(The Center Square) – The Oklahoma State Department of Education (OSDE) will withhold $9.1 million from a nonprofit school it says exceeded state spending caps on administrative spending.
Epic Charter Schools will repay the state about $20 million based on an investigation into Epic Youth Services (EYS), a for-profit company hired by the school system to oversee its administration and management, according to a news release from the office of the Oklahoma State Auditor and Inspector (OSAI).
Ben Harris and David Chaney, the owners of the management company, were receiving a 10% fee for their services, which exceeds the 5% administrative cap. A 2020 audit showed Epic owed the state millions for exceeding the administrative cap, according to the OSAI.
“From the day we started the audit, I have continually asked what services Epic’s hired management company provided the school in exchange for its 10% management fee,” said Cindy Byrd, state auditor and inspector. “They used state employees and state resources to do their company’s administrative work for the school. Where did the money go?”
The OSDE asked Epic to repay the money based on the 2020 audit, according to an OSDE news release. Epic officials offered to repay just more than $300,000. A review of Epic's records covering 2015 to 2019 led the OSDE to assess an additional and separate $10 million penalty.
The OSDE will reallocate the $9.1 million it is withholding from Epic to other school districts, according to a news release from the department.
“State education dollars should support student learning, not corporate profits,” Oklahoma State Superintendent of Public Instruction Joy Hofmeister said.
The situation has prompted an investigative audit of the State Board of Education by SAI. The first findings should be available in the spring, Byrd said.
Epic fired Chaney and Harris and has a new board, Byrd said. The new board is now “under attack” and is being sued by Chaney and Harris for more than $7 million, she said.
“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 the news release. “Who is protecting the school and its students? Why should the new Epic board be responsible to pay for the abuse and malfeasance of the terminated management company?"
Byrd said she turned her investigation over to the attorney general’s office 10 months ago.
“I am still waiting for legal action to hold Harris, Chaney, and Brock accountable.” Byrd said.
Epic officials said in a social post they agree with the findings and will continue cooperating with investigators.
“Epic appreciates the work of and supports the findings of SAI and OSBE,” they said in their post. “It is our responsibility to right the wrongs that occurred during the tenure of EYS.”