Based on projections, and expressed as a percentage of revenue, the Bay City Academy's deficit is 41.09%.
In 2016, the deficit was 35% of revenues.
Expressed in term dollars? The 2017 deficit is projected to be -$1,260,373.
The MDE is required to report quarterly to the Michigan Legislature on schools incurring year-end deficits and the progress in reducing those deficits. In the fourth quarterly report for FY 2016-2017, an analysis of the projected FY 2016-2017 financial data was been completed for those schools that ended FY 2015-2016 with a deficit. The analysis was conducted using data collected from Deficit Elimination Plans (DEPs) and required monthly budget control reports.
According to the Bay City Academy's 2014/2015 financial report, the charter school incurred a significant operating deficit in the fiscal year ending June 30, 2015, resulting in a cash flow shortage — the Academy's liabilities exceeded its assets by $1,374,477.
Stating that its finding was a result of observation and inquiry with the Academy's administration, the auditors in 2015 determined the deficit was result of an over reliance 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.”
However, according to a FYE June 30, 2017 3rd Quarter balance sheet filed on June 23, 2017 by the Bay City Academy, the projected year-end deficit after two years remains virtually unchanged—after two years and nearly $7.0 million public dollars poured into the school by the State of Michigan and the federal government.
Let's look at how the Bay City Academy arrived in Deficit Town: via the Steven Ingersoll Express.
Regular readers of this blog will recognize same unethical habits — prepaid management fees and bogus “cash refunds” that went unpaid, sitting for years on the books as “receivables” from the scheme Steven Ingersoll employed during his multi-million dollar plunder scheme at the Grand Traverse Academy.
And it appears that the Bay City charter school's board members were as willfully impotent and sympathetic as those in Traverse City.
But let's stop talking in code.
The Bay City Academy's $1.3 million dollar deficit in 2015 was not a “budget shortfall” or a “negative amount”, it was a loss.
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).
You'll note when you read the Bay City school's 2015 financial report, auditor Weinlander Fitzhugh expressed doubt about the financial viability of the school: “As discussed in Note 13 to the financial statements, the Academy has incurred a significant operating deficit in 2015 resulting in a cash flow shortage. These conditions raise substantial doubt about its ability to continue as a going concern.”
Effectively restating financials from its first three fiscal years, and without Steven Ingersoll's trademark money sleight-of-hand, the Bay City Academy situation reminds me of Warren Buffett's famous comment: you only find out who is swimming naked when the tide goes out.