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.  

Tetra renovation nearly half a million dollars over budget this year alone.

UPDATE, Noon, May 23:  RA financial data through April 2016 just now available to us from RA's Fiscal Committee showindicates s that NO capital budget has been approved by the Board for the Tetra fiasco this year.  We are concerned that the Tetra expenditures so far have not been authorized by the Board of Directors.

In addition, the report shows an operating income loss of $35,987 already this year (four months).  The 2016 budget for this period shows an expectation of $31,008 in net losses through four months, so current losses exceed budget projections by almost $5,000.  As reported below,  the now year-old Voter's Guide projected a $55,000 net income this year while the latest budget proposal projects a $4,000 operating loss.

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A presentation to be made to the RA Board of Directors this Thursday, May 25, 2016, shows that efforts to rehabilitate the Tetra "lake house" Restonians agreed to buy in a referendum last year are over budget by $451,000--approaching a half-million single-year deficit.  (The presentation comprises pp. 67-86 of this week's Board Meeting Agenda Packet.) 

• $24,000 of that overrun is in operating income and expenses, which includes an unlikely high estimate for income this years (more than $100,000), so that number is likely to increase before the end of the year--even if the Board increases income by adding an after-school program (a $4,000 income "potential").  In short, RA foresees a $59,000 shift in net income from positive to negative during 2016.

• The vast majority of the overage is, however, in the capital budget where the latest estimate skyrockets capital costs this year from $259,000 to $687,000, an increase of $428,000 or 165%!  

The net additional cost to Restonians this year will be $451,000 over this year’s earlier draft budgets for the Tetra fiasco.  The overage represents a 125% increase from the 2016 referendum proforma budget.  

But, in fact, the cash flow deficit is $486,269 based on the “final” RA pro forma statement in its Voters’ Guide sales pitch for approval of the referendum last spring, the difference coming from the $59,000 forecast cut in revenues.  Here is how the costs of the Tetra fiasco have escalated:

 

The most important numbers reported above are the added impact on cost per household:  RA voters foresaw an additional likely assessment fee cost of about $18 for this year alone, but not that additional costs per household for 2016 appears to be about $40.  The RA Board will have a hard time living up to its commitment during the referendum to not increase RA assessment fees in 2016 and 2017 due to Tetra costs without jeopardizing other activities or needed reserves.

Nonetheless, that hasn’t stopped the RA Tetra Working Group (aka “Lake House Working Group”) from calling upon the RA Board to add $430,000 to its 2016 budget from RA's Operating Fund this year to make of for the shortfall according to the RA Board materials.  No explanation is remotely offered for why an added capital cost should be taken from the RA operating budget.  In fact, that is absurd and dangerous:  There are good reasons why the two funds are kept separate in any business organization.

More importantly, if funding to cover the massive spending deficit is approved, the Tetra fiasco would add about $22 more per RA member household than was estimated just a year ago—before we voted. 

Watch for the substantial increase in your assessment fee next year!  And given the pathetic misinformation offered in the original referendum, we anticipate continuing large deficits in the Tetra fiasco project budget for several years—neither revenues nor operating and capital costs will come close to meeting their targets we believe, meaning Restonians can expect continuing large increases in their annual assessment fee to bail out the Tetra fiasco.

In a broader context, the obviously dubious referendum proforma financials make us wonder about RA’s overall financial condition. Some points to ponder:

•  Where is RA’s 2015 Annual Financial Report?  This report is normally released to the public by May the following year.  The end of May is approaching and the report is not even on the RA Board’s agenda.  What is wrong with the report to cause the delay? 

• Similarly, where is the auditor’s report on the 2014-2015 RA Annual Financial Report?  This annual report is usually completed in late March or April and presented in early May with the annual financial report.  Yet it is not available even at the late May date of theRA Board meeting.  What do the auditors have to say about RA’s accounting and its financial condition?

• Why does the RA Board approved budget for 2016-2017 show that funds from the Comstock contribution in RA’s capital account will be used to offset expected losses of $98,254 in Tetra’s operating account in 2016?  Why is such a loss anticipated (this in November 2015) when the April 2015 Board-endorsed voter’s guide anticipates a 2016 net operating income of $55,085? Even the most recent iteration forecasts only a $4,000 shortfall in operating income for 2016.  How are such conflicting values possible?  What is the real state of operations at Tetra?

• How can the December 2015 Fiscal Committee report show that Tetra’s 2015 budget and expenditures for the year were exactly equal—to the dollar?  Note 3 on the table below says the expenditures include “Loan Interest of $37,512 and property Taxes of $7,754.”  These are the only recorded expenditures.  Were there no other expenditures on the Tetra project?  Why does the report not include nearly $50,000 in costs the Fiscal Committee attributed to Corporate and Board expenses (see p. 1) that mostly relates to the Tetra Referendum expenses not budgeted for of $39,467 and Community Projects of $10,300 (sic)?” What was the real budget for Tetra in 2015—or were its costs simply a bucket to be filled?  If the Fiscal Committee is using Comstock’s capital contribution against operating costs, why are the capital costs of repairs and improvements on the Tetra property through December not included in this calculation? 

 

• And the questions go on….

At this juncture, virtually every financial figure that RA has presented to the community concerning the forecasting and actual costs of remediating and programming the Tetra property for useful RA functions appear to be questionable.  Indeed, we do not know even the exact sums RA spent in 2015 on Tetra and where those funds came from (as well as the actual revenues) to make the Tetra property suitable for RA use.  Given the poor state of RA’s financial reporting on this project (and who knows what other financial discrepancies may exist), we recommend the following:

• Those senior RA staff members who played a significant role in the development of the referendum proforma statements should not receive a performance award for 2016.  In fact, if the performance awards for 2015 have not yet been awarded, they should be rescinded.  This is called accountability for misleading, whether by ignorance, incompetence, or intent, Restonians on the costs of the Tetra property.  At the minimum, the CEO, CFO, and C/PRC should not receive bonuses.  We defer to the Board on what other staff members should not receive bonuses.  The scope of future additional reductions in staff bonuses should be tied to the accuracy of RA forecasts and completeness of public reporting on the costs of the Tetra project henceforth.

• The RA Board of Directors should not approve the $430,000 budget addition request by the Tetra Working Group until a full independent investigation of the causes of the massive cost overruns has been completed.  Besides examining the failures in recent budget forecasting, this panel should re-calculate anticipated costs and revenues, operating and capital, through at least 2020.  No RA staff members, Fiscal Committee members, or members of the RA Board who served on the Board last year should be on the panel.  The panel should comprise Restonians with a reasonable degree of financial understanding.  They should have access to all RA financial transactions and other records pertaining to the Tetra project through the CFO.  

• The RA Board of Directors must make public as soon as possible the RA Annual Financial Report for 2015 and the auditor’s statement on that report and explain the delay in their publication.  It is unconscionable that these reports have not already been made public and leave all Restonians to doubt the ability of RA to properly handle the management of their assessments fees. 

Not until the RA Board of Directors clarifies to the community the state of RA’s finances, especially the funding and costs of the Tetra project, does the Reston community have any reason to believe that RA’s financial reporting is accurate.  More seriously, the longer the delay in understanding these multiple unanswered questions, the greater the suspicion will be that RA records are being manipulated in an unprofessional manner.

Fairfax library cuts may mean more overtime for employees, Fairfax Times, March 26, 2015

 UPDATE (March 31, 2015):  Several leaders in the effort to stop "the decade-long trend of relentless cuts to our local library system" co-authored a letter to the Fairfax Times striving to clarify a few facts on the FCPL budget issue.  Their letter may be read here.

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Some branches rely on volunteers to fill key gaps in service

by Kali Schumitz Staff writer 

 Library employees and supporters say the latest proposed budget cuts will continue to erode services in an already-struggling library system.

Proposed staffing cuts will make permanent a situation that has led to understaffing and routine use of overtime in most library branches, advocates say.

“Libraries need funding to provide quality public services our citizens need. We are understaffed and working overtime to provide fundamental basic library services,” said Jennifer McCullough, president of the Fairfax County Public Library Employee Association.

County Executive Ed Long’s proposed budget for fiscal 2016 includes $855,000 in reductions to the library budget. The total proposed library budget is $27.6 million, less than 1 percent of the county’s $3.8 billion operating budget.

Most of the savings would come from eliminating 14 library aide positions, which already are vacant — representing about 15 percent of the 93 positions being eliminated throughout the county. . . .

Click here for the rest of this article on the Board of Supervisors' war on our public library system.

No wonder our Library collection is shrinking: Materials acquisition has plummeted for more than a decade..

Budget information provided by the Fairfax County Public Library (FCPL) shows that amount devoted to buying new materials--books, magazines, e-books, databases, etc.--has shrunk dramatically since FY 2000, and even more steeply since the peak year of FY 2006.  Overall, the materials budget has shrunk by nearly half since FY 2000 while the county's total General Fund expenditures (basically operating expenditures that exclude capital investments) have increased by 83% over the same timeframe.

Maybe more importantly, real spending per capita--recognizing both the increase in our county population and the decreased value of the dollar--has shrunk by nearly two-thirds.

The library's Collection Overview corroborates the decline in materials acquisitions.  In FY 2006 (the earliest year for which we have information), the library acquired 368,225 items.  Last fiscal year, the library acquired only 131,110 items--a 64% cut in materials acquisitions.  At a 62% reduction, the percentage cut in number of items acquired is almost identical to the cut in the materials budget from FY 2006 to FY 2014.

It is no wonder, then, that the number of items in the library materials collection has shrunk by 440,000 items through FY 2013 (still no data publicly available on FY 2014 which ended last June), especially in the face of the library's hyper-aggressive culling policies and practices.

County budget forecast looks bleak, could mean higher homeowner taxes

Fairfax County is predicting little growth in property values over the next year, less than in its last forecast for FY2016, which is likely to mean higher real estate property tax rates.  Situation is aggravated on the spending side by likely reductions in state funds for the county.  At this point, the County is expecting a $71.4 million dollar shortfall, nearly double the $37.6 million shortfall they forecast last year for 2016.

   Fairfax County Joint Budget Development Committee, FY2016 Financial Forecast

Is FCPL buying books and other holdings? It's a riddle wrapped in a budget enigma.

Happy New Fiscal Year, Fairfax County!  Yes, it’s July 1, 2014, the first day of FY2015 for the County.  

. . . but there is still some news about FCPL spending for FY2014 although the final figures are not yet in. 

Here is the table of FCPL General Fund expenditures for FY2014 through May—eleven month of the fiscal year:

 

What stands out in the above table, the first three columns of which are copied from the Fairfax County Financial Transparency website, is that the Library Administration has yet to spend a quarter ($1.8 million) of its operating expense budget for this fiscal year.

Digging more deeply into that operational expenditure shortfall, we find that the operating expenses category has a large and diverse set of expenses.  Here’s the list through May 2014:

Expenditures by Line Item
OPERATING EXPENSES

Line Item	Expenditures Year-to-Date
ASSIGNED AGENCY VEHICLES	$151.93
BUILDING MATERIALS AND SUPPLIES	$17,306.31
COMMUNICATIONS AND MEDIA RELATED SERVICES	$216,912.44
COMPUTER ACCESSORIES AND SUPPLIES	$12,633.35
COMPUTER EQUIPMENT	$436,459.11
COMPUTER SERVICES	$49,061.49
CREDIT CARD EXPENDITURES	$125,852.17
DEPARTMENTAL AWARDS	$7,003.78
DOCUMENT SERVICES COPYING CHARGES	$119,024.82
DOCUMENT SERVICES MICROFILM CHARGES	$30,333.86
DOCUMENT SERVICES PHOTOTYPESETTING CHARGES	$0.00
DOCUMENT SERVICES PRINTING AND BINDING CHARGES	$28,974.27
FIRE EXTINGUISHER MAINTENANCE AND REPAIR	$125.00
FUEL	$441.02
LIBRARY EQUIPMENT AND SUPPLIES	$13,286.47
MANAGEMENT/PROFESSIONAL TRAINING	$0.00
MEALS	$0.00
MILEAGE ALLOWANCE AUTOMOBILE	$14,455.59
MISCELLANEOUS SERVICES	$19,830.57
MOTOR POOL	$716.65
OFFICE EQUIPMENT AND FURNITURE	$17,047.59
OFFICE EQUIPMENT MAINTENANCE AND REPAIR SERVICES	$6,919.44
OFFICE SUPPLIES	$2,741,795.18
OPERATIONAL TRAVEL	$46.63
OTHER OPERATING EXPENSES	$117,147.47
OTHER PROFESSIONAL CONSULTANT&CONTRACTUAL SERVICES	$165,471.90
PC REPLACEMENT CHARGE BACK	$701,500.00
POSTAGE	$27,578.64
PRINTING ACCESSORIES AND SUPPLIES	$321.98
PROFESSIONAL MEMBERSHIPS	$4,564.00
REFUSE DISPOSAL EXPENSE	$35,106.24
SECURITY, FIRE, SAFETY, AND EMERGENCY SERVICES	$1,177.92
SERVICES-OTHER AGENCY	$306,818.66
TECHNOLOGY INFRASTRUCTURE CHARGE BACK (DATA CENTER	$119,699.00
TRANSLATION SERVICES	$366.60
VEHICLE REPLACEMENT	$275.00
TOTALS:	$5,338,405.08

Nowhere in the entire FCPL budget is there a concrete reference to acquisition of library holdings.  Nowhere does any table list “books and other holdings” or words to that effect, the knowledge capital of the public library system.  We suspect that the purchase of books is hidden in the highlighted category  “Office Supplies” given the size of the expenditures--but it could be for paper clips.  At the same time, FCPL can list $321.98 in purchases of “printing accessories and supplies” on a separate budget line.   Even "Meals"--on which NO money was spent--has its own budget line.   Apparently books, magazines, online subscriptions, and the rest are not sufficiently important to the Library’s administration to have their own budget line despite their role in the library's mission.  

Of course, there is no way for the public to know how much the Library had budgeted for “office supplies”  although the highlighted line shows that FCPL has spent about $2.7 million on “office supplies” during the fiscal year through May.  By comparison, by the end of last fiscal year (FY 2013) FCPL had spent more than $3.7 million in this nebulous purchase category—one million dollars more spending than this year.  Who knows, it too could have been spent on paper clips....

The good news possibly is that buying books is a straightforward process--just sign a purchase order--and the funds could have been obligated and committed in June 2014 for these acquisitions.  Who knows, there may be more books and other publicly available information available from the library this year if it doesn’t cull too many.

We will check when the final tabulation comes in on how well the library did in buying books and other holdings to fulfill its public mission although this kind of accounting is not helpful.