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Coverage from across Michigan and the state Capitol with the Michigan Public Radio Network and Interlochen Public Radio.

Popular charter school overshadowed by financial mess

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Peter Payette
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One of northern Michigan’s most successful charter schools is trying to move on from a controversy that has stretched over the summer.

Officials at Grand Traverse Academy decided last week that they will not go after the founder of the school for $1.6 million -- or at least not now.

A financial debacle has cast a shadow over the school which has grown steadily since opening in 2000. It now has around 1,200 students. That makes it nearly as large as nearby class B school districts like Kingsley or Elk Rapids.

The charter school focuses on character development for students, through an approach called “choice theory.” Kerrie Kornexl, a member of the support staff, says they teach kids to see the power of their own choices.

“We want that, when they go out into the world, they can do whatever it is they want to do,” she says. “We start training them here.”

Cindy Evans has two kids in school there and says the education is “top notch.” But Evans has not been impressed with the school’s management.

When she heard about its recent troubles, she had questions for the board and emailed some of them. That was two months ago and she got her first response last week.

“They talk about teaching our children about being responsible citizens," Evans says. “The top leadership in this school, in this whole situation, is not demonstrating that. There’s a problem.”

Is it philanthropy?

The main question is how did Grand Traverse Academy lose $1.6 million?

Last year, the board ended its relationship with Smart Schools Management. That’s a company run by Steven Ingersoll, an optometrist from Bay City. He founded the academy and could soon be on trial in federal court for alleged fraud and tax evasion. That's why they parted ways.

In 2013, the school’s audit noted that Smart Schools was in the habit of advancing payment to itself for management services. The audit called this a “prepaid expense,” suggesting that the school had paid in advance for services it would receive later.

School officials don’t like this term. The current manager, Mark Noss, calls it a “terrible description of what that money is.”

Noss has been involved with Grand Traverse Academy since it opened. He says the reason Ingersoll’s company owed the charter school money was not because the school paid for services it never received.

"It's a common accounting practice." --Mark Noss

Noss says it was because the management firm would promise to refund some fees when money was tight for the academy, like if teachers offered to take a pay cut in the middle of the year to fill a budget gap.

“There were times when the resources were just not there,” explains Noss. “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.’”

That point in time never came for $1.6 million.

But leaders at Grand Traverse Academy insist Steven Ingersoll was a philanthropist, not a thief.

The auditors that questioned these “prepaid expenses” said they were a violation of Michigan’s school code.

The report points out that the management company had access to the public academy’s checking account, and was able to transfer funds without board approval. According to the report, in 2013, Smart Schools actually paid itself more than the maximum its contract allowed. Nearly $300,000 more.

Mark Noss disagrees that any of this was illegal. He says numerous accountants and state officials said it was legal.

“Everyone said it was fine,” says Noss. “It’s common accounting practice.”

An open process to hire a new manager?

Another question critics of the school are asking is how Mark Noss got the contract to run Grand Traverse Academy.

Noss is an associate of Steven Ingersoll. Both are optometrists and part of the Excel Institute, an organization that promotes improving learning through visual development. Excel’s ideas are used at the academy.

Noss was the president of the board until March. He went into a special meeting on the 19th as the president and came out of it as the hired manager of the school. That management contract is worth upwards of $700,000 this year.

School leaders, including Noss, say nobody else could step in for Smart Schools and they had to move quickly.

“Had we had a new management company come in with no understanding of who we are, they could have destroyed this school,” says Noss.

"This is why charter schools have a bad name." --Cindy Evans

Last week the school’s attorney, Kerry Morgan, said the board did nothing wrong when it hired Mark Noss. He did not elaborate and could not confirm that the public was appropriately notified of the special meeting.

Morgan also said the charter school will wait until after the federal charges against Steven Ingersoll have been resolved to decide what to do about the $1.6 million.

Where is the oversight?

Also last week, school officials posted documents on the website to explain the issues that have been dogging them all summer.

Parent Cindy Evans says they don’t explain that much.

This isn’t the only charter school under scrutiny in Michigan. Since an investigative series from the Detroit Free Press, the state is talking about increasing transparency and oversight.

But if anyone suggests GTA is being treated unfairly because it’s a charter schools, Evans disagrees.

“This is why charter schools have a bad name,” she says. “Because there’s no transparency.”

Anita Senkowski wonders why Grand Traverse Academy isn’t facing more scrutiny. Senkowski blogs extensively about this story on her website “Glistening, Quivering Underbelly.”

She says there are so many questions and it’s amazing nobody is looking for answers. She can’t understand why the state or the school authorizer isn't asking about getting the $1.6 million.

“Nobody is asking those questions as far as I can tell,” she says.

An official at Lake Superior State University says they are satisfied with the situation, for now.

A spokesman for the Michigan Department of Education says it has no “specific authority” to act.

But the state might end up involved in a different way. Right now the $1.6 million “prepaid expense” currently shows up as an asset in the school’s balance sheet.

The school’s attorney says future balance sheets will stop showing that asset. At that point, Grand Traverse Academy could be in a budget deficit, and that’s when the state does have the authority to act.