Autumn on Lake Audobon

Autumn on Lake Audobon
Autumn on Lake Audubon, Photo by Alison Kamat

Thursday, December 22, 2016

RA overshoots May Tetra budget for 2016 by $29,000.

After finally admitting that renovations for Tetra were over budget by $430,000 in May, RA put in place a new budget--new revenue stream, new cost estimates, top to bottom, and six months later RA expects to be another $29,000 over its new Tetra budget--an additional seven percent in seven months, including nearly $6,000 over its renovation budget.

In the end, Tetra's $902,000 net cash flow loss cost each RA member household about $41 this year alone.  

At its December 19th meeting earlier this week, the Fiscal Committee received its November financial report on Tetra (see p. 11) mandated by the RA Board.  What it shows when you cut through all the details is that RA will spend more than $29,000 over the 2016 budget it set for itself just seven months ago.  Here's a spreadsheet that summarizes that report:

Several observations are possible by looking at this table:
  • RA was absolutely horrible at budgeting program revenues for Tetra with revenues coming in at less than half the $175,000 budgeted.  This was clearly not a serious effort at budgeting, merely an exercise at calculating revenue potential assuming virtually every open minute of every day was scheduled with some revenue generating activity.
  • Tetra's net operating loss was more than five times greater than had been budgeted in large part because of the horrible revenue forecast.  The cost underruns are roughly proportional to the revenue underruns.
  • RA clearly had a contract with the general contractor for interior work because there is no variance in cost over the year.  Given that the first expenditures under this contract were made in February 2016 and completed by July, RA knew that this $504,000 contract was more than double the $250,000 forecast in RA's voting guide a year earlier.  Still, it chose not to disclose this huge cost overrun until after the 2016 RA Board elections in March--a huge assist to incumbents running for re-election (Eve Thompson and Dannielle LaRosa)--as we suggested in our proposed independent audit agenda.
  • All told, RA spent nearly one million dollars on Tetra this year ($984,929) which was actually under budget, but only because the lack of program revenues meant a lack of program costs.  This is hardly anything RA should be proud of.  
Aside from the horrible mishandling of the Tetra purchase and renovation, this cash flow analysis suggests that RA can not put together a reasonable budget for a new activity over even a short period of time.  Clearly, more work is in order to straighten out RA's house--as well as Tetra.  

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