The discovery of an accounting error made by the Gainesville finance office, coupled with savings from last school year, means the Gainesville school system deficit is about $2.6 million smaller than first believed.

The system had estimated its deficit would be at $3.6 million this fall, but it now will be at about $758,000 to $1 million.

That’s great news for the school system and for taxpayers who are less likely to see property taxes increase this fall, said school system Chief Financial Officer Janet Allison.

The city had misallocated more than $1.2 million too much in tax revenues to the school system’s debt service account when it should have been directed to the school system’s general fund account, Allison said. The debt service account pays off general obligation bonds taken out in the early 1990s for school construction.

Allison said the city’s financial software unintentionally misdirected the $1,229,961 between fiscal years 2004 and 2006 because of an error during a software conversion. The school systems’ finance department confirmed the error with the city last Thursday, she said.

"This is huge for us," she said. "I really think this is the final piece to the puzzle."

Allison said the error seems only to have affected the two fiscal years for the school system’s debt service account. She said it was the city and the school system’s responsibility to ensure the correct transactions were made.

Allison said the error was not discovered sooner because the system’s finances have been in such disarray in recent years.

In June of 2008, system accountants estimated the Gainesville Board of Education had a more than $6 million deficit stemming from the rushed implementation of new accounting software. The software was incorrectly implemented and system accounts were linked that masked overspending.

"When you’re unraveling things, you have to wait for the dust to settle," she said of how the recent errors were found. "... Basically what happened is the city switched the columns. We got the money right."

Although all the property tax revenue was in the school system’s accounts, some of it was in the wrong account. The large amount of money in the debt service account caught Allison’s eye, triggering the correction.

"The balance that was there, in my mind, was too high," Allison said.

Gainesville Superintendent Merrianne Dyer said in addition to discovering the roughly $1.2 million error that can be applied to the system’s deficit, a 5 percent cut in all expenditures saved the system an additional $3.5 million in fiscal year 2009, which ended June 30.

Dyer said those savings, plus the recently found revenue, will reduce the system’s deficit by $4,689,849. The system initially planned to reduce its deficit, which was defined as about $5.4 million last month, by $1.8 million.

Dyer said the $3,459,888 in savings came from cuts to transportation, energy costs, personnel and travel.

The savings and newfound funds are cause for celebration, Dyer said.

"This means we’ll get out of deficit a lot sooner," she said. "Best case scenario, we could end this year with a little bit of a fund balance."

Despite the system’s healthier bottom line, Dyer said budgets will remain tight.

"We’ve got to hold the course to our savings and to our plan," she said. "We’re not finished until we have a healthy fund balance that’s at least 5 percent of our budget."

School board members David Syfan and Maria Calkins said once the system is back in the black, the first priority is to fully restore the salaries of all system faculty and staff. This summer, the board cut all employees’ salaries between $10 and $75 per month, and cut their own salaries by 10 percent and Dyer’s by 2 percent.