NORMAL -- Unit 5 finances are improving, but the school district still has a long way to go to reach the state's top financial rating, auditors and administrators told the school board Wednesday night.

Auditor Tom Pfeffer of Gorenz and Associates Ltd. of Peoria told the board Unit 5 has moved off the state's financial watch list for troubled districts into "financial review" status, which is the second-best of the four rating categories.

To reach the top level - "financial recognition" - it must have higher balances in its reserve accounts, he said.

The district overspent its $84.6 million education fund for 2008-09 by $3.2 million, drawing down the reserves. About $1 million of the education fund overspending was due to negotiating more insurance coverage for union employees after the budget was set, said Jim Gillmeister, Unit5's chief financial officer.

The district closed the books on 2008-09 on June 30 with $16.3 million left in reserve in its three main operating funds. That means the district has enough money in reserve to run for about a month, which is "tight," Pfeffer said.

Board member Wendy Cannell said replenishing reserves is almost impossible when the state continues to run behind on is aid payments.

The late income payments, including county property taxes in 2008, also were blamed for a portion of the district's overspending on some budget line items. For example, $600,000 in utility bills were delayed so long they had to be paid out of the 2008-09 budget instead of the 2007-08 budget, pushing up the spending in the 2008-09 budget.

Pfeffer praised the district for changing its budget recordkeeping.

"Things have improved tremendously," he said.

Superintendent Gary Niehaus said the district still needs to do a monthly analysis from the bottom to the top to ensure the district stays on target for its budget. For example, overspending in one school may throw off the entire district.

Board member Jay Reece called for a more conservative budget which allows for the possibility of late payments by the state to avoid overspending in the future.

"I know some of this funding difficulty is funding timing," he said.