Education department says school did not record where commonwealth funding was being spent and pooled funding with other revenue
A phantom loan, mystery payments and undeclared conflicts of interest are among the issues identified by a federal government investigation into Australia’s largest Islamic school, which faces closure after being stripped of $19m federal funding.
The full extent of the alleged mismanagement at Malek Fahd Islamic school (MFIS) is laid out in a proposed Department of Education decision sent to school administrators in November, obtained and published in full by Guardian Australia on Wednesday.
It includes a number of allegations that commonwealth funding was not entirely being spent on the school and that hundreds of thousands of dollars were instead paid to senior administrators and the school’s parent organisation, the Australian Federation of Islamic Councils (Afic).
In one example, a former business manager of the school, Agim Garana, earned more than $500,000 since 2012, including annual leave loadings that were inconsistent with his salary, and payments that either predated his contract or were not included in any agreement.
“The contract with Mr Garana, the payments to Mr Garana and the lack of identification of the services provided demonstrates to me that money of MFISL is being distributed to Mr Garana,” a Department of Education delegate said in the breach notice.
Another key former Afic figure, Amjad Mehboob, was engaged in 2013 to provide capital management services at a cost of more than $481,500 since 2013, though he also received payments that predated his contract.
“There is inadequate information to identify what services were provided for the $481,500,” the department said.
It argued that Mehboob, the head of Muslims NSW, took a key managerial role in the school but there was “no evidence to support the adequacy of the experience and expertise of Mr Mehboob in providing those services”.
“I consider that Mr Mehboob does not have sufficient experience and expertise in administering a school,” the breach notice said.
Garana and Mehboob were both sacked from the school in October after falling out with its chairman, Hafez Kassem, who is also the president of Afic. Emails obtained by Guardian Australia indicate the pair are now among those leading the push to oust Kassem at a special Afic congress organised for 6 March.
The investigation found the school did not record where commonwealth funding was being spent and pooled the funding in its accounts with other sources of revenue.
“This means that accurate attribution of commonwealth funding by MFISL is not possible and it is likely that commonwealth funds are being used for purposes other than education, which is inconsistent with the act,” the investigators said.
No school board members had ever registered any conflicts of interest, including Kassem, even when his daughter Mona was appointed acting principal of the school’s Hoxton Park campus, a reporting line that ultimately led to her father.
Some agreements to lease buildings from Afic were made at “above market rates”, the breach notice said, and included significant prepayments “without adequate explanation”.
Auditors also discovered an unexplained $1,453,073 loan from the school to Afic. “There is no evidence that a loan agreement exists and no evidence as to what the loan relates to or what benefits MFISL receives,” the breach notice said.
The school was given 28 days to respond to the concerns outlined in the breach notice but in February had its federal funding revoked due to “non-compliance” with the Australian Education Act. Five other schools affiliated with Afic were given breach notices in November.
Concerned parents held meetings at Malek Fahd’s Greenacre campus last week, urging the school board to resign, in a bid to have federal funding restored and the school, which has 2,400 students, kept open.
Earlier this month Guardian Australia revealed that Afic was also being investigated by the Australian Charities and Not-for-profits Commission over concerns its senior leaders were using the charity’s funds for overseas travel and lawyers’ fees.
Mehboob told Guardian Australia it was “incorrect” that he had received any money from Malek Fahd that predated his contract with the school. He said any payments he had received before the contract with the school began in 2012 had come from Afic, rather than Malek Fahd.
Any suggestions he lacked expertise in managing properties and facilities was “bullshit”.
“I had the good fortune to be involved in the setting up of all Afic schools, from the buying of land to getting approval from governments and councils,” he said. “I had responsibility for the building projects, for managing the facilities … I have experience in this since 1985 – how much more experience would anyone have?”
He said his rate of $75 an hour had been approved by the board in his absence and reasonably reflected his decades of experience and the fact he was working across Afic’s six schools.
Garana said he too had been working for Afic before his contract was transferred to Malek Fahd in 2012 in order to minimise Afic’s involvement in the day-to-day operations of the school.
He said his pay rate of $85 an hour was set by the school’s directors and was reasonable given he was working for Afic schools across the country, helping to set up bursaries that were independent of Afic, in order to better comply with government regulations.
Malek Fahd Islamic school will be seeking a review of the decision and deny the allegations set out in the breach notice.
Hafez Kassem and Afic declined to comment.