New restrictions on conflicts of interest at virtual charter schools will necessitate a change at the top of the organizational chart at Epic Charter Schools, according to the Tulsa lawmaker who sponsored legislation to crack down on such practices.
Rep. Sheila Dills, R-Tulsa, said the passage of House Bill 1395, which Gov. Kevin Stitt signed last week, means Epic’s superintendent could not remain in that role because of his ownership stake in the for-profit company that manages the public charter school.
“He is not going to be able to continue as superintendent,” Dills said of David Chaney, who is co-founder and superintendent at Epic, as well as co-owner of Epic Youth Services LLC, a separate company with which the school contracts for its operation.
That contract indicates an annual cost of $125,000 for “development services” plus a 10 percent share of the school’s collected revenues as an “indirect cost allocation.” To put that 10 percent into context, Epic Charter Schools has been allocated $112.9 million in state aid funding alone for fiscal year 2019.
Asked whether Chaney would continue to serve as superintendent after the passage of HB 1395, Emily Lang, with Epic’s contract public relations firm Price Lang Consulting, responded: “EPIC intends to fully comply with the law. Staffing and leadership changes are typically announced over the summer.”
In a statement issued after Stitt signed HB 1395, Chaney applauded the governor’s decision.
“EPIC was pleased to be at the table with other public school leaders and the bill’s authors to produce a law that reinforces our school’s commitment to transparency and accountability,” Chaney said. “We support this new law, and we are pleased that it addresses the concerns of the greater public school community, of which we are proud to be a part.”
HB 1395 was approved with an “emergency” attached, meaning it went into effect as soon as it was signed by the governor.
HB 1395 sailed through both the state House and Senate, with votes of 95-0 and 41-0, respectively. In addition to the conflict-of-interest restrictions on employees, the measure will require a host of new financial transparency reporting to the public.
For the first time, virtual charter schools that contract with education management companies, like Epic, will be required by law to divulge financial transactions expended on behalf of the school — including salaries of superintendents, administrators, board members, managers and owners, Dills said.
The measure also added new, annual training requirements for charter schools’ governing board members, just like at traditional public schools.
Dills has said she was not targeting any one school but thinks the public deserves an accounting for an estimated $18 million in state and federal funds flowing from virtual charter schools to for-profit management companies in the current fiscal year.
Dills has said some virtual charter schools have been voluntarily reporting such expenditures as superintendent salaries and that the new requirements imposed by reporting requirements will begin July 1.
State education officials indicated that the new reporting requirements will begin July 1, which is the start of Fiscal Year 2020. Previous years’ expenditures are not subject to the new law’s reporting requirements. “However, an audit can look at anything,” Dills said.
Asked how soon Epic will comply with the new reporting requirements for payment and itemized expenditure information related to Epic’s educational management organization, Lang responded: “We will comply fully at the first reporting deadline that arises after the law is in effect.”
The Oklahoma State Department of Education will now have to add new reporting categories to its statewide financial accounting system for public schools, called the Oklahoma Cost Accounting System, or OCAS.
“We are beginning implementation of 1395 with creating new OCAS codes and definitions that describe the expectation of what is to fall into that code. We will then start informing the districts that will likely be affected. Full implementation will begin July 1,” said Deana Silk, deputy director of communications at the state Department of Education.
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