Ann Arbor SPARK Refuses To Release Audit

WARD 1 CITY Council member Sumi Kailasapathy is a CPA. It was Kailasapathy who pushed the Council’s Audit Committee to investigate further after it was revealed City Attorney Stephen Postema had allegedly “double-dipped,” in accepting a car allowance and mileage reimbursement.

Postema’s reimbursement request had been flagged by the city’s auditor. Then the City Attorney attempted offer legal advice on the matter to Council members.

Kailasapathy told Postema to step back because, as she explains, “in my opinion it was a conflict of interest.”

Since then, she has asked to see the audits of various entities that receive funding from the city, including the Downtown Development Authority and the AAATA.

“I recently asked to see the audits for Ann Arbor SPARK,” she said.
Emails shared with The Ann Arbor Independent show Kailasapathy (left) requested the documents from City Administrator Steve Powers, who serves on the Board of Directors of Ann Arbor SPARK. In his reply to her, Powers offers Kailasapathy annual reports and 990 income tax returns, among other materials. However, Powers writes he will not share SPARK’s annual audit statements with her.

Kailasapathy did not mince words: “It’s outrageous. Those people come to City Council for money, and yet they want to keep their financial documents a secret from the public. No, no, no.”

According to the city’s online checkbook, between July 1, 2011 and October 1, 2013, Ann Arbor gave $4,757,357.06 to Ann Arbor SPARK—including money from the city’s General Fund. The General Fund pays for services, such as police and fire, both of which have suffered deep staffing cuts.

“I will never vote to approve another dollar of funding for SPARK,” said Kailasapathy. “Each time I will read the email in which I was told I could not see the annual audit reports.”

Kailasapathy hopes other City Council members will follow her lead.

Ann Arbor SPARK also diverts money from the Ann Arbor Public Schools through a tax increment financing (TIF) scheme. SPARK has skimmed over $3.5 million dollars from the local public schools over the past five years. In 2011, SPARK skimmed around $1.4 million in tax money that would have gone to a cash-strapped AAPS.

In 2009 the Washtenaw County Board of Commissioners (BOC) imposed a new property tax on county residents to fund Ann Arbor SPARK. The Act 88 millage was imposed under the watchful eye of Robert Guenzel, then the Washtenaw County Administrator, now retired, and a member of the SPARK Board of Directors for the past several years.

In its 2011 budget the BOC slashed human services funding forcing cuts to programs that deal with homelessness, domestic violence and child abuse. The BOC then renewed the Act 88 millage, and increased the annual amount county taxpayers give to Ann Arbor SPARK. In 2013, the Act 88 millage is expected to provide over $500,000 in county tax money to SPARK.

In fact, in 2011 Ann Arbor SPARK got over 10 times more money from Ann Arbor taxpayers than Food Gatherers ($171,177.50), and Habitat for Humanity ($116,050). The Shelter Association of Washtenaw County received $61,887.75 during the same time period.

Perry Nursery School serves low-income and single-parent families. According to the group’s web site: “Perry Nursery School prepares at-risk preschool children for future academic and social success while providing their parents opportunities for professional, personal and parental growth.”

Between July 1, 2010 and November 30, 2011, Perry Nursery School received $55,378 in funding from the City of Ann Arbor.

Ann Arbor citizens, the online news site A2Politico have repeatedly requested copies of Ann Arbor SPARK’s audited financial statemenst. Greg Fronzier, a SPARK employee, responded via email:

“The financial statements that we make available are the 990’s.  Would you like me to send you an electronic copy of our 990? Our annual audit is only presented internally to our Finance Committee and our Board of Directors.”

This is precisely what City Administrator Steve Powers, who sits of the SPARK Board, told Council member Kailasapathy.

She explains her reason for asking to see the audits: “In 2008, SPARK’s audit revealed several serious problems. I have had constituent questions about SPARK.”

The Associated Press summed up the 2008 auditor’s report thusly: “SPARK didn’t have adequate internal controls, submitted invoices late, provided services for companies that weren’t eligible because they weren’t in Ann Arbor and billed for services even when they hadn’t fulfilled the contract’s terms.”

The embarrassing auditor’s report came back to haunt Governor Rick Snyder during his 2010 campaign. The financial irregularities had occurred when Snyder sat on the Board of Ann Arbor SPARK, a position he has since resigned.

In short, Ann Arbor SPARK officials claimed that the official audit of their finances, including what they do with the money skimmed from the public schools, as well as close to $2 million dollars from the city’s taxpayers, is a secret that they won’t share with the public. A2Politico has learned that Ann Arbor SPARK hasn’t shared audited financial documents with city officials prior to receiving millions in public money. In response to requests from A2Politico, Ann Arbor SPARK was the only non-profit entity that received taxpayer money from the city of Ann Arbor in 2010 that refused to release a copy of its audited financial statements to the public.

Before nonprofit human services agencies receive public money from Ann Arbor, organizations must provide a bevy of financial documentation, including 990s, as well as up to date audited financial statements.

Many of the human service agencies also provide documentation of the number of city and/or county residents served by the city’s allocation of funds. Going as far back as 2008, Ann Arbor SPARK has never provided any such documentation to city officials, and between 2005 and 2012 never provided verification of its job creation claims made in Annual Reports.

A Freedom of Information Act (FOIA) request was made for the following:

1.  Copies of the 2008, 2009 and 2010 990 forms for Ann Arbor SPARK in the possession of the City of Ann Arbor

2.  Copies of the 2008, 2009 and 2010 audited financial statements for Ann Arbor SPARK in the possession of the City of Ann Arbor

The city’s response to the FOIA reveals a pattern of lack of oversight of Ann Arbor SPARK: “…The city does not have these documents….Audited financial reports are maintained by them, so they [Ann Arbor SPARK] would have to provide them to you.”

In response to a FOIA, Washtenaw County officials could not produce 990s or audited financial statements for SPARK either, despite levying a millage in order to fund the entity.

Ward 1 Democrat Sumi Kailasapathy is undeterred, however.

“Mr. Krutko (the CEO of Ann Arbor SPARK)  is making a mistake in withholding the audits from the public. Where there is poor accountability for the use of public funds, I am very concerned. We should all be concerned.”

In the final Annual Report signed by Rick Snyder as CEO of SPARK, he claimed SPARK created or retained over 12,000 jobs. According to the most recent Annual Report, “approximately 36 percent of SPARK’s $11.5 million budget comes from local funding, with the remainder made up of federal and state grants and foundations.” SPARK officials claim to have created 628 new jobs and to have retained 1135 jobs last year.