Eagle Pass Ethics Review Commission Finds City Manager and Finance Director Failed to Follow Required Budget Appropriation and Approval Procedures

By: Jose Landa, Copyright 2026 Eagle Pass Business Journal, Inc.

The Eagle Pass Ethics Review Commission issued its Findings and Conclusions of Law on September 3, 2026 regarding a citizens complaint filed by Enriqueta Diaz, alleging that City Manager Homero Balderas and City Finance Director Felix Castillo had failed to follow required appropriation and approval procedures concerning $5,379,709 in over-expenditures in the City’s 2024-2025 fiscal year budget.

Diaz alleged that $5,379,709 was overspent by the City during the 2024-2025 fiscal year without any amendments approved by the City Council. Diaz noted there are no City Council agendas nor minutes reflecting approval of the $5,379,709 over-expenditures.

The City’s Ethics Review Commission found that City Manager and Budget Officer Homero Balderas and Finance Director Felix Castillo failed to follow required local and state budgetary procedures involving expenditures, budget amendments and more than $4.25 million recorded as General Fund transfers.

The findings were detailed in a four-page document signed September 3, 2026, following the commission’s review of a sworn complaint submitted by Enriqueta Diaz.

The panel consisted of Ana Laura Castillón, Eric Villaseñor and Isabel Perez.

According to the document, the review committee requested written information from Balderas concerning budget amendments, General Fund transfers, capital-outlay expenditures, the scope of his authority as budget officer and supporting financial records.

The original deadline was August 20, 2026, and an extension was approved through August 25. The panel stated that it had not received a written response from Balderas when it considered the matter.

The panel concluded that Balderas failed to cooperate with the investigation, violating a provision of the Eagle Pass Code of Ethics requiring city officials and employees to cooperate with the commission and provide requested testimony or evidence.

The committee also requested information from Castillo. His consolidated response was dated August 26, one day after the extended deadline.

The panel stated that it considered his response despite its late submission.
The commission found that the city’s General Fund balance decreased from $12,363,383 at the beginning of fiscal year 2025 to $6,983,674 on September 30, 2025, representing a decrease of $5,379,709 during the fiscal year.

The findings also identified two budget amendments totaling $1,335 that transferred appropriations between departments.

Castillo acknowledged that the amendments should have been presented to the Eagle Pass City Council but were not.
The panel examined five capital-outlay accounts in which $116,113.18 in expenditures was recorded without appropriations in those accounts.

Of that amount, $108,494.77 involved four grant-funded acquisitions. Another $7,618.41 involved Eagle Pass Police Department office and other equipment paid for through the General Fund.

According to the findings, Castillo acknowledged that recognizing or receiving a grant did not automatically provide the city with authority to spend the money. No budget amendments appropriating the four grant awards were presented to or adopted by the City Council.

The largest issue involved an additional $4,254,449.51 recorded as General Fund transfers.

The city’s Annual Financial Report showed a final budget of $2,882,744 for General Fund transfers. Actual transfers were reported at $7,137,193, creating a negative variance of approximately $4.25 million.

The panel found that the additional amount resulted from Journal Entry 5271 and was not included in the adopted or amended appropriation for General Fund transfers.

It further found that the accounting entry was not preceded by City Council authorization or a budget amendment.
The entry reclassified $124,626.51 to the Main Street Fund, $32,086.05 to the Disaster Relief Fund, $315,030.26 to the Economic Development Fund, $3,668,680.11 to the Environmental and Solid Waste Fund and $114,026.58 to the Capital Replacement Fund.

Those amounts totaled $4,254,449.51.
Castillo described the transaction as a year-end, noncash accounting reclassification of interfund balances that were not expected to be recovered within a reasonable period.

He said it was not a new expenditure or cash disbursement.
The findings did not state that $4.25 million in cash was missing or had been personally taken by either official. The panel’s concerns centered on whether the reclassification required prior City Council authorization, a budget amendment and direct disclosure to the governing body.

Castillo acknowledged that the effect of the journal entry on the General Fund was significant enough that it should have been specifically reported to the City Council.

He also acknowledged that it was not reported and accepted responsibility for that communication deficiency.

The panel determined that the actions taken by Balderas and Castillo failed to adhere to required budgetary procedures.

It also concluded that the evidence supported the complaint’s allegation that the city failed to maintain expenditure compliance with its adopted fiscal year 2025 budget.

The panel recommended that the City Council take appropriate action concerning Balderas for the budget-compliance deficiencies and his failure to cooperate with the investigation.

The possible actions identified by the panel included advanced municipal-budgeting and ethics-compliance training, a corrective-action plan and placing Balderas on probation for one year.

The commission separately recommended corrective action regarding Castillo under the City of Eagle Pass Personnel Rules and Regulations.

The document also referred to Section 102.009 of the Texas Government Code. Municipal budget requirements under Chapter 102 are contained in the Texas Local Government Code.

The panel’s central finding determined that budget actions and expenditures were handled without the required appropriation and approval procedures and that the City Council was not adequately informed about a multimillion-dollar accounting action affecting the General Fund.

The Ethics Review Commission found that Diaz’s allegations are supported by evidence and meritorious, recommending that the City Council take appropriate action against City Manager Homero Balderas for his budget compliance deficiencies and his failure to cooperate with the Ethics Review Commission’s investigation. The commission stated the City Council take appropriate action under state law and any applicable employment agreement, suggesting Balderas be required to take advance trainings in municipal budgeting procedures and ethical compliance as well as probationary status for a one year period with corrective action plans in place.

The Ethics Review Commission also recommended that City Finance Director Felix Castillo be subjected to appropriate corrective action for his budget and appropriation procedure deficiencies.