PILOT POINT — The Pilot Point school district made good financial progress during the 2008-09 fiscal year, an independent auditor told the school board this week.

The annual report was refreshing news to school officials whose district three years prior faced an $800,000 deficit that was attributed to a drop in enrollment, overstaffing, state funding cuts and bookkeeping errors.

Auditor Dan Tonn of the firm Hankins, Eastup, Deaton, Tonn & Seay noted that as of June 30, the end of the district’s fiscal year, the district had more than $1.65 million in its unreserved fund balance for the general fund — the savings a district carries from year to year.

The district’s assets exceeded its liabilities by more than $5 million, a $1.4 million improvement over the previous year, according to the report.

The audit reflects 10 months of financial data. During fiscal year 2009, the district was in the process of changing its fiscal start date from Sept. 1 to July 1 so that budgets and accounting were better aligned with the school year.

“I think it’s a really positive report in terms of finances of the district,” Tonn told trustees Monday.

Since Superintendent Glenn Barber arrived in 2007, the Pilot Point district has developed plans to cut expenses while increasing its reserve fund.

In October 2008, voters passed a 9-cent tax rate increase of $1.39 per $100 property valuation. The rate increase allowed for staff pay raises, more funds to cover increased operating costs and additional money in the district reserve fund.

The Texas Education Agency recommends that districts have three to four months of operating funds in their reserves for emergencies, Barber said.

According to the audit report, that equates to between about $2.7 million and $3.17 million. The district has $1,653,497 in reserves, Barber said.

Reaching that goal could take at least two years, Barber said. As operating costs increase, the funds needed to run the district for a month also will grow, he said. However, Barber said the district anticipates designating more than $225,000 for reserves this year and about $148,000 for fiscal year 2011.

“We’re not there yet by any means but we’re going to keep working at it,” he said.

Tonn said no difficulties or problems were encountered in conducting the district’s financial audit.

The district’s finances were given high marks with an unqualified opinion, the report states. Tonn said that the district also met indicators for the Financial Integrity Rating System — indicators that Pilot Point did not meet the previous year.

Auditors recommended that the district “develop additional procedures that automate the process in accumulating the number of meals eligible for reimbursement” through the federal child nutrition programs.

Findings from the audit showed that the district incorrectly calculated the number of meals for reimbursement. Since then, the district has filed “corrected reports to correct the reimbursement amount,” according to the audit report.

School board President Larry Smith said he found the report to be good news. In recent years the district has worked at increasing its reserve fund, and the passing of the tax rate election has helped, he said.

Seeing such a positive report shows the district is moving in the right direction, Smith said.

“We’re happy campers around here,” he said. “It’s really, really good news for the district.”

BRITNEY TABOR can be reached at 940-566-6876. Her e-mail address is btabor@dentonrc.com.