The state’s multicounty grand jury on Thursday called for the board of Epic Charter Schools to “extricate itself from its incestuous relationship” with a private management company formed by Epic’s co-founders.
Grand jurors issued a 25-page interim report as they continue to investigate Epic and Epic Youth Services, the company that has run the school system since its founding.
“It is hoped changes will allow the parents to have confidence in a public school motivated by a desire to improve education outcomes and not by profit,” the grand jury stated. “The citizens of Oklahoma demand more. The students in Oklahoma deserve better.”
Epic has limited the company’s authority over the school, but both entities have not fully cut ties with each other. The private company no longer has access to school bank accounts and doesn’t supervise any school employees.
“Epic’s Board of Education has since October 2020 made significant corrective actions, including Epic Youth Services no longer operationally or financially managing or controlling the school,” said Shelly Hickman, Epic’s assistant superintendent of communications.
Epic is the largest public school system in Oklahoma with about 55,000 students.
Management fees generated millions for Epic’s founders
Epic’s co-founders, David Chaney and Ben Harris, own the company, which handled day-to-day operations at the school and earned 10% of Epic’s annual funding as a management fee. That has generated more than $45.9 million for Chaney and Harris since 2015, the grand jury reported.
“This incestuous relationship is not consistent with the purpose of a public charter school nor conducive to providing transparency and accountability in the expenditure in public funds,” the grand jury stated.
Grand jurors also said the relationship, as designed, is “ripe for fraud.” Epic has denied any wrongdoing.
The numerous investigations and legal actions against Epic “greatly concern” the grand jury, as does a “lack of transparency and accountability of public funds” distributed to Epic, the report states.
Grand jury investigation of Epic continues
The grand jury repeatedly stressed that the investigation is not complete. No one has been indicted on any criminal charges.
Grand jurors said a lack of cooperation by Epic and diversion of public funds have made the process difficult to complete in a timely manner.
“There should not be such a shadow hanging over the largest public school district in the state,” grand jurors stated. “It is unfortunate that such disfunction can impact the confidence parents may have in the education of their students.”
Epic said it has cooperated fully with the grand jury by providing public records.
“We will continue to fully cooperate in sharing any information we have with the grand jury,” Hickman said.
State auditor: ‘Hours to explain all the violations’
The grand jury’s concerns echo those of Oklahoma State Auditor and Inspector Cindy Byrd, who also reported an unusual lack of cooperation from Epic.
State auditors released a scathing report on Epic’s finances Oct 1.
Among the chief findings was Epic chronically exceeded a state-mandated cap on administrators’ salaries and covered it up in financial reports. Epic said auditors gravely miscalculated.
“I have seen a lot of fraud in my 23 years and this situation is deeply concerning,” Byrd said at an Oct. 1 news conference. “Our audit is around 120 pages long — so it would take hours to explain all the violations we discovered.”
The Oklahoma State Board of Education demanded Epic repay $11.2 million in response to the audit. That payment is on hold indefinitely while state education officials conduct their own review of audit records.
The Oklahoma State Bureau of Investigation also alleged financial misconduct at Epic.
The OSBI in 2019 court records accused Epic of illegally inflating student enrollment counts with children who received little to no education from the virtual charter school. Investigators alleged Chaney and Harris pocketed millions of taxpayer dollars after funneling school funds to Epic Youth Services.
Epic, Chaney and Harris have denied any illegal activity. No one has been charged with any crimes in the investigation.
The grand jury has been hearing testimony and reviewing evidence on Epic since December. Grand jurors specifically stated they are investigating “whether public funds may have been used inappropriately.”
The grand jury typically meets two to three days a month in Oklahoma City in closed-door sessions. It next meets June 1-3.
Grand jury issues recommendations
Grand jurors listed several concerns and recommendations in their report, including a desire for more involvement from the Oklahoma Legislature.
Among those recommendations is Epic’s school board members be elected independently by parents of the school system and stakeholders in education. Currently, the school board decides its own membership.
The school system already has agreed to have seven-person school boards for each of its two branches, Epic One-on-One and Epic Blended Charter, and for those boards to be made up of entirely different members.
Currently, they have five-person boards with the same members overseeing both branches.
Those boards have approved multiple rounds of reforms following the state audit to improve internal financial controls and oversight of school finances.
Grand jurors noted a lack of state laws govern for-profit companies that manage charter schools. The Legislature should add more statutory requirements for these charter management organizations and consider more accountability and transparency provisions, the report states.
The interim report also recommends all charter schools should be subject to an in-depth audit by the Oklahoma State Auditor and Inspector’s Office or by an approved independent auditing firm before their charter contracts are renewed. These audits should be more detailed than typical yearly audits that test a school’s internal financial controls, the report states.
Epic already pledged to address a key concern from grand jurors and state officials. A controversial Learning Fund, which pays for student extracurricular activities and supplemental learning resources, will move into a public bank account on July 1.
Epic Youth Services garnered significant scrutiny for owning the Learning Fund account and blocking any public review of its records. The company argued documents belonging to a private business shouldn’t be subject to public audits or open records requests.
Byrd took the company to court in March 2020 after it rebuffed subpoenas for Learning Fund records. Epic Youth Services has since offered to turn over records but only under private seal.
The case is still pending in court. No Learning Fund documents have been provided to state auditors as of Thursday.
Epic will consider all Learning Fund records prior to July 1 as private, but all future transactions will take place in a public account owned by the school.
Staff writer Nolan Clay contributed to this report.
Reporter Nuria Martinez-Keel covers K-12 and higher education throughout the state of Oklahoma. Have a story idea for Nuria? She can be reached at [email protected] or on Twitter at @NuriaMKeel. Support Nuria’s work and that of other Oklahoman journalists by purchasing a digital subscription today at subscribe.oklahoman.com.