}

Tuesday, February 20, 2018

SETTING SAIL ON A SEA OF RED INK? Grand Traverse Academy's FY 2018 Sixth-Month Financial Check-Up Reveals Negative Trend; Is Another Budget Deficit Looming?

“Peacock said an existing bond issue also requires GTA to keep its general fund balance at about $700,000. Those reserves – pegged to rise this year to $191,000 – should grow or officials risk bondholders demanding new management, he said.”   

Traverse City Record-Eagle
October 26, 2017

On December 19, 2017, the Grand Traverse Academy board approved a third budget revision for the current fiscal year, boosting its projected June 30, 2018 fiscal year-end fund balance from $454,895 to $508,141.

However, in financial statements filed February 8, 2018 on the Municipal Securities Rulemaking Board's municipal bond disclosure data site, EMMA, the GTA's six-month snapshot revealed an ominous future: as of December 31, 2017, the school had a -$105,151 negative net income, and projected an insufficient $86,212 year-end balance. 



And that's an improvement over an even more negative 1st quarter, with its -$467,998 net income.


But, as recently as its December 19, 2017 meeting, the Grand Traverse Academy board was still publicly projecting a rosy (and perplexing) $508,141 July 1, 2018 fund balance. 

How?

Rocked by declining enrollment (skidding down from a peak of 1,230 students in 2013/14 to 1,107 students as of the Michigan Department of Education's February 2018 State Aid Status report); the lingering impact of financial fraud perpetrated by former manager, convicted tax cheat Steven Ingersoll and the civil lawsuit spurred by the Traverse City charter school's abortive attempt to expand its footprint with construction managed by another former manager, Mark Noss, the Grand Traverse Academy is struggling to establish a solid financial foundation—a foundation that never truly existed.

After years of intentionally misleading financial projections that hid the Grand Traverse Academy's inability to maintain the minimum reserves legally required by its $16.2 million municipal bond, the charter school's board is facing the likely possibility of another budget deficit, fueled by an August 2018 $1,521,277 balloon payment on a $2,330,00 PNC Bank loan. 

Here's how it happened: during a seven-year period (between 2007 through 2014), the Grand Traverse Academy board deliberately misrepresented, misstated or omitted financial statement data, creating a false impression of a charter school with significant  financial strength. 

Fraud in financial statements takes the form of overstated assets or revenue or understated liabilities and expenses. The Academy carried on its books six- and seven-figure amounts classified variously by Ingersoll (with the board’s approval) as “amounts receivable from sources other than governmental units”, “prepaid expenses” or “related party receivables”, misleading bondholders and the general public. 

The table below reveals how the Grand Traverse Academy's fund balances would have appeared without Steven Ingersoll's padding.

And then this happened: the Grand Traverse Academy board refinanced $2.3 million in short-term debt it owed to Traverse City State Bank with an agreement that included a stunning provision requiring the interception of nearly $895,000 of school aid funds away from the charter school during this current year and transmitted directly to bondholders for debt-service payments — funding that cannot be redirected to any other budget line item.

It is another brick in the wall—part of the Grand Traverse Academy's ten-year cycle of short-term borrowing, and retiring debt with subsequent borrowing. 

Instead of a pattern of subsequent borrowing to pay off the previous year's obligations, the school should have been building cash reserves instead of relying on larger and larger loans. 

Who believes board members didn't notice that pattern, especially when those same members approved all that short-term borrowing activity? 

In the October 26, 2017 Record-Eagle story excerpted above, Rehmann’s Steve Peacock referred to the Grand Traverse Academy’s Series 2007 $16.2 million bond, stating the bond issue required the school to keep its general fund balance at about $700,000. 

Those reserves – pegged to rise this year to $191,000 – should grow or officials risk bondholders demanding new management, he said. 

But current trends indicate even that inadequate number will likely not be achieved. 

Maybe that's why the Grand Traverse Academy is looking for a Staff Accountant.

For those who are interested in more coverage on the sorry financial state of affairs at the Grand Traverse Academy, you can read more at these links:

COOKING THE BOOKS: Part 1 http://glisteningquiveringunderbelly.blogspot.com/2017/08/cooking-books-grand-traverse-academys.html 

COOKING THE BOOKS: Part 2 http://glisteningquiveringunderbelly.blogspot.com/2017/08/cooking-books-part-2-does-this-inflated.html 

BOND COVENANT VIOLATIONS http://glisteningquiveringunderbelly.blogspot.com/2017/08/grand-traverse-academy-violates-bond.html 

http://glisteningquiveringunderbelly.blogspot.com/2016/05/wait-what-i-didnt-realize-there-were.html 

2017 GTA FINANCIAL REPORT http://glisteningquiveringunderbelly.blogspot.com/2017/11/the-fall-of-schoolhouse-of-ingersoll.html 

DEFICIT http://glisteningquiveringunderbelly.blogspot.com/2017/10/financial-kinks-in-state-aid-firehose.html

HEADS ROLL http://glisteningquiveringunderbelly.blogspot.com/2017/09/heads-roll-at-grand-traverse-academy.html 

ACCOUNTS DECEIVABLE http://glisteningquiveringunderbelly.blogspot.com/2017/08/accounts-deceivable-grand-traverse.html 

TCSB LINE OF CREDIT NOSS http://glisteningquiveringunderbelly.blogspot.com/2017/06/exclusive-traverse-city-state-banksmart.html 

http://glisteningquiveringunderbelly.blogspot.com/2017/08/for-love-of-money-mark-noss-agreed-to.html

http://glisteningquiveringunderbelly.blogspot.com/2017/08/for-love-of-money-mark-noss-agreed-to_29.html

SYMBIOTIC OR PARASITIC http://glisteningquiveringunderbelly.blogspot.com/2017/08/symbioticor-parasitic.html 

DEFAULT IN OUR STARS http://glisteningquiveringunderbelly.blogspot.com/2017/08/default-in-our-stars-wide-ranging.html




4 comments:

  1. Inconceivable why this entire board hasn't been forced to stand down and be replaced. The staff and programs are very good. It is the leadership and irresponsible authorizing that has brought them down. Bondholders need to act before it is too late.

    ReplyDelete
    Replies
    1. Forced? By whom? Who has the power to force them to stand down? LSSU? Well they may have the power but certainly have no interest in hearing what anyone has to say. Not staff, not parents, not students. They are a "hands off" authorizer, giving full power to five of the most egotistic board members ever. And don't even talk about the accountants. They have their own Agenda and it has nothing to do with "what is best for the students". They've lost most of their top of the line secondary teachers. And if I were an elementary teacher there, I'd keep my mouth shut around my coworkers. Trust me... Lots of back stabbing happening. I personally couldn't be happier to be completely free of that place.

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  2. Who in their right mind would want to be on a new board or one made up of ethical leadership? They could trim some corners some places, I'm sure, but at whose expense? Good staff, who may not want any cuts. Maybe PNC Bank can foreclose on this IVL Empire that Ingersoll and Noss left behind for others to fix.

    ReplyDelete
    Replies
    1. Ingersoll and Noss did not want to leave this "IVL Empire". Rather, they wanted to keep this cash cow flowing in their direction. Had they been allowed, Ingersoll would have kept building up even further his financial scheme of "Accounts Receivable" with his IVL Math... Steve + the GTA + GTA Board of Ed = MONEY FOR LIFE!

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