A group of Oklahoma lawmakers is calling for an investigation of the Oklahoma State Department of Education, which would examine whether the agency failed to ensure that schools complied with cost accounting regulations.
The group of 22 Republican lawmakers, which includes Rep. Rand Worthen of Lawton, requested the investigation based on a recent investigative audit of Epic Charter Schools. The lawmakers said State Auditor and Inspector Cindy Byrd’s report raised several serious issues, including allegations that the Department of Education did not take steps to ensure Epic’s compliance with the Oklahoma Cost Accounting System.
All Oklahoma public schools – including Epic – are required to use OCAS, a standardized system for reporting school districts’ revenue and expenditures. Districts that fail to comply may be penalized. The group of lawmakers said the auditor had found that the Department of Education did not have a way to evaluate whether districts were complying with school finance laws.
“The auditor goes on to state that ‘there is virtually no follow-up or on-site review conducted by SDE as it relates to the actual records underlying the data reported,’” the group said in a news release. The group said it wants to know whether the Department of Education’s alleged failure to monitor compliance with OCAS was confined to Epic Charter Schools or if it affected other public schools as well.
Department of Education officials would be happy to meet with any lawmaker who wants a better understanding of the audit’s finding, executive director of communications Carrie Burkhart said Monday.
“We are always open to improvements, but we believe this group’s concerns may stem from a misunderstanding of what has occurred as it relates to the audit,” she said in an email. Byrd’s office released the first installment of the two-part Epic audit last month. The report, which focused only on the funds held by the school, found that Epic Charter Schools received $458 million in state and federal aid over the past six years.
Of that amount, about $125 million of that amount was funneled to Epic Youth Services, a for-profit charter management company that runs Epic Charter Schools, the report said. Among other problems, the report found that the Epic One-on-One program misclassified administrative costs of about $2.9 million in fiscal year 2016. The reportedly inaccurate classification allowed Epic to avoid a $2.6 million penalty for exceeding the state’s 5% cap on administrative overhead expenses.
Additionally, the report found that the State Department of Education improperly accepted the misclassification. “In summary, the inaccurate and questionable reporting by One-on-One, along with their lack of cooperation with SDE, combined with the failure by SDE to enforce required reporting standards, resulted in a significant reduction of One-on-One’s administrative costs,” the report said. “If the expenditures would have remained classified as administrative costs, as first reported, One-on-One would have been penalized approximately $2.6 million.
“SDE and One-on-One share the responsibility for the breakdown of the process, which resulted in no penalty to One-on-One and no accountability for the reclassified administrative costs.” Shortly after the audit was released, Epic issued its own report refuting the audit’s findings. The statement said the audit – and an accompanying news release – were designed to draw attention to the fact that Epic Youth Services received a substantial amount of money to manage its Epic Charter Schools.
“But it ignores the fact that this large dollar figure directly corresponds with Epic Charter Schools being the largest school district in the State of Oklahoma and needing to pay for the resources that EYS pro-vides to more than 61,000 students and the services it performs for the school itself,” the statement said.
Epic said One-on-One’s changed its classification of administrative costs in FY 2016 because the State Department of Education had removed one of the Oklahoma Cost Accounting System codes that Epic had used the previous year – without first notifying Epic.
“Without its tried-and-true code to rely upon and with the September 1st OCAS deadline swiftly approaching, Epic coded the entire EYS management fee into a place holder code,” Epic said. “The code temporarily selected happened to qualify as an administrative cost.” Epic said the state allows schools to change their coding submissions up until Dec. 15, and the charter school reclassified the management fee payments. In addition, the school voluntarily itemized the components of the management fee to separate codes at the state’s request.
“There was no ‘elimination’ of an administrative cost penalty – the itemized classification of management fees in 2016 was done within the appropriate time frame for coding revisions and with input from the SDE,” Epic said. “Ultimately, the SDE accepted Epic’s revised codes and the administrative cost threshold was not exceeded to incur a penalty in the first place.”