While Epic’s co-founders Ben Harris and David Chaney, along with former chief financial officer Josh Brock, were arrested on racketeering charges Thursday morning, current leaders of Epic Charter Schools were presenting the State Board of Education with their defense of a 76-page investigative report released by the State Department of Education earlier this week.
During Thursday’s regular State Board of Education meeting, board members also took action regarding Western Heights Public Schools.
The Epic report alleged attendance fraud, Open Meeting Act violations and that Epic Superintendent Bart Banfield received $67,500 in bonus payments, a number 50 percent higher than the $40,000 he was authorized to receive by the board.
“Epic has been under well-deserved scrutiny for years and we have been effecting substantive change over the past 13 months,” Epic Charter Schools Board Vice President Ginger Casper said. “Thirteen months of intense work, not only uncovering and examining systemic issues, but also empowering our students, teachers, administrators and executive leadership into the cohesive team that is here today.”
During a press conference held by the OSDE to discuss the Epic report earlier this week, State Superintendent of Public Instruction Joy Hofmeister said she would pursue placing Epic’s accreditation on probation at the state board’s July meeting.
State board member Jennifer Monies questioned why the board would pursue probation when Epic appears to be trying to work through issues.
“It sounds like both sides are saying that they’re bending over backwards to fix this and figure it out,” Monies said. “You guys (with the OSDE) are working hand-in-hand with them as partners to do that. All of that daily work, it sounds like, is happening. So why probation?”
Hofmeister said she believes probation is warranted.
“We are still talking about things that don’t happen that impede the rest of the state from being able to move forward because of the need for all the information to be in at a certain deadline and it doesn’t happen,” Hofmeister said. “The potential is great. But, we’re talking about individuals stepping forward saying, ‘We signed up to try to help to pull this out of where it was.’ That’s admirable, but that alone isn’t going to make that change happen without the supervision of probation.”
State board members also approved a resolution that requires the Western Heights Public Schools Board to retain a qualified accountant through an RFP process to work in cooperation with Western Heights interim Superintendent Bradyn Savage and legal counsel to get the district’s financial records on track following a troubling Fiscal Year 2020-2021 audit report that was released last week.
Savage was also in attendance Thursday, as OSDE legal counsel Brad Clark provided an overview of the Western Heights audit report for state board members.
“There’s so much backlog of problems in the finical department that it’s going to take a while to turn that ship around,” Clark said.
‘Misunderstandings about the intentions of the people involved’
The OSDE opened an investigation into Epic after one of the charter schools’ former board members, Katherine Steno, resigned suddenly in December and submitted a letter alleging questionable behavior by board Chairman Paul Campbell and unapproved staff bonuses, among other issues.
During Thursday’s meeting, Clark reminded state board members of Epic’s historic problems, which include a failure to approve financial transactions, a failure to report data accurately, employees with no contracts, governance and oversight issues and a failure to implement board policies.
Clark discussed the issues found within the new report, including attendance irregularities. Clark said virtual charter schools within the state must withdraw students who are absent — meaning they do not complete instructional materials — for 15 consecutive days. He described a pattern in which 4,819 Epic students were counted as absent for 14 straight days and then marked as present on the 15th day.
“They definitely dropped students. In fact, the former internal auditor said, ‘You’re dropping too many kids.’ I think we found the opposite,” Clark said.
Casper acknowledged the troubles Epic and their school board have had to contend with.
“Epic has a decade’s worth of layers accumulated due to profit motive and power centered with an elite few,” Casper said following Clark’s presentation. “As each layer presents, our new executive leadership has faced it, worked with it and worked with our board to bring Epic in line with our new aspirations.”
Clark also said there were approximately $8,598,184 in bonuses paid to administrators without board approval. Epic Superintendent of Finances Janice Wynn said nothing nefarious was done in regard to bonuses.
“I understand that there are some irregularities around the approval of the bonuses in the minutes. If I thought those were not approved, that order to pay those bonuses would have never gone to payroll,” Wynn said. “(Human Resources) was involved as well. It was a team working on that. I don’t prepare payroll. I think that there are very clear misunderstandings about the intentions of the people involved and what happened.”
Casper outlined what she called some of the most difficult transformations for Epic, which she said are “almost complete.” Those include:
- Severing all ties with Epic’s former management;
- Establishing a new board of education comprised of business and civic leaders without any previous relationship to Epic management;
- Creating, for the first time, new checks and balances to strengthen internal controls and ensure fiduciary oversight by the Epic board of education;
- A plan to consolidate the two school districts to streamline services; and
- Investing in new software to enhance operational efficiency and shift away from the proprietary, customized software created by Epic’s former management.
“We’re highly committed to being transparent. We’ve demonstrated it,” Casper said. “We want to work alongside partners in the State Department of Education to provide guidance and ensure that our policies and procedures are compliant and in the best interest of our school and our community.”
‘There’s lots of process and procedure issues that we have’
Clark also went over the findings of the FY 2020-2021 Western Heights audit that was initially published by News 9 earlier this month. The audit reflected 19 significant deficiencies, including employees being under and overpaid, a lack of internal controls for federal program revenue and expenditure reporting, and an unauthorized $25,000 bond paid to suspended district Superintendent Mannix Barnes.
The audit also states that the school district does not maintain adequate accounting records to provide sufficient information for the preparation of financial statements. According to the report:
- Of the employees tested, 22 percent of payroll expenditures tested were not supported by employment contracts or other authorization, resulting in potential error to financial statements; and
- IRS Form 941 payroll tax reports had not all been filed or provided to the auditor and therefore could not be audited;
- Bank reconciliations were not performed during the audit period; and
Like the Epic presentation, Thursday’s state board discussion about Western Heights began with Clark taking the board back in time to the district’s FY 2018-2019 and FY 2019-2020 audits. Those audits included findings of unbalanced activity fund accounts, with 53 percent of tested deposits not made in a timely manner, and the use of 2018 bond proceeds to make payments on 2009 and 2013 bonds.
“Under our Federal Programs Monitoring report last year, when we were able to go on site, the district could not provide any inventory listed,” Clark said “The natural question is what happens if there was a fire? How do you account for the inventory? The response at the time was, ‘Not sure.”
During the meeting, state board member Brian Bobek asked Savage is there was anything the board could do to help her solve the issues found within the audit.
“Obviously there’s lots of process and procedure issues that we have,” said Savage, Western Heights’ interim superintendent. “Going forward, from July 1, we’re really looking at all of those processes and procedures especially based on the findings from this most recent audit. It’s honestly in such a disarray that we would really like to look at bringing someone in to to help us.”
Savage said the district would have to look at asking the local board to approve an RFP for a company to come in to help move forward. Savage said she has been having a hard time finding a chief financial officer willing to take on the job and that one who had been hired recently quit.
“The school’s under our purview, so at some point, as far as I’m concerned, it comes back on us that these things aren’t happening,” Monies. “If you’re getting stonewalled, at a certain point, this board, I think, has the ability and willingness to make changes that are needed to move forward.”
After discussion between Clark and legal counsel for the state board, Travis Jett, the board voted to instruct the Western Heights Public Schools Board to hire someone to help get the district’s finances in check.
“My analysis is action item B, specifically the first phrase of it, would give you the authority to pass a resolution today instructing the Western Heights Board to retain a qualified accountant through the RFP process, working in cooperation with Superintendent Savage and her legal counsel,” Jett said. “I think that would be an appropriate and permissible action by this board.”