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Friday, May 23, 2014

OTHER THAN FULL AND OPEN COMPETITION: Miss Fortune Explicates Grand Traverse Academy Board Meeting Minutes And The "Urgency Exception"

The Grand Traverse Academy's May 2 board meeting minutes have finally been made available and, like a mankini, they reveal much...but still conceal the most important thing.

What remains hidden is a "tick-tock" precisely describing the process employed to transition from federally-indicted Steven Ingersoll's Smart Schools Management, Inc. to former board president Mark Noss's newly-minted Full Spectrum Managment, LLC. 

And how could "urgency" have truly driven the board's decision to hire former board president Noss, when it's been firmly established both on this blog and in the Traverse City Record-Eagle that the Academy's board and legal counsel had prior knowledge of Ingersoll's $2.38 million dollar management fee "overpayment"? And how could a purported "urgent" contract have been awarded with a two-year term when most formal governmental "urgency exceptions" cap contracts at one year?


The "proposed minutes" of the board's May 2 meeting have just been released, and one statement attributed to Academy attorney, Doug Bishop, caught my attention immediately: "Contract with Full Spectrum done out of urgency."

Leaving aside the potent argument that can easily be made against Bishop's self-serving bias of "urgency" (Ingersoll's $2.38 million dollar management fee "overpayment" was publicly revealed in the Academy's 2013 fiscal audit nearly six months ago), Bishop's statement seems to imply that a form of explicit approval exists supporting the astonishing decision to award a noncompetitive multi-year, multi-million dollar contract to a former board president who resigned mere days before the contract was granted.

But according the laws that govern Michigan charter schools, it's unlikely that any formal "urgency exception" was sought and granted. 


There are several justifications a public body can give for entering into a noncompetitive contract. One is that there is only one vendor qualified to provide the goods or service the public body requires. But another is that there is an “unusual and compelling urgency” that requires the public entity to award the contract without competitive bidding. In these cases, there is usually a risk of financial or other injury to the entity caused by a delay in the competitive bidding process.

However, it appears that Michigan charter school regulations (and the charter agreement governing the Grand Traverse Academy) do not include a specific provision for an "urgency exception".

Michigan’s statutes grant the board of a charter school the ability to enter into binding legal agreements with persons or entities as necessary for the operation, management, financing, and maintenance of the charter schools.

The law requires authorizers to review – and allows them to disapprove – any agreement between a charter school and an educational management company before such an agreement is final and valid. (The law provides that disapproval may only occur if the agreement is contrary to the contract or applicable law.)

Statutes prohibit specifically identified family relations between members of the board of directors and officers and members of any educational management company involved in the operation of the school (with such provisions detailed in charter contract). However, it does not require existing and potential conflicts of interest between the two entities be disclosed and explained in the charter application.

The law requires authorizers to ensure that charter school governing boards operate independently of any educational management organization.

In addition, the Academy's agreement with authorizing entity Lake Superior State, clearly establishes the "education service provider" (ESP) contracting process. The following excerpts from the current agreement explain the steps, including required "due diligence": 

A. Academy Board Due Diligence
1. Prior to executing an agreement with an ESP, the Academy Board shall perform sufficient due diligence to establish that the ESP has the appropriate financial resources, educational services, and managerial experience to provide the contracted services. Prior to contracting with an ESP, the Academy Board shall obtain sufficient information to conclude that the ESP agreement, on the terms to be approved, is in the best financial and educational interest of the Academy. 

At a minimum, and prior to the execution of an ESP agreement, the Academy Board shall provide the following information to the Charter Schools Office in addition to the proposed contract:
- List of all ESP owner(s), directors and officers.
- Type or form of entity (for-profit corporation, non-profit corporation, limited liability
company, etc.).
- Name of the ESP's primary banking institution.
- Legal counsel for the ESP. Name, address, and telephone number of firm and name of contact person.
- Accounting firm for the ESP. Name, address, and telephone number of firm and name of contact person.
- A written statement regarding the ESP's experience in providing educational services and a description of the types of educational service to be provided to the Academy.

2. Academy Board members, Academy Board employees, and their respective spouses and immediate family members may not have any direct or indirect ownership, employment, contractual or management interest in any ESP that contracts with the Academy. 

The Charter Schools Office may formally waive this condition for persons who have an ownership interest in an ESP that contracts with the Academy if it concludes that the ownership interest is minimal.


Although I confirmed on May 21 that Michigan Attorney General, Bill Schuette, had launched an investigation of the Academy's missing millions, it's unlikely the Academy's superintendent, its current and former board members and legal counsel will reveal any more answers until they're subpoenaed.

But there's nothing stopping them from revealing more details right now.

Tick-tock, tick-tock, tick-tock!

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