Could Grand Traverse Academy's loss (initially estimated at $1.6 million dollars) be even larger than what we’ve been led to believe?
And, if it is, just how much money was swept away from school?
INCONSISTENCIES AND CONTRADICTIONS
Last September, an Interlochen Public Radio report examined the Grand Traverse Academy’s loss of “$1.6 million dollars” and the March 2015 federal fraud trial of the charter school’s manager, Steven Ingersoll.
Any municipal government that issues bonds — like the Grand Traverse Academy did in 2002 and 2007 — is required to file annual financial reports, material event notices and other documents like quarterly reports.
However, a close examination of those “continuing disclosure” filings submitted on behalf of the Grand Traverse Academy (available publicly in EMMA, the Electronic Municipal Market Access system) reveals a confusing pattern of inconsistent financial reporting of the school’s “accounts receivables” and “prepaid expenses” categories.
And, even more importantly, a trend analysis shows unexpectedly large fluctuations in amounts identified as accounts receivable and prepaid expenses in the Academy’s quarterly financial reports prepared between September 2011-March 2014 by its management company, Steven Ingersoll’s Smart Schools Management, Inc. — reports that should have drawn more attention and spurred action by the school's board of directors.
ACCOUNTS RECEIVABLE, PREPAID EXPENSES: SELF-CONTRADICTORY & INCOMPLETE
The chart above was developed using information from quarterly financial reports provided to the Grand Traverse Academy's board of directors by Smart Schools Management and disclosed to municipal investors via EMMA. While EMMA went live in July 2009, only 4th Quarter financial reports for fiscal years 2009, 2010 and 2011 (ending June 30) were disclosed by the Academy.
As you can clearly see, the first three years (2009-2011) show a relatively consistent pattern of seven-figure "accounts receivable" and mid- to high-six figure "prepaid expense" amounts.
But that all changed during the 1st Quarter of the 2011/2012 fiscal year.
While the quarterly report for June 2011 revealed nearly $4.0 million dollars in "accounts receivable", the amount had dropped to just over $3,000 in three months, according to the September 2011 report.
However, an amount nearly identical to the previous quarter's "accounts receivable" ($3,861,067) appears in the September 2011 quarterly report as a "prepaid expense".
And the September 2011 "prepaid" figure ($3,802,483) is nearly three times the $954,366 amount identified at the end of the previous fiscal year — 298 percent higher, to be exact.
How could, in the words of Mark Noss, "what we're calling a prepaid expense" balloon from an already bloated $954,366 to nearly $4.0 million dollars in three months?
Was it because, as Noss told Interlochen Public Radio back in September 2014, the "management firm would promise to refund some fees when money was tight for the academy, like if teachers offered to take a pay cut in the middle of the year to fill a budget gap"?
Some fees...like nearly $4.0 million dollars?
Or is there another explanation?
UNEXPLAINED FLUCTUATIONS: PREPAID EXPENSE TREND ANALYSIS
The following chart, showing only "prepaid expense" amounts and their respective percentage changes from quarter-to-quarter, reveals a startling pattern of erratic, unexplained shifts in those figures.
For example, the changes range from a nearly 300 percent increase to a 72 percent drop.
Could the volatility come from the need to produce financial statements that tell a better story than are supported by the facts?
Coming Tuesday, June 16.