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Op-Ed: Many Issues With Reston Association’s Budget Process, Spending

by RestonNow.com — September 30, 2016 at 2:00 pm 12 Comments

Reston Association/Credit: RAThis is an op-ed by Reston resident Ed Abbott. It does not reflect the opinion of Reston Now.

During the regularly scheduled Reston Association Board meeting on Sept. 22, RA CEO Cate Fulkerson presented items for the board to consider as they prepare RA’s 2017 “draft” budget. According to the presentation, members’ annual assessments may increase from $657 to $712 next year.

There are numerous problems with this, the least of which is the assessment increase. Let’s take these one at a time.

There is no such thing as a “draft budget” in the second year of a biennial budget. The board passed the 2017 budget in November 2015. Once the Board approves the biennial budget, the budget is final. By creating a 2017 draft budget at this stage, the budget process is morphing into an annual budget review and approval process in clear violation of the governing documents, which specify a biennial budget process.

Budget information is not presented to the Board in an organized and intelligible manner. The latest budget presentation by CEO Cate Fulkerson and Board Treasurer Danielle LaRosa is a good example. It starts out well with a “Back to Basics” slide that should tie the budget items back to RA’s mission statement, but this never happens. Instead, the presentation includes a confusing and incoherent array of tables and graphs.

It presents CEO goals, comments about the percent that RA programs and facilities pay for themselves, and compares RA assessments with other similar entities. The assessment comparison cannot be checked as the sources used for the comparison are not provided.

The comparison does, of course, show RA’s assessment is the lowest, but there is no detail provided on the other HOAs to make this convoluted viewgraph meaningful. The presentation concludes with a recommendation that the RA Board adopt the recommended 2017 assessment rates.

The Board is obviously confused about the budgeting process. It was painfully obvious from the discussion that followed the budget presentation that a number of the Board members were as confused as I was by this exercise in bureaucratic obfuscation. Just to provide a perspective on how confused the RA Board is, consider the following. Directors Sanio and LaRosa believe that instead of doing a budget, the Board should set an arbitrary assessment and tell Ms. Fulkerson to manage the association to the revenue generated. This is pretty close to dereliction of duty.

Budget items are never related back to RA’s core mission of promoting “the peace, health, comfort, safety, and general welfare of the Members.” What is called a draft budget is a wish list that is disconnected from RA’s mission. Neither Fulkerson’s presentation nor the discussion during the Board meeting provide anything that could be remotely considered as a meaningful rationale for monies spent.

Here are some examples: Three planners are to be added to the staff at an annual cost of $255,000. There is $233,000 for merit increases for the staff. There are least four capital projects for $112,000. Finally, there is about $700,000 in even more renovations cost for the Tetra project. No justification for any of these expenditures is provided and several of them pre-judge the ongoing work of the independent Tetra audit of RA overspending.

The Board is over-withholding reserves. Treasurer LaRosa pointed out the association has increased reserves to about $7 million (a $1 million increase) annually, when RA’s own hand-picked consultant indicated last year that $5 million was more than sufficient.

One has to ask why RA needs a reserve level of nearly half of total annual expenditures for any other reason than to fund RA’s horrendous track record of managing existing capital project costs. The Board has a history of forging ahead with spending on numerous capital projects in spite of obvious problems in controlling project costs as evidenced by from the Tetra project.

The Board does not seem to recognize that it has a fiduciary responsibility to its members to manage within its means and spend the members’ money in the interest of all its members. To accomplish that, the RA Board must understand why and how the money is being spent and how it supports RA’s core mission.

There is only one way out of this mess. The Board should cut the “draft” 2017 budget. Start with the Tetra project and stop any further work. Cancel the merit increases; certainly none have been earned by any RA staffer who contributed to the Tetra debacle. Cancel any added staff positions. Cancel all proposed capital projects, including those currently suspended due to the Tetra cost overruns.

Do not approve any additional funds for anything until the independent audit by Mediaworld is completed, its recommendations understood and the appropriate ones implemented.

  • George

    You guys need to get off your high horses and realize the lake house is an awesome new addition to Reston. Stop complaining about every little thing and understand that everyone at Reston works really hard so we can enjoy the great pleasures they have to offer. I for one love what they have done for Reston and if you guys could see the great work they do I believe you guys will be a lot happier in life.

    • Greg

      Tetra was robbery. Next?

    • Rational Reston

      I believe the “high horse” view is the one where people blindly follow what RA tells them and the myth of the ‘Promise of Reston’.

      I’ve lived here 15 years and it’s run amok. Stream ‘restoration’ projects that destroy old growth trees, disrupt the animal habitat, purposely leaves pools of still water when we’re being told of mosquito borne illnesses. Rigging the governance document referendum by moving the closing date beyond the published date. Tetra. The amount that all of Reston subsidizes tennis for a very small minority. The only time I think any kind of sanity took hold was stopping the bocce courts.

    • JoeInReston

      I’ll admit it – I can’t tell if this is parody or not.

    • Newport

      Where else can a purchase for higher the cost and with no inspection or analysis or vote (oh wait they said it was a unanimous vote) and continue to pour money into a facility that will only be used by a small portion of individuals in the town —- its called RESTON!

  • EliteinReston

    Point of clarification. Unless the bylaws posted on the RA website are out of date, I can’t find any language that says once the board approves its biennial budget it cannot revise it the following year. In fact, this is the budgeting practice in states with biennial budgets. Lawmakers approve separate budgets for two fiscal years at the same time. It’s common to revise the budgets each year in part because revenues are increasingly volatile. However, the practice of biennial budgets is antiquated. Most governments have changed to annual budgets because they wasted so much time revising the biennial budget in the second year. The best practice for RA to consider is preparing an annual budget, but including five-year revenue and spending projections at the same time to ensure the budget is sustainable in the years ahead.

    • cRAzy

      See Section V.13 (b)(1) of the RA Deed:

      “After Notice pursuant to Deed Section I.1(bb)(1) and hearing, the Board of Directors shall adopt a budget for the Association on a biennial basis containing an estimate of the total amount considered necessary for the ensuing two fiscal years to pay the cost of management and Upkeep of the Common Area and, to the extent provided in the Association Documents, Upkeep of the Lots, and the cost of other expenses that may be declared to be Common Expenses by the Reston Documents or by a resolution of the Board of Directors for purposes found by the Board of Directors to be in the best interests of the Association, including without limitation services provided to the Owners, Lots, or Common Area.”

      Please note there is nothing in the Deed about amending the budget year to year, much less drafting a new one. The following describes how amendments to the biennial budget need to be handled. Subsection (d) of the same section says:

      “(d) Unforeseen Expenses. The Board of Directors may not commit funds in excess of the budgeted amount, unless approved by a two-thirds vote of the Board of Directors at a regular meeting. In case of emergency, the Board of Directors may commit such funds by a two-thirds vote at any meeting, but shall confirm such action at the next regular meeting.”

      So technically RA staff VIOLATED this section by committing (obligating) more than $259K to Tetra renovations before it sought approval at the May 23, 2016, meeting. In fact, RA’s subsequent presentation shows that it spent ($$$ out the door) more than $340K on Tetra by the end of May.

      Just so you know because no one on the RA Board gives a damn. It follows the Deed when it’s convenient, not when it’s required.

    • John Higgins

      Not to put too fine an edge on the argument, documents such as the Reston Deed don’t typically state what cannot be done, they state what can or what must be done. In this case, a biennial budget is called for. True, boards can amend any budget at any time by a two-thirds vote of directors. Moreover, the board (by resolution) directs the CEO to suggest amendments to the second year’s budget if needed “to address any administrative and policy anomalies resulting from activities in Year One.” That’s a pretty clear outline of the intended process.

      Uncertanties of revenues is, indeed, a reason some organizations prefer an annual budget. One can debate whether that is a factor here. But the flip side is the consequence of annual budgeting. The RA staff and board spend considerable time examining the programs and cost-drivers. To do that each year when there are few changes to the underlying programs probably makes little sense.

      I take Mr. Abbot’s point. The 2017 budget has been set. Some creative ideas have been placed before the board and, if approved, they will represent an amendment of the 2017 budget, not refinement of a draft. The gravity of such a change is underscored by the vote require for passage.

      • FedUp

        “creative” or “stupid” ideas to drive up assessments–thereby allowing more stupid expenditures.?

  • LeftPolitico

    Completely agree that no merit increases should be given to any RA staffer who “contributed to the Tetra debacle.” Presumably, in a perfect world, the Mediaworld investigation will identify those people. Also, it seems like a no-brainer that no additional funds should be approved until the Mediaworld investigation is complete and the appropriate changes to people and process are implemented.

    Have either Cate Fulkerson or Dannielle LaRosa given their rationale for why they want to have more money in the reserve fund than their consultant recommended?

  • 30yearsinreston

    RA is run for the benefit of those paid to run it, its not run for the benefit of the members and has not been for years
    Can someone please sue these incompetents

  • ZeroBaser

    This latest out-of-cycle budget increase sham is plainly driven by the $4 million debacle on the dam. The tiny house with no legit purpose yet in sight is the leading hemorrhage of our money, but is followed closely by excess millions in reserve cash ((who knows when another realtor will offer the next Tetra deal), the glut of well over an additional million $ for hard-to-justify bonuses for richly compensated staff and high priced lawyers doing really skilled work such as note-taking for the CEO day and night. Then there the high priced additional positions proposed which have NOTHING to do with programs directly serving homeowners or addressing the core functions of s home owners association.
    It is time to turn back the page, and reduce a seriously bloated and misguided budget.

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