in Houston, Texas
South Texas water district’s spending practices, fiscal oversight lacking, auditors find
Friday, Jun 01, 2012, 01:57PM CST
By Steve Miller

A state audit of a water district in South Texas, which was the subject of legislative scrutiny last year, reports poor fiscal oversight and lax spending discipline.

The Hidalgo County Water Improvement District No. 3 has spent more than it has taken in since at least 2008, according to the Texas State Auditor’s Office report.

Auditors found the district had  “significant weaknesses in the management of its finances and operations.”

It found that assets including land, water rights and easements were sold to cover for revenue deficits, but “it cannot continue to sustain itself through the sale of assets.”

The audit also found fault with the district’s collection procedures, maintenance documentation, and discovered that “the individual who is both the District’s general manager and the president of its board has multiple businesses that provided services to the District in fiscal years 2008 through 2011” without a process to ensure compliance with state laws regulating such arrangements.

Pay for the board members of the district increased 76 percent in 2011, and the audit found no documentation to verify the hours worked in exchange for that pay, a violation of the Texas Water Code.

District employees and board members who handled cash were not bonded, another violation of the code.

The district provides water to the city of McAllen and a number of other entities and individuals.

In its response to the audit, the district claimed that proponents of dissolution of the utility made “politically charged allegations” and pointed out that previous claims by its detractors of missing funds were not sustained by the audit.

The district also maintained that the sale of assets were not made to cover shortfalls and instead relied on an “interim operating loan,” which it repaid.

It cited a number of deficiencies named in the audit that have been corrected, including the money handling, director compensation documentation and conflict of interest concerns.

The audit was prompted by a 2011 bill, SB 978, which would have dissolved the district and authorized the city of McAllen to take over its management. A number of McAllen residents and city leaders testified in favor of the bill and despite a favorable analysis of the bill by the Senate Resource Center, Gov, Rick Perry vetoed the bill, instead ordering the audit.

The city of McAllen has unsuccessfully tried to take control of its water since 2007 through legislation.

Contact Steve Miller at 832-303-9420 or

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Photo of water spigot by flickr user Tara R., used via a Creative Commons license.

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