Audit of Oklahoma virtual school reveals numerous problems
OKLAHOMA CITY (AP) — An embattled virtual charter school that has grown to become Oklahoma's largest public school used a "remarkably complex" infrastructure to divert tens of millions of taxpayer dollars into a for-profit business controlled by three men, State Auditor and Inspector Cindy Byrd said Thursday.
Byrd, a Republican with more than two decades of auditing experience, said the the problems uncovered in the investigative audit of Epic Charter Schools and the company that manages it, Epic Youth Services, were among the worst she has seen.
Byrd released a scathing 120-page audit of the school's activities and finances from 2015-2020 that shows the school funneled about $80 million into a "learning fund" managed by the school's founders, Ben Harris and David Chaney, that has never been audited. Another $45.9 million, about 10% of every public tax dollar that came to the school, went directly into the for-profit management company controlled by Harris, Chaney and the school's chief financial officer, Josh Brock.
"It appears three people make the financial decisions at Epic and its related entities," Byrd said, referring to Harris, Chaney and Brock. "This arrangement presents an inherent conflict of interest."
Among the audit's other findings were that the school recently spent $3 million over three months on advertising to attract new students and that Epic Youth Services used $203,000 from the student learning fund to help with start-up expenses for expanding its operations into California. The audit also revealed Harris and Chaney used Oklahoma school personnel and funds for its California operations and pledged credit from Epic bank accounts as collateral to secure loans to run its for-profit venture in California.
Byrd's office remains locked in a legal dispute with Epic, which has refused to provide access to records of Epic Youth Services and the learning fund. A trial in that case is set for December.
Byrd says she intends to share her findings with both state and federal investigative agencies, including the FBI and Internal Revenue Service. The Oklahoma State Bureau of Investigation, which has been looking into the school and its founders for years, said in a statement Thursday that its investigation remains "very active" and that the details of Byrd's audit will aid in that probe.
"The findings will be utilized as the OSBI continues to unravel the many layers of this complicated and intricate investigation," the agency said in a statement. "The ultimate goal of this investigation, or any other, is to find the truth. The OSBI will continue in that pursuit."
No charges have yet been filed in connection with the investigation.
Epic declined to make Harris, Chaney or Brock available for an interview, but spokeswoman Shelly Hickman described Byrd's press conference as "political theatrics" and said school officials dispute many of the audit's findings.
"We will be providing a point-by-point response within 24 hours, but once you cut through the theatrics of today's announcement, the conclusion of the report calls for changes to the law; it does not assert that laws have been broken," Hickman said in a statement. "Policy makers should be cautious about believing politicians over parents."
Epic is a free, public school for children in pre-kindergarten through grade 12 that has enjoyed explosive growth since it was founded by Chaney and Harris in 2011 and now has an enrollment of about 46,000 students.
The school boasts on its website that Epic teachers can earn an estimated $15,000 more than the state average, and many parents say their children prefer Epic to a traditional brick-and-mortar school. Epic also offers a "learning fund" credit of between $800 and $1,000 per student that can be used to pay for such things as karate and dance lessons, yoga or music instruction.
The school came under increased scrutiny last year when an OSBI agent, in an affidavit for a search warrant of an Epic teacher's home, alleged Harris and Chaney embezzled millions of dollars in state funds through an illegal scheme that involved the use of "ghost students" to artificially inflate enrollment numbers.
Days later, Gov. Kevin Stitt and State Superintendent of Public Instruction Joy Hofmeister requested Byrd's office launch an investigative audit.
"While we are still reviewing the entire contents of the audit, the initial findings are concerning," Stitt said in a statement.
Hofmeister described the audit's findings as "deeply disturbing."