalkwyk of the Massachusetts Institute of Technology recommends businesses also make sure they have access to what would be needed to live without help for a week. "Look at supply chains," he says. "In a post-Katrina world, it makes sense to plan to be self-reliant for up to seven days."

Having a comprehensive continuity/recovery plan will help minimize disruption, economic loss and legal liability, and it will streamline decision making during a crisis. Like liability insurance, it provides a level of assurance that if a major catastrophe occurs it will not destroy the firm.

Detailed information on developing continuity/ recovery plans is available from many publications, Internet resources and organizations. Here are a few:

* AICPA Hurricane Katrina relief information as well other recovery help, www.aicpa.org/news/2005/disaster_recovery_resources.htm.

* Disaster Recovery Journal, downloadable guides for making a plan and implementing recovery, www.drj.com.

* Downloadable checklists from FEMA, www.fema.gov/areyouready.

* Downloadable guidance for many types of business disruption, www.lojine.com/downloads/Unexpected_Shutdown_eBook.pdf.

* Recovery publications to purchase, www.lojine.com/downloads/Unexpected_Shutdown_eBook.pdf.

* Recovery planning guides to purchase, http://www.disaster-survival.com/tc-brp.html.

--Michael Hayes

Business Recovery Procedures

A company or firm that has a continuity plan is better positioned to deal with a catastrophe than one that doesn't. All businesses will need to organize quickly.

In the damage assessment phase, line up help.

* Contact the local emergency operations center to register a claim for relief.

* Contact your property/casualty and E&O insurer(s). Review the policy, talk with a representative about the loss and discuss business interruption coverage for loss of income as well as reimbursement for expenses such as temporary office space and equipment. Obtain guidance about how to avoid malpractice liability if the firm will miss client deadlines.

* Assess damage to determine what, if anything, is salvageable and how long recovery efforts will take.

Communicate with everyone important to the business.

* Inform all firm members of the status of the situation and establish interim communication procedures (telephone trees, emergency information hot line) until office space is acquired and everyone can get under one roof again.

* Let vendors know where the temporary location is.

* Advise the post office and other delivery services to stop shipments to the damaged location and reroute services to the temporary site.

* Contact banks for replacement checks.

* Stay in touch with the payroll service as necessary.

Contact the phone company to reinstate telephone service.

* Arrange for an answering service with an appropriate message until the new system is in place.

* Arrange for temporary service at the interim location for phones, fax, modem and Internet use.

* Have phone calls forwarded to the new number.

* Get cell phones for those people who don't have them.

Obtain work space, furnishings and equipment for staff.

* Identify some alternative work locations.

* Call local realtors to find office space.

* Arrange for temporary space--share with other firms, law firms or rent a hotel suite.

* Rent, borrow or purchase desks, chairs, lamps, filing cabinets and bookshelves.

* Obtain operating systems. Equipment needed may include computers, computer networks, printers, fax machines, copiers, word processors and calculators. (Check whether staff members' laptops and home computers can be used for the business during recovery.)

Contact equipment vendors.

* Discuss existing leases, contracts and performance obligations under the terms of lease or contract.

* Get a vendor to assist with the recovery of computer hardware and peripherals.

Obtain office supplies.

* Contact the supply vendor to obtain necessary supplies.

* Hire a printer to print stationery and business cards.

* Obtain billing and other forms from a forms vendor.

Recover records.

Begin assessing damage once the workplace is accessible. If fire was involved, make sure all file cabinets or other containers are cold to the touch. Flash fires may occur upon opening a warm cabinet. If water damage is the problem, obtain the following supplies:

* Freezer or waxed paper.

* New boxes, file pockets and folders.

* Plastic milk containers.

* Refrigerated facilities or trucks.

* Plastic garbage cans or pails.

* Sawhorses, plywood and plastic sheeting to wrap wet records for removal.

* Fans and dehumidifiers; pumps, if necessary.

* Mops, buckets, sponges and rubber gloves.

* Irons, plastic clips and clothesline or nylon fish line (to use in drying a small volume of records).

Assess damaged property and documents.

Assign priority to damaged documents. Separate records that are of critical importance from those that can wait. Protect the most critical documents from further damage with waxed paper as you organize them to be restored. If documents are waterlogged, you can freeze them and have a commercial restorer salvage them. Freezing will preserve paper documents up to six years. If backup records are available, then the originals are not necessary.

Identify the documents' physical status with colored tape or markers:

* Black--beyond hope and cannot be recovered.

* Red--to be recovered first, of the greatest importance.

* Yellow--to be frozen and recovered only when needed. Long-term storage is possible.

* Green--not damaged and can be used immediately.

Document all losses.

Destruction of items should be documented for legal and insurance purposes. Use a disposal certificate to indicate what is beyond recovery and why. It should describe what was destroyed, how it was destroyed and how it was pertinent to a client (if so), and it should be signed and dated.

Techniques to recover water-damaged documents.

* Separate sheets of paper by hanging them on a clothes-line or interleaving them with absorbent paper. Dry individual sheets by ironing them using low heat.

* Protect a damaged document with clear Mylar as you photocopy it. Discard the original and use the photocopy.

* Create new file folders, pockets or boxes to organize all of the documents as you restore them.

* Pack wet documents for freeze-drying into cut-off plastic milk containers. Stand them upright and pack two-thirds full.

Techniques to recover fire-damaged documents.

Look at charred records that are not wet to see if they are completely obliterated or just have burned edges. If the information is recoverable, photocopy the document. Handle the records as little as possible.

Source: Tennessee Bar Association with the Association of Contingency Planners at www.acp-international.com.

Survivors and Rescuers Offer Tips

Planning to rebound from a catastrophe involves making plenty of big decisions, from where you'll stay during a crisis to how you'll fund rebuilding or relocating your home and/or business. CPAs who experienced different sides of Hurricane Katrina have a few suggestions.

Little things can mean a lot. Professors Joyce C. Lambert and S. J. Lambert III of the University of New Orleans--CPAs and also husband and wife--discovered certain lifestyle choices had unexpected utility when Katrina left their home under nine feet of water. To position yourself to recover, they say, take these steps:

* Establish online accounts at a bank with locations outside your city and state.

* Attach a wireless Internet card to your computer, and keep the computer with you.

* Learn how to send and receive text messages with your cell phone. When phone lines were busy in the New Orleans area, text messages often got through (for more information, see "Small Firm Technology Tips," JofA, May06, page 43).

* Carry your passport and a copy of your business license with you. After Katrina, business owners were allowed back into New Orleans earlier than residents.

Relief teams must prepare, too. While some CPAs lived through Hurricane Katrina, others lived through its relief efforts.

Lena Ellis, CPA, is assistant finance director for the city of San Antonio, Tex., which set up four large shelters for Katrina evacuees--two unused buildings at Kelly Air Force Base, a dormant manufacturing plant and a near-empty shopping mall--each holding anywhere from 1,500 to 5.000 people. She remembers vividly the desperate expressions of the people in the shelters. "They came here without anything, and their faces showed their hopelessness," she says.

Supply chains are key. Ellis was part of the city's purchasing and finance team that ordered emergency supplies such as food, cots and large air conditioners for the shelters. During the relief effort the team also contracted for the construction of bathrooms and the provision of health care services. Agencies such as the Red Cross and the Salvation Army "used us to put their orders through," she says. At press time, the city had spent about $34 million on the relief effort, excluding labor costs--most of it for temporary housing.

Ellis says local governments can do more to prepare. She suggests that communities

* Develop disaster aid plans and test them; choose a team and meet regularly.

* Set up contingency agreements in advance with vendors and builders whose goods and services will be needed in an emergency.

* Have standardized, prenumbered requisition forms on hand to make it easier to keep track of the goods and services purchased specifically for a disaster-relief effort. That will make it easier to avoid duplicate orders and to receive reimbursement from government agencies.

* Make provisions in the internal accounting system for keeping track of such purchases.

* Take the time to learn what the Federal Emergency Management Agency and other government entities will and won't reimburse. For example, once San Antonio had purchased all the temporary bathrooms it could find, it constructed some that could have been deemed permanent--and FEMA won't reimburse local governments for permanent improvements. "A city is not supposed to be better off once the relief effort is over," Ellis says. "It's important to understand the rules and regulations and plan accordingly."

Randy Myers is a financial writer and contributing editor for CFO, Corporate Board Member and Plan Sponsor magazines. The International Federation of Accountants in 2004 chose his Journal of Accountancy article "Ensuring Ethical Effectiveness" for an Articles of Merit Award. Myers lives in Dover, Pa.; his e-mail address is [e-mail].

When Will
New Orleans Get
Back to Normal?

Three to five years   26%
Never                 43%

Source: Poll of 804 New Orleans
residents, USA Today, February 2006.