Epic ordered to pay $11.2M to the state
O k l a h o ma ' s t o p s c h o o l boar d has demanded Epi c Charter Schools repay $11.2 million i n st ate f unds t hat auditors say was illegally used and falsely classified in financial reports.
The Oklahoma State Board of Education unanimously voted Monday to order Epic to pay within 60 days of receiving notice. The amount of $11.2 million is based on material findings from an audit by the Oklahoma State Auditor and Inspector's Office.
The demand came on the same day as two other major a n n o u n c e ment s a f f e c t i n g Epic.
A t t o r n e y G e n e r a l Mi k e Hunter appointed a special counsel Monday to oversee the state's investigation into the virtual charter school system. T h e Okl a h o ma S t a t e wi d e Virtual Charter School Board r el eased a meeting agenda showing it might vote Tuesday to terminate its charter contract with Epic One-on-One.
T h e s t a t e s c h o o l b o a r d demanded Epic repay mill i o n s o f d o l l a r s s p e n t o n a d mi n i s t r a t o r s t h a t we r e supposed to support students and teachers. The repayment a l s o i ncl udes $ 2 03,000 i n taxpayer funds that auditors found was unlawfully transferred to Epic's charter school in California.
“This is not normal,” board member Carlisha WilliamsBradley said during Monday's meeting. “This is not OK, and I do think that it requires action of this board and body to say that this is not acceptable and it's by law our responsibility to do something here in this setting.”
Epic denies any wrongdoing and disputes the audit's f i n d i n g s . S u p e r i n t e n d e n t Bart Banfield said the school intends to “debunk” the audit report by reviewing the auditors' calculations.
“E P I C i s n o t p e r f e c t , ” B a n f i e l d s a i d i n a s t a t e - ment. “No school is. But the dedication of EPIC's 2,100 employees working here to
get things right and improve our processes i s. We know more than 60,000 students and their families are counting on us to work with the State Department of Education to resolve issues and we will not let them down.”
On Oct. 2, State Auditor and Inspector Cindy Byrd released the first part of the audit of Epic, f oll owing a directive from Gov. Kevin Stitt to investigate the school's finances and “all related entities.”
Byrd reported wide-ranging misuse of funds at the school, millions of dollars hidden from public view and lacking oversight from the entities tasked with holding Epic accountable.
F o r y e a r s , E p i c d o d g e d p e n a l t i e s b y i n a c c u r a t e l y reporting millions in administrative costs, a move that reportedly lined the pockets of the school's co-founders and t heir charter management company, according to the audit report.
Epic' s c o- f ounders, Ben Harris and David Chaney, also own t he private company that helps manage the virtual charter school. The company, called Epic Youth Services, receives 10% of the school's revenue as a management fee. It also runs a bank account of money for student activities, called the Learning Fund.
E p i c e x c e e d e d t h e s t a t e - ma n d a t e d l i mi t o n a d m i n i s t r a t i v e c o s t s b y o v e r s p e n d i n g o n s a l a r i e s and payments to Epic Youth Services, auditors said. The school reportedly covered it up by reclassifying certain expenditures as non-administrative i n f i nancial r e ports t o t he Oklahoma State Department of Education.
Oklahoma public schools with more than 1,500 students cannot spend more than 5% of funds on administrators.
The state board demanded t h e r e t u r n o f $ 8 . 3 m i l - lion in misreported salaries and $2.7 million wrongfully paid to Epic Youth Services. With the addition of $203,000 i l l e g a l l y t r a n s f e r r e d t o a California charter school, the board aims to recoup a total $11.2 million.
A u d i t o r s s a i d t h e s t a t e Education Department took Epic's financial reports at face value and failed to verify their accuracy. The department accepted reports of estimated costs from Epic rather than exact f i gures, according to the audit.
S t a t e s c h o o l s S u p e r i n t e n d e n t J o y Hofmeister said the findings were “very si gnificant and alarming” during Monday's board meeting.
“We have, as a state board, a duty to recoup those funds,” Hofmeister said.
Epic's enrollment skyrocketed over the summer amid increased demand for virtual learning during the pandemic. It has grown into the largest school system in Oklahoma, o u t n u mb e r i n g O k l a h o ma City Public Schools and Tulsa Public Schools.
I t r e mai n s u n c l e a r h o w E p i c ' s s t u d e n t s woul d b e affected should the Statewide V i r t u a l C h a r t e r S c h o o l Board terminate its contract with Epic One-on-One, the school's free virtual platform a v a i l a b l e i n a l l Okl a h o ma counties.
Rose State College i s the c h a r t e r s p o n s o r f o r E p i c Blended Centers l ocated i n Tulsa County and Oklahoma County. The college didn't commit to considering an end to its contract with Epic when The Oklahoman r equested comment on Monday.
"Any statement at this time would be premature before all of the facts are laid out and as entities are still meeting around the issue," Rose State said in a statement.
Ro s e S t a t e a n d t h e v i r - tual charter school board are r e s p o n s i b l e f o r o v e r s e e - i ng performance and f i scal m a n a g e m e n t o f E p i c ' s t w o b r a n c h e s , a s i s t h e Oklahoma State Department of Education. Auditors found “no evidence” of quality oversight by Epic's own school board.
Epic has been under investigation for years by state and federal officials. Agents with the Oklahoma State Bureau of Investigation alleged Epic and its co-founders embezzled mil l i ons i n s t a t e f unds by i l l e g a l l y i n f l a t i n g s t u d e n t enrollment counts, according to court documents filed last year.
The OSBI said earlier this month its investigation is still “very active.” No one has been charged with any crimes.
OSBI agents have been consulting with Oklahoma County District Attorney David Prater for their investigation into the school.
But Prater stepped aside Monday as the state attorney general appointed a special counsel to lead the investigation of Epic. Former Oklahoma Labor Commissioner Melissa McLawhorn Houst o n wi l l review the state audit's findi n g s a n d d e c i d e wh e t h e r f u r t h e r l e g a l a c t i o n i s necessary.
The head of the attorney general' s Cri minal J ust i c e Unit, Joy Thorp, will assist Houston in the investigation. Thorp oversees t he state's multicounty grand jury, which could hear evidence in the Epic case i f prosecutors pursue criminal charges.
Oklahoma lawmakers, who met privately with the state school board Monday, also will hear t he audit's f i ndi ngs. Reps. Rhonda Baker, R-Yukon, and Mark McBride, R - M o o r e , a n n o u n c e d l e g i s l a t o r s w i l l l i s t e n t o t e s t i mony f r o m t h e s t a t e auditor i n an Oct. 21 hearing with the House Common Education Committee and t he House Appropriations and Budget Subcommittee for Education.
“These heari ngs a r e not about determining guilt or i nnocence because t hat i s t h e r e s p o n s i b i l i t y o f l a w e nf o r c e ment, not l e g i s l a - tors,” Baker and McBride said in a joint statement. “These hearings are not about school c h o i c e o r E p i c ' s l e a r n i n g mo d e l b e c a u s e t h o s e a r e not the issues in this audit. The s e h e a r i n g s a r e a b o u t g a t her i ng i nf or mation f or policymaking.”