Sunday, July 14, 2024

GISD board clashes over proposed HCAD forensic audit

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Amid parliamentary confusion and points of order, the Granbury Independent School District board of trustees found itself in a spirited debate over a proposal for a forensic audit during a regularly scheduled meeting June 24.

Place 3 Trustee Melanie Graft and Place 7 Trustee Karen Lowery initially submitted a resolution to the board calling on the Hood Central Appraisal District to conduct a forensic audit.

The topic first came up during a Granbury City Council meeting May 21 when Mayor Jim Jarratt expressed concerns that excess funds from the HCAD were not being returned to the appropriate taxing entities.

"I have no reason to believe that there's anyone that has taken a financial gain,” Jarratt explained, during the council meeting. “I have no reason to believe that at all. I do believe though, that there are processes and procedures that have probably been inherited, at least two and maybe more … that raise concern.”

Jarratt said the reason the HCAD was holding the excess funds was due to a desire to construct a building — specifically, a home office for the appraisal district.

"When you start spending money, it's the approval of the entities, and there's a resolution process that you go through to request that of the entities — and it never occurred,” he previously said.

According to Jarratt, a contract was written between HCAD and Cauble Hoskins Architects that involved a $333,000 purchase for the home office, however even after the deal fell through, $132,000 in taxpayer funds was never returned to the entities.

"I have documentation from the appraisal district, and it shows a selling point made to the appraisal district by Government Capital Corporation, and it was not made to the appraisal district; it was made to the HCAD Home Office Corporation, which if you go back and look at the minutes, there's a resolution that has been made by the HCAD to form a home office corporation, naming the directors of the HCAD as directors of the home office corporation, but not responsible to the HCAD,” Jarratt said. “The information documents, the bylaws, they all seem to contradict the tax code.”

The Hood County Commissioners unanimously approved a resolution May 28, also calling on the HCAD to undergo a forensic audit of the prior five fiscal years.

During the commissioners meeting, Precinct 2 Commissioner Nannette Samuelson explained that last summer, there were a lot of questions surrounding the appraisal district and the funds that were being held in non-compliance with Texas Tax Code 6.0 — which ultimately resulted in a refund back to the taxing entities of more than $2 million.

“It has since been discovered that the prior board of the appraisal district also misappropriated an additional $387,000,” Samuelson said May 28. “This additional expense occurred as the result of the Central Appraisal District forming the Hood Central Appraisal District Home Office Corporation, appointing themselves as directors and seeking to borrow $6.2 million from Government Capital Corporation to build a new building. The $387,000 was then spent on architectural design and construction fees, including fees to appraise and survey the GISD-owned property that was being pursued as a swap for the existing HCAD office building. The HCAD Home Office Corporation formation documents and the bylaws are in direct conflict and contradict the requirements of the Texas Tax code 6.0."

According to Lowery and Graft’s resolution, it was also the concern of GISD that there may be additional funds that were inappropriately allocated. They requested the district also be assured prior inappropriate budget actions and practices have been corrected.

As soon as discussion began, however, Secretary Billy Wimberly issued a point of order, stating the Agenda Item Request Form was inappropriately filled out. Wimberly said the resolution does not apply to the business office and facilities of GISD, nor does it fit any strategic planning goals relating to the business and operations check made on the form. The form also indicated there would be no financial impact to GISD with this resolution.

"I move to suspend indefinitely this request for resolution presented,” Wimberly said.

“When I submitted this, you didn’t come back and tell me there was anything wrong with it,” Lowery said. “You went ahead and agreed to put it on the agenda.”

Place 2 Trustee Nancy Alana seconded Wimberly’s motion.

“You've made your point. I understand what you're saying,” Board President Barbara Townsend said, addressing Lowery. “The only problem I have with it is it really does have financial impact, because where their budget comes from, 52% of their budget comes from us. So, if they do a forensic audit, we are paying 62%, so we have to look at ‘Do we have the money in our budget for them to do a forensic audit?’ And we don't even know how much it's going to cost, so I really worry about that.”

Wimberly also pointed out that HCAD gets audited every year and that they have had successful, clean audits every time. He said he considers the audit a “waste of money.”

"I think a better question is how much taxpayer's money has GISD already spent on the cost of an unapproved HCAD building, and how much more we’re going to allow this to go on,” Lowery said. “This is not an audit. This is a forensic audit, and there's a big difference."

Place 3 Trustee Melanie Graft added that the city of Tolar, Granbury City Council and the Hood County Commissioners Court have already approved a resolution to request the HCAD to undergo a forensic audit.

"I think it's a way to be transparent to the taxpayers,” she said. “It is their money, so if we choose not to do it, I don't think that plays well with the voters at all.”

“But none of those others are having to pay the bulk of it that we are; that's the thing,” Townsend said. “I mean, Tolar is what? 2%? Maybe 5%? And we're 62%. We have no idea what the price is. I propose that those entities that want to do the forensic audit should go ahead and definitely have it done, and they split the cost of it.”

Lowery then suggested for the board to suspend the rules for public speaking and allow Mayor Jarratt to explain the situation. Wimberly pointed out the board had already made a point of order and that a motion was on the table.

Alana said she doesn’t understand how the school district has the authority to request a forensic audit from the HCAD. She seconded Wimberly’s comment that there haven’t been any “red flags” brought up in any of the HCAD’s previous regular audits.

"I also know that this is more of a political issue than it is anything else,” she said. “We have a group of politicians that enjoy sowing the seeds of mistrust in the community, and this is another political strategy to get the taxpayers to not trust those that have been appointed to take care of their finances. ... It is my opinion that this is pure politics, and I will not vote for a forensic audit.”

Lowery gave an overview about the situation, stating that without the taxing entities’ approval May 18, 2023, the HCAD passed a resolution to purchase GISD property for $565,000 and to borrow $6,250,980 to build a new HCAD building. She explained that all emails and correspondence regarding the HCAD’s home office were laid out in a red book.

"This expense to the taxpayers was not approved by the taxing entities as required,” she said. "I think there's enough things here and in this red book, if you look through it, that says that there needs to be a forensic audit for the taxpayers.”

“I don't question any of what you just said, but I do not believe that a forensic audit is called for when they do a regular audit every year and there have been no indications of anything,” Alana said.

“Regular audits are only balance sheets,” Lowery explained. “To do a forensic audit, they're going to look at each line, each thing, and see where there might be a problem.”

“I will not vote for a forensic audit,” Alana repeated.

Wimberly then called a question, which is a motion to end discussion on an item and to immediately bring a pending question to a vote.

However, the call to question left many members confused about what they were voting on.

Townsend first asked members to vote on the resolution for the HCAD forensic audit but was corrected by Wimberly that the vote was on whether or not to call the question.

“We’re voting on whether or not to actually vote on this,” Townsend said. The board voted unanimously in favor of its understanding of the motion.

“Now we’re going to vote on whether or not we want the resolution to conduct the audit, correct?” Townsend asked.

“The motion was the move to suspend indefinitely the request for the resolution as presented,” Wimberly said.

"We have to revote that because that is not what people thought they were voting on," Townsend said.

Following more deliberation, the board voted 4:2 to end discussion on the topic, with Lowery and Graft voting against the motion.

The second motion was for the board to suspend indefinitely the request for the resolution as presented. The motion passed 4:2, with Lowery and Graft voting, “No.” Vice President Courtney Gore was absent from the meeting.