Cashing in on Kids

Feds Charge Michigan Charter School Manager with Fraud

piggybank It might be an overstatement to say that some operators use charter schools as their own personal piggy banks, but then again a recent corruption scandal at a Michigan’s Grand Traverse Academy illustrates just how easy it is for money to flow from charter schools to private individuals.

A 2013 audit of the Grand Traverse Academy, a Michigan charter school, revealed that Smart Schools Management Inc., an education management firm run by the school’s co-founder Steven Ingersoll, would draw down cash advances from the school every year, unauthorized by the board. The advances were based on budgeted amounts that “exceeded what the Academy could ultimately afford.”

As the audit concluded, “Smart Schools Management, Inc.’s ability to prepay their fee and withhold payment of overpaid fees enables Smart Schools Management, Inc. to abuse their access to public funds.” (Emphasis added). Though these practices were business as usual at Grand Traverse Academy, school officials raised no alarm when these “prepaid expenses” jumped from $69,898 in 2012 to $2.3 million in 2013.

Rather than demanding Ingersoll’s company give back the $2.3 million, Grand Traverse Academy’s board agreed to a compensation plan that would reduce management fees for future services until 2016. Like a player on the Wall St. futures market, the school board gave Ingersoll’s company the leeway to tap into the school’s finances with the promise of management fee savings later. Unfortunately for students at Grand Traverse Academy, their school board may have lost its bet.

Less than a year later, an April 2014 federal indictment charged Ingersoll with fraud. The indictment alleged that Ingersoll had tried to redirect about half of a separate $1.8 million construction loan to a personal bank account controlled by Ingersoll and his wife in part to “reduce his indebtedness to the Grand Traverse Academy.” As the Traverse City Record-Eagle reported, because of this legal jeopardy, which included additional counts of tax evasion, the $1.6 million Ingersoll owes to the charter school remains in limbo.

Despite a promise to clean house, things don’t appear to have changed much at Grand Traverse Academy. As the education writer Miss Fortune points out in her blog, the month before Ingersoll’s impending indictment, Mark Noss, Ingersoll’s twenty-year associate and a former board president, filed incorporation paperwork to form another education management firm Full Spectrum Management, LLC. The very same day, Grand Traverse Academy announced its switch to Noss’ company.

Even though Noss worked with Ingersoll for twenty years and headed the board that allowed Ingersoll’s company to collect advanced payments year after year, he claimed he had no knowledge of Ingersoll’s alleged wrongdoing. “With my deep understanding of GTA’s history and operations, and my thorough knowledge and alignment with the school’s model,” Noss explained, “I am confident that Full Spectrum will be a great asset to Grand Traverse Academy.”

But as the example of Grand Traverse Academy shows, it is often seems as though charters schools are great assets to their managers, not the other way around.