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Thursday, October 12, 2017

FROM MISMANAGEMENT TO “MISS FORTUNE”: What Happened At The Grand Traverse Academy?

Later today, I will be publishing the second installment of  my exclusive coverage of the Grand Traverse Academy's media sleight of hand regarding its deteriorating financial outlook.

For readers who've just recently discovered this blog, here's the background on the situation: the Traverse City charter school is buckling under the loss of nearly $5.0 million misappropriated by its former manager, convicted felon Steven Ingersoll.
On March 2, 2007, Steven Ingersoll signed a $16.2 million Public School Academy Revenue and Refunding Bonds on behalf of its issuer, the Grand Traverse Academy. Ingersoll’s company, Smart Schools Management, Inc., had been contracted by the academy’s Board of Directors to handle its daily operations since the academy's inception in the fall of 2000. 

However, when Ingersoll signed the bond contract, he omitted information about false and misleading public statements he and the Board of Directors had already made (and continued to make for at least seven years) regarding the Grand Traverse Academy’s financial condition. The academy’s financial situation had already begun to deteriorate due to Ingersoll’s misappropriation of funds, an amount estimated at nearly $5.0 million. 

The Grand Traverse Academy’s financial misstatements and omissions were not the result of an isolated incident, but were recurrent and stretched from one fiscal year into the next. 

At the start of each fiscal year, (beginning July 1, 2007 and continuing for six years through the fiscal year ending June 30, 2013), Grand Traverse Academy (GTA) manager Steven Ingersoll withdrew his entire annual Smart Schools Management, Inc. fee from the Traverse City, Michigan charter school’s bank account before it had been earned—and before he was contractually entitled to receive it. 

Although ostensibly based on a percentage of the GTA board’s approved preliminary budget figures, Ingersoll’s management fee was necessarily “adjusted downward” after actual budgets were calculated at the end of each year. 

Ingersoll booked the overpayment on the GTA’s balance sheet as either “accounts receivable” or a “prepaid expense”, claiming them as “assets”, thereby concealing the school’s shaky financial condition. 

In addition, Ingersoll utilized a “lease receivable”, a wildly-fluctuating amount purporting to be “facility lease payments”, to avoid showing a financial deficit. Those annual “lease” amounts ranged from $0 to $800,000 for two 12’ x 12’ rooms. 

The “prepaid expense” scheme was publicly supported by then board president (later head of Full Spectrum Management, the Academy’s most recent management company) Mark Noss, who described it in a September 17, 2014 Interlochen Public Radio interview: “There were times when the resources were just not there. So Smart Schools basically pledged or rebated that money back, saying ‘at some point in time we will repay what we’re calling a prepaid expense.’” 

However, Ingersoll never really repaid the difference between the amount he'd advanced himself (“what we’re calling a prepaid expense”) and the actual management fee he should have received. 

So how did the receivable grow from $538,864 on June 30, 2007 to $3,551,328 on June 30, 2012 if Ingersoll, as he’d claimed in multiple financial documents to the GTA board, booked each year’s fee overpayment as a receivable and paid it off at the beginning of the next fiscal year? 

Simple: after Ingersoll had paid the previous year's receivable balance using Michigan state aid money provided to the Grand Traverse Academy, he transferred that money back from the Academy’s bank account to one of his Smart Schools accounts, creating a new, and even larger, receivable balance. (Ingersoll admitted the multi-year scheme on December 9, 2015 while testifying under oath during his federal sentencing hearing). 

The Grand Traverse Academy carried on its books large amounts classified either as “amounts receivable from sources other than governmental units”, “related party receivables” or “prepaid expenses” beginning as far back as the fiscal years ending June 30, 2005 ($126,649) and June 30, 2006 ($691,703). 

In its 2008 audit, the Grand Traverse Academy revealed it was owed $938,481 as an “accounts receivable”. 

In its 2009 audit, the Grand Traverse Academy revealed it was owed $3,049,957 as an “accounts receivable”. 

In its 2010 audit, the Grand Traverse Academy revealed it was owed $2,715,251, classified as "amounts receivable from sources other than governmental units". 

The 2011 audit revealed that the Grand Traverse Academy was owed $2,500,000 from "related parties", the first use of that classification. 

The "related party receivable" amount, which ballooned to well over $3.5 million by the June 30, 2012 audit, was solely attributable to Steven Ingersoll. 

Ingersoll ultimately admitted he’d utilized an “accounts receivable” financial statement manipulation scheme as cover for his diversion of funds from the Grand Traverse Academy — under direct examination on December 9, 2015 by Assistant U. S. Attorney Janet Parker during his sentencing hearing.

However, on April 27, 2016, Steven Ingersoll requested and received letters of recommendation from Mark Noss, Bradley Habermehl and Bruce Harger addressed to the Michigan Board of Optometry regarding the potential revocation of Ingersoll’s license. 

In his letter, Mark Noss stated the Academy Board was “appreciative of all the good Dr. Ingersoll did for the school”, and referenced a public document, “History of Grand Traverse Academy”, previously posted on the Academy’s website.


  1. Hahaha the good Steve Ingersoll did? You mean money laundering he and his cronies did. And Lake Superior State University kept their mouths shut, basically allowing it to happen. When will the tv and newspapers report honestly what has happened and what is continuing to happen.
    You have to wonder what else is going on behind closed door. Lies lies and more lies GTA! I would not want my children in that school. The school is broke, continually lies about what is financially happening and the pattern of money laundering continues.

  2. Wonder how appreciative of Steve the Academy is now with all the financial problems? Hope they get taken over by the state and if that doesn't happen, get closed down completely.