Oct. 6: City auditors issue a report highlighting problems in the School Department's accounting that "lends itself to errors going unnoticed."

2007

May 3: Portland city councilors learn that school officials did not cut $500,000 from the $82 million 2006-07 budget as ordered. The money was used to hire 25 additional people.

May 4: Superintendent Mary Jo O'Connor says she instituted spending controls in February and expects the budget to reflect the $500,000 reduction by June 30.

On or about May 10: According to the city's financial administrator, Paul Colpitts, he notifies the School Department's business manager that there is an estimated $2.4 million budget in the 2006-07 budget.

July 10: Calling it "regrettable but unavoidable," O'Connor announces that the School Department overspent its budget for the previous year by $1.7 million.

July 13: School officials warn the 2006-07 budget deficit may climb as high as $2.5 million after auditors complete their review this fall.

July 17: City and school officials agree on a plan to reconcile the previous year's budget deficit and to institute a budget review process. The School Department deficit will be covered by the city's review fund. Dipping into the reserve fund might endanger the city's bond rating, unless it can show that there is a plan in place to prevent future deficits.