A Bradford secondary school exposed more than £1 million of its funds to “significant risk of loss” by placing it in the accounts of two private firms it had formed, say auditors.

Laisterdyke Business and Enterprise College in Thornbury Road is in the process of winding up its limited companies because the practice was in breach of financial regulations.

Principal Jen McIntosh said the school was also appointing an independent body to investigate its actions.

Bradford Council criticised the school in its annual audit report but added it was satisfied that the money had been transferred to the companies in good faith.

A Council report states: “There was no evidence to suggest that any of the money was misappropriated or ever intended for anything other than the use of the school, but the audit identified that the actions taken by the school exposed these funds to significant risk of loss, and that, in acting as they did the school was in breach of Financial Regulations, the Scheme for Financing Schools, School Companies Regulations, HMRC Regulations, and Companies House Regula-tions as required under the Companies Act 2006.”

At one stage, the total amount held jointly in the accounts was in excess of £1m and the balances went unreported to Education Bradford, leaving the Council in the dark about the the school’s financial status.

There was a lack of governance over the private school companies and significant failures in control systems within the school that allowed the public funds to be transferred to private company accounts, the report says. It meant the school’s income and expenditure was misrepresented in its updates to the Council, the report adds.

The school responded to the audit report at the start of the year when Mrs McIntosh took up her post, it says. The funds have now been transferred back to the school and the school is working with Education Bradford to ensure that the funds are accounted for correctly.

Yesterday, Mrs McIntosh told the Telegraph & Argus: “A draft letter received from Bradford Council’s Internal Audit Service in January led to the college reviewing the status of the two school companies it had run.

“Mimethon Ltd was set up in June 2000 in order for the school to legitimately reclaim the VAT on capital building work undertaken when the college changed from a middle school to a secondary school. LBEC Training Ltd was initially established in 2005 as a fully traded company in order to provide vocational training services to students from other local schools as well as Laisterdyke students.

“In line with the recommendations of the Audit Service, all of the funds that were held in these company accounts were transferred to the college accounts before the 2010/11 year end accounts were finalised.

“The governing body has resolved that a full investigation of the issues raised in the Internal Audit Report should take place and is currently working to ensure that a suitable body is appointed to conduct this investigation and therefore it would be inappropriate to comment further.”

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