HARLINGEN — A private investigations firm is being hired to conduct a “compliance review” of the city’s investment policy and its investments.
After two weeks of debate, city commissioners last week voted 3-2 to hire Safe Track, a McAllen firm, for $80,000 to determine whether the city’s investment policy and its investments comply with state law.
Commissioners Michael Mezmar and Rene Perez cast the dissenting votes.
During a special meeting, Mezmar, Perez and Mayor Chris Boswell questioned whether the firm had experience and staff including certified public accountants and attorneys to conduct a financial review.
Meanwhile, Mezmar questioned whether the review was aimed at investigating a “political connection” between the city and one of its banks, Texas Regional Bank, which employs at least two airport board members.
“I wanted to ask the commission to hire this company to do a full review of our investment policy, see if we’re in compliance, see if we did all the processes correctly,” Mayor Pro Tem Richard Uribe told commissioners during Thursday’s special meeting. “The way I read everything, I don’t think we’re in compliance and I think it’s an opportunity to fix what needs to be fixed and have our money in the best possible place.”
Uribe questions CD investments
Earlier this month, Uribe began questioning Finance Director Robert Rodriguez’s decision to move $3 million into a certificate of deposit already holding $2 million, arguing the city wasn’t getting the best return on the money that could have funded drainage projects.
Uribe, who said the Harlingen WaterWorks System moved $9 million into CDs, said he wanted to know whether the city had changed a policy which gave Dallas-based Hilltop Securities, the city’s financial advisor, oversight over investments.
During Thursday’s meeting, Rodriguez presented commissioners with a five-year summary of the city’s cash and investments, adding the city’s investment policy has assigned the finance director to oversee investments since the 1960s.
“It’s always been delegated to the finance director,” he said. “There hasn’t been any change.”
Texas Regional Bank offers highest rate
Texas Regional Bank offered the highest rate of return at 0.46 percent when he shopped around in 2020, Rodriguez said.
“In comparing those, we did our due diligence,” he said.
Meanwhile, Frost National Bank offered 0.0001, TexPool offered 0.147, BBVA offered 0.20, Lone Star National Bank offered 0.3 percent and the U.S. Treasury offered 0.12 percent.
“I congratulate you on shopping a good rate and getting a good rate for the citizens of our community,” Boswell told Rodriguez.
Shopping best rates
During discussions, Uribe questioned whether Rodriguez had contacted other banks.
“You’re saying you shopped it out,” he said. “Did you shop it out to all the banks or you pick and choose who you call? Were there other banks in the city — were there other banks in the region — or you just picked a handful and you called and said, ‘OK.’ How are we to know it was the best possible? There’s got to be ways to look at that and that’s one thing this company will tell us.”
“Our job is to make sure we’re getting the best possible return and provide you with the tools to make that happen.”
In response, Rodriguez said, “There’s so many banks. We couldn’t possibly be able to get every single bank.”
“There’s not a minimum or a maximum in the investment policy. Those are just the larger ones that we try to select that were available.”
Meanwhile, Commissioner Frank Morales said he wanted to review any connection between the city and Texas Regional Bank employees who sit on city boards.
“One thing that makes me wonder — if we start looking through who the board members are, a lot of them happen to be with Texas Regional Bank,” he said. “Is that a coincidence? I’d rather turn around and make sure and verify that everything is up to speed across the board.”
During discussions, Uribe questioned the reason a copy of a Texas Regional Bank document didn’t include the bank’s signature.
“That’s a problem. We need to fix that process,” he told Rodriguez. “This is maybe something inherited — it’s the way it’s always been done. But we need to be transparent, more accurate, more organized.”
In response, Rodriguez said Dallas-based Federal Home Loan Bank held the original document.
“We have contacted Federal Home Loan Bank to get a copy of it,” he told Uribe. “We’ve been trying to get it.”
City’s CD policy
In reviewing Rodriguez’s investment documents, Uribe questioned the reason the summary didn’t include guidelines regarding certificates of deposit.
“It literally states in our policy that we have a CD policy,” he told Rodriguez. “That’s why we need to review it. We need to make sure we’re in compliance with state and federal laws. I don’t think it’s put together very well, at least for what we deserve or what I expect and I don’t think it has the best practices available.”
“That’s why I want to hire a professional company that’s going to come in and go through every single step, make sure everything’s in compliance, report back to the commission and say, ‘This is what we need to address to put us into compliance and how we can better handle our money.”
Hilltop Securities’ review
Meanwhile, Boswell said Hilltop Securities found the city’s investment policy, which commissioners had approved in April 2021, in compliance with Texas law.
“I’m puzzled at what we’re concerned about here because this notion that we were being paid a below-market rate is just patently false,” he told commissioners. “I don’t understand why anyone would be critical of you in making this decision because it sounds like it was a very good financial decision for the city of Harlingen.”
In response, Uribe said Hilltop Securities limited its review of the city’s investment policy.
“‘Our review was limited in scope with the primary purpose being to evaluate whether the city’s policy conforms to … the act,’” Uribe said, reading from Hilltop Securities’ email. “‘We did not seek to ensure the city’s funds and procedures are addressed in the policy nor have we reviewed compliance of the policy or internal controls of the city.’”
During discussions, Boswell said Hilltop Securities found the city’s investment policy in “full compliance.”
“‘As a result, we believe the city of Harlingen’s investment policy remains in full compliance with state law and recommend no changes,’” he said, reading from the company’s email.
Safe Track experience
During Safe Track’s presentation, an official who didn’t state his name told commissioners he had served 23 years with the FBI while the staff making up the company founded in 2008 included officials who had served with federal and state law enforcement agencies.
After the presentation, Boswell questioned the company’s experience in conducting investment policy compliance reviews.
“I went to your website and I looked at the services that you offer and here’s the menu with services you offer: ‘Armed and unarmed security guards, video monitoring systems, escorted transportation services, GPS tracking and panic buttons, first responders, safe alert system, safe training courses, due diligence and background investigations and regional intelligence consultation.’ I don’t see anything in here about performance auditing or forensic auditing.”
In response, the company official said, “We do do it. We do quite a bit of it.”
Boswell added, “But it’s not something that you currently specialize in but you don’t advertise it on your website.”
Push for Ernst & Young
During discussions, Boswell suggested commissioners request Ernst and Young, the international accounting firm commissioners hired at $60,000 to conduct a performance audit of the city’s public works department, perform the investment policy compliance review.
“I don’t understand why we wouldn’t want to have Ernst and Young, who’s already been vetted by the commission — we’ve already seen all their requests for proposals — why we wouldn’t go back to Ernst and Young and ask them to add this to the list of things to do.”
“They are a nationally recognized, national Big Three accounting firm that, as they indicated to you in their proposals to the commission, they can perform both performance audit services and they can perform forensic accounting services.”
Perez also suggested commissioners give the job to Ernst and Young.
“I agree this needs to be done,” he said, referring to the compliance review. “I don’t feel comfortable with this specific company. It doesn’t seem to me that this company … has the experience that’s necessary. I think it’d be a good idea to have lawyers or also CPAs on the staff that would be doing this investigation. I would agree with Ernst and Young.”
