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State auditor conducts audit investigation into Epic Charter Schools

Posted at 2:59 PM, Oct 01, 2020
and last updated 2020-10-02 00:17:34-04

TULSA, Okla.  — State auditors are launching a special audit investigation into Epic Charter Schools and related entities.

The more than 100-page report, for audit years FY2015-FY2020, found that Epic Charter Schools designed an administrative system inconsistent with the Oklahoma Charter School Act and its charter agreements, according to State Auditor and Inspector Cindy Byrd.

Byrd said the special audit was ordered by Governor Kevin Stitt in July 2019.

The 21 findings from the year-long audit include the following:

  • Epic spent almost $3 million on advertising in three months to recruit new students
  • Epic has paid almost $80 million into the Student Learning Fund which is managed by founders Ben Harris and David Chaney
  • The Student Learning Fund has never been independently audited and the release of its financial records to the State Auditor is currently in litigation
  • 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)
  • 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
  • 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
  • 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
  • During the audit period, SAI calculates that Epic exceeded the administrative cost cap by $8.9 million
  • The audit identified $6 million in fund transfers between Epic school districts without board approval
  • One Epic district loaned another Epic district $3.3 million without board approval

Assistant Superintendent Shelly Hickman with Epic Charter Schools provided a statement Thursday about the report's findings:

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.

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