One of Sydney's largest private schools looks set to close after a tribunal upheld a federal government decision to revoke its funding over concerns it was operating for profit.
The Malek Fahd Islamic School, with campuses in Greenacre, Hoxton Park and Beaumont Hills, has around 2400 students who now face an uncertain future in the new school year.
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Parents and students protest at Malek Fahd
Parents and students demand transparency of Malek Fahd's school board after an investigation showed it has been operating for profit.
"That is a hard outcome for Malek Fahd, and the students and community it serves. But the ultimate responsibility must be laid at the door of the previous management of Malek Fahd," Administrative Appeals Tribunal deputy president Bernard McCabe said of his decision.
The school has been operating under a cloud since a review in late 2015 raised questions over improper financial arrangements between the school's board and the Australian Federation of Islamic Councils, which was instrumental in founding the school in 1989.
Based on its students' strong performance in the 2016 HSC, Malek Fahd ranked 76th in the state.
The Tribunal found: "The evidence suggests Malek Fahd is a good school which provides quality education. It appears to enjoy support in the community. It has the loyalty of its students and staff. But the reviewable decision is not directly concerned with the quality of the education provided by the school. The requirements ... of the Act are concerned with accountability."
The decision centred around a series of "uncommercial" property deals and loans between the school's former board and the Australian Federation of Islamic Councils.
"There is little doubt that Malek Fahd was making distributions to AFIC over a long period … in the form of inflated rents that were paid in advance," the Tribunal found.
Despite significant improvements in management and governance since last year, "the ongoing burden of the uncommercial arrangements with the Australian Federation of Islamic Councils" meant the board was still not a "fit and proper person" to run a school, the Tribunal found.
The school last year severed its ties with AFIC and instituted a new board, including the bursar of The Kings School, Geoff Dorman, the first female Muslim chief executive of TAFE South Australia, Miriam Silva, and respected veteran NSW public school principal Martyn Bawden.
The new board commenced proceedings in September in the NSW Supreme Court against AFIC seeking damages for breaches of fiduciary duty and back-payment of the above-market rents. But this was not enough to sway the Tribunal.
Ms Silva told parents on Thursday that the school intends to appeal the Tribunal's decision to the Federal Court. The school believes Commonwealth funding would still continue to flow while any appeal was on foot.
Ms Silva said the AFIC must now turn over the school property to the school to ensure its future.
"It is up to AFIC. Our future hinges on AFIC doing the right thing by Malek Fahd Islamic School and our community for this generation and generations to come."
Keyser Trad, the President of AFIC, said in a statement that Ms Silva was "blame-shifting".
"It was heartbreaking to receive the news today that the Malek Fahd Islamic School had lost its appeal against the Department of Education Decision to cancel its funding. My heart goes out to all the students and their families. I want to reassure everyone that AFIC will continue to do the right thing by the school," he said.
"I have read with dismay the statement from the interim school Chair Ms. Miriam Silva shifting the blame on AFIC. This is grossly unfair, maybe in contempt of court and bears very little relation to the reality of the government's position on the funding."
"AFIC again affirms its willingness to work with the Minister of Education and the school Board to resolve all outstanding issues to allow the school to function properly as a one of the leading educational institutions in the country."
At a doorstop interview in Adelaide on Wednesday Minister Birmingham acknowledged it was a difficult time for the school community.
"The decision is very clear: that the school has been operating in a manner that is for-profit, that is benefiting the AFIC, and indeed that it would continue to do so in the future under current arrangements that are in place. This is a completely unacceptable situation, and of course it is why it is completely unacceptable for any further taxpayer dollars to go into this situation.
"We will not take a backwards step when it comes to the governance of schools and when it comes to ensuring that every single taxpayer dollar is used for the benefit and the wellbeing of students alone."
Between 2012 and 2015, the school received more than $76 million in financial assistance from the Commonwealth, making up the majority of its funding, alongside parent contributions and state government money.
Federal Education Minister Simon Birmingham initiated a formal review into Malek Fahd and five other schools affiliated with the Australian Federation of Islamic Councils in May 2015, following concerns about their financial management and governance arrangements.
Funding approval was revoked in February 2016, but the school appealed the decision to the Administrative Appeals Tribunal, and funding was restored while the Tribunal considered the case.