HAMDEN — The town ended the last fiscal year with a surplus of more than a half a million dollars, bringing its fund balance to just over $7 million.

Auditors Robert and David Cappelletti, father and son from the Woodbridge accounting firm of Levitsky & Berney, appeared before the Legislative Council Monday night to review the report, which they completed in December. It covers the fiscal year that ended June 30, 2007.

As of June 30, the fund balance was $6.54 million, an increase of $1.7 million over the previous year. But when the $578,976 surplus from fiscal 2006-07 budget of $163.64 million is added in, the fund balance grows to $7.08 million. The fund balance should be 5 percent to 7 percent of the budget, Finance Director J. Michael Betz said.

Betz said the surplus and increase in fund balance “was driven by expenditure control and favorable variances in every category.”

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Mayor Craig B. Henrici said before the meeting that the audit shows the town is on the right track, and is a “testament” to the finance department.

Councilman Curt Leng, D-6, chairman of the council’s audit subcommittee, noted improvements over last year’s audit and said that with a few exceptions, it was “very sound.”

The audit once again said the town has not properly funded the pension fund for several years. With the $15.9 million contribution of 2007, the fund contained 56.4 percent of what it is supposed to have. The long- term liability is $104 million. “I guess you have a plan in place to increase funding each year,” Robert Cappelletti said.

Henrici has said he plans to once again ask the council to consider pension obligation bonds to cover the liability, which the council didn’t go for last year.

The town’s medical self-insurance fund also has a deficit. In 2006, it was $3.39 million. Money was added in 2007 so now the deficit is $1.52 million.

“We’ve shown increases in the self-insurance fund. ... We’re heading in the right direction,” said Councilman James Pascarella, D-at large.

Council President Al Gorman, D-at large, said the Board of Education has responded to the part of the audit that calls for an improvement in how it monitors monthly bank reconciliations on its accounts payable and payroll accounts. “We’re very pleased with the rapid response. It’s the first time they responded on paper,” Gorman said.

David Cappelletti noted that communication has improved between the school board and town finance divisions.

The audit also noted that invoices are being paid in the Department of Parks and Recreation without the assurance that proper documentation is on file, and is recommending that proper information exist before invoices are paid.