An audit of Epic Charter Schools released Thursday calls into question how the virtual school accounts for millions of taxpayer dollars meant for educating students.
“From this thorough and exhaustive investigative audit, I remain concerned that the money is not getting to the students,” State Auditor Cindy Byrd said Thursday in releasing the first part of her office’s findings.
Auditors found that between 2015 and 2020, Epic, now the state’s largest school district, received $458 million — nearly all from state coffers. And more than one-fourth of that money — $125 million — went to Epic Youth Services, a for-profit management company owned by the school’s co-founders, David Chaney and Ben Harris.
Nearly $46 million in management fees went to the company, which didn’t have any employees until October 2018. It has since added three staffers, according to the report. When asked about the number of employees, Harris told auditors: “What the Legislature will do if we make our employee count public record, they will bludgeon us about our fees.”
The remaining $79 million to Epic Youth Services was earmarked for the learning fund, which allows Epic students to choose how some state funding is spent on items like extra-curricular activities. Those funds have not yet been audited and are part of a legal dispute. Byrd said an accounting of the learning fund monies will be included in part two of her office’s report.
Epic spokeswoman Shelly Hickman said school officials haven’t yet read the report and would respond point-by-point on Friday. “What we witnessed today was political theatrics,” she wrote in a statement, claiming that Byrd was attacking parents’ right to choose a school for their child.
Here are the main takeaways from the auditor’s report, which has been underway since July 2019 (see the full report below):
Mysterious enrollment. Auditors said Epic’s method for calculating enrollment was a mystery and they could not confirm the school was entitled to the amount of state aid they received.
Profit motive. Epic’s structure provides a financial incentive to recruit more students. The school spent almost $3 million on advertising in three months, auditors found. The learning fund was also used as a marketing tool to drive enrollment.
Out-of-state ventures. Auditors found Epic used $203,000 from the learning fund account to help with expenses for Epic Charter School California, which opened in 2016. They used an additional $210,000 in Oklahoma resources to develop the California project; Epic paid back those funds after auditors discovered it, the report states. The school’s board didn’t authorize the transactions.
Chief financial officer. Josh Brock’s role as CFO at both the school and the for-profit company violates basic accounting standards, the report states. Auditors asked how one person could be entrusted with safeguarding public tax dollars while simultaneously prioritizing profit for the company.
Administrative expenses. Epic exceeded the 5% cap on administrative expenses year after year, auditors found. Last year, Epic had to repay $530,000, but the audit report estimates they owe the state $8.4 million.
Lack of board approval. Epic conducted major financial transactions without a vote from their governing board. Auditors found two transactions totaling $6 million between Epic entities and a $3.3 million loan from one entity to another — all without the required board approval.