A recently released special investigative audit of EPIC Charter Schools, an online K-12 provider, says the school failed to make appropriate payments into the state Teachers Retirement System (TRS) for some employees.

But documents provided by EPIC in response indicate the actions recommended in the audit violate state law and regulations.

The audit said payroll data reported by EPIC for employees of its Blended Learning Centers “did not appear to accurately report the complete and total compensation of Blended employees to TRS.”

For example, the audit said the salary reported to the retirement system for one employee was listed as $42,623 when the individual received total compensation of $63,168. Another employee’s reported salary was $34,813 when total compensation was $46,954.

“Detailed information supporting this finding was provided to Epic on August 18, 2020,” the audit states. “As of the release date of this report they had not provided any additional information.”

But in their letter of response, EPIC officials said they did provide significant documentation in response to the auditor's questions about retirement payments, and that the audit’s findings contradict Oklahoma law.

“The State Auditor’s notion of ‘total compensation’ is not in accordance with state law,” the EPIC letter states. “Teacher Retirement System rules provide that additional payments to teachers, such as stipends not given to all employees (i.e., bonuses), are not considered compensation for purposes of the Teacher Retirement System.”

EPIC’s total compensation for teachers is among the highest in the state, but a substantial share of that compensation comes from a bonus that is tied to student results. The size of the bonus varies based on individual teacher results.

EPIC’s 132-page letter of response notes that Oklahoma Administrative Code provisions regarding the Teachers’ Retirement System of Oklahoma exclude bonuses from retirement calculations.

The code states that the “regular annual compensation” of members of the Teachers’ Retirement System is “defined as wages plus fringe benefits” and “shall include all normal periodic payments.” The administrative code then specifies that “stipends that are not given across the board to all employees” are to be excluded from the calculation of regular annual compensation for retirement purposes.

The state administrative code specifies that the bonus payments given to teachers who obtain National Board certification are also to be excluded from retirement calculations.

EPIC’s response also includes a June 30, 2014 email from Lisa Giles, a client services manager at Teachers’ Retirement System of Oklahoma, stating, “This is what I have to offer regarding stipends or bonuses. As a general rule the answer is ‘No, bonuses and stipends are not considered to be “Regular Annual Compensation” and should not be considered as contributable.’”

“The State Auditor and Inspector claims that the Schools did not respond to this proposed finding, but this is incorrect,” EPIC’s letter states. “The Schools promptly provided the State Auditor with numerous documents where, contrary to the State Auditor’s position, a representative of Teacher Retirement System repeatedly specifically directed the Schools to not include bonuses as compensation for purposes of the Teacher Retirement System. The information supplied by Epic was omitted from the State Auditor and Inspector’s finding and is directly contrary to the specific directives from the Teacher Retirement System.”

The retirement issue is not the only instance in which the state audit criticized apparently legal activity. The audit also criticized EPIC Charter Schools for spending more than $2.6 million on advertising, media, and promotional mall playgrounds between April 2019 and July 2019, but conceded that “there is currently no state law prohibiting the use of state appropriations by schools for advertising.”

While traditional public schools have students assigned to them based on geographic proximity, EPIC must rely on publicity efforts to a greater degree because its student enrollment is generated entirely by the choice of the student or family from any location in Oklahoma. And EPIC is not the only education entity in state government that has paid for advertising. For example, Oklahoma’s CareerTech system aired an ad during this year’s NFL Super Bowl as part of a consortium.

In its letter of response, EPIC officials said the school will “work with the Teacher Retirement System to encourage legislation to make bonus payments part of a teacher's retirement eligibility.”