Epic Charter Schools agrees to repay $9.1M to State after audit, bringing total to $20M

As you might recall, Epic Charter Schools somewhat took the public education scene by storm over the past several years, rapidly becoming the largest public school system/district in the state. The education establishment felt threatened by the growth of virtual charter schools (which... isn't that basically what brick-and-mortar schools turned into due to COVID-19?), and started to go after their new competitors.

Unfortunately for Epic, it seems that they failed to follow certain state education rules and basic finance procedures, to the point that earlier this year they were charged $10.5M in penalties. The State Board of Education, last October, demanded that Epic pay $11.2M, which Epic disputed. Upon further review by the State Auditor's office, Epic has now agreed to repay $9.11M, bringing their total in penalties to around twenty million dollars.

The press releases below are from State Auditor Cindy Byrd and State Superintendent Joy Hofmeister (who is, herself, a misrepresenting fraud):

EPIC TO RETURN $20 MILLION TO STATE

AUDIT FINDINGS VALIDATED

 OKLAHOMA CITY – After a thorough review of the investigative audit of Epic Charter Schools conducted by the State Auditor’s office last year, and a ruling by the State Board of Education (SDE), Epic Charter Schools has agreed to repay $9.11 million to the state.  

“I want to commend SDE for its work to determine Epic’s administrative costs,” said State Auditor & Inspector Cindy Byrd.  “Because of our audit, Epic will return approximately $20 million in total to the State. 

“Epic Charter Schools is a public school district, funded 100% by taxpayers, and my office has a duty to make sure they are spending the money properly.  We asked for records and its hired education management company (EMO) refused to fully comply.  Our audit findings verified the numbers based on the information the company did provide.  Today’s agreement confirms that Epic’s EMO abused millions of taxpayer dollars by hiding its excessive administrative costs.”

Under the operating agreement between Epic Charter Schools and its hired management company, owners Ben Harris and David Chaney were taking 10% of every dollar Epic received to provide administration and management to the school.  Their 10% fee exceeds the 5% administrative cap in state law.

“From the day we started the audit, I have continually asked what services Epic’s hired management company provided the school in exchange for its 10% management fee,” Byrd said.  “They used state employees and state resources to do their company’s administrative work for the school. Where did the money go?”

Until 2019, David Chaney was both Superintendent and 50% owner of the EMO and had the authority to submit false information to SDE. When SAI reported about the company filing falsified invoices and personnel reports, the company claimed to hire an internal auditor to reassess its administrative costs. Harris and Chaney are now suing the school for more than $7 million dollars for more administrative costs without documentation of exactly what services they provided after their contract was terminated in May.

“Harris and Chaney attempted to discredit our audit findings based on the work of their hired ‘internal auditor’ who, it turns out, is a relative of the company’s CFO, Josh Brock,” Byrd said. “Who is protecting the school and its students? Why should the new Epic board be responsible to pay for the abuse and malfeasance of the terminated management company? The new board at Epic Charter Schools has taken great steps toward transparency and have been very cooperative in providing SAI needed documentation; now they are under attack.”

Auditor Byrd hopes to get answers to her questions as State and Federal investigations progress.

“Almost 14 months ago, I provided documentation to the Attorney General’s office that proved the company submitted false invoices to syphon off millions in taxpayer dollars under false pretenses,” Byrd said. “I am still waiting for legal action to hold Harris, Chaney, and Brock accountable.”

Because of the questions concerning administrative costs within schools, lawmakers asked Governor Stitt to request a special investigative audit of SDE. That audit is currently underway, and the first phase should be released publicly in Spring of 2021.

Hofmeister’s pursuit of $9.1 million in Epic funds approved by State Board of Education 

OKLAHOMA CITY (Dec. 16, 2021) – The Oklahoma State Board of Education voted today to withhold $9.1 million from Epic Charter Schools for exceeding the allowable amount on school administrative costs. The vote came in the wake of an extensive yearlong review by the Oklahoma State Department of Education (OSDE) of Epic’s spending to determine the dollar figure. 

“The road to today has been long, challenging and frustrating. State education dollars should support student learning, not corporate profits. The state board’s vote is a huge step forward for the students and families of Epic, as well as all Oklahoma taxpayers,” said State Superintendent of Public Instruction Joy Hofmeister. 

An investigative audit by the Oklahoma State Auditor and Inspector’s Office concluded in 2020 that Epic owed millions for exceeding state caps on administrative spending. The State Board of Education demanded repayment. The following month, Hofmeister recommended probation for Epic, but the Board rejected it. Epic disputed the auditor's figures and offered to repay a little more than $300,000. OSDE then conducted a 10-month secondary review of Epic’s administrative costs between 2015 and 2019, examining more than 30,000 documents of evidence. Beyond the amount identified on the state audit, Hofmeister assessed a separate $10 million penalty to Epic for additional misreporting of administrative costs in 2020.

The State Board voted unanimously to claw back the money from Epic’s state funding payments. That money, in turn, will be redistributed through the state school funding formula to other districts.