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.