Following the death of its business administrator in August, Grand School District in Moab discovered a $2 million deficit in its budget.

The State Board of Education Friday granted the district permission to reallocate funds within its budget so as to maintain district operations.

Kaaran Jorgen, president of the Grand school board, was in tears after the board's vote. "I am so grateful and relieved that our teachers and staff don't have to take the full hit for these erroneous fund balances," she told the Deseret News.

The timing is extremely bad for Grand District, which already was suffering from budget cuts, just like the other 40 school districts in Utah due to state revenue shortfalls.

Grand officials are discussing other budget reductions, including slicing $100,000 from student activities; decreasing salaries by 4 percent; requiring an insurance co-pay for all insured district employees and implementing a two-day instructional time furlough for a total five-day furlough.

The district doesn't want to do layoffs, consolidate schools or cut salaries up to 12 percent – which would have been options of the district didn't get the state's permission to reallocate funds.

State Office of Education auditors will be sorting out Grand's budget mess. District officials say they don't believe it is an embezzlement issue but one of financial mistakes. "It's more accounting errors," Grand district Superintendent Margaret Hopkin told the Deseret News Friday.

Grand district's business administrator Doug Cannon died due to illness. The district brought in Richard Clark last summer to temporarily oversee financial matters two days a week. Clark is a recently retired business administrator from Murray School District.

Clark discovered many red flags in the district's budget – mainly that the Maintenance and Operation fund is down $1 million from last year. Since this year's budget was based on inaccurate assumptions from the previous year, the district is predicted to be deficient another $1 million. Meanwhile other district funds, such as the capital fund, have more money than they should.

"We were stunned," Hopkin said. "We are still reeling."

Grand district now has "financially distressed status" for one year. To obtain this status, the district had to meet eligibility requirements including: being incapable of meeting statewide educational standards; and having a deficit of 3 percent or more in its Maintenance and Operation fund.

Grand District actually has an 8 percent deficit in its operating budget, said Todd Hauber, State Office of Education associate superintendent of business services. "It's a significant deficit within their finances," he said.

The State Board's auditor will spend a couple of days in Grand District offices and then do an assessment. The auditor will be trying to discover how far back the district's financial errors go, how big a problem it is and how it occurred. "We're pretty sure it's not (embezzlement) but you never know," Hauber said. "We'll make sure that isn't the case."

Grand district, in east-central Utah, has approximately 1,500 students in two elementary schools, one junior high and one high school.

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