DALLAS – The Texas Education Agency issued a harsh report on the South San Antonio Independent School District's administration of a $58 million bond program.
Among the major findings were improper financial controls and failure to disclose conflicts of interest among school board members in the contracting business.
The plan calls for "drastic improvement" in the district's business practices based on a lengthy report, according to a cover letter from David Marx, head of the division of financial compliance for the TEA.
The agency, which supervises all school districts in the state, approves coverage of local school bond issues by the Texas Permanent School Fund. The PSF confers triple-A ratings on the bonds, dramatically lowering borrowing costs.
Voters in the district approved $58 million of bonds in 2010, a year after defeating a similar measure. With about $112 million of outstanding debt, the district earned underlying ratings of A-plus from Standard & Poor's and Fitch Ratings.
The TEA gave the district a Jan. 4 deadline to approve a uniform set of financial and administrative policies and publish them on its website. The report also requires certification that employees have been trained on the new system. New banking policies and an update of authorized signatures are also required.
"The board of trustees failed to manage and control the district's finances to ensure the district's financial statements accurately reflect the value of the district's assets on hand," the report said.
The report also noted that the district has had five superintendents in five years and that the board of trustees has not shown that it can collaborate with the district's administrators.
After the current superintendent, Abelardo Saavedra, took the job last year he fired the district's longtime finance director. Several board seats have also changed hands since the bond program was launched.
"Although members of the administration team that managed the bond program are no longer with the district, the current administration has been proactive in its efforts to improve processes and efficiency within the business office," Saavedra said in a press statement.
Fitch Ratings took the investigation into account in a December 2014 ratings report.
"Fitch does not believe the investigation poses a threat to the district's financial position, but that it reflects a history of weak financial oversight," wrote analyst Shane Sellstrom. "Fitch expects that recent corrective actions will provide stability to the district's fiscal processes."
TEA began the investigation after receiving complaints about the district's management of its 2010 bond program funds and allegations that it hadn't adopted policies to prevent fraud, waste and abuse, according to the report.
The report dated Nov. 6 was the second call for correction of the district's finances. In June, TEA found that the district failed to document and track how it managed its federal funding from 2009 to 2012. The district was ordered to repay nearly $300,000 that appeared to have been misspent.
With a population of 64,074 and enrollment of 10,000 students, the district is entirely within the city of San Antonio. The district includes the former Kelly Air Force Base, since converted to civilian use. A Toyota truck assembly plant is nearby.
"The district's sound fiscal cushion mitigates the risks related to the high debt burden and leadership challenges," Sellstrom wrote in 2014. "The stable outlook is based on expected maintenance and growth of these reserves."
