Faced with $9.1 million holdback, Epic charter schools want refund from Epic Youth Services

The Epic Charter Schools Board of Directors, Community Strategies, is holding a meeting on Friday, December 17, 2021. (Megan Prather)

Epic Charter Schools will seek reimbursement from their former management company, Epic Youth Services, for $9.1 million in public funding that will be withheld by the Oklahoma State Department of Education over the next 12 month. OSDE’s board formalized its decision to withhold the money on Thursday due to Epic’s past overruns on administrative costs identified during the auditor’s office investigative audit and the state inspector last year.

Epic Board Chairman Paul Campbell discussed the state board’s decision at Friday’s meeting of Community Strategies, the governing body for charter schools.

“We anticipated that our audit was wrong and the state auditor was right,” Campbell said. “I want staff and parents to know that this stinks and seems extremely unfair. It’s the ethical thing to do to accept it and move on. I think the ethical thing to do is to look at all of our options to get him back.

State Department of Education General Counsel Brad Clark attended Epic’s board meeting to discuss the state board’s decision. While the state board originally voted to require Epic to return approximately $11.2 million to the state Department of Education in October 2020, Epic officials have offered to refund only $307,148. . OSDE conducted a secondary review of Epic’s administrative costs and readjusted the amount owed to $9.1 million.

“At the time, in October 2020, Epic’s response was, ‘That’s a joke, that’s inaccurate,'” Clark said during Friday’s meeting. “The ministry started to engage in our own review, and it was no joke. The department ended up agreeing with the state auditor 95% of the time. »

Epic Charter Schools is offering the Epic Youth Services refund after cutting ties with their former management company in May. Epic Youth Services is owned by Ben Harris and David Chaney, the charter schools co-founders.

During Friday’s meeting, Clark said the tone of communications with current management at Epic Charter Schools has improved. Epic’s board has new members and bylaws, and a host of other state agency recommendations have passed.

“From the start, the district itself has been responsive, but the tone has been different,” Clark said. “I don’t want to call it reluctance to speak, because it was there. But, the unpleasant nature was different.

Epic Superintendent Bart Banfield expressed his gratitude to the entities involved in the audit process.

“I want to thank Superintendent (Joy) Hofmeister for her leadership and willingness to stand up for all public schools. I want to thank the State Board of Education for their support and willingness to make tough decisions that are right for public schools and taxpayers,” Banfield said. “The last person I want to thank is our State Auditor Cindy Byrd. We wouldn’t be here today without her and the incredible team.

Epic’s state recovery nears $20 million

The Office of the State Auditor and Inspector released a statement Thursday afternoon following the state board’s vote to withhold the $9.1 million in state funding. Combined with over $10 million in penalties imposed by the OSDE in April and a handful of other fines, Thursday’s vote means about $20 million will be clawed back from Epic by the state.

“I would like to commend SDE for their work in determining Epic’s administrative costs,” Byrd said in the statement. “Through our audit, Epic will return approximately $20 million in total to the state.”

Byrd’s press release also touched on the operating agreement between Epic and Epic Youth Services. Chaney and Harris, owners of EYS and founders of Epic, took 10% of every dollar Epic received to provide administration and management of the school. However, the 10% levied by the EYS exceeds the 5% cap on public school administrative expenses specified in state law.

As co-owner of Epic Youth Services and superintendent of Epic Charter Schools until 2019, Chaney may have submitted false information to the OSDE, according to Byrd.

Earlier this month, EYS sued for breach of contract against the schools for approximately $7 million. The trial coincided with a resignation of board member Kathren Stehno, who made allegations of misconduct against Campbell and encouraged state authorities to investigate the schools’ current leadership. (The letter’s thumbprint lists its author as William Hickman, Epic’s longtime attorney whose spouse was also a longtime Epic employee under the schools’ previous leadership. Stehno told Jennifer Palmer of Oklahoma Watch that Bill Hickman reviewed the letter before distributing it.)

Byrd said the criminal investigation of Epic Youth Services and former Epic executives is still ongoing.

“Harris and Chaney attempted to discredit our audit findings based on the work of their hired ‘internal auditor’ who, it turns out, is a relative of the company’s CFO Josh Brock,” Byrd said in his statement. “Who protects the school and its students? Why should Epic’s new board be responsible for paying for the abuses and malfeasance of the terminated management company? The new Epic Charter Schools Board of Trustees has taken great strides towards transparency and been very cooperative in providing [our agency] documentation needed: now they are under attack. »

Hofmeister said in a statement Thursday that state aid withheld from Epic will be redistributed through the statewide school funding formula to other districts.

“The road to today has been long, difficult and frustrating,” Hofmeister said. “State money for education should support student learning, not corporate profits. The State Council’s vote is a huge step forward for Epic’s students and families, as well as all Oklahoma taxpayers.

Epic Charter Schools released a statement on their Facebook page Thursday stating that they will continue to cooperate with the State Board of Education and state auditors.

“It is our responsibility to right the wrongs that occurred during EYS’ tenure,” the statement said. “Our duty is to the students and parents who have chosen Epic. EYS is responsible for this penalty and Epic will pursue reimbursement on behalf of our school. While this penalty is substantial, these monies will be returned to Oklahoma public schools. Epic is strong and supports public education statewide.

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