Mineral Wells Area News

Reporting By Gary Norman | Mineral Wells Area News

Representatives from the Texas State Auditors Office have completed an audit of the Palo Pinto County Municipal Water District No. 1.

Performed during the first week of February 2026, the auditors evaluated the financial operations of the District by examining contracts and accounting records, testing financial controls, and interviewing staff and Board of Directors members. A report on their findings is expected to be issued in July 2026.

District General Manager Howard Huffman said the State Auditor’s Office notified him in December 2025 that an unnamed State Representative had requested the audit. In a letter dated Dec. 22, 2025, State Auditor Lisa Collier, CPA, wrote, “The audit objective is to determine whether the District has processes and related controls to ensure that it complies with applicable statutes and requirements.”

In an email sent the same day, the State Auditor’s Office requested the following documents to assist in planning the audit:

• Audited financial statements for fiscal years 2023, 2024 and 2025.
• District policies and procedures related to financial and operational functions, along with any ethics or conflicts of interest policies.
• A description of the District’s rate-setting methodology and a history of rates from 2023 forward.
• Minutes of District Board meetings from 2023 forward.
• A copy of the agreement between the Texas Water Development Board and the District for construction of the Turkey Peak Reservoir.
• Any other audits or studies performed by consultants for the District during the same time frame.

During a conference call with the State Auditor’s Office, Huffman and District Board members asked for clarification regarding the scope of the audit.

“We absolutely wanted a more defined scope and what we were told is that this type of audit is when they come in and they take a 50,000-foot view of the District and then from there they determine if a more focused scope of work is needed,” Huffman said.

Huffman noted the District had recently completed its annual independent financial audit (which was shared at their January public meeting) making the requested documents readily available. Most were uploaded to the State Auditor’s intake system within 24 hours.

After reviewing the documents and planning their work, auditors spent three days onsite completing their examination. Huffman said discussions largely focused on where payments were directed and how disbursements are controlled, how water rates are calculated, possible conflicts of interest at the Board level, and the purchase of FM 4 from the Texas Department of Transportation.

Spending authorization controls were reviewed, as were the separation and controls between the District’s and the City of Mineral Wells’ accounting systems.

As conversations turned to water rates, Huffman said there appeared to be some confusion.

“I don’t sell potable water. I have three customers that buy raw water, and I think that was eventually straightened out. Once we had a chance to sit down as a collective group and have that conversation, those questions stopped because they realized I do not generate water rates,” he said.

Regarding potential conflicts of interest, Huffman said auditors specifically asked about recent land acquisitions. He said no Board members were conflicted and that any conflicts would have been revealed during title work related to land purchases.

He also said he was able to demonstrate District ownership of the section of FM 4 associated with the Turkey Peak Reservoir project by producing survey documents, appraisals, deed records and financial transaction documentation.

Huffman said three minor deficiencies were identified during the audit. A hard copy of the District’s latest third-party financial audit had not been mailed to the Texas Commission on Environmental Quality as required by state law, and certain information regarding the Board of Directors had not been filed with the TCEQ and the Secretary of State.

According to Huffman, a copy of the financial audit was mailed within 24 hours, and the Board-related information was filed within two days. He added that auditors may recommend additional financial controls but noted implementation could be challenging given the District’s small staff.

Following the audit notification, Mineral Wells Area News submitted a request under the Texas Public Information Act seeking communications between the State Auditor’s Office and the office of State Rep. Mike Olcott regarding the District. In response, the State Auditor’s Office informed MWAN that certain responsive records were considered working papers and not subject to disclosure. The agency further notified MWAN that it was seeking a ruling from the Office of the Attorney General of Texas regarding whether 25 pages of communications between its staff and Rep. Olcott’s office concerning “audit matters” must be withheld under legislative privilege  .

The filings do not describe the specific substance of those communications. MWAN contacted Rep. Olcott’s office to ask whether the audit was requested by his office and what prompted the communications. No response was received prior to publication. The Attorney General’s Office has not yet issued a ruling regarding whether the communications must be disclosed.

Huffman said he expects to receive at least a preliminary report in July 2026. While uncertain whether the scope of the audit will be expanded or finalized, he said he looks forward to reviewing the findings.

“My career and education is all about quality and this is just a quality check of the District,” Huffman said. “And I informed the State Auditors team that was here, that is my attitude towards them being here. They are here to make me better and I cooperated with that spirit.”