With the altered financial reports he created, Ingersoll (facilitated by longtime business associate, Academy Board President Mark Noss) effectively swindled the Traverse City charter school out of at least $110,000, while successfully using the deceptive bank documents in a bizarre scheme to convince the Academy Board he’d repaid $1,813,330 owed by Smart Schools Management, Inc. to the Grand Traverse Academy.
But Ingersoll hadn’t really repaid the money.
He just made it look like he had — with the help of his friend, Mark Noss, aided by the apparent lax due diligence of the Academy's legal counsel, Traverse City attorney Doug Bishop.
Beginning in 2007, and continuing for six years until 2012, at the beginning of each fiscal year (July 1), Steven Ingersoll advanced his entire annual Smart Schools Management, Inc. fee directly from the Grand Traverse Academy’s bank account before he had earned it — and before he was entitled to receive it. Although based on Board-approved preliminary budget figures, Ingersoll’s management fees are later adjusted downward after actual budgets are calculated. However, Ingersoll never repaid the differences between the amounts he'd advanced himself, and the actual management fee he was contractually allowed to receive.
However, instead of implementing the recommendations outlined in a 15-page May 30, 2013 legal opinion it received from the Thrun Law Firm, the Grand Traverse Academy Board instead inexplicably formed what appears to be an alliance of convenience with Steven Ingersoll, including a colossally deceptive statement read publicly during the Academy's July 17, 2014 Board meeting by its President, optometrist Brad Habermehl.
According to the May 30, 2013 Thrun Law Firm Letter to former Grand Traverse Academy Board President Mark Noss, the issue before the Board “relates to funds withdrawn from the Academy’s general fund by Steven Ingersoll and/or representatives of SSM, which exceed the amount appropriated or authorized by the Board to be paid to SSM for either management fees or the reimbursement of Academy expenses.”
The letter estimated Ingersoll’s debt to the Traverse City charter school at $3,548,319 (based on information provided by Ingersoll’s handpicked CPA, Tony Henning), and during a May 20, 2013 meeting, Ingersoll admitted owing at least $3.5 million dollars but asked to have his debt reclassified as a "loan".
As Henning had relied solely on “financial reports and representations of Steve Ingersoll” to determine the amount, Thrun repeatedly urged the Grand Traverse Academy Board of Directors to “independently verify the full sum due” instead of merely accepting Henning’s number.
Thrun represented the interests of the Academy and the Board, not Steven Ingersoll and Smart Schools Management, affirming in its May 30, 2013 letter that “Steven Ingersoll openly admitted, when asked by us during the May 20th meeting, that a conflict exists between his personal interests and the interests of the Academy.”
FALSIFIED BANK STATEMENTS, A (PAID/UNPAID) $1,813,330 “ACCOUNTS RECEIVABLE” BALANCE...AND AN ABUSE OF PUBLIC FUNDS
The year 2013 closed with a December 6, 2013 email from Mark Noss to Steven Ingersoll regarding a dispute that arose after the Grand Traverse Academy Board’s November 8, 2013 meeting.
According to government documents released in connection with Ingersoll’s sentencing hearing, Ingersoll sent a November 24, 2013 email to Noss denouncing CPA firm Dennis, Gartland & Niergarth's presentation of the “final audit and unexpected finding that implied ‘abuse’ of public funds.”
In the email, Ingersoll complains to Noss that DGN had based its finding “on their stated position that SSM had not transferred cash to service the FYE accounts receivable balance on GTA’s books at FYE 12.”
Ingersoll appears to be disputing DGN’s contention that he had not transferred cash from his accounts to the Grand Traverse Academy to “service the FYE accounts receivable balance” during the fiscal year that ran from July 1, 2011 through June 30, 2012.
In his email to Mark Noss, Ingersoll reminds Noss that “I disputed that contention both verbally and in management’s written response. The auditors verbally repeatedly stated that there was no evidence of cash transfers. I have stated that bank statements that they should have reviewed would confirm those transfers. I have attached the confirming bank statements for your review. Please share these statements with your board member colleagues to give them comfort that those transfers did occur.”
The document Ingersoll described as a “bank statement” is shown at left. You'll notice that while the statement period date is May 1, 2013, the document is clearly a cut-and-paste job created using cherry-picked transactions from July, August and September, with the actual years missing.
In addition, although an effort has been made to make this “Account Summary” appear official, “GTA Account at Fifth third” is an incorrect presentation of the financial institution's actual name, Fifth Third.
Noss responds to Ingersoll on December 9, assuring him that he has “sent these bank statements to all board members and followed up with phone calls to each member to discuss this. Every board member saw and understood that these transfers took place and agreed that no ‘abuse of funds’ took place. We are all comfortable that we made the right decision in accepting management’s response to the audit.”
|Authentic Fifth Third Bank Online Summary|
Did Mark Noss forget what was disclosed in the May 30, 2013 Thrun letter regarding Ingersoll’s claim that he’d “repaid” another amount previously owed to the Academy in July 2011?
Or that the letter revealed former Grand Traverse Academy auditor Tony Henning had erroneously represented to the Thrun Law Firm that Ingersoll’s Smart Schools Management had repaid its “receivable” or “prepaid expense” in full during the 2011-2012 fiscal year, and that this account had been “zeroed out”?
Ingersoll’s misuse of his position of trust clearly continued even after his financial abuses were exposed to the Grand Traverse Academy Board by the Thrun Law Firm.
The question is...why?
Although Ingersoll sent the November 24, 2013 email to then Grand Traverse Academy Board president, Mark Noss, he'd previously sent a letter the Board's attorney, Douglas Bishop, accompanied by the same selectively chosen bank records. (The June 16, 2013 letter is shown at left.)
The bank records Ingersoll provided to Bishop on June 16, 2013 purported to demonstrate that Ingersoll had actually transferred $1,813,330 from Smart Schools Management, Inc. account back to the Grand Traverse Academy's account are described by Ingersoll as “bank statement entries of SSM outgoing and GTA incoming transfers from SSM to GTA that you had requested”.
Notice the description: 'bank statement entries', and not 'bank statements'.
However, Ingersoll did not disclose to Bishop that he had also transferred funds from the Grand Traverse Academy account to his Smart Schools Management, Inc. account before making his so-called payments.
According to documents released October 19 by the government, just prior to the start of Ingersoll's sentencing hearing, the net impact of the transfers made by Ingersoll from July 1, 2012 to December 31, 2012 between the accounts for the Grand Traverse Academy and Smart Schools Managment, Inc. was that Smart Schools Management, and therefore Ingersoll, received over $110,000 more from the Grand Traverse Academy than the Academy had received from Smart Schools Management.
But Doug Bishop could have uncovered Ingersoll's scheme if he'd demanded Ingersoll provide copies of actual bank statement records for both Smart Schools Management and the Grand Traverse Academy instead of the fabricated financial documents Ingersoll had proffered.
But he didn't...and neither did then Board President Mark Noss.
Instead, mere months after receiving the devastating Thrun letter (which outlined Ingersoll's fiscal abuses in excruciating detail), both men apparently chose to accept Steven Ingersoll's claims — overlooking his self-serving financial statements and making no effort to independently confirm what Ingersoll had claimed.
Why would they do that?
An answer may be found in the Grand Traverse Academy's 2013 financial statement, the report containing the allegation that Ingersoll had not repaid money his Smart Schools Management, Inc. owed to the Grand Traverse Academy, and that Smart Schools Management's ability to prepay its management fee and withhold payment of overpaid fees enabled “the abuse of Smart Schools Management, Inc. in their access of public funds”.
“As the Academy completed the year, its governmental funds reported a combined fund balance of $2.37 million, a decrease of approximately $384,000. Approximately $2.34 million of the fund balance is not in spendable form for expenses that have been prepaid.
As described in Note M to the financial statements, the Academy has advanced Smart Schools Management, Inc. $2,338,980 as of June 30, 2013, resulting in deficit unassigned fund balance. The Academy has accepted a repayment plan from Smart Schools Management, Inc. in which the management company will work off the prepayment by partially reducing cash transfers for future management fees through June 30, 2016. We have reported findings related to the advance of prepaid fee, “the abuse of Smart Schools Management, Inc. in their access of public funds”, and the negative unassigned fund balance in our report in accordance with Government Auditing Standards noted below.”
In the Notes section, DGN calls attention to “related party activities”:
“In July 2009, the Academy entered into a seven-year agreement with Smart Schools Management, Inc. Under the terms of this agreement, Smart Schools Management, Inc. provides a variety of services including financial management, leased employees, education programs and consulting, as well as teacher training. Management fees, leased employees, and curriculum material totaled $1,347,234, $4,680,661, and $300,000, respectively, equal to the amount budgeted for the year ended June 30, 2013.
The contract states the maximum management fee shall not exceed $2,000,000 in any fiscal year. The Board passed a resolution on May 4, 2012 maintaining a management fee of 12% of revenue, or approximately $1,053,000. The management fee exceeded the 12% amount by approximately $294,000. The intent of the Board in the May 4, 2012 resolution was the recognition of the past and ongoing contributions of Smart Schools Management, Inc. Total payments to Smart Schools Management, Inc. during the year totaled $6,946,462 and refunds total $1,897,805. As of June 30, 2013, the Academy carried a prepaid expense/expenditure balance of $2,338,980 for payments made to Smart Schools Management, Inc.
The prepaid expense/expenditure is expected to be received as follows: 2014 $774,000; 2015 $960,000; 2016 $604,980.
(Another Ingersoll-controlled entity, GTAS, LLC, provided janitorial services to the Academy for fees totaling $232,000.)”
Under “prepaid expenses”, DGN calls out Ingersoll's Smart Schools Management, Inc. for its ability to prepay the management fee and withhold payment of overpaid fees, which enables Smart Schools Management, Inc. to “abuse their access to public funds”.
This section, Note M in the June 2013 Grand Traverse Academy financial statement, is exactly what Noss references in his December 9, 2013 email response to Steven Ingersoll. Assuring Ingersoll, Noss states he has “sent these bank statements to all board members and followed up with phone calls to each member to discuss this. Every board member saw and understood that these transfers took place and agreed that no ‘abuse of funds’ took place. We are all comfortable that we made the right decision in accepting management’s response to the audit.”
“We are all comfortable that we made the right decision in accepting management’s response to the audit.”
Management's response to the audit — the one based on false financial information from Steven Ingersoll — and not the independent opinion of its auditor, DGN.
And here it is, straight from the Grand Traverse Academy's 2013 financial statement:
Criteria: The Revised School Code does not authorize local or intermediate school districts, including a public school academy, to advance monies to private entities.
Condition: As of June 30, 2013, $2,338,980 of management fees pledged back to the Academy have been advanced to Smart Schools Management, Inc.
Cause: The contract with Smart Schools Management, Inc. sets a ceiling for the management fee, but does not include an objective measure to calculate the fee annually. Smart Schools Management, Inc. has the ability to transfer funds between the Academy and Smart Schools Management, Inc.’s bank accounts. Smart Schools Management, Inc. took cash advances for their management fee each year in the beginning of the school year based on the budgeted figure without further Board action. Prior to 2013, budgeted amounts have exceeded what the Academy could ultimately afford. At the time it was realized Grand Traverse Academy could not afford the management fee, the fee was adjusted downward on the general ledger, but the advances were not repaid.
Effect: Smart Schools Management, Inc.’s ability to prepay their fee and withhold payment of overpaid fees enables Smart Schools Management, Inc. to abuse their access to public funds. Further, the Academy is out of compliance with the Revised School Code.
Management’s Response: Smart Schools Management, Inc. agrees that it owed Grand Traverse Academy an amount classified as a prepaid balance on June 20, 2013. Similar fiscal year-end balances were always paid by SSM. The current balance will also be paid in full as described in Management’s Response to 2013-5. As these balances have always been paid in full, management believes that no “abuse” has ever occurred or currently exists.
Less than six months after receiving the May 30, 2013 Thrun Law Firm legal opinion regarding manager Steven Ingersoll's massive misappropriation of millions of dollars, both Mark Noss and attorney Doug Bishop accepted falsified bank documents from Steven Ingersoll — documents Ingersoll had used to cover his tracks and steal another $110,000 from the charter school in 2012.
Is there anyone who still believes Ingersoll was the only one helping himself to the taxpayer millions that flowed into (and out of) the Grand Traverse Academy?