State Auditor Releases Part 1 Of The State's Investigative Audit Of Epic Charter Schools

The investigative audit of Epic Charter Schools was "one of the worst" audits State Auditor and Inspector Cindy Byrd has seen, she said Thursday.

The special audit was ordered by Gov. Kevin Stitt in July 2019.

Byrd released the first part of of a two-part investigative audit against the online charter school district.

In the first part of the audit, Byrd laid out 21 findings, including:

1. Epic spent almost $3 million on advertising in three months to recruit new students
2. Epic has paid almost $80 million into the Student Learning Fund which is managed by founders Ben Harris and David Chaney
3. The Student Learning Fund has never been independently audited and the release of its financial records to the State Auditor is currently in litigation
4. The State of California has confirmed Epic Charter Schools' Charter Management Organization, Epic Youth Services (EYS), used $203,000 from the Student Learning Fund - money dedicated for educating Oklahoma children - to help with start-up expenses for Epic-California (Epic-CA)
5. Epic's founders used Oklahoma school personnel to operate its California counterpart including $210,000 to develop Epic-CA and these funds were only repaid after the State Auditor discovered the transfer and made inquiries into the expenditure
6. Harris and Chaney pledged credit from Epic Charter Schools (Oklahoma) bank accounts as collateral to obtain a half-million dollar loan to run their for-profit venture in California
7. Epic Charter Schools underreported administrative costs above the statutory five percent cap last year and was required to repay the state a half-million dollars
8. During the audit period, SAI calculates that Epic exceeded the administrative cost cap by $8.9 million
9. The audit identified $6 million in fund transfers between Epic school districts without board approval
10. One Epic district loaned another Epic district $3.3 million without board approval

Byrd said these findings were shared with the attorney general's office, the Oklahoma State Bureau of Investigation, the Oklahoma Tax Commission, the U.S. Office of the Inspector General, the Internal Revenue Service and the FBI.

Click here to read the full report.

Epic Charter Schools' Assistant Superintendent Shelly Hickman released the following statement:

"We haven’t had a chance to read this 120-page report. What we witnessed today was political theatrics, but the information was not new and has been in the public realm for many years. What we did witness was Auditor Byrd attacking parents' rights to choose the public school they think is best for them, and disparaging the work we are doing to provide high quality, remote learning opportunities for over 61,000 students and parents.

"We take issue with the auditor’s assertion that we were not helpful or cooperative in this process. Our school’s staff has spent thousands of hours responding to a seemingly endless fishing expedition. We gave them access to our computer system, and to date we have paid $243,000 for the audit.

"What the auditor seems to object to is the idea that our school model provides an alternative to traditional public schools. We have grown from only 1700 kids to more than 61,000 students over our 10-year history. Does our Learning Fund help us attract and retain students? Of course it does because it empowers parents and individualizes their children's education. 

"We also explained, many times, the method we use to calculate student enrollment. In fact, we provided the auditor’s office with a chart, outlining the method and the resulting calculations. Those calculations are in line with other school districts. They were also accepted, year after year, by the State Department of Education. If the State Auditor understood how those calculations are made and reported, she would understand why we don't owe $8.9 million.

"We will be providing a point by point response within 24 hours, but once you cut through the theatrics of today’s announcement, the conclusion of the report calls for changes to the law; it does not assert that laws have been broken. Policy makers should be cautious about believing politicians over parents."

Stitt released the following statement after the announcement:

“While we are still reviewing the entire contents of the audit, the initial findings are concerning. Our state has recently invested in public education at the highest levels in our state’s history, and Oklahomans deserve accountability and transparency on how their hard-earned tax dollars are being spent.

“I am grateful for Auditor Byrd’s extensive work on this report and agree that her findings are not representative of all public charter schools or alternative forms of education. We know parents want educational options, especially in light of how education has shifted during the COVID-19 pandemic. We expect every Oklahoma student to have access to high quality options that are transparent about their performance and accountable to taxpayers.

“I am committed to working with Superintendent Hofmeister and the Legislature to ensure our public education funding provides the maximum benefit for our students and teachers.”

State Superintendent of Public Instruction Joy Hofmeister released the following statement:

“In an education environment where every dollar is being stretched to the limit, these findings are deeply disturbing. It is one thing for a public school to utilize the services of a private vendor, which is common practice, but when that private vendor operates the school in question and can manipulate that structure to obfuscate or mislead, there is something systematically wrong. Oklahomans deserve better.

“As the coronavirus pandemic has made clear, there is no question that virtual instruction and innovative models are important options for many students and families. These changes are rapidly transforming the education landscape and it is critical that laws, policies and infrastructure keep pace to ensure transparency and accountability. We will closely examine the most appropriate steps moving forward in consultation with the State Auditor and other state officials.”