A project to clean up mold at Kings Highway Elementary School went more than $1.6 million over budget with the additional costs covered by funds the school administration allocated for utility costs in annual operating budgets.

That overrun was uncovered during an internal audit of the school district's spending. Lynn Scully, the town's internal auditor, is expected to present the findings in detail at the Sept. 3 Board of Finance meeting.

According to the project review, $2,878,000 was approved for the project, but $4,527,969 was actually spent -- a $1,649,969 difference.

The project initially was designed to deal with mold and air quality at the school, but during that process lead was discovered there as well, the audit states. After the lead was found a new vendor was hired to complete the work.

A "breakdown" of the $1.6 million increase found $714,233 went for hazmat abatement and $683,132 for arbitration and legal fees.

The report found that the funds used to cover the additional spending came from money in the school district's electricity and natural gas accounts. The report points out there was no appropriation request submitted to the town for the overrun and there was inadequate reporting of those costs in the education budgets for several years beginning in fiscal year 2007-8 and ending in fiscal year 2013-14.

The audi also found the contract for lead abatement awarded to Abatement Industries Group did not go through the formal bidding process, which is required for projects expected to cost more than $10,000. AIG was paid $673,000, according to the report.

"I don't like it. It was a large amount of money," Brian Stern, finance board vice chairman, said of the $1.6 million overrun.

"We had to do it. We had to get the school fixed because they found toxic chemicals," he added. "But I think what should have happened was to go the proper route." That route, he said, was for school officials to bring the matter before the finance board "and deal with it there."

Stern said the issue leads to other questions, like why other education budget accounts, like the allocation for utilities, appear to have "so much slack in them."

He called them "slush funds."

He also said that money spent for arbitration was "a large expense for a dispute" apparently with a vendor hired for the project.

Stern added that you can't "audit every dime," so the matter comes down to "transparency and trust."

"This was a complex, multi-year project, and its proper and timely execution required more funds than originally projected," Board of Education Chairwoman Elaine Whitney said in an email statement when questioned by the Westport News about the audit's criticisms. "The project has been successfully completed and fully paid for, and the Board of Education is putting in place a detailed, publicly available financial tracking instrument for capital projects going forward."

Superintendent of Schools Elliot Landon and the school district's business manager Elio Longo did not return calls for comment as of Thursday morning.

The object of the review was to identify how much the project went over its initial budget and determine how that overage was funded.

Recommendations include having a written policy formulated by the town and school district for proper processes and reporting associated with capital expenditures.

It also recommends that additional policy language specific to building construction and improvements be developed by the town that addresses project oversight and approval requirements, as well as accounting and reporting requirements.