Houston Independent School District issues credit cards to employees with bankruptcies

The Houston Independent School District has given out credit cards to more than a dozen employees with bankruptcies on their credit records, including some who ran up debts to local school districts, according to a review of records by Texas Watchdog.

At least two employees who currently hold district-issued "procurement cards" or "p-cards" -- a form of credit card -- previously had their HISD wages garnished to pay off creditors, records show.

Those with tarnished credit backgrounds included a school psychologist, a high school registrar, a grant writer and several teachers. One card-holding teacher filed for bankruptcy twice, once in 1996 and again in 2007, and in the latter filing claimed to own $2,500 in furs and jewelry. Several cited large student loans as part of their debt.

The school district, the largest in Texas, currently has issued p-cards to 1,216 of its 29,500 employees, according to records provided by the school district. Texas Watchdog ran some of the more unique names on the list through databases of federal bankruptcy court records, and then reviewed documents in the case files to verify that the filers listed the Houston school system as their employer.

That review turned up 18 HISD p-card holders who disclosed in bankruptcy court documents that they were employed by the school district when they filed their cases. Texas Watchdog researched the bankruptcy status of only a fraction of the the HISD p-card holders, so there could be others among the list of 1,200 card holders.

Among the findings:

+ One elementary school secretary with 11 years at HISD filed for Chapter 13 bankruptcy in 2007, owing $77,000 jointly with her husband to the Internal Revenue Service. The couple noted as part of their necessary expenses $320 a month on phone service and $270 a month on dry cleaning and laundry.

+ An HISD transportation supervisor ran up a $23,226 debt on multiple privately issued credit cards and retail charge accounts, most of it in a three-year period, and included as creditors both the Fort Bend Independent School District and Fort Bend County. He filed for Chapter 7 relief in 2007.

+ An office clerk, with the district for 15 years, incurred credit card debt of more than $30,000 and filed for bankruptcy with her husband in 2008.

+ The school psychologist filed earlier this year and listed as assets a 50-inch television, $1,000 worth of art, and a collection of shoes worth $1,000. His credit card debt of $64,147 included a $27,724 balance on a Chase credit card. He also listed $221,230 in educational loan debt.

The U.S. Bankruptcy Court of the Southern District of Texas has garnished the wages of at least two card holders. In 2006, the court ordered HISD to pay $500 each pay period to the bankruptcy trustee for a secretary in the HISD secondary curriculum department. In another case, the district was ordered to pay $404 each pay period to a trustee on behalf of an elementary school secretary in a 2007 filing.

One owed the Cypress-Fairbanks Independent School District $150 in property taxes. Still another – a secretary in an administrative office – owed HISD $1,016 in back taxes in a 2003 filing.

School district officials are given the cards for routine school supply purchases and to avoid the delay that is incumbent with a government purchase-order system.

The practice of giving out the cards is sound on its face, said Michael Granof, an accounting professor at University of Texas-Austin.

“Issuing credit cards for purchasing purposes is common, and there is nothing wrong with that,” Granof said. “The reason is that it makes purchasing a lot easier ... I think the fact that somebody has filed for bankruptcy, or has real credit problems, is the perception that person can’t be trusted. But the district should have controls in place.”

HISD has policies in place that address misuse and appropriation of district-issued cards "Procards" via a 96-page user's manual, relying on a stated "three-strikes-you're-out" policy for failure to comply with guidelines.

Use of the cards for personal items is forbidden. Goods and services worth up to $500 may be purchased, with a limit of $5,000 a month. Holders must be full-time employees and undergo training to obtain cards. The cards can be used for purchases over the phone, Internet or at a store. Prohibited items include gift cards, jewelry, cameras and electronics, entertainment, and purchases from sources where the cardholder has a financial interest.

"Prudent, good business judgment must be exercised at all times when making a purchase with a district Procard," the manual says. "Cardholders are expected to be as conscientious with district funds as they would be with their own."

The district does not perform credit checks on employees who are being issued cards, said Chalita Cyprian, HISD's program manager for Procards, "because the cards are not issued to people personally. It's a district card and has nothing to do with their personal credit history."

School district credit cards can be misused, such as in these recent cases in San Francisco and in Nashville, where school system workers bought digital cameras, iPods, and gift cards. Dallas schools were also struck by a scandal in 2006 regarding misuse of credit cards.

Public school budget hawks have for years criticized the practice of school districts issuing credit cards to anyone, let alone those with tarnished credit.

Publishing all expenditures online – including receipts – is part of the finance reform advocated by Peyton Wolcott, an education watchdog in Horseshoe Bay, Texas. Or perhaps school districts need to get out of the credit card use altogether.

“Let’s not issue any credit cards at all," Wolcott said. "It doesn’t seem so hard to buy supplies, really. If I head up a department and have been doing this a while, I have an idea of how many staples I need.”

She noted that when credit card purchases are tracked, the user is less likely to abuse the privilege.

“This scrutiny can help (make) employees … less likely to abuse the system,” she said. “If you knew that every purchase on your personal credit card was going online somewhere, you would be more careful; if you did that for schools, it would have the same effect.”

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Credit cards picture by flickr user ohadweb, used via the Creative Commons license.

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