VPP apps prompting for Apple ID on Supervised iPads

We are currently in the midst of a large one to one iOS deployment for a school district. We are running into an issue when updating VPP apps currently deployed on iPads. Our workflow is as follows,

1.Using iTunes on the Apple Configurator provisioning machine we updated the apps

2.We then re-imported the newly updated .ipa files into configurator choosing to replace the outdated.

3.Ensure that "Remove apps and profiles Configurator did not install" is un-checked so as to retain any student data that has been created.

4.Plug in devices and refresh

5.Open a VPP app such as Garage Band, then you are prompted with a blank request to input an Apple ID and password.

Have verified the provisioning machine is authorized in iTunes, and that all VPP apps were redeemed using the institutuional Apple ID.

iPads= iOS 6.0.1

Apple Configurator 1.2.1

Provisioning machine=10.7.5

iTunes=10.7

Any help on this would be greatly appreciated.