The South Whidbey Board of Education’s Monday night workshop was more like reality television than a business meeting.

Drama unfolded throughout the evening as news of a $369,000 shortage in the district’s fund balance was made public for the first time. In short order, one district administrator resigned and another was asked to do so as board members wondered how to get back money that never existed.

Before the board meeting, district business manager Mike Moore admitted to making budgeting mistakes that led district administration and members of the board of education to believe there was as much as $700,000 in the district’s fund balance. As it turns out, there was only $238,000.

In a prepared statement he read to the board, Moore took full responsibility for the situation and resigned.

The bottom line is that the fund balance is somewhere between $369,000 and $450,000 short, depending on who whether it is a board member or a district administrator talking about it.

After Moore gave his resignation, his boss, Superintendent Martin Laster, described the inaccurately inflated, then deflated account as a “significant setback.” But, he said, the news is not all bad.

“In spite of this, we have a balanced budget and we are solvent,” he said, reading from his own statement. “What there isn’t money for is staff development and technology upgrades.”

Following a lengthy discussion, the board voted to beef up the fund balance to $338,000 by moving the district’s entire internal reserve — $100,000 –into the fund balance. The internal reserve was set aside for purchasing a new language arts curriculum, for special education needs and contract negotiations.

The board also approved investigating the cost and timeline of an outside audit of the district’s finances.

Board members learned of the fund shortage last week when Laster informed them of the situation.

Events leading up to this disclosure began to unfold following a July 28 school board meeting. Board members and the administration were working under the assumption that there was nearly $700,000 in the fund balance. Moore assured the board a finished 2003-04 budget would be available before Monday night’s meeting and ready for approval at the Aug. 25 regular meeting.

Two days later, on July 30, Moore told Laster and assistant superintendent Dan Blanton there was a problem with the fund balance.

Administration officials called in John Jenft, an auditor who has worked with a number of districts and the Office of the Superintendent of Public Instruction to prepare budgets. Working 15-hour days since last Thursday, Jenft and the administration finished the new budget.

Moore said he overstated the fund balance by $200,000, and failed to review assumed revenues against actual revenues as the year programs, which resulted in another $175,000. In his statement, Moore noted that Laster offered to hire him assistance to get the budget completed.

“But I refused the offer thinking that just working longer would get the job done,” he said.

After Moore’s resignation, school board president Ray Gabelein demanded Laster’s resignation. In a three-page written statement, Gabelein said Laster should “take responsibility, be accountable to the board, all employees, our staff, our students, the public and taxpayers of our district resign immediately.”

Gabelein also went on record saying he could not support a proposed levy that was to be generate funds for maintenance and technology “until our district has a superintendent and board of directors that prove to the public they are financially accountable.”

Gabelein also said he wants a written detailed report showing where the approximately $400,000 went and a list of proposed cuts the superintendent can recommend to the board to bring the fund balance back to the target of $725,000 for this year.

Gabelein said he cannot support a budget that does not show a $725,000 fund balance.

Also taken by surprise by the fund shortfall, board Director Barb Schneeman called for an immediate external audit of the district finances.

Gabelein’s formal statement angered Director Bob Riggs.

“I didn’t have the luxury of coming with a prepared statement,” he said. “I find the procedure distasteful. We have protocol to follow with no grandstanding.”

Speaking about the proposed budget presented by Jenft, Director Jim Adsley said he wanted to know that he could believe in the numbers.

“I would like assurance there aren’t any more surprises out there,” he said. “I want to know these numbers are real.”

The public also got its chance to speak to the fund loss. Langley resident, Gary Uhlig, a spokesman for a group of parents of special needs students,, told the board he is concerned that if the budget doesn’t increase there won’t be money for additional staffing for special education.

Jim Simpson, another Langley resident, said the fund loss was “unfortunate.”

“It is not a disaster,” he said. “We are better off than we were before this current administration. We have a balanced budget which is better than many other districts in the state.”

District employees Rick Pitt and Brian Miller spoke in support of the superintendent and his ability to deal with the current situation.

“This is a hurdle,” Pitt told the board, “but you have a great leader here.”

Miller reminded the board that though the fund came up short, the district still has a new computer lab, a resurfaced track and a repaired roof at the Primary School to show for recent expenditures.

Laster received additional support from his wife, Jonna, who told the approximately 50 people at the meeting she appreciated the courage of those willing to stand up and speak to the board.

Others were concerned for the district’s budgeting future. Rufus Rose encouraged the board to seek an independent audit. He alleged gross mismanagement.

“I don’t know if Mr. Moore should fall on the sword,” he said. “We should know whether its his and his alone.”

A hiring freeze on all new positions was discussed by the board as a way of dealing with the shortfall. But after a lengthly discussion the board voted against it.

South Whidbey High School principal, Mike Johnson and Langley Middle School principal, Greg Willis spoke only to the freeze, saying it would cause undue hardship for the upcoming school year.