The lawyer for a Sydney school that has been stripped of $19 million in government funding has raised concerns about the school's own governance practices following allegations of financial mismanagement.
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Rick Mitry, who is acting on behalf of both Malek Fahd Islamic School and the Australian Federation of Islamic Councils, said there were ongoing concerns about loans that had been made to members of the school community and allegations of nepotism.
"At this stage there are certainly a lot of indications that six figure loans were made to former school board members and if that is the case they will have to be reimbursed," he said. "There are complaints that money is being spent on matters other than the educational requirements."
"I can't justify loans being made to people who aren't contributing to the school, that is just disgraceful."
The school, which is 75 per taxpayer funded, had $19 million of Commonwealth funding axed on Tuesday after an Federal Department of Education investigation found it had been operating for profit.
The school community has demanded answers from the school board over the future of its 2400 students, with funding due to run out before the end of term one.
On Thursday, parents, staff, students and alumni started a petition that agreed with the federal government's ruling.
"We demand a response to the alleged financial mismanagement of the school from the school board," the petition said. It has already been signed by more than 1000 members of the school community.
"The governance of the school needs immediate transparency, Students have graduated to become active contributors to our valued Australian society. The reasons given (though justified) for the decision have nothing to do with the main stakeholders which are the students, parents, staff and the wider MFIS community."
The school is also fighting a second set of legal battles with the NSW Department of Education in the Supreme Court. The school was asked to pay back $8.5 million in state government funding last year after NSW Education Minister Adrian Piccoli declared that it was operating for profit.
On Thursday, the court heard that the legal process had stalled. The school's new legal representatives have not been given up to 70 boxes of documents by the previous solicitors, despite having up to three months to complete the handover.
Mr Mitry said that an emergency meeting of the board had been held on Wednesday to decide the new make up of the school council after allegations that school funding had been inappropriately diverted to the Australian Federation of Islamic Councils.
Mr Mitry is also representing AFIC in 15 separate pieces of litigation.
"There is an argument hat AFIC shouldn't be there at all, but AFIC is a major contributor, they own the land, they own the property," he said.
"The school is considering the re-structure of the board. We don't think that the state or federal government will be too happy to have too much AFIC influence on the board."
Mr Mitry said that he hoped the future board would be made up of professionals, not friends of friends.
"There won't be favours or nepotism or anything like that," he said.
Mr Mitry said that the school would engage KPMG to undertake an extensive audit of the school to compare with the federal government's findings.
He reiterated that the school would appeal the federal government's decision.
