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Thursday, November 2, 2017

THE FALL OF THE (SCHOOL)HOUSE OF INGERSOLL: Unexplained “Prepaid Expenses” Prop Up Grand Traverse Academy Financials In 2017 Report; Mark Noss Was Paid $856,000 Management Fee, Even Though LSSU Accountant Advised Board “There Should Be No Cash Paid To FSM During 1st Quarter Of FY 2017”

If you've been pining away for that infamous Ingersollian accounting trick, the “non-spendable asset”, fear no more—it's baaaack!

Yes, the dishonest assertion that Smart Schools Management's pattern of ending a fiscal year with a “prepaid expense” balance was merely a way to record Steven Ingersoll's “pledge” to contribute about “5 million to GTA over time” has returned, casting a gloomy shadow over the Grand Traverse Academy's June 30, 2017 financial report.

Here's a refresher: the formal pivot away from acknowledging the $1.7 million owed to the Academy by Ingersoll's Smart Schools was the direct result of Steven Ingersoll's 2013 fiscal year $2.38 million fee “overpayment” began at the charter school's July 18, 2014 Board meeting. 

Brad Habermehl, then board president, read this prepared statement: 
 
If not for the efforts and intellectual contributions of Dr. Steven Ingersoll and Kaye Mentley and Smart Schools’ willingness to rebate its earnings, GTA would not likely exist today. 

Over the years GTA needed substantial financial support and Smart Schools always supplied what the Academy needed. 

Analysis of GTA’s audited financial statements and board minutes from June, 2004 through March, 2014 shows that Smart Schools gave GTA $3.3 million from its budgeted and contractually authorized earnings. Additionally, Smart Schools planned to rebate another $1.6 million from its future earnings which is classified on GTA’s books as a non-spendable asset. 

Smart Schools founded and funded GTA from its origin. GTA flourished in large part because Smart Schools was willing to rebate its contract and budget authorized earnings during GTA’s lean years of infancy, expansion and State funding reductions. 

With Smart Schools no longer associated with GTA the board will now go into closed session to consider proper disposition of the $1.6 million non-spendable asset. 

During that meeting, Habermehl offered no proof that backed up his assertions—because there really isn't any. 

Even the Board's five-page follow up attempt—“History of Grand Traverse Academy”, published on September 14, 2014—provided no legitimate financials supporting its assertions or those made by Habermehl. 

However, that tissue-thin fiction might have held up if Ingersoll himself hadn't copped to the scheme while testifying in December 2015 during his sentencing hearing. 

Folding like a cheap flea market card table under withering questioning by Assistant U. S. Attorney Janet Parker, Ingersoll revealed the method he used to finagle nearly $5.0 from the Traverse City charter school:

At the end of each fiscal year, Ingersoll booked his annual management fee overpayment as a “receivable”, then used school funds at the beginning of the following fiscal year to repay the receivable back to the Grand Traverse Academy. 

Shortly after that repayment, often within days, Ingersoll transferred the money back from the school's bank account into his own, subsequently creating a new (and even larger) receivable the next year. 

So why is this background important, and how does it relate to this year's Grand Traverse Academy financial report?

Here's why: although the school's 2016 report claimed that Mark Noss had reduced Full Spectrum Management's fee by $211,000 (booking the amount as a prepaid expense from 2016 to 2017, a Lake Superior State University Charter School office accountant directed the Grand Traverse board in a September 14, 2016 email “there should be no cash (or check) paid to FSM during 1st Quarter of FY 2017 (Jul-Sep 2016) for FSM’s Management Fee”.

However, in its 2017 report (publicly released yesterday by the Michigan Department of Education), the Grand Traverse Academy revealed in paid Noss “approximately $856,600 for the year ended June 30, 2017”.




In addition, an unexplained $119,749 “non-spendable balance” helped boost the school's 2017 Total Fund Balance from $71,615 to $191,364.


Did the Grand Traverse Academy defy the directive from Lake Superior State University's accountant and instead pay Noss his entire 2017 fee without deducting his purported 2016 $211,000 reduction?

My preliminary analysis reveals the answer may be yes, as the school's 2017 report notes it paid Noss roughly $856,600, not an expected $645,000 applying that $211,000 reduction.

The facts...and the figures.  

I VOLUNTARILY CONTRIBUTED $211,000 OF MY FEE IN FISCAL YEAR 2017 TO KEEP THEM OUT OF DEFICIT IN 2015-2016


And what about the deposed Mark Noss? 

An email excerpt cited in an August 2017 Traverse City Record-Eagle article revealed Steven Ingersoll's trusty sidekick seemed to be getting ready for Halloween, donning a “good guy” mask while trotting out this hoary canard: “I voluntarily contributed $211,000 of my fee in fiscal year 2017 to keep them out of deficit in 2015-16,” Noss wrote in an email to a Record-Eagle reporter. 

However, the true story of Full Spectrum Management's 2016 fee reduction is much cloudier, and far less altruistic. 

According to a September 14, 2016 email (shown above) sent by Rebecca Clawson, a CPA and Finance Specialist in the Charter School Office at Lake Superior State University, to GTA board members Lesley Werth, Samer Bourdkani and Charter Office head Chris Oshelski, Noss did not actually refund $209,789.34 to the Grand Traverse Academy, he merely booked it as a Prepaid Expense for the next fiscal year. 

By shifting the contribution into the FYE June 30, 2017, Noss was able to record his so-called “reduction” in the FYE June 30, 2016, craftily engineering a financial balance sheet maneuver that ultimately paid off with positive PR—while maintaining a tight grip on his $852,341 management fee payment for 2016. 

In her September 14, 2016 email, Clawson advised GTA board president Lesley Werth about the proper method of accounting for the $209,789.34 fee reduction. 

Referencing a conversation she'd had with FSM accountant, Angela Bush, Clawson detailed appropriate guidelines for handling the transaction: 

“Ms. Bush explained that the Prepaid Management Fee was recorded because GTA over expended their budget and Mr. Noss decided to “forgive” the Management Fee for the last quarter of FY 2016 (Apr-June 2016). 

I questioned Angela about the proper accounting treatment of the Prepaid and if it was GAAP; she stated that is was upon GTA’s auditor’s recommendation that the item be recorded as a Prepaid Asset. 

I asked if she would confirm with the auditor (Mr. Sweeney) about the treatment of this item regarding the Annual Audit; she included me in an email to Mr. Sweeney, which I have not yet seen a response confirming this item. 

In the event that the Prepaid Management Fee is displayed in GTA’s Annual Audit Report, then the Academy Board needs to be aware that there should be no cash (or check) paid to FSM during 1st Quarter of FY 2017 (Jul-Sep 2016) for FSM’s Management Fee. 

There should be no payment because, in effect the Academy has already paid for the service in the last quarter of FY 2016 (Apr-Jun 2016) even though Mr. Noss forgave the fee. 

In the Academy’s accounting records for the first quarter of FY 2017 the Prepaid Management Fee should be reduced and applied towards the Management Fee expense. 

However, there should not be a cash (or check) transaction in relation to FSM’s Management Fee. 

It is incumbent upon the CSO to inform the Board that the forgiveness of fees should be confirmed in writing, ideally, prior to the execution of the transaction, in order to protect the Academy from recourse (if any). I did not see that the Management Contract between the Academy and FSM addressed forgiveness of fees.” 

So was there a cash payment made to Full Spectrum Management during the 1st quarter of 2016/2017? 

And if so, what was the total amount?

You'll have to pose those questions to the Grand Traverse Academy board, which revealed in an October 27, 2017 “Profit & Loss Budget vs. Actual” report for July-September 2017 that it paid Full Spectrum Management its July 2017 management fee: $71,391.17.

7 comments:

  1. You know why Susan retired she knows depositions are soon to be coming or some type LOL LSSU needs to do their job now thank you for staying on this Anita

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  2. Parents I would be pulling my kids immediately! Get them into the public schools let them enjoy Thanksgiving and Xmas in a new school. It is the best time to get them in there so they have a fresh start with the energies and sharing of the holidays. And it's a great time to meet new friends. Get out of there before there is no room elsewhere.

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  3. White collar welfare brought to you by Steve Ingersoll and Mark Noss. I heard they have a video out on all the tricks to successfully swindle the government.
    Too bad the governing university LSSU, didn't do their job and make sure they weren't cheating the system. Oversight by LSSU none, money paid to LSSU plenty.

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  4. Love your clever observation of Noss wearing a "good-guy" mask for Halloween. Ingersoll was always wearing his "philanthropy-guy" mask. We all know what was behind the paper-thin mask for both of them - an "IVL" mask (I VALUE LOOT).

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  5. It's almost laughable were it not so sad. The weak board, incompetent leadership, ignorant teachers, it will all fold soon enough. They can't say you didn't warn them. Lynch is next- uncredentialed opportunistic prick. The Record Eagle is finally handing them their a$$ (with egg on their face). I'm sure it's hard for them to get scooped in their own backyard.

    ReplyDelete
    Replies
    1. That's funny!
      Short sweet and to the point how funny!

      Delete
  6. I just adore that Brian Lynch comment above. I think that sums him up to perfection.

    These idiots will all have to face the law at some point and Brian Lynch is just as guilty as Mr. Ingersoll and Mark Noss. What a bunch of asses they all are.

    ReplyDelete