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Epic Charter Schools audit prompts investigative audit at OK Department of Education

Epic Charter Schools audit prompts investigative audit at OK Department of Education

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Joy Hofmeister - Epic Charter Schools composite image

A new investigative audit request is the result of a 2020 audit reporting that Epic Charter Schools had misreported its school administrative costs to the tune of millions of dollars during the previous five years. That report also called into question the oversight of Epic’s financial accounting by the agency run by State Superintendent Joy Hofmeister.

Gov. Kevin Stitt on Thursday formally requested that the State Auditor and Inspector’s Office conduct a first-of-its-kind investigative audit of the Oklahoma State Department of Education.

The audit will have two primary objectives:

Identify all revenue sources flowing into OSDE — including federal funds, state appropriations, taxes and fees — and determine whether the revenues were properly allocated and expenditures from selected funds were made in accordance with applicable laws.

Determine whether OSDE and Oklahoma school districts are complying with Oklahoma Cost Accounting System reporting requirements and whether OSDE is “effectively requiring consistent application and timely accountability.”

“This type of audit has never been conducted in the history of Oklahoma and, perhaps, the nation,” said State Auditor Cindy Byrd. “As always, these audits are about transparency and accountability to taxpayers. I commend Gov. Stitt for requesting this audit. People want to know how their tax dollars are spent on education.”

Stitt said the request is the result of “evidence of misuse of funds found in the audit of Epic Charter Schools and is crucial given that more than $3 billion will be invested in education in fiscal year 2022, the largest amount ever in Oklahoma history.

“I promised Oklahomans that as governor I would clean up state government to make it more transparent and accountable and I am keeping that promise,” Stitt said in a statement. “As we make record investments in our public education system, students and parents deserve to know that their schools are spending our tax dollars appropriately and in accordance with the law.”

State Superintendent Joy Hofmeister branded Stitt’s move “an attack audit on public education.”

“The Governor’s call for an audit is yet another attack on Oklahoma’s public education system,” she said in a Thursday afternoon press statement.

“As the Governor should already know, the State Department of Education has undergone more than 20 financial, compliance and programmatic review audits by the state auditor’s office in the last 6½ years.

“Additionally, the Governor’s hand-picked Secretary of Education approves every agency expenditure over $25,000 on a weekly basis. Every single spending request has been personally approved by Secretary Ryan Walters.”

She was referring to her department’s compliance with an executive order put in place by Gov. Mary Fallin and renewed by Stitt.

Hofmeister added: “At a time during which there are serious audits we have requested which potentially involve criminal activity, and while 541 school districts are struggling to find normalcy during a pandemic, the Governor’s attack on public education couldn’t be worse timing for students, families, teachers and taxpayers.”

This new investigative audit request is the result of Byrd’s reported findings on Oct. 1, 2020, that Epic Charter Schools had misreported its school administrative costs to the tune of millions of dollars during the previous five years.

“I deeply appreciate Governor Stitt for his confidence in the findings of the Epic Schools audit report released last year,” Byrd said. “It is clear Epic’s founders were able to take millions of dollars by manipulating the schools’ administrative costs reported to OSDE.”

Since Byrd’s Epic audit, nearly all of Epic’s governing board members have changed and the remade board has severed all ties with the schools’ co-founders, David Chaney and Ben Harris, their for-profit firm and a California Epic Charter School.

But Byrd’s report on Epic also called into question the oversight of Epic’s financial accounting by the state agency run by Hofmeister.

At the State Department of Education, Byrd reported finding “ample oversight but limited accountability,” even when red flags were raised internally about Epic’s cost accounting.

A month later, in November 2020, 22 Republican lawmakers formally requested that Stitt seek an investigative audit into the OSDE’s handling of the Oklahoma Cost Accounting System.

Byrd’s office said Thursday that remaining within administrative spending limits established in state law “can create unique challenges for school boards and administrators especially when considering whether to accept certain federal grants that increase administrative costs for compliance with federal regulations.”

But, “in the end, the intended purpose of this audit is to ensure per-pupil spending and education funding is making it to the classroom,” Byrd said.

It is unclear why Stitt did not request the audit sooner, as he vowed publicly in November to work with the lawmakers on the audit request and applauded their concern “for being good stewards of taxpayer dollars.”

In the interim, Stitt’s education secretary, Walters, announced that he is running for the office of state superintendent, as Hofmeister is term-limited.

Stitt’s press release on Thursday included remarks by Walters.

“Oklahoma’s students deserve the best education and this audit will ensure that we are investing in the right priorities to better serve our kids,” his written statement says. “I appreciate Governor Stitt and the legislators who requested this audit for their commitment to protecting taxpayer resources and delivering transparency to parents for the first time.”

The request for the audit sent to Stitt in November was signed by Rep. Jeff Boatman, Tulsa; Rep. Chad Caldwell, Enid; Rep. Denise Crosswhite Hader, Piedmont; Rep. Sheila Dills, Tulsa; Rep. Tom Gann, Inola; Rep. Tommy Hardin, Madill; Rep. Mark Lepak, Claremore; Rep. Garry Mize, Guthrie; Rep. Carl Newton, Cherokee; Rep. Kevin West, Moore; Rep. Rande Worthen, Lawton; Sen. Mark Allen, Spiro; Sen. David Bullard, Durant; Sen. Nathan Dahm, Broken Arrow; Sen. Julie Daniels, Bartlesville; Sen. Brent Howard, Altus; Sen. Casey Murdock, Felt; Sen. Joe Newhouse, Broken Arrow; Sen. Marty Quinn, Claremore; Sen. Dave Rader, Tulsa; Sen. Rob Standridge, Norman; and Sen. Brenda Stanley, Midwest City.

Featured video: Epic Charter Schools co-founder’s audit recommendations make it into legislation

Epic co-founder Ben Harris audio from Jan. 14, 2021


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Staff Writer

I'm a projects reporter, examining key education topics and other local issues. Since joining the Tulsa World in 1999, I have been a three-time winner of Oklahoma’s top award for investigative reporting by an individual. Phone: 918-581-8470

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