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Thursday, May 8, 2014

AN EXTERNAL DISTRACTION: Lake Superior State University's "Oversight" of Grand Traverse Academy Highlights Inherent Weakness in Michigan Charter School Statutes

During last week's Grand Traverse Academy board meeting, the Lake Superior State University representative termed the growing Steven Ingersoll scandal is merely an "external distraction", leaving the impression that doting apple-polishing is part of the University's charter agreement.

Miss Fortune examines what "oversight" Lake Superior State University delivered to the Academy between 2009-2013 for the $1,229,989 it received...and finds that it came up short.


According to state statutes, Michigan’s authorizing bodies play three essential roles in the establishment and monitoring of charter schools.

First, authorizing bodies act as chartering authorities, issuing contracts to nonprofit corporations that allow the corporations to operate as public schools and receive state school aid funding.

Second, authorizing bodies perform certain oversight functions, including monitoring the actions of charter school boards of directors and their compliance with the contract and all applicable law.

Third, authorizing bodies act as fiscal agents for charter schools, receiving state school aid payments and forwarding those payments to the schools.

Michigan charter school authorizers receive administrative fees for their services, currently set at 3 percent of total state aid.

Lake Superior State University received $1,229,989 between 2009-2013 for their "oversight" of the Grand Traverse Academy, or an average of approximately $246,000 per year.

Granted, it's likely that Lake Superior State reviewed thousands of pages of documentation for each charter school it authorized every year, the University's incompetent monitoring of the Academy's financial and operational condition may have cost Michigan's taxpayers millions of dollars. 


Steven Ingersoll was federally indicted on April 10, and three days later this blog broke the news that Ingersoll had racked up a $2.3 million dollar management fee overpayment.  The story finally hit the pages of the Traverse City Record-Eagle nearly two weeks later.

But it wasn't really news, was it? 

The Grand Traverse Academy 2013 financial audit report has been publicly available online since at least mid-November, nearly five months ago. T

Included in the Academy's 2013 audit was the shocking revelation that the Academy was carrying a whopping “prepaid expense/expenditure balance” of $2,338,980 for payments made over the past few years to Steven Ingersoll's Smart Schools Management, Inc.

Even more shocking was Ingersoll's ability to "prepay their (Smart Schools') fee and withhold payment of overpaid fees".

The Traverse City certified public accounting firm Dennis, Gartland & Niergarth raised several troubling internal financial control and compliance issues in its 2013 audit report to the Academy.

Among its major concerns were the advance by the Academy of prepaid fees to Smart Schools Management, the possible “abuse” of Smart Schools Management in their “access to public funds” and the negative unassigned balance in the Academy’s General Fund.

Although the Academy paid Lake Superior State University $256,753 in 2013 for services including "oversight", you didn't hear a word about Ingersoll's ability to prepay his firm's management fee and withhold payment of those overpaid fees until April 13, 2014...nearly five months after the report was issued.

Part of Lake Superior State's contractually-dictated "oversight" function includes reviewing the Academy's audited financial reports as submitted, including the auditor’s management letters. 

Whoops, must have missed that one! 

And what has Lake Superior State University done since Ingersoll disclosed his impending indictment back in March?

Not much, by the looks of it.

Although the charter agreement between Lake Superior State and the Grand Traverse Academy clearly specifies strict "due diligence" requirements for the hiring of an education management company, Lake Superior State University sat on the sidelines as the Academy awarded its former board president's newly-hatched management company a two-year agreement.

And although it's been nearly two months since the hiring  of Mark Noss's Full Spectrum Management firm was announced, the Michigan Department of Education still has not received a copy of his management contract.


With Steve Ingersoll as a precedent and a board stacked with cronies and yes-men (and women), it's unlikely that the Academy will institute any new financial restrictions on Noss or develop a conflict of interest policy with real teeth...and Lake Superior State University will be right there, cheering them on and taking another couple hundred grand.

Even though insolently proud Kaye Mentley, the Academy's Superintendent, claims she's "not concerned" about the millions owed by Ingersoll, Miss Fortune says go ahead and throw all the shade you want.

Pretty rich for someone who participated (along with Steven Ingersoll) in a $1.6 million dollar "character study" funded by Uncle Sugar designed to improve a student's character by teaching that their choices have repercussions!

An "external distraction" can turn into "internal destruction" in the blink of an eye.

Kiss kiss!

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