The Dallas Independent School District violated rules for a number of federal grant programs in 2008-09, including giving "teacher incentive" stipends to educators who may not have been eligible for the awards, auditors have found.

Deloitte & Touche auditors questioned almost $80,000 in stipends awarded through the Teacher Incentive Fund, a federal program that rewards teachers and principals based on gains in student achievement and other measures, according to the 2008-09 annual financial report approved by trustees Thursday evening.

"Documentation supporting that employees met the required gains in student achievement necessary to receive an incentive could not be provided in all circumstances," auditors stated, basing the finding on a sampling of employees checked.

Auditors also noted that the district couldn't prove that it had met a matching requirement to spend at least $500,000 of its own money on the stipends – another violation of the federal rules.

DISD chief financial officer Larry Throm said Thursday that the district did spend the money required for the match, but did not properly code the expenditure in its financial accounting system. The district has been working on improving the system.

Although auditors found problems in several areas, trustees noted that the number of significant negative findings, called material weaknesses, has gone down from previous years.

The overall audit, most of which was released earlier this week, showed that the district posted a $22 million deficit in its main operating account for the year ending June 30, drained more of its meager reserves to cover the red ink and borrowed money to make ends meet.

Still, the situation could have been worse. After a budget debacle last fall, the district estimated a shortfall of at least $74 million in its chief operating fund. The district laid off hundreds of teachers and staff members and made other cuts to minimize the financial crisis.

"We've come a long way. We really have," Trustee Jerome Garza said Thursday evening.

At the same time, Garza asked that trustees be kept informed of efforts to fix significant problems cited by the auditors – some of them not corrected from previous-year audits. Trustees agreed to begin receiving quarterly status reports on those areas.

Auditors also questioned almost $200,000 in federal grant money used to pay employees who may or may not have worked in the areas covered by various grant programs. The district could not provide appropriate documentation to prove the expenditures were correct, a violation of federal rules.

In a finding that dates to 2006, auditors also noted that the district may be liable for $3.5 million in questionable expenditures related to the Title I federal grant program for disadvantaged children.