Valentine ISD audit reveals $165,000 in unauthorized transactions, prompting further investigations 

Valentine ISD’s recently-finalized audit of the 2021-22 school year finances found roughly $165,000 in unauthorized transactions had taken place; further investigations are ongoing. Staff photo by Maisie Crow.

VALENTINE — A recent audit of the Valentine Independent School District found that a lack of oversight over the district’s finances resulted in roughly $165,000 in unauthorized transactions, plus instances of falsified documents, prompting an additional forensic audit and a criminal investigation by state and federal authorities.

“There were numerous instances of unauthorized transactions, improper coding of transactions, altered documents, payments to fictitious employees and unauthorized withdrawals of the district’s funds,” reads the financial report, prepared by accounting firm Bolinger, Segars, Gilbert and Moss, the district’s accountants of several years. 

These findings are part of a report on “material weakness in controls” within the document, which concludes that “internal controls over financial activities were not properly segregated or monitored,” as evidenced by an unnamed, sole individual controlling credit cards, bank reconciliations, payroll, recording of transactions and other financial matters.

The audit, covering the 2021-22 school year finances, was presented to the Valentine ISD Board of Trustees last week at a meeting in the schoolhouse. Trustees voted to approve the report, which has now been made public via the Texas Education Agency. The audit reveals $96,960 in unauthorized expenditures within fiscal year 2022, plus $68,075 from prior periods — the combined amount of $165,035, which the report says may be recoverable through insurance, was reclassified to accounts receivable. These adjustments allowed the district to pass a clean audit report free of material misstatements.

Because Valentine ISD is a public school district, the $165,000 in unauthorized transactions are taxpayer funds, Superintindent Debbie Engle confirmed. 

The dollar amounts in unauthorized transactions are preliminary, said auditor Kacey Gast, who presented the findings on behalf of the firm. The results of an additional, more in-depth forensic audit are still pending. That investigation is being conducted by a forensic auditor hired by Underwood Law Firm, the district’s legal counsel, said Engle.

In an interview with The Big Bend Sentinel, Engle said that pending the results of the forensic audit, she was unable to further specify the nature of the unauthorized transactions or how they were logged.

In the meantime, said Engle, preliminary findings have been turned over to the Texas Rangers and the Federal Bureau of Investigation. As of press time, no criminal charges stemming from the audit findings had been filed. The FBI declined to provide further information regarding the status of its investigation because it is ongoing. The Texas Rangers did not respond to requests for comment by press time. 

Engle said that law enforcement agencies may probe district financials from previous years, and would likely subpoena the forensic audit findings once complete.

Amidst the auditing process, Valentine ISD’s longtime director of finance and tax assessor-collector, Ernie Villarreal — who had been with the district since 2007 and oversaw its finances during the audited period — chose to step down following a brief suspension. Engle said that Villarreal was first placed on administrative leave in October, shortly after discrepancies were found during the routine audit process the previous month. He then resigned on November 15, said Engle, and gave no reason for his resignation.

When asked why Villarreal had been placed on administrative leave, Engle said it had been a stopgap measure pending the outcome of an investigation into the financial discrepancies.

“There were some charges that we could not determine and we did not have supporting documentation for, and we were starting an investigation,” explained Engle. 

Villarreal did not respond to requests for comment regarding his resignation.

Engle confirmed that the person engaged in the unauthorized transactions referenced in the report is no longer with the district, but would not speak with any greater specificity as the concurrent investigations are pending. (The audit also states that “personnel changes have been made” as a corrective action).

In the financial report, auditors recommend the segregation of financial duties that had previously fallen to one individual and the increased involvement of management “to help strengthen controls in areas which cannot be segregated, including board oversight.” As head of the district, Engle is listed as the responsible party in the report. 

Engle said the district has, per those recommendations, separated financial duties. The Region 11 Education Service Center has been contracted to assist with payroll and other matters, and an existing district employee has been performing accounts payable duties and tax collections while Villarreal’s position remains vacant. 

“We’re trying to find out exactly what happened and correct it so it doesn’t happen again,” said Engle.  

Due to Valentine ISD’s size, Engle said the director of finance and tax assessor-collector roles have traditionally been combined to create a sustainable job for one individual. In other nearby counties, such as Presidio County, the county tax-assessor collector handles school district property tax collections. 

“We were trying to have full-time duties and be able to afford to pay somebody a decent salary to perform those duties, [so] they combined them,” said Engle. 

The Jeff Davis County tax assessor-collector, Sheriff Bill Kitts, and his office temporarily stepped in to assist Valentine ISD this winter after they were left without an in-house tax assessor-collector in the wake of Villarreal’s resignation, but were unable to help the district long-term. The district will begin its tax season this summer when appraisal values are received by the district, with tax bills going out to property owners in October, said Engle. 

As far as immediate consequences of the unauthorized expenses go, Engle said it was negatively impacting the small district, which currently enrolls 42 students and adopted a deficit budget this year due to facilities acquisition and salary increases. 

“It’s hurting us. It shortchanges the kids,” said Engle. “It impacts the decisions as to what we do, anything extra we do — any new vehicles we might buy, a bus, playground equipment, trips, activities for the kids — it impacts all of that.” 

This is a developing story. The Big Bend Sentinel will continue to provide updates as they become available.