El Paso Independent School District’s former chief financial officer and her team were aware of the system’s worsening financial condition but failed for months to communicate the risks to the superintendent and board, EPISD’s chief internal auditor said Tuesday.
“The conclusions reached during this review extend beyond the budget overrun itself and reflect breakdowns in financial risk management and budgetary control processes that limited the timely identification, communication, and mitigation of significant financial risks,” Chief Internal Auditor Mayra Martinez said in a report outlining her findings to the school board.
She said EPISD needs to build an organizational culture that encourages employees to move beyond the chain of command when employees see significant problems.
“There probably needs to be more of an awareness of, you see something, you say something,” Martinez told the board.
Trustee Mindy Sutton said the audit findings exposed “severe incompetence” in prior leaders, apparently referring to Martha Aguirre, who served as CFO for several years and as interim superintendent from June to December 2025.
Martinez’s review began in early May after Aguirre made Superintendent Brian Lusk aware of a mushrooming deficit and then resigned. The internal auditor found that $10.3 million in budgetary savings and financial assumptions weren’t achieved, and $11.1 million in additional expenditures were made outside the board-approved budget for 2025-26.
The unrealized savings included almost $4 million in initiatives that district personnel had determined weren’t feasible before the budget was adopted in June 2025, Martinez’s report said.
The school board was aware of much of the $11.1 in additional expenditures added after the budget’s approval, but the added costs weren’t incorporated into the district’s spending plans through budget amendments.
“The adopted budget did not function as the district’s primary authorization and control mechanism,” Martinez’s report to the board said.
Martinez said her report makes 18 recommendations to strengthen governance, financial oversight, accountability, transparency and budgetary controls.
The chief internal auditor said she interviewed the five current board members but not the two board members who recently resigned, Daniel Call and Valerie Ganelon Beals, or previous board members.
The formal audit report will be released within 48 hours after Lusk and his leadership team develop a corrective action plan.
Martinez’s presentation added some information on how EPISD went from planning for pay raises in the 2026-27 budget in the early spring to slashing hundreds of positions and freezing pay just weeks later.
Trustee Jack Loveridge, who chairs the school board’s audit committee, said the report found several situations where Aguirre and members of the district’s finance department had a chance to inform the board and Lusk about the deficit but chose not to.
“It does kind of go into the culture of an institution that there is no protocol for what to do if your boss seems recalcitrant and doesn’t want to provide information to the government structure, and we want to change that as a board. We want to make sure that the administration has clear policies in place. If you see something, say something,” Loveridge told El Paso Matters ahead of the meeting.
The district’s budget problems came to light in early May, when Aguirre told Lusk that the deficit would reach the tens of millions of dollars by the end of the school year just weeks away. Lusk has said that Aguirre, who served as the district’s interim superintendent before he was hired in December 2025, had deliberately deceived him about EPISD’s financial situation.
The school board in June 2025 adopted a budget that called for a $6 million deficit, to be paid out of the district’s reserves.
By mid-May, outside consultants hired by the district had estimated that the deficit could reach almost $53 million for the 2025-26 school year and as much as $42 million for 2026-27, which would have vaporized most of EPISD’s reserves unless extensive cuts were made for the coming year.
As part of the district’s financial stability plan, trustees approved a reduction in force and broader staffing cuts designed to realign expenses with revenues and enrollment levels, which have been declining for more than a decade.
Overall, the district eliminated more than 800 positions, including hundreds of vacant jobs, while making 244 layoffs and reducing expenditures by approximately $57 million.
Some of the displaced employees have already been placed in other district jobs, reducing the number of layoffs to 195, Patricia Cortez, EPISD’s chief human capital management officer, said at Tuesday’s school board meeting.
Those actions substantially reduced, but did not eliminate, the deficit. Trustees ultimately adopted a 2026-27 budget with about $518.6 million in revenue and $522.9 million in expenditures, leaving a projected deficit of approximately $4.3 million.
Although the immediate crisis was triggered by a one-year deficit that had been allowed to swell for months before being brought to EPISD leadership, the district’s fiscal position had been deteriorating for several years, according to figures Martinez presented as part of her report.
After being appointed superintendent in 2022, Diana Sayavedra proposed and the school board adopted four consecutive deficit budgets. Between 2010 and 2021, EPISD had three years of deficit spending.
EPISD’s unassigned fund balance – essentially its available savings – stood at $125.2 million when she arrived in February 2022.
Sayavedra’s final budget for fiscal year 2025-26 – developed as she retired under pressure from the board majority – would have left the district’s savings account depleted by $30 million since she arrived at the district.
“This is not a financially healthy institution,” Loveridge said of the deficits and depletion of savings in Sayavedra’s tenure.
Loveridge was appointed to the board in 2024 and was initially part of a three-person board minority that was critical of Sayavedra’s leadership while she had the support of four board members. School board elections in May 2025 resulted in a 5-2 majority that was more critical of Sayavedra, and she retired in June 2025.
The actual revenues and expenditures discovered beginning in May 2026 reduced the unassigned fund balance by another $44 million, leaving EPISD with an estimated $60.3 million in unassigned fund balance. That’s a decline of 52% in five years.
El Paso’s two other large districts have also depleted much of their fund balances in that time.
The Legislature didn’t increase its per-student allotment between 2019 and 2025, which left Texas school districts struggling in a time when the cumulative inflation rate was 26%.
El Paso ISD, Socorro ISD and Ysleta ISD chose to dip into its savings rather than reducing expenses to match its revenues in recent years. Before 2025-26, Socorro ISD had deficit budgets for 10 straight years.
Socorro’s unassigned fund balance declined by 61% between fiscal years 2022 and 2025, and Ysleta ISD’s declined by 45% in that time, according to Martinez’s presentation Tuesday to the El Paso school board.
Ysleta trustees adopted a 2026-27 budget that reduces the district’s unassigned fund balance to $4.5 million.
The post EPISD finance leaders knew of budget risks for months but did not alert trustees, audit says appeared first on El Paso Matters.
Read: Read More