The state’s largest school system was ordered Monday by the Oklahoma State Board of Education to pay back $11.2 million in taxpayer funding after an investigative audit pointed out excessive administrative costs among its findings.

The board voted unanimously to demand the money back from Epic Charter Schools, which boasts more than 60,000 enrolled students.

According to a report on the Epic website, there were 97 students from Kingfisher County enrolled in Epic as of July 27, a number that was expected to grow as public schools returned to in-person instruction for the 2020-21 term.

“This isn’t questioning the efforts of public school teachers at Epic and it’s not a school choice issue,” said Kurt Bollenbach of Kingfisher who is a part of the seven-person state board.

“But there are finite dollars in public education. We hold public schools to a certain accountability standard and we have to hold public charter schools that receive state dollars to that same standard.”

The board made the move after hearing from Brenda Holt, an audit manager for the special investigative unit of the State Auditor and Inspector’s Office, which recently released a report on its findings.

The largest bulk of what the state board demanded back was underreported administrative payroll costs, according to the audit.

School districts that receive state funds can only use 5 percent of their overall budget for administrative salaries and costs. It’s designed to ensure a bulk of the dollars are spent on students and their related education costs.

The audit alleges Epic underreported about $8.9 million in administrative payroll costs over a six-year period, of which it had already been penalized about $530,000.

It also stated Epic “inaccurately reclassified administrative costs” to avoid $2.6 million in penalties for exceeding the state’s limit.

The board also is de manding back $203,000 of state taxpayer dollars the audit said was paid to Epic’s charter school in California.

In demanding Epic return the funds, the state board was following state statue 70 O.S. § 18-118.

Part C reads, in part, “If audits disclose that state monies have been illegally apportioned to, or illegally disbursed or expended by, a school district or any of its officers or employees, the State Board of Education shall make demand that the monies be returned to the State Treasurer by such school district.”

Epic has come under fire for pumping portions of the state monies it receives into a for-profit management company.

The audit stated that of the $458 million allocated to Epic over the last six years, $125.2 million have been placed into Epic Youth Services, the company set up by school co-founders Ben Harris and David Chaney.

Auditors said records for how a large chunk of that money has been spent is kept from them.

“We [State Board of Education] ask for annual appropriations totaling approximately $3 billion and $125 million works out to about 4.1 percent,” Bollenbach said to Holt during the meeting. “Are you saying I do not have access to or oversight of 4.1 percent of the funds that come through this department?”

“Yes,” Holt replied.

Bollenbach told The Times & Free Press that he has an issue with that for multiple reasons.

Among them, he said, is districts like Kingfisher have to provide a detailed record of every dollar spent.

“Kingfisher Public Schools hold bank accounts that are public record,” he said. “Virtual schools that accept state money need to be under the exact same rules as public schools. We need to worry about transparency and accountability with taxpayer money.”

Epic Superintendent Bart Banfield released a statement after Monday’s decision: “It’s no secret we dispute some of the SAI’s material findings and have requested through an open records request its work papers to review their calculations so we can go beyond our initial audit response to exercise our due process and debunk these calculations.

“Epic is not perfect. No school is. But the dedication of Epic’s 2,100 employees working here to get things right and improve our processes is. We know more than 60,000 students and their families are counting on us to work with the State Department of Education to resolve issues and we will not let them down.”

After Monday’s meeting, State Attorney General Mike Hunter announced in a news release that he appointed Melissa McLawhorn Houston to serve as special counsel in his department’s review of Epic.

“With assistance and resources provided from my office, she will conduct an extensive review of the auditor’s findings and make recommendations based on the rule of law,” Hunter said.

Hunter had recused himself and several others in his office from further review of the audit due to multiple ongoing investigations and litigation involving Epic.

On top of that, the Virtual Charter School Board was scheduled to meet Tuesday. Its agenda included an item that allowed it to consider a change to its sponsorship contract with Epic Charter Schools.

That change included the possibility of termination of the contract.

Bollenbach said his vote Monday wasn’t a reflection of his views on the importance of Epic.

“The reality is, Epic provides a service. It fills a niche,” he said. “There’s a reason so many people go there. And it’s not like charter schools are going to go away, but if we’re going to spend public dollars on them, the money needs to be spent properly.”