State auditor accuses Epic of potentially-fraudulent practices in half-billion dollars in government funds; Epic says the auditor has an agenda

State auditor and inspector (SA&I) Cindy Byrd released the first of a two-part report of an audit done on Epic Charter Schools on Thursday. The special investigative audit came after a six-year investigation into the organization and their accounting practices and concluded that millions of dollars of taxpayers’ money in the form of government appropriations meant to educate students has been grossly mishandled, in large part by being funneled to one of its for-profit entities. 

Epic is a virtual school system that is now the largest school district in the state, with approximately 60,000 students. These numbers increased significantly recently due to parents’ concerns about sending children to traditional schools during the uncertainty of the coronavirus epidemic. 

According to the report, “a total of $458 million in state aid and federal funds has been disbursed by the State Department of Education to Epic over the past six years.” Almost a fourth of this money went to Epic Youth Services, LLC (EYS), the for-profit charter management organization (CMO). 

The report outlines what Byrd calls unethical, even possibly illegal actions taken Epic—largely by Ben Harris and David Chaney, co-founders of Epic and co-owners of EYS. One example is that although government funding is to be used for “school related goods and services, they are maintained in an outside bank account controlled by EYS.” Further, “EYS has restricted SA&I’s access to these records and transparency for public accountability purposes is non-existent.” 

The auditor says that almost $80 million has never been audited by an independent agency and that $125 million is being “managed outside of the purview of the taxpayers of Oklahoma.” Astonishingly, “multi-million-dollar invoices lacked specificity and did not provide the per student count needed to account for the payments made.”

Other allegations in the report include the commingling of funds between entities and therefore between school districts, some of which are in another state (California), there were many decisions made without Board approval, and even questionable advertising decisions. “Tax dollars that could have been used for the benefit of Oklahoma’s students, were instead used to increase Epic Charter School’s enrollment and thereby EYS’ revenues.”

SA&I says that as an agency, it “respects the privacy of private companies but is adamant that the stewardship and management of $79.3 million in state appropriated funds designated for student education should be transparent and the records be made available for audit.” 

Not only was there a multitude of evidence of the improper handling of state-allocated funds, but Byrd also stated that, “the lack of cooperation and the roadblocks constructed by Community Strategies, their subsidiary, their charter management organization, and their legal counsels were unprecedented in the experience of SA&I.” They “erected barriers around personnel and records limiting access to both, which is normally standard procedure during an investigative audit. Most records had to be requested through the use of subpoenas and it was routine for compliance to be incomplete, late, or lacking. The lack of unrestricted access to records and employees greatly inhibited progress and significantly prolonged the timeframe required to complete this audit.” 

There has been vociferous criticism of Epic from traditional public school administrators who have been calling for an investigation of this kind for some time. They have also attempted for years to bring state legislators on their side. One of their complaints is that virtual charter schools are not regulated the same as traditional schools and that they are not under the same stringent requirements they are, such as having to accept students into their district from another in the middle of a school term, even if those students will not be counted in their weighted average daily membership, and therefore they will not receive funds from the state to offset their costs. This is just one example of the concerns from traditional administrations. 

The auditor emphasized that the report is not a condemnation of all virtual schools in general, but rather a specific denouncement of Epic’s administration and management specifically. 

Epic’s 132-page rebuttal came a day later accusing the auditor of showing “a clear, personal anti-public school choice agenda.” They deny allegations that they were uncooperative in the investigation. Assistant Superintendent Shelly Hickman said the “audit weaves quite a tale” and “that tale is fiction.” Ultimately, they say, “the findings were presented with over-the-top sensationalism guaranteed to stir up defenders of the education status quo because we are growing, and they are struggling.”

The SA&I said they plan “to continue their audit of Epic Charter Schools” with “a review of the Student Learning Fund (subject to court case resolution), student enrollment and attendance reporting, and expenditures,” along with other items they may find of interest. There is also an ongoing Oklahoma State Bureau of Investigation case.

Sapulpa Times will be updating this story as it unfolds. To read the audit for yourself, you can visit the SA&I website at sai.ok.gov

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E. B. Thompson

E. B. Thompson

Born and raised in Sapulpa, Elizabeth has a Bachelor’s degree in American Studies and is a former banker. She is thrilled to be back in her hometown with her husband Michael and to be contributing to The Sapulpa Times.