18 Nov 2013

Report exposes conflicts of interest at Muslim free school

Home Affairs Correspondent

A leaked government audit of the controversial Al-Madinah free school in Derby obtained by Channel 4 News reveals a number of governors may have had conflicts of interest.

On Tuesday, Education Minister Lord Nash will meet the governors of the school to decide on its future.

The Department for Education’s audit, published in September, found that some governors at the Muslim faith school “are closely involved with suppliers to the school either directly or through family connections”.

It also said the school “cannot currently demonstrate that it is maintaining proper accounting records” and revealed that auditors had identified “irregular payments” of almost £20,000.

The news follows shadow education secretary Tristram Hunt’s warning that Al-Madinah had exposed the government’s free school policy as “a dangerous ideological experiement which has been allowed to run completely out of control”.

Last month, the Al-Madinah school was placed in special measures following a damning report by Ofsted which described it as “dysfunctional” and “in chaos”.

Previous reports had also claimed that the school required staff to cover their hair even if they were not Muslim, and made girls sit at the back of the classroom while boys sat at the front.

‘Complicated’ governance

The DfE’s leaked audit said the school had been rocked by the resignations of the principal, vice principal and business manager, which had left a “complicated” governance situation.

The DfE said: “Whilst a number of new governors have been appointed there is still concern that there are too few which has resulted in decisions made by some committees (eg the finance committee) being made by two governors”.

Allegations of financial mismanagement against the Al-Madinah free school were first made earlier this year, writes Home Affairs Correspondent Darshna Soni.

The school was dramatically closed in September following an urgent inspection by Ofsted. Then, the Education Funding Agency (EFA), which regulates the funding of free schools, announced that it too was investigating the school. Its report was never made public, but I have now obtained a leaked copy.

The EFA's main concerns focus on the role of the governors, some of whom it was alleged have employed relatives or have awarded contracts to their own companies.

Javid Akhtar was a governor from April until August this year. He chaired the school's HR committee, which is responsible for all staffing issues. But Mr Akhtar is also managing director of a company called Prestige HR solutions – and his company was awarded a contract to run Al-Madinah's HR services.

On Monday, I caught up with Mr Akhtar at his office and asked him if he thought this represented a conflict of interest. "Yes," he told me. "But as soon as this was pointed out to me, I resigned as a governor."

Mr Akhtar told me his company initially received £1,000 per month from the school. However, he was then told he would have to bid for the contract again, which he did. His company again won the contract, but now he gets a reduced rate of £600 per month.

"There has been a lot of mis-reporting," Mr Akhtar told me. "I think there has been a lot of negative publicity about the school. I don't have anything to do with it any more."

The report listed those who had declared conflicts of interest, including one former governor and one current governor whose companies supplied the school, one governor with relatives working as suppliers to the school and another governor with a relative working at the school.

It found further potential conflicts with one governor whose company provides HR services to the school.

The law permits governors to have a conflict provided they go through all proper proceedures and remove themselves from the decision-making process.

‘Irregular’ expenditures

The DfE’s audit also found “no complete record” of expenditure or receipts for the period September 2012 to August 2013.

Reviewing expenses claims, petty cash, bank statements and cheque stubs, the DfE found a number of “irregular” expenditures.

These included £11,000 in costs related to new free school bids for schools in Bradford, Birmingham and Nottingham.

Among the smaller costs listed were the provision and payment of iPhones and iPads.

The report also exposed “gaps in policies” at the school, which it said had no guidance on what travel expenses or meals could be claimed.

It found that in some instances petty cash was being used to reimburse travel and food expenses.

A DfE spokesperson: “Lord Nash wrote to Shazia Parveen, the chair of the Al-Madinah Trust, on 8 October placing 17 requirements on the trust, which they must satisfy or risk their funding agreement being terminated.

“The last of those deadlines has now passed. We are actively considering the responses from the trust. It would be inappropriate to go into any further detail at this stage.”

The Al Madinah School made no comment.

Kevin Brennan, shadow schools minister, said: “Another day, more trouble for David Cameron’s flagship free schools programme. These allegations have caused huge embarrassment to the prime minister.

“Labour has been warning about the risks that come with the complete lack of oversight of Cameron’s free schools. Now we are seeing the consequences.”