Report: Progreso ISD allowed serious violations of financial requirements - The Monitor: News

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Report: Progreso ISD allowed serious violations of financial requirements

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Posted: Monday, November 4, 2013 8:54 pm

PROGRESO – Leadership of the Progreso school district failed fundamentally to manage its finances and knowingly broke federal and state laws, the Texas Education Agency said in findings sent to district officials Monday evening.

TEA found the district didn’t keep credit card receipts and contracts, didn’t protect itself from theft and didn’t fingerprint employees, among other problems.

“The violations found through this investigation reflect intentional and unethical acts by board members and district administrators that compromise the basic mission of the Texas education system,” the report says.

The agency launched an investigation into the district’s management Aug. 29, after Michael “Mikey” Vela, his brother Mayor Omar Vela and their father Jose Guadalupe “Lupe” Vela were indicted on corruption charges.

The men served, respectively, as the district’s school board president, security and truancy coordinator and maintenance and transportation director. Other family members were employed as the assistant superintendent, asset and risk manager and interim business manager.

An FBI agent testified that the Velas had essentially controlled the small city for years by cooperating with those who bribed them and punishing those who did not. Many of the allegations center around the school district, where the Velas reportedly collected huge amounts of cash in exchange for contracts and tried to keep the superintendent confined to his office when he began cooperating with investigators. 

TEA’s probe found the district had failed in six major areas: fiscal management, federal program funds compliance, board duties, criminal history record reviews, use of district resources for personal benefit and records retention.

The district did not keep credit card receipts or written contracts with many vendors. TEA cited the indictment’s allegations that the Velas extracted kickbacks by having contractors submit false invoices on projects including a new gymnasium and elementary school.

One firm, for example, reportedly billed the district for some $13,000 over two years for products it never delivered.

TEA found the district lacked overall policies to account for money and did not keep track of equipment worth less than $5,000, so many of those things are missing – including at least 40 iPads.

The district lacked accounting of how it spent federal grant money and didn’t maintain control of how it was appropriated. In particular, auditors noted that payments to vendors did not receive approval from the appropriate personnel.

The report says, if the indictment is true, the board failed in its duties and the Velas orchestrated “a scheme to defraud and to deprive the district of money and property through bribery, kickbacks and the concealment of material information.”

It also found that the board members didn’t complete required training hours, employees were allowed to work with students without being fingerprinted, contractor records and conflict-of-interest statements are missing, and personnel had been used on district time to repair the roof of the Board Room Bar & Grill, which Lupe Vela owned.

TEA said it initiated a separate fingerprinting audit during its investigation to address allegations that people with felony convictions were working with students.

It also found that Superintendent Fernando Castillo may have used a district credit card to pay for the personal expenses of meals at McAllen restaurants Santa Fe Steakhouse, Cabritos Nuevo Leon and P.F. Chang’s.

The report does not say what action will be taken against the district – as that is handled by a separate branch of the agency – but district attorney Kevin O’Hanlon said Monday evening that he expected to be notified of sanctions within the next couple of days.

The report says such sanctions could include lowering the district’s accreditation status.

“We are required to, one, distribute it to our board members, which we’re working on this evening,” O’Hanlon said of the report. “We’ll have a meeting to go over this … and I want to find out tomorrow what the sanctions will be.”

The report said Progreso would need “extensive and long-term intervention to restore integrity to the district’s operations.”

O’Hanlon said the district would probably try to time a meeting on the subject to when a TEA team might be in town, and noted the district would have to obtain permission if it calls a meeting outside of its regularly scheduled times.

“I’m sure we’ll be answering media questions for the next little bit and then will go to work putting systems in place to make sure this never happens again,” he said. “We need to rebuild the business function pretty much.”

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