By Constitution Staff

Oklahoma State Auditor and Inspector Cindy Byrd held a news conference on October 1 to announce the release of the first part of a “Special Investigative Audit” of EPIC Charter Schools. Byrd stopped short of accusing EPIC of fraud, but said, “what we found was very disappointing.” The 116-page report alleged a number of concerns regarding the school’s finances and how it uses the money it receives from the state to educate students.

The audit, which covers fiscal years 2015 through 2020, was requested by Gov. Kevin Stitt in July 2019. EPIC came under scrutiny last year when a Oklahoma State Bureau of Investigation agent, in an affidavit for a search warrant, alleged that the founders of the charter school embezzled millions of dollars in state funds through an scheme involving the use of “ghost students” to inflate enrollment numbers.

Following release of the audit report, Governor Kevin Stitt and State Superintendent of Public Instruction Joy Hofmeister issued statements in response to the allegations contained in the report.

Governor Stitt said: “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.”

Hofmeister said: “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.”

EPIC is a free public charter school for grades Pre-K-12th. Founded in 2011, EPIC Charter Schools has grown from 1,700 students to nearly 61,000 students and operates across the entire state. It is now the largest school district in Oklahoma. According to the audit report, a total of $458 million in state aid and federal funds has been disbursed by the State Department of Education to EPIC over the past six years.

EPIC operates mostly online with its one-on-one program offered in all 77 Oklahoma counties. EPIC’s one-on-one program pairs learning at home using a digital curriculum with regular, one-on-one and face-to-face instruction with an Oklahoma certified teacher. The one-on-one program includes access to a Learning Fund of $1,000 per student to be used in purchasing of curriculum and other approved educational expenses, including extracurricular activities such as sports, dance, and music lessons. EPIC also has three Blended Learning Centers (BLCs) located in Tulsa and Oklahoma County. The BLCs are physical learning sites that students can attend each week and receive on-site, classroom instruction from certified teachers, as well as food service and before- and after- school academic enrichment programs.

The audit itself has raised concerns for not following standard professional auditing practices. The Auditor and Inspector failed to provide a draft report with findings for review and comment by officials of the audited entity to help the auditors develop fair, complete, and objective report. And, it did not include a letter of response from the audited entity. The Auditor and Inspector’s office responded to this criticism by saying this was a “Special Audit” and therefore is not subject to any standards.

Shelly Hickman , a Superintendent for EPIC, issued a statement following the release of the audit report: “Yesterday, we witnessed pure politics on display. The State Auditor, an elected politician, stood behind a podium and a gaggle of reporters and told a story. This isn’t the first time we’ve been subjected to political scrutiny, nor were the allegations new. The findings were presented with over-the-top sensationalism guaranteed to stir up defenders of the education status quo because we are growing, and they are struggling.”

The prompt for the audit was the issue of “ghost students” and was mentioned in the audit. EPIC’s leaders took particular offense to Byrd’s allegation that the school’s method of counting the number of students is “a mystery.” Hickman responded: “When the auditor said that our student count is a mystery, we were floored. It isn’t a mystery. Our student count is calculated the same way all schools’ student counts are calculated – and then approved by the State Department of Education. We explained this to the auditor’s main staff person, Salesha Wilken, many times throughout this process, but she seemed unable to grasp the concept.”

Hickman noted that Wilken was not an auditor: “She’s a former reporter. Her LinkedIn page lists skills like public relations and graphic design. She’s a storyteller by trade, and we saw that on full display in this audit report, which weaves quite a tale. That tale is fiction, and the State Auditor used it to further what is a clear, personal anti public school choice agenda. That is apparent in her final thoughts section of the report.”

EPIC later released a 132-page report responding point-by-point to the allegations made in the audit report.

According to the audit report, EPIC exceeded the statutory five percent administrative cost cap as called for in the Oklahoma Cost Accounting System (OCAS) by $8.9 million and the school owes that money back to the state. In their response, EPIC explained “The State Auditor claims that employees with the words ‘Manager’, ‘Director’ or ‘Supervisor’ in their job title should automatically be classified and reported as ‘managers’ in OCAS and therefore should be considered administrative regardless of what they actually do.” EPIC notes that the State Department of Education approved EPIC’s classification of employees, but is working to resolve the issue with the auditor. “Pursuant to the SA&I’s recommendation, the Schools will modify employee titles for all employees with the word ‘Manager’ or ‘Director’ or ‘Supervisor’ in their job title if they have no supervisory responsibility to avoid any confusion in the future.”

The audit report raises the issue of the large amount of funds, over $125 million, directed into the private management company called EPIC Youth Services (EYS) including $79.3 million deposited in the Student Learning Fund. The auditor complains they were not allowed to audit the use of those funds and issued a subpoena. A “Motion to Compel” was filed in Oklahoma County District Court to require EYS to comply with the subpoena and the court case is still pending. In their response, EPIC charged that “the constant inclusion of large, irrelevant dollar figures is a scare tactic.” They further responded: “The Learning Fund was appropriately funded pursuant to the contract between the parties and the Board verified and substantiated the amount paid to EYS through its approval of the invoices and through its own independent audit posted on the State Auditor’s website.”

Byrd’s report says EYS used Oklahoma state funding for its start-up school in California. EPIC acknowledged that EYS employees also did work for the California school, but that work had been invoiced at the time of the services, and payment has been made.

In their response, EPIC noted that there were a number of concerns raised in the audit report that were not based on alleged violations of law: “Moreover, many of their findings have no basis in any violation of statute or regulation. For example, the State Auditor and Inspector warns that ‘Epic spent $2.48 million in taxpayer funds in less than three months on an advertising campaign.’ But there are no state laws prohibiting the use of school funds for advertising. The purpose of the advertising and related marketing efforts were to increase brand and community awareness to ensure that Epic Charter Schools are able to successfully recruit faculty and staff in the midst of a historic teacher shortage.” As EPIC noted, there is no state law prohibiting schools from advertising. In fact, the audit report admits that fact: “While there is currently no state law prohibiting the use of state appropriations by schools for advertising, the significance of an expenditure of this magnitude is questionable, especially in light of the consistent financial concerns surrounding public school funding.” So, according to the auditor, there was no violation of law, but the auditor did not like how EPIC decided to spend the funds.

Since this audit report was called part one, what can be expected in part two? That was answered in the report: “The State Auditor & Inspector plans to continue their audit of Epic Charter Schools including, but not limited to, a review of Student Learning Fund (subject to court case resolution), student enrollment and attendance reporting, and expenditures.”

Following the release of the special audit, opponents of EPIC went to the State Virtual Charter School Board (SVCSB) to have EPIC’s contract with the state terminated. In a 3-1 vote, the Board decided to begin the process of terminating its contract with EPIC. Prior to the vote, EPIC Superintendent Bart Banfield pleaded with the board to give EPIC time to dispute the claims in the audit. “Please do not act rashly by circumventing the pursuit of truth and take hurried action today that could throw this school year into even more pandemonium,” Banfield said. The action by the board only initiates the process of terminating the contract. After at least 90 days, there will be an administrative hearing where EPIC will be allowed to defend itself.

EPIC administrators remain confident they will succeed and released the following statement: “Fairness did not prevail today, but it’s important to understand what did happen. The SVCSB voted to initiate the process to terminate, but it is a process that provides EPIC due process with that Board, as well as other legal options. So far, only one side of the story has been allowed to be told. We are confident that once we have the audit work papers and have as much opportunity to present our side of the audit as the State Auditor has been provided, we will prevail for our more than 2,100 employees and the families of our more than 60,000 students.”