ATLANTA --- A sweeping audit of the Georgia Department of Transportation found the agency overstated its federal funding by nearly $2.4 billion before the past fiscal year, leading to a massive deficit that has shut down local road construction aid and threatens the jobs of hundreds of state employees.

Officials with the department said the audit supports their contention that some of the previous transportation commissioner's funding methods were unconstitutional and are ultimately responsible for the deficit now rocking the agency.

Others have said the shortfall is actually the result of little more than a change in accounting systems from an "accrual basis" to a "cash basis."

"Much has been discussed about the appropriate accounting method for GDOT, and we believe that the findings of this audit effectively resolve any further debate and closes the door on that discussion," said a statement issued by the agency.

At issue is whether the department must have cash on hand to fully fund its long-term projects or whether it is sufficient to account for the funding projected to flow to the agency in future years.

Auditors and state attorneys have told board members that the funding must be on hand, a statement backed up by the report released Monday.

"Speculation that 'accounting changes' were responsible for the 'preliminary' deficit detected during the course of this audit is not correct," the report says. "Based on our examination, business practices changed during fiscal year 2007 ... appear to be responsible for the 'preliminary deficit.' "

But State Transportation Board member David Doss, one of the most outspoken critics of the cutbacks that followed the deficit, said he hasn't had a chance to read the report but remains unconvinced.

"This entire deficit, as I've said from the beginning, is and always has been and always will be a deficit on paper only, that no actual deficit exists," Mr. Doss said.

The deficit already has prompted the department to cut off millions of dollars in state aid for local road projects, angering lawmakers who say the agency should instead lay off hundreds of employees as part of any plan to right the financial ship.

"The tragedy here is that we have basically shut down road and bridge projects in this state for the past 11 months. ... And the result is we have put thousands of Georgians out of work as a result in the private sector, and of course, there are calls for us to lay off hundreds of GDOT employees at a time when the state of Georgia has the second-highest unemployment rate in the United States," Mr. Doss said.

The report said "the financial position marked notable improvement" because of steps taken in the last fiscal year, which ended June 30.

Reach Brandon Larrabee at (678) 977-3709 or brandon.larrabee@morris.com.