Epic board OKs new financial controls
Following scathing reports of poor financial oversight, the board of education for Epic Charter Schools approved its first round of corrective action Wednesday.
Board members for Community Strategies Inc., the nonprofit that runs Epic, will meet again Nov. 18 to continue discussions on corrective measures. Serving 60,700 students, the virtual charter school is the largest public school system in the state.
In an audit released Oct. 1, the State Auditor and Inspector's Office reported widespread fiscal mismanagement at Epic and the private company that manages it, Epic
Youth Services. Epic disputes the auditor's findings and denies any wrongdoing.
But, in a lengthy meeting Wednesday evening, the board agreed to implement internal controls that state auditors said were lacking.
Board members directed the school and Epic Youth Services to notify them of any financial transfers between Epic One-on-One and Epic Blended Centers and to wait for board approval. Auditors found a $3.3 million loan and a $6 million transfer went from Epic Blended to Epic Oneon-One in 2019 without a board vote. Other payments from Epic accounts were already completed by the time they came before the board, auditors said.
State auditors said Epic Blended and One-on-One are separate school districts and shouldn't commingle funds. Epic disagrees that these transfers were unlawful but acknowledged the board should have been made aware beforehand.
These transactions simply “fell through the cracks,” said attorney Libby Scott, who represents Epic Youth Services.
“We took corrective action,” Scott said. “This should never occur again.”
The board amended its contract with Epic Youth Services to specify the basis for calculations of school payroll, administrative fees and payments for the Learning Fund — a bank account that supports student extra- curricular activities and supplemental learning.
Auditors said the calculations for these payments were unclear, particularly for the Learning Fund.
Board members also agreed to hire a new encumbrance clerk to be responsible for school finances. The employee would report to the superintendent. Chief Financial Officer Josh Brock has thus far served as Epic's encumbrance clerk.
One of the most emphasized complaints from state auditors has centered on Brock. The audit described the degree of separation between Epic, Community Strategies and Epic Youth Services as virtually nonexistent with Brock acting as CFO for all three entities.
Attorneys representing Epic said the majority of the state auditor's report is inaccurate with incorrect interpretations of law or Epic's charter contracts. Board members seemed incredulous at the audit results and the response from other state agencies.
“I've sat here for 10 years, and I've never heard of anything like this,” board member Mike Cantrell said during the meeting. “For the very groups that have audited us over the years and approved our budgets and approved what we've done around the state, for them to just pile on without giving us due process is just wrong.”
The Oklahoma State Board of Education demanded Epic repay $11.2 million in funds allegedly misidentified in financial reports. The Oklahoma Statewide Virtual Charter School Board started the process to possibly terminate its charter contract with Epic One-on-One.
Rose State College, the charter sponsor for Epic Blended, opted to wait until investigations are complete before taking any action.
Epic Superintendent Bart Banfield said the school intends to “debunk” the audit report, and officials have requested work papers to check auditors' calculations.
The school has 60 days after it receives the work papers to respond to the $ 11.2 million demand for repayment.
Attorneys for the school questioned why the state audit's findings were never brought up in the past as potential issues. The state auditor's office, the Oklahoma State Department of Education and the virtual charter school board review and accept financial audits and reports from Epic every year.
“If somebody doesn't tell you you're doing it wrong and they accept it, you think it's OK, and that's what we've been doing until now,” Epic attorney Bill Hickman said. “It's challenging when you believe you're relying on the experts who aren't telling you that you're wrong ... . Only after the fact when the state auditor's report comes out, we're being told to pay this money back.”
The board accepted the resignation from one of its members, Liberty Mitchell, on Wednesday.
Chairman Doug Scott read Mitchell's resignation letter aloud during the meeting. Mitchell said her career as a nurse does not allow spare time to serve on the board, especially during a global pandemic. She also is planning to move to Texas.
Mitchell was a member of Epic's first graduating class in 2012. Epic is accepting applications to fill her seat, though the board hasn't finalized a process for selecting new members.