Accountants who lived and worked in the path of Hurricane Katrina are relocating, rebuilding and, very slowly, recovering from the unprecedented devastation that changed hundreds of thousands of lives last month."I used to work in New Orleans," said Mark Harris, CPA and secretary of the State Board of CPAs of Louisiana. "Somebody would say, 'Hey, there is a hurricane in the Gulf,' and we'd say, 'Is this supposed to be the Big One?' They'd say, 'No, it's only a Class 1 or 2' ... and we'd go right back about our business."
"But we always knew there was going to be something that was potentially another Camille [previously the worst storm ever to hit the mainland, it struck the Gulf Coast in August 1969]," he said. "We always knew there'd be a Big One."
Just how many accountants have been uprooted from their offices in New Orleans was unclear at presstime. Areas in Mississippi and Alabama and other parts of Louisiana suffered severe damage as well, but it's New Orleans, and particularly the Orleans Parish, that was decimated by the double whammy of Katrina and the flooding from nearby Lake Pontchartrain when the levees collapsed.
Harris estimated that as many as 2,500 CPAs operate out of the New Orleans area.
"If your office was in the Orleans Parish of New Orleans, you can't even go into the city - you can't go get your stuff, your records. Your clients probably aren't there either," said Grady Hazel, executive director of the Society of Louisiana CPAs. "If you were a firm operating in Jefferson Parish, you can go in and get your stuff, but from what we know, after that you aren't going to be able to go back for at least two months."
In addition to the SLCPA, the aftermath of Katrina has prompted an outpouring of support from the Internal Revenue Service, the American Institute of CPAs, and various local and global firms, as well as the National Association of State Boards of Accountancy and the various state boards.
"We have a staff task force developing support for CPAs, their clients and employees," said Barry Melancon, president and chief executive of the AICPA (and a Houma, La., native). "Firms will be hit hard. Very hard. Their staffs have lost homes. The firm's clients are out of business for months, no cash flow, etc. We are working on helping getting some staff temporarily assigned at other firms in the country."
The SLCPA has set up a temporary office in Gonzales, La., about two-thirds of the way from New Orleans to Baton Rouge. "We have a CPA who is letting us use some vacant space," said Hazel. The SLCPA Web site was knocked out in the storm, as were most of the communications for the area, but little by little, telephone, cell phone and Internet communications are coming back.
Both Harris and Hazel indicated that there has been a tremendous response from people and firms offering jobs, office space, temporary housing and help with relocation to displaced CPAs. "I've spoken with people from all over the country," said Harris. The state board plans to place a link on their Web site for all of the employment offers that the board is fielding. For example, Harris was contacted by a CPA firm in Maryland that has been preparing to add to its staff. "They said, 'We're not going to hire anyone except someone who's been displaced.'"
Meanwhile, NASBA and various state boards are coordinating an effort to collect stockpiled NASBA tote bags, fill them with some necessities, and give them to evacuees in Lafayette and Baton Rouge shelters.
The Louisiana state board has expedited some Internet features that had been in the works before Katrina, including electronic CPE tracking and telecommuting capability for staff. And CPA Exam candidates can now access their grades over the Internet. Also, those candidates who were scheduled to take the exam on August 31 have received an automatic extension.
In addition, Harris explained that Louisiana coincidentally was one of the pilot states in the formation of a national accountants' licensing database put together by NASBA. The database will provide Internet access to information about disciplinary actions taken against prospective licensees from other states - useful for employers who are considering hiring out-of-state accountants. NASBA is attempting to make Louisiana's information available as quickly as possible.
Putting it back together
The top priority for firms that have been forced to relocate is finding personnel. With communication systems malfunctioning, that is problematic, particularly for firms that were completely uprooted with all of their employees in evacuation areas.
Hugh Parker, executive partner at Jackson, Miss.-based Horne LLP, happily reported that all of his firm's employees are accounted for. The firm has offices throughout Mississippi, and in Mobile, Ala., and New Orleans. Only the New Orleans office is closed. "Our people are coming back to work as their personal situations allow."
Horne is trying to contact clients to see what help can be offered. "We are working in a number of ways to help them secure the financial part of their businesses," said Parker. He mentioned that firm members from all around the country are pitching in, helping storm-affected clients meet deadlines and assisting with business interruption claims.
Bill Potter, managing director of Postlethwaite & Netterville, the largest Louisiana-based accounting and business advisory firm, said that the firm has offered storm-affected employees $2,500 in interest-free loans to help with essential needs such as clothing and housing. The firm's HR people have been helping uprooted members find new housing. "Housing is difficult," Potter said. "Some of our employees have taken fellow employees into their houses."
The firm is also reaching out to others. "We've tried to talk to other CPAs to see if we can help them." The firm rented two trucks (and hired three armed guards) to go into its offices in ravaged areas and clear out equipment and files. As long as they still have the trucks, they plan to put them to good use. "I took one of the trucks yesterday, we loaded 500 cases of water, and took it to my home town," said Potter.
Big Four firm KPMG is using its Disaster Relief Fund to help displaced employees. One New Orleans administrative employee reports that she has received money, transportation to join her family out of state, and help with finding housing and, if she elects, another job (though she has been told she still has a job with KPMG).
PricewaterhouseCoopers has a firm crisis team in place, providing help with travel assistance, hotels and other needs.
Deloitte's Jerry Bennett, regional manager of public relations in Dallas, said that the firm has made arrangements for evacuated employees to relocate to any city where there's a Deloitte office. "Most of them are choosing to go to Houston," said Bennett. "Many of our New Orleans clients are relocating to Houston, so that makes sense."
"We are almost going to reconstruct the New Orleans practice in our Houston office," he added. "We've located housing - we're actually going to settle within one apartment complex; we're arranging for cars; getting furniture - all of the apartments will be fully furnished; arranging for kids to enroll in schools. Our people in Houston are making sure they have clothing, toys for the kids, basic food in the apartments." Soon after the arrival of the New Orleans residents, the Houston office hosted a welcoming reception.
The firm is confident its data is secure. "We have captured electronically all of our files and have reconstructed our voice-mail system," said Bennett. Electronic file systems and off-site back-up systems might be one of the major beneficiaries of the Katrina disaster.
Dealing with disasters is getting to be a way-too-familiar process with Deloitte - the firm endured both World Trade Center attacks, and the New York City blackout. "Based on the experience we had at 9/11, we tend to have information on where our people are at all times. They understand if there's been an emergency to call 1-800-DELOITTE; someone there answers the phone at all times," said Bennett.
IRS eases requirements
Just as they did in the aftermath of the 9/11 terrorist attacks four years ago, the IRS has announced a smorgasbord of tax law easements to help those who are affected by Katrina. Here's a sample of the measures in place:
* The due date for tax returns that are due in September and October, including estimated tax payments and tax returns currently on extension, is extended to October 31 for hurricane victims. Taxpayers wishing to take advantage of the extended due date should write "Hurricane Katrina" in red across the top of their returns.
* The due date for federal employment and excise tax deposits due prior to September 23 is now September 23.
* The tax credit regulations that require owners of low-income housing to rent only to low-income people have been waived nationwide, thus making more housing available for displaced storm victims.
* New organizations that are forming to provide aid and relief for Katrina victims can expect expedited processing of their not-for-profit status applications.
* The cost of acquiring copies of back tax returns has been waived for those who are affected by Katrina.
* The deadline for certain employee benefit plan contributions in the affected areas that are due between Aug. 29, 2005, and Oct. 30, 2005, is extended to Oct. 31, 2005.
* The tax penalty on sales of dyed diesel fuel is waived effective August 25 in Florida, August 30 in Alabama, Louisiana and Mississippi, and August 31 throughout the rest of the country. It will remain in effect until September 15.
* Taxpayers residing in the areas declared by the president to be disaster areas and who receive grants from nonprofit organizations or employers to cover medical, transportation or temporary housing expenses do not have to report the value of this grant money in gross income on their tax returns.
The IRS isn't the only agency extending deadlines. Hazel said that he has been paving the way for extension on government audits. Many accountants "were in the middle of audits," he said. Hazel spoke with the legislative auditors, who assured him that they were in the process of meeting with people from the Federal Emergency Management Agency and other government officials and would arrange to extend deadlines on government audits.
Accountants working with taxpayers in the affected areas have the opportunity to help taxpayers file amended income tax returns to take advantage of a facet of the tax law that allows people in federally declared disaster areas to claim a casualty loss on their tax return in the year in which the loss occurred. Since most people have already filed their 2004 returns, this means that those who want to take advantage of this facet of the tax law will need to amend their tax returns.
However, as Tom Ochsenschlager, vice president of taxation for the AICPA, pointed out, "in some cases they might not want to file an amended return." He made the point that the federal casualty loss amount is determined in part by the amount of adjusted gross income on the return. "If you have a year when your income is substantially lower, as it might be in 2005, you're better off claiming the loss in the year when you have the lower income." Also, taxpayers must be able to itemize their deductions in order to take advantage of the casualty loss.
Ochsenschlager noted that, in many cases, displaced people filing amended tax returns might have to use the address of a relative outside the affected area, or he suggested that accountants use their office address as the "in care of" address for refund requests.
H&R Block announced its willingness to provide free preparation and filing of amended 2004 tax returns that claim weather- and theft-related losses as a result of Katrina. The service is offered nationwide at all H&R Block offices. So far there are no plans to call in the seasonal reinforcements that the firm uses during the spring tax season. "We think that our full-time year-round associates will be able to handle the demand, although calling people in early remains an option for us, especially in markets where they've seen an influx of evacuees," said Tom Linafelt, communications manager for H&R Block.
Block gained plenty of experience helping hurricane victims in Florida last year. "Our experience in Florida last year may be indicative that people take some time to settle in before considering their tax and financial situation," said Linafelt, "although while they're surveying their losses or assessing their damages for insurance purposes, it makes sense that they would also be taking care of whatever tax benefits they can claim."
Joint AICPA/IRS effort
The American Institute of CPAs is working with the IRS and will coordinate state CPA societies to offer volunteer assistance. "Our volunteers are partnering with the IRS and will be set up in Federal Emergency Management Agency centers, helping the victims prepare those returns, document losses, helping with financial advice and insurance recoveries, things of that nature," said Ochsenschlager. "In order to get into those areas, we have to work with the IRS, and the IRS is working with FEMA. We have to work under the auspices of the IRS because they have the connections as a central government agency to request space in FEMA centers."
The AICPA is setting up a Web site and an 800-number where people can call for assistance and information. Also, AICPA members will help man the telephones at FEMA centers to answer financial questions.
"We're asking CPAs to volunteer to help out wherever these people are located," said Ochsenschlager. However, "at this point in time, FEMA is telling the IRS (and us, indirectly), 'Don't come down right now, you're likely to get diseases, we don't have enough food for people.'" He estimated the program would be in full operation by mid- to late-September.
Meanwhile, an outpouring of support is coming from CPAs all over the country:
* Ernst & Young has established a Katrina Disaster Relief Fund, wherein the firm has promised to match donations by firm members and plans on donating a total of at least $1 million toward the relief effort.
* KPMG has announced plans to make a donation to the American Red Cross.
* RSM McGladrey is offering a match for employee contributions to the American Red Cross and another charity up to a total of $50,000.
* The Moss Adams LLP Foundation is donating $50,000, plus an additional $50,000 in a matching program for various relief efforts.
Those who live near the coast and who have seen the damage from Katrina have a difficult time putting their emotions into words. "A number of people from our area have volunteered and gone down and been there and come back out; they say it's simply indescribable," said Horne LLP's Parker.
Said the SLCPA's Hazel, "It's just overwhelming."
