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Thursday, October 29, 2015

"IRREGULAR EXPENDITURES": 2015 Audit Reveals Bay City Academy's History Of Unauthorized Payments, "Shrinking Enrollment, Significant Operating Deficits" Raise Serious Doubts About Charter School's Ability To Continue As "Going Concern"

                      Gots money?
SSM transferred the entire annual management fee and a significant portion of the annual lease payment in July 2014, the first month of the fiscal year. These transfers were made prior to SSM earning the right to these payments. In addition, the contract with SSM did not include an objective measure to calculate the annual management fee.”  
Bay City Academy
June 2015 Financial Statements

Why am I not surprised? Less than three months after his federal indictment was unsealed, Steven Ingersoll managed to extract $140,968 in a lump sum from his teetering Bay City charter school — right under the snoring noses of its Board of Directors.

According to the Bay City Academy's recently released 2014/2015 financial report, the hobbled charter school founded and formerly managed by convicted felon Ingersoll incurred a significant operating deficit in 2015, resulting in a cash flow shortage — as of June 30, 2015, the Academy's current liabilities exceeded its current assets by $1,374,477. That's pretty steep for an operation with $3,980,670 in total revenues.

In addition to calling out Steven Ingersoll's longtime pattern of paying his Smart Schools Management expenditures without providing a whiff of documentation, the report places blame for much of the financial fiasco squarely at the feet of the school's Board of Directors. Under Michigan state law, the Board of Directors has ultimate oversight responsibility for the school district's operations.

Stating that the finding was a result of observation and inquiry with the Academy's administration, the auditors determined the deficit was result of an overreliance on Smart Schools Management for financial oversight. As a result, there was “a lack of appropriate administrative oversight by the Board of Directors over the Academy's finances during the year. The effect of this condition resulted in actual expenditures exceeding budgeted amounts, and a year end deficit fund balance.”

Noting the Board's so-called overreliance, independent auditor Weinlander Fitzhugh examined invoices from SSM and selected certain items on those invoices for examination of supporting documentation. 

Hold onto your collective hats, here comes the shocker: for the items selected, the supporting documentation was “incomplete, insufficient or nonexistent”. 

“Additional support was requested for these items. We were informed by SSM that the selected invoice items were derived from the Board approved budgets and resolutions directing and delegating SSM to supply and/or procure all materials and services necessary for the Academy's operation.”

In other words, Ingersoll likely informed the auditors that while the Bay City Academy Board of Directors resembled human beings, the group was in reality a life-like assemblage of fleshy rubber stamps.

As of June 30, 2015, the Academy's current liabilities exceeded its current assets by $1,374,477 (and the General Fund had a deficit fund balance of $1,374,477). In addition to filing a “plan of action” with the State of Michigan, the management new team has eliminated several jobs and many other expenditures. 

Former Bay City Academy Superintendent Brian Lynch's new management company, Mitten Educational Management LLC, officially took control of the school on May 1, 2015. Under the insta-firm's two-year deal, it “provides a variety of services including financial management, leased employees, education programs and consulting as well as teacher training” to the school.

The audit also revealed Mitten had been paid $60,673 in management fees as of June 30, roughly $20,000 a month. By that measure, it appears Mitten could be pulling in roughly $250,000 per year.

Lots of cheddar for overseeing a dwindling charter school during its twilight days. (The report also claims the “amount paid to Lake Superior for oversight functions during the year ended June 30, 2015 was $108,902”, which must be a joke. I read that report, and could find no evidence of oversight. Overlooked, yes; oversight, no.)

By the way, irregular expenditures are either unauthorized or not in accordance with the terms of a Board-approved expenditure resolution.

The Bay City Academy also renegotiated the terms of its short-term debt: Wildfire Credit Union will receive a monthly principal payment of $10,000 per month plus interest at 5% commencing in August 2015 with a balloon payment scheduled in July 2016; First National Bank of Michigan will receive a monthly principal payments of $50,000 plus interest at 3.5% commencing in May 2016 with a balloon payment scheduled in August 2016. 

In other words, update your resume and keep a carton in your office — just in case you have to pack up quickly.


  1. "Irregular expenditures" is too mild a phrase to use here. Can't wait for the 'rest of the story'.

  2. It's undeniably obvious that Ingersoll's shenanigans are standard operating procedure with all of his schools, and hes been at this racket for over 20 years. This is only one guy. There are 232 for-profit charter schools currently operating in Michigan.

  3. If you notice, convicted felon Roy Bradley's daughter is still running the school's finances (into the ground) and holds other positions in the office in the Bay City Academy, and her husband now works there too?!

    1. The comment is accurate: a check of the Bay City Academy's staff directory shows that Kristy Bradley Wyson is listed as "Office Administration" and her husband, Shawn Wyson is shown as "Maintenance".

    2. Looks like Roy Bradley's daughter and son-in-law are 'maintaining' their financial situation and 'cleaning' up with a lot of dough too.

  4. Yes, Kristy handles money for the school, in sort of an accounting role (smart, right?). Shawn does (or is supposed to...rarely does he do anything) maintenance and also did so last year. People that SHOULDNT be involved in the school, are still involved. Miss Fortune, did you know that despite being billed as "former superintendent " for BCA, Pat is still very much involved in the school? He has been there many times. He gave my niece a rubber bracelet at Birney Park at the beginning of yhe year...it reads "JDWR" or "Just do what's right"....you can't make this stuff up!!!