CORRECTION: Findings from the first phase of the special investigative audit of the State Department of Education should be released publicly in Spring of 2022, not 2021, as previously stated.
“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.”
In October 2020, Byrd released a 120-page report showing her findings in the audit of Epic Charter Schools.
“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,” said Byrd. “Today’s agreement confirms that Epic’s EMO abused millions of taxpayer dollars by hiding its excessive administrative costs.”
Byrd said they reviewed Epic Charter Schools’ finances from 2015 to 2020.
“Epic charter schools was given almost a half a billion dollars during the audit period,” Byrd previously said. “They take 10 percent of every tax dollar that comes through the school’s door.”
Byrd added that Ben Harris and David Cheney, the co-founders of Epic Schools, 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?”
Much of the scathing 2020 report focused on the funds spent on Epic Youth Services, which schools contracted with.
Epic Youth Services is a privately-owned, for-profit management organization that oversaw Epic Charter Schools day-to-day operations since it was established in 2011.
Harris and Chaney are also co-owners of Epic Youth Services.
A PPP-loan report showed that last year, Epic Youth Services received a loan of $42,700 for its three employees.
Byrd pointed out the company was paid $46 million in tax-payer dollars from 2015 through 2020, even though it had zero employees besides the two founders for most of that time.
“In 2019, they hired two lobbyists and a security man, but we are unsure how these positions helped the management of the school,” Byrd said.
Byrd went on to spell out what she called falsified monthly invoices from EYS to Epic One-on-One and Epic Blended, including invoices for certified and non-certified employees – even though there were only the three – and food services for virtual-only students.
“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.”
Epic Charter Schools officials signed a settlement with the Statewide Virtual Charter School Board in April that required Epic Charter Schools to separate from Epic Youth Services.
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 2022.
“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.