DALLAS — Standard & Poor's lowered its issuer credit rating on the scandal-plagued Beaumont Independent School District three notches to A-minus from AA-minus as the Texas Education Agency prepared to take control of the district.
"The downgrade of the district's unenhanced ratings primarily reflects our view of the district's weakened financial position and financial management practices, including reported gaps in internal controls uncovered by an ongoing FBI embezzlement investigation and an investigation by the Texas Education Agency," Standard & Poor's analyst Lauren Spalten wrote in her April 9 report. The outlook remains negative.
The district's $183 million of general obligation bonds retain their triple-A enhanced rating because they are backed by the Texas Permanent School Fund.
Moody's Investors Service downgraded the district to Baa1 from A1 on April 2 and also maintained a negative outlook.
"The negative outlook reflects Moody's expectation that the district will face significant fiscal pressure in the near- to mid-term stemming from the projected narrowing liquidity in fiscal 2013 and 2014," wrote Moody's analyst Karolina Norris. "Additionally, the outlook reflects uncertainty surrounding the timing of disclosure of fiscal 2013 financial statements, the ongoing concerns about the district's previous audited financial statements, and the implementation of TEA's recommendations."
The TEA has recommended that a board of managers take over the district, which has been wracked with upheaval and turnover in the top ranks amid a Federal Bureau of Investigation probe of accounting practices and alleged embezzlement.
On April 8, the district hired Willie Leeann Westbrooks as chief financial officer. Westbrooks was previously assistant superintendent for the Spring Independent School District.
TEA Commissioner Michael Williams said he would make a final decision on whether to take over management of the district after a telephone conference call with residents of the district on April 10.
