After Disputed Lake House Purchase, Reston Association Reflects on Lessons Learned

Reston Association says that its internal controls and processes have come a long way since the botched purchase of the Lake House at nearly double its assessed value five years ago.

At a Thursday meeting, RA’s Board of Directors reviewed progress on fifteen recommendations suggested by global advisory firm StoneTurn Group in a $45,000 independent review of the controversial purchase.

Eric Carr, the board’s treasurer and chair of a committee formed to review the purchase, said RA was “not equipped to handle an undertaking and purchase like this.”

“This is why I ran and it was my goal above all other goals to make sure this never happened in the association ever again,” Carr told the board at the meeting. “I think we’re in a good place for that and I think we’ve done largely what the StoneTurn report requested us to do.”

RA purchased the Lake House property from Tetra in 2015. Renovations to transform the property into a community building cost three times more than expected, resulting in requests for independent audits and reviews.

The report found that RA’s governing documents had no defined process to ensure that internal controls and processes were being followed. The group also suggested that RA adopt a policy to improve transparency on items that are discussed in closed sessions without compromising its interests. At the time, RA did not have controls in place to prevent the contracting of an amount in excess of the budget.

Carr said that all but two of the company’s recommendations are either completed or already exist.

One glaring gap — establishing an ethics code — remains. Discussions on establishing the code, which has been underway for nearly two years, are expected to formalize at the board’s meeting in March.

Highlights of steps undertaken in response to recommendations are below:

• General Counsel will continue to review policies as necessary and as directed by the board
• Although staff indicated recommendations to establish “owners of the internal processes” were vague, RA has a resolution governing internal financial controls
• Greater transparency in executive sessions will be pursued so long as it does not contradict POAA rules
• Establishing processes where capital expenditure maximums are calculated and included in the budget
• Clarification of policy to provide guidance if a project exceeds the budget or if the budget estimate is found to be impractical or incorrect
• Preparation of a long-term capital improvement plan that is updated on an annual basis
• Written policies and procedures to evaluate and management capita projects that emphasize key assumptions and estimates
• Ensuring purchase orders and contracts are not issued unless funds are available and allocated within the approved budget

A complete breakdown of StoneTurn’s recommendations and progress made is available online. Board vice president Julie Bitzer requested the progress update.

Photo via vantagehill/Flickr; YouTube