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The National Finance Center and

Hurricane Katrina

John White, Deputy Director

June 2006

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USDA, Office of the Chief Financial Officer

Chief Financial Officer’s View - USDA Characteristics:

- 110,000 employees @ 14,000 offices and field locations- 300+ national programs - $77B in annual spending- $128B in assets- $100B in loans

Program Management Responsibility Includes:- Financial leadership across the enterprise; roughly

equivalent in size to 6th largest private sector firm in U.S.- Financial policy and planning- Financial systems and operations- Government-wide service delivery through the National

Finance Center (NFC)

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Scope of USDA CFO Operations inNew Orleans (co-located)

National Finance Center (NFC)- Government-wide payroll/personnel for 585,000 employees- Government-wide Human Resource services- Government-wide Health Benefits Programs- Disbursements and Collections- Data Center Services- At time of Katrina, over 1300 employees

CFO Controller Operations Division- Provides financial services to USDA agencies, including administrative payments

(2.5 million annually), interagency payments, reconciliations, and vendor file- Assembles USDA financial reports, including FACTS I & II, and annual consolidated

financial statements- At time of Katrina, almost 300 employees

CFO Financial Systems Division- Operates the corporate consolidated financial system for all USDA agencies- Operates administrative systems, such as travel and property, for all USDA agencies- Creates and reconciles data extracts for consolidated audit and financial statements- At time of Katrina, over 70 employees

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Prolog: Accountability – Guiding Principles

Embrace that you are in charge and responsible for your organization, its finances, and people.

Be prepared to go it alone, do what is necessary to get the job done and care for your staff. In a major situation, there may be no one else to consult about how to proceed.

Never forget that during a crisis, people demand leadership, decisions must be made--often in a vacuum, stick to the plan but be flexible.

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Preface: Risk Management – Guiding Actions

Managing to deliver the expected business results by considering risks in doing what we do.

Focusing on most significant risks associated with the nature of the business:- Economic – controls & testing based on what is at stake- Operational – environmental, internal, natural, compliance,

technical, organizational, and human risks

Keys to successful risk management:- Understand the risk profile of the business- Leadership sets the tone- Integrate risk management into day-to-day practices and

decisions- Evaluate on clarity, transparency, integrity, & performance

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Preface: Business ContinuityApproach – Prepare!

Business Impact Assessment Disaster Recovery Plan Business Continuity Plan Uninterruptible Power Supply Emergency Power Supply Two annual NFC drills USDA and Government wide drills Three historical near misses

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Hurricane Katrina

Activated DR on Friday

evening Deployed Advanced Teams

on Saturday morning Completed payroll late

Saturday evening Shutdown data center and

facility early Sunday Made disaster declaration

Sunday evening Began implementation of

COOP on Monday

Initial Timeline:

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COOP Concept

Subscription service for

data center, workstations, and bulk print and mail

Philadelphia site used for data center and 101 data center staff seats

Grand Prairie site used for 150 business operations seats

Plans all geared to loss of New Orleans facilities

Concept of operations:

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Realities of Katrina

Implications were larger

than anyone imagined This would be a long-term

situation Immediate focus was:

- Service to the customers- Accountability and

caring for employees- Fiscal accountability

Balance delivery and personal needs

Initial reactions:

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Oversight Priorities

Incorporating local efforts

into Departmental and Government-wide efforts

Keeping long-term, big picture in focus

Finding ways to add value while allowing those on the line to keep things moving: - Policies- Resources- Contracting- Financial- Liaison - Monitoring and Reporting

View from the top:

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Locating and Deploying Staff

Local telecommunications

infrastructure mostly inoperable

Pre-planned out-of-town contact numbers functioning

No single data base for locating people in shelters

Travel impacted by roads and gas shortages

Family issues had to be addressed

First 14 days:

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Expanding Capabilities to Meet Long-Term Deployment

Duration of COOP means

more seats needed- Trailers acquired in Atlanta- USDA sites used in D.C.,

Kansas City, Roslyn, and Alexandria

- Customer sites in Birmingham and Fairfax leveraged

Secure connectivity and postal mail were two key infrastructure challengesto achieve

First 14 days:

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First Job, First

Critical data center resources are recovered

Essential services are restored

Payroll is made timely while migrating 60,000 new payees (565,000 total)

Financial systems returned online

First 14 days:

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Settling In for the Long Haul

Subscription service

requires sharing of resources during 6-week recovery period

Essential services require dedicated resources

Impact of Katrina implies 6 months not 6 weeks

Customer dedicated connectivity key issue

Decision made to buildout in “cold site”

First 14 days:

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Focus on Service Delivery

Resuming all services

requires that all resources (human, technical, and other) be available

Service delivery focus isfor Agency customers, payees, vendors, and employees

Give employees the challenge and the toolsand stay out of their way

First 14 days:

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New Orleans Critical to a Timely Return to Full Service

Returning to full service

required a full staff Deployed status had limited

seat availability, some security concerns, was costly, and came at a personal sacrifice to many

The New Orleans facility has the infrastructure to address business needs and support the additional population

Next 60 Days:

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Reconstitution in New Orleans

Housing, family issues, telecommunications,postal services, and local infrastructure had to be addressed- Security- Logistics- Habitation necessities- Health care

Family & friends, FEMA trailers, and cruise ships address most housingneeds

Next 60 Days:

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It’s Nice to Have Friends

USDA Secretary Johanns

and entire USDA family strongly supported COOP needs and the employees

Tremendous outreach by Federal colleagues, local Government, local organizations, and peoplein deployed locations

Food, clothing, education opportunities, friendship, and other assistance

Keys to success:

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It’s Nice to Be Prepared

Managers and involved

staff built the plan Same managers and staff

practiced the plan Live and desktop drills

under varying scenarios honed the mental and technical readiness

We know our customers rely on our mission delivery in order to sustain theirs

Keys to success:

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Lessons Learned – Governmentwide

Consolidated information

source needed to support decision-making

Central clearinghouse for needs and resources

Designation of essential services and associated rights is needed

Handbook to guide Federal Agencies through extraordinary authorities

Single coordination point for Federal efforts andissues

Learned:

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Lessons Learned - NFC

Communications are

always the challenge; planned communications channels are a real aid

Having a well-drilled plan allows for the basics to be accomplished with little intervention and allows management to focus on exceptions and surprises

Learned:

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Subscription service not

an ideal model for essential service provider

Administrative support a key aspect of support for long-term deployed staff

For long-term deployment, coordination of outreach efforts targeting employees becomes an essential task

Lessons Learned - NFCLearned:

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Some organizations

benefit from close proximity with one another

Must revalidate plan assumptions, plan contents, and business requirements annually

You cannot assume infrastructure items will be there for you

Lessons Learned - NFCLearned:

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Working to Mitigate Future Risks

Data Center equipment will

remain at subscription service location until new primary facility is selected

New AWS alternatives being explored

All business operations are being reassessed based on experiences

Lessons learned are being incorporated into revised DR and COOP plans

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People, Planning, & Practice

People who understand &

believe in DR and COOP make it happen

Plans have to account for your threats, the business requirements for COOP, and the people side of things

Practice is the best teacher. Practice on a regular schedule (top priority) and against changing scenarios. Capture the valuable lessons from each exercise.

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Epilog

Facing the most devastating

natural disaster to impact the United States, the employees of NFC set aside their personal concerns and focused on delivering for their customers.

Given such an event, the best came out of people, far and wide, and we are all better because of it.

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One-Year Review of Key Indicators

Housing rehabilitation and demolition are well underway while the housing market tightens- Pace of demolitions has accelerated in the last six months- Number of permits issued for rehab has nearly doubled- Rent prices have increased by 39% and home sale prices

have spiked in suburban parishes

Public services and infrastructure remain thin and slow to rebound- Approximately half of the bus and streetcar routes running

with only 17% of buses in use- Gas service reaching 41%; electricity reaching 60% of pre-

Katrina customer base

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One-Year Review of Key Indicators

Labor force in the region is 30% smaller than one year agowith slow growth over the last six months- Unemployment rate remains higher than pre-Katrina- The New Orleans metro area lost 190,000 workers- In the past six months, 3.4% more jobs but much of that may reflect the rise

in new job seekers- Unemployment rate is now 7.2%, higher than last August

Over $100 billion in federal aid dedicated to serving familiesand communities impacted by hurricanes Katrina, Rita,and Wilma

Number of displaced and unemployed workers remains high- Federal government approved approximately $109 billion in federal aid to the

Gulf Coast states- Half has been dedicated to emergency and longer-term housing- Estimated 278,000 workers are still displaced- 23% remain unemployed

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Questions???

Please ask us questions important to you.

“Lagniappe” is a New Orleans’ term often used to indicate getting something extra in a

transaction. Our lagniappe for you today includes additional pictures of the post-Katrina

New Orleans area.

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LagniappeCanal Street in CBD

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LagniappeLower 9th Ward

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LagniappeMold

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LagniappeThe lake is on the other side of the building

LagniappeThe lake is on the other side of the building

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LagniappeBoat came 3 miles inland

LagniappeBoat came 3 miles inland

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LagniappeBefore

NATIONAL FINANCE CENTER

LagniappeBefore

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LagniappeAfter

LagniappeAfter

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LagniappeAnyone missing a hot tub?

LagniappeAnyone missing a hot tub?

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LagniappeA quite country road

LagniappeA quiet country road

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LagniappeMain bridge into Eastern New Orleans

LagniappeMain bridge into Eastern New Orleans

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LagniappeA view from the elevated expressway

LagniappeA view from the elevated expressway

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LagniappeBourbon Street – Never so clean!

LagniappeBourbon Street – Never so clean!

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NSAA IT Conference