Epic Charter School and federal pandemic relief spending created two of the state’s biggest education-related scandals over the past few years. The top two candidates for governor had some involvement in both controversies, and each has accused the other of culpability.
Education is a key policy debate in the gubernatorial race, so we focused on the role and response both candidates —Republican Kevin Stitt (governor) and Democrat Joy Hofmeister (state schools superintendent) — had in two instances of alleged mismanagement of millions in taxpayer dollars.
Oklahoma’s use of pandemic relief funds comes under scrutiny
How did it start?
In 2020, Stitt received a $39.9 million purse of COVID-19 stimulus funds, called the Governor’s Emergency Education Relief Fund (GEER), to spend at his discretion to support students and educational entities most affected by the pandemic.
The governor dedicated $8 million to an initiative called Bridge the Gap Digital Wallet, which distributed $1,500 grants to Oklahoma families to spend on their children’s learning needs. Another $10 million went to the Stay in School Fund that supplemented tuition for private school students whose families endured economic hardship.
The Florida-based company ClassWallet assisted with both the Bridge the Gap and Stay in School initiatives.
Stitt gave $8 million to the Oklahoma State Department of Education to bolster distance learning. The Oklahoma Statewide Virtual Charter School Board received $12 million to offer online educational content and teacher professional development. Tri-County Technology Center got $1 million to waive tuition for students pursuing high-demand jobs.
Hofmeister, education advocates and Democratic lawmakers were critical of the governor’s choice to spend a good portion of the GEER funds on private instead public schools, which educate 90% of Oklahoma schoolchildren.
What went wrong?
A scathing audit by the U.S. Department of Education found the state was unable to explain how and why it chose four of its five GEER initiatives. As a result, Oklahoma “lacks assurance” $31 million of the $39.9 million was spent in line with the GEER fund’s purpose, which was to support entities that the pandemic most affected or that were essential to carrying out emergency educational services.
Auditors also determined $652,700 in Bridge the Gap funds were misspent because the state failed to ensure subcontractors placed proper limitations on families’ spending. Some families used their $1,500 grants on home decor, televisions, cookware and other non-educational appliances, auditors found.
The state didn’t ensure its subcontractors retained all records of Stay in School Fund recipients, investigators found. Auditors checked 10 applicants and, because a subcontractor automatically deleted emails after 90 days, were unable to confirm eight met eligibility requirements.
Oklahoma officials, except for those in the state Education Department, failed to properly monitor their contractors to ensure they followed through with grant initiatives, auditors said. All five initiatives had weak cash management procedures that didn’t fall in line with federal regulations.
What was Stitt’s role?
Staff members of the governor’s office, former and current, were heavily involved the program’s rollout, the report states. Michael Rogers, Stitt’s then secretary of state and education, played a key role in pitching and drafting uses for GEER funds, according to the audit.
Ryan Walters, Stitt’s current education secretary, conceived of the Bridge the Gap and Stay in School programs with ClassWallet’s chief executive officer and helped oversee both programs. Walters is the executive director of the pro-school choice organization Every Kid Counts Oklahoma and wasn’t in public office at the time the initiatives began.
Federal auditors said extra guardrails were available in ClassWallet’s system to prevent non-educational expenditures, but Walters declined to use them, resulting in families misspending $652,700.
Walters is now the Republican nominee to succeed Hofmeister as state schools superintendent.
State officials say fault for the wrongful expenditures is “wholly attributable” to ClassWallet. The state sued the company on Aug. 5 for breach of contract, but the attorney general’s office has yet to serve the company the legal papers, spokesperson Rachel Roberts confirmed.
State officials said they worked in good faith amidst a “high-pressure environment” during COVID-19 and that ClassWallet assured them its system virtually eliminated risk of misspending.
What was Hofmeister’s role?
The state Education Department’s share of the funds received a relatively clean bill of health in the federal report. Auditors said the agency, which Hofmeister leads, followed federal regulations when awarding and monitoring grants to local school districts, but it had weaknesses in cash management protocols.
Millions allegedly embezzled through Epic Charter Schools
How did it start?
Co-founders Ben Harris and David Chaney established Epic Charter Schools in 2010. The virtual charter school offers free public education in all 77 counties of Oklahoma and receives state funding for every student enrolled.
Harris and Chaney’s company, Epic Youth Services, for 10 years received 10% of the schools’ annual revenue as a fee for managing the school system.
What went wrong?
Epic’s co-founders and their chief financial officer, Josh Brock, falsified financial reports to the state to avoid penalties and spent Oklahoma taxpayer dollars on a charter school venture in California, according to a 2020 report from the Oklahoma State Auditor and Inspector’s Office.
Harris, Chaney and Brock were charged in June in Oklahoma County District Court with a litany of financial crimes. Investigators accused them of costing taxpayers $22 million by orchestrating a “complicated criminal enterprise” at Epic and spending school dollars on political donations.
Harris, Chaney and Brock deny any wrongdoing. Epic cut ties with the co-founders and their company in May 2021.
What was Stitt’s role?
Stitt and Hofmeister called for a state audit of Epic in July 2019 after the Oklahoma State Bureau of Investigation released a public search warrant accusing Harris, Chaney and Brock of embezzling school funds and illegally inflating Epic’s enrollment count.
State auditors ultimately found important details that assisted the criminal investigation and led the Oklahoma State Board of Education to penalize Epic $9.11 million.
Stitt said Education Department leaders were “asleep at the wheel” while Epic mismanaged funds. Last year, he requested a state audit of the Education Department, asking for a focus on the agency’s financial oversight of public schools. The superintendent called the audit an “attack on public education.” That audit is still under way.
Hofmeister said Stitt’s chief of staff, Bond Payne, called her in the wake of the state audit and advised against her plans to seek probation for Epic. She said Payne was “notably agitated” that she aimed to downgrade the school’s accreditation and he feared Epic might lose students.
In response to Hofmeister’s allegation, the governor’s office said Stitt’s focus at the time was keeping students in school during COVID-19.
The state Board of Education — all of whom Stitt appointed except for Hofmeister — ultimately chose not to place Epic on probation in 2020.
What was Hofmeister’s role?
Although charter schools purposefully have more freedom, they are subject to state Education Department oversight. Financial reports from all Oklahoma public schools flow through the agency, which is tasked with ensuring school funds are spent properly.
Hofmeister requested the state audit of Epic in conjunction with Stitt, and her agency has penalized the school a total of $20 million.
State auditors said the Education Department took Epic’s financial reports, later found riddled with inaccuracies, at face value because a process to verify information from schools “did not exist.” Hofmeister said it would take far more manpower than is available at the agency to check the accuracy of reports from every Oklahoma school district.
The Education Department has investigated further governance and truancy issues at Epic. Hofmeister and the state Board of Education placed Epic on probation in July in light of the investigation’s findings, despite declining to do so after the state audit in 2020.
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.