Epic Charter Schools’ deadline for repaying the state $11.2 million has been pushed back a month, and the State Auditor’s Office has reportedly identified additional administrative payroll cost violations, the Tulsa World has learned.
Meanwhile, the State Auditor and Inspector’s lawsuit in pursuit of public records to account for Epic’s previous use of another $79 million in taxpayer dollars for something Epic calls its “Learning Fund” appears to have stalled.
The case, filed by the Oklahoma Attorney General’s Office, is just five weeks shy of 1 year old at this point.
Nearly $80 million budgeted for students’ learning needs in six previous years — and tens of millions more for the current fiscal year — remains out of reach of the State Auditor’s Office and outside public scrutiny.
A hearing set for Dec. 16 was stricken in November by the Oklahoma County District Court judge overseeing the case, and no new conference or hearing dates in the case have been set.
The Tulsa World contacted Judge Natalie Mai’s office to inquire about the status of the case, and the judge’s bailiff said: “The case is still pending. They are working on negotiations in the case. They will call or contact in case they need to come up to the courtroom and see the judge.”
As for Epic’s outstanding $11.2 million bill, in October the Oklahoma State Board of Education voted to demand back the money after an investigative audit identified chronically excessive administrative overhead costs and inaccurate cost accounting.
Epic was given a deadline of 60 days after it received copies of the state auditor’s “work papers,” which are mostly public records obtained directly from Epic and interview notes made during the investigation, all used as the basis of audit findings.
In mid-December, State Auditor Cindy Byrd announced those work papers had been delivered and the clock on Epic’s deadline would be starting.
But a check-in on the status of Epic’s repayment revealed that an issue raised by Epic’s attorneys about how the $11.2 million demand was calculated was just resolved Friday — which bought more time for the state’s largest public school system.
“The documentation to begin the 60-day window was provided to the (Oklahoma) State Department of Education and Epic on January 22, 2021,” Byrd said in a written statement in response to the Tulsa World’s questions. “We have also communicated to the State Department of Education that our office will be issuing an addendum to our report disclosing additional instances of administrative payroll costs violations.”
Brad Clark, general counsel for the state board of education, confirmed the delay because of “a final component to the work paper production.” That was received Friday afternoon, and the 60-day deadline for Epic to repay the state began Saturday, Clark told the Tulsa World.
Epic Assistant Superintendent for Communications Shelly Hickman said: “We believe there are significant methodology flaws and calculation errors in the (state auditor’s) report and we now begin the process of demonstrating that to the State Department of Education.”
Asked to explain the discrepancy identified by Epic’s attorneys, Byrd’s office said they had not accounted for Epic’s administrative employees “who only worked part of the year or the timing of the change in some administrative positions.”
“However, in fairness to our office, we were not provided open and honest answers in discussions of administrative costs, employee positions, and alleged coding errors,” Byrd added. “Regardless of the dollar amount, the irrefutable fact remains that Epic has been miscoding and misreporting administrative employees for years and then knowingly submitting false reports to the State Department of Education. This leads us to the bigger issue of the school paying nearly $46 million during the audit period to a private company to provide administration yet the private company is utilizing state employees to manage the school.
“One miscalculation on our part does not equal an exoneration on Epic’s part.”
Byrd’s office found that Epic exceeded the state’s 5% state cap on administrative overhead costs intended to ensure public schools direct most resources on students “year after year.”
In all, $125.2 million of the $458 million allocated to Epic Charter Schools for educating students between fiscal year 2015 and fiscal year 2020 was found to have ended up in the coffers of Epic Youth Services, a for-profit charter school management company that has reportedly made millionaires of school co-founders Ben Harris and David Chaney.
But the state audit questioned how EYS could take $46 million for management services while relying primarily on publicly funded administrative employees of Epic Charter Schools to do the work.
In demanding repayment, the state board of education zeroed in on three findings in the state’s original investigative audit report:
Underreported administrative payroll costs for six previous fiscal years totaling $8.9 million, of which Epic was already penalized about $530,000.
A 2016 episode first red-flagged by accountants at the Oklahoma State Department of Education that showed Epic “inaccurately reclassified administrative costs,” thus avoiding a $2.6 million penalty for exceeding Oklahoma’s limit on administrative costs.
And the discovery that $203,000 in Oklahoma taxpayer dollars was paid to Epic’s charter school in California.
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