The company that manages Epic Charter Schools in Oklahoma refuses to provide state auditors details about how it spends millions of dollars provided by the state to pay for students’ extra activities.
The dispute is a central part of a legal battle between the school’s management company, Epic Youth Services, and state auditors. Attorneys for the company have said it has no desire to be secretive, but releasing the information publicly will compromise its entire business model.
But Epic’s virtual school in California has already supplied details about similar spending to the Orange County Department of Education. The department provided two years of data, for 2017-18 and 2018-19, to Oklahoma Watch in response to a public records request.
The records show the amounts that Epic paid per student to vendors through its “learning fund,” which Epic describes as a way for families to select books, supplemental items, technology and extracurricular lessons in sports and fine arts. Families request the items or classes, and Epic makes the purchase using state dollars the school receives per student.
According to the records, Epic Charter School California in 2017-18 paid more than a half-million dollars from its learning fund to a home-school co-op that offers sectarian and non-sectarian programs — accounting for 72% of spending from the fund. The following year, the same co-op and a private “enrichment center” that also caters to students who are home-schooled received more than 70% of the funds.
Home schooling families and groups are among those Epic has recruited in Oklahoma to join the school by offering the learning fund, an Oklahoma State Bureau of Investigation agent alleged in a search-warrant affidavit filed last summer.
Epic and its supporters say the learning fund gives its students access to the kinds of activities that students in traditional school districts receive. It does so by outsourcing those services to private vendors.
Students, parents and school officials have said the learning fund is a major draw to enroll in Epic. Students receive $1,000 in Oklahoma and $1,500 in California and can receive bonuses for referring additional students to the school.
Oklahoma regulators are pushing to examine the spending, saying the information should be public.
One Model, Two States
Epic operates as a public online charter school in both states, but its student population is much larger in Oklahoma. Epic California had 626 students in 2019; in Oklahoma, Epic reports a current enrollment of 40,810 students – and growing daily as families seek out an online option amid the COVID-19 pandemic.
The financial stakes in Oklahoma are much higher.
In California, Epic Charter School’s total budget was about $7 million in 2019-20. Over a two-year span, Epic paid a total of $1.4 million to 165 learning fund vendors. Payments to the vendors are made by the school, said Paul MacGregor, the school’s executive director.
The school is managed by Community Strategies-CA, a not-for-profit LLC that is a subsidiary of the Oklahoma school.
Epic’s Oklahoma school has a budget of $262 million this year. Of the total funding Epic receives each year, a portion – 10% – is paid to the for-profit Epic Youth Services for management services.
The Oklahoma school has paid Epic Youth Services about $114 million since 2015, according to an attorney representing the state auditor’s office. Of that, $69 million went to the company’s bank account to be used to make purchases through the learning fund. The other $44 million was for its management fee.
The school’s co-founders, David Chaney and Ben Harris, jointly operate the company.
Oklahoma auditors probing Epic’s finances at the request of Gov. Kevin Stitt have been unable to obtain records of the funds paid to Epic Youth Services. The company refused to comply with auditors’ subpoenas, which requested bank and credit card statements, vendor contracts, school emails, records on various fees and learning fund revenues and expenditures.
The auditor has asked a judge to order the documents’ release, and the case is ongoing.
In a court filing, Epic Youth Services says it is willing to provide learning-fund records to the state auditor if the state pledges to not release the information under an Open Records Act request. The company also wants assurance it will not be penalized for not adhering to public accounting standards.
Epic Youth Services’ attorneys argue that funds it receives from the state are no longer public once they are paid to the company.
A growing number of public officials disagree. Rep. Sheila Dills, R-Tulsa, has authored several laws to regulate virtual charter schools and increase transparency. She said she’s especially concerned about Epic’s learning fund.
“When you move that money into the private company, you have no transparency,” Dills said. “There’s just a lot of hidden information that I think taxpayers have a right to see. They (Epic) can argue all day long those aren’t public dollars, but they are public dollars.”
The Statewide Virtual Charter School Board, which oversees statewide online schools, recently joined the state auditor’s legal effort to force the management company to turn over learning fund records. Board Chairman John Harrington says the school’s contract requires it to provide spending records, including the learning fund.
“This is the information that any of our charter schools have agreed to provide, and we expect to see that type of information,” he said.
An internal auditor at Epic recently completed an audit of the learning fund but its scope was more limited than what the state auditor is tasked with. The audit examined one randomly selected learning fund purchase made by 20% of the students in Oklahoma and Tulsa counties over two years. The audit found fewer than 20 small instances of inaccuracies and recommended tighter procedures.
Vendors in California
Auditors have not said publicly what exactly they would look for in records about learning fund spending. But in a pair of search-warrant affidavits filed last summer, an investigator questioned some practices.
Epic previously had paid dues and fees for home-school organizations, in violation of the Oklahoma Charter School Act, the investigator alleged. He also found at least two instances where Epic entered into relationships with convicted felons; one of those was a vendor advertised as a personal trainer. Epic denies wrongdoing, and no criminal charges have been filed.
The only public information about Epic’s learning fund vendors is on its website. More than 1,400 private learning-fund vendors are listed by Epic in Oklahoma and 300 in California, where Epic operates in five counties. But it’s not a comprehensive list.
In California, the vendor that received most of the learning funds over two years was Young Lamplighters Co-op, a home-school organization located in Santa Monica and led by a rabbi and his wife. The co-op received $886,787 over two years for tutoring services, enrichment classes, exercises and excursions for Epic students, school records show.
But Young Lamplighters isn’t on the publicly available list, and it wasn’t in 2017 either, according to an archived version of the site. MacGregor, the school’s director, said vendors have a choice about whether to be listed on the website, and Young Lamplighters chose not to.
Young Lamplighters’ website describes the group as running an “academic enrichment sectarian and non-sectarian program for students.”
Its chief financial officer is Rabbi Verachmiel “Chaim” Teleshevsky; his wife, Shira Cunin, is chief executive officer, according to California Secretary of State records.
The couple are directors at Chabad on Montana, a “center for Jewish life and education,” at the same mailing address as the school co-op attended by Epic students. Several phone messages left for Teleshevsky were not returned.
Addressing the vendor’s religious ties, MacGregor said students do not need to be Jewish to attend Young Lamplighters and all the services, materials, programs and activities provided to Epic students are secular.
“Young Lamplighters is a nonprofit organization that provides home schooled students and students of non-classroom based independent study programs opportunities for individual subject tutoring, enrichment classes, and activities,” MacGregor wrote. “Just because the director of Young Lamplighters is a rabbi does not mean their organization will only serve Jewish people.”
The second largest vendor is Friends of Willow Tree, a former charter school that now operates as an “enrichment center,” though its current and earlier Facebook pages refer to it as a “private school.” In 2018-19, the center, located in Fallbrook, received $131,280 in learning fund dollars for at least 64 students.
Director Bethany Chaffin said charter students who also attend Willow Tree can attend the main classes or electives, such as art, woodwork or music, but aren’t allowed to attend four days a week.
“We are not their full-time educators. They have to use the Epic curriculum, or any other charter they are enrolled with, as their main focus,” she said.
Friends of Willow Tree follows Waldorf principles, which caution against screen time for young children and recommend strict limits for older children – placing it in sharp contrast to Epic’s model, which offers full-time online curriculum and instruction. Fewer students at Friends of Willow Tree enrolled in Epic last year because they felt it was too much online work, Chaffin said.
Information Withheld
The California school’s learning fund details were released to Oklahoma Watch by the Orange County Department of Education, which oversees 16 charter schools, including Epic.
If the Oklahoma school’s authorizer, the Statewide Virtual Charter School Board, had similar learning-fund figures, the information might also be obtainable through a public-records law request because it’s a government agency. But the board has failed to gain access to the records. Rebecca Wilkinson, the board’s director, said she reviewed some learning fund details in 2019 at the Epic office in Oklahoma City but doesn’t have a copy.
In response to the audit, Epic Youth Services says it has provided some records but State Auditor Cindy Byrd said the company has not provided sufficient records to get a complete picture of its finances. The State Chamber of Oklahoma has filed an amicus brief in the case siding with Epic; it argues that allowing auditors to subpoena private businesses would be a “dangerous expansion” of the auditor’s power under state law.
Epic is now subject to stronger accounting standards. A 2019 proposal by Dills, the legislator, led to a change in state law that now requires itemized spending by an educational management company to be reported to the state Department of Education. But auditors have asked for documentation back to 2015.
Learning fund spending is not the only information Epic has declined to make public citing its management firm’s right to confidentiality. Epic denied Oklahoma Watch’s request for the number of students enrolled in each of the dozens of curriculum choices that Epic offers to students, saying Epic Youth Services handles the purchasing and has the records.
“Because the school contracts these functions to a private entity, the data you have requested is proprietary to Epic Youth Services, a private company,” Ben Wadley, director of legal services for the school, wrote in an email to Oklahoma Watch in June.
The arrangement has also kept as confidential the salaries of Chaney and Harris, joint operators of Epic Youth Services.
