A NORTH-EAST academy school has been ordered to repay at least £162,000 of “misappropriated” taxpayers’ cash, paid to a private company.

Police are now investigating Glendene Arts Academy, at Easington Colliery, County Durham, over what the department of education (Dfe) calls “serious mismanagement of funds”.

Around £162,000 was spent on subsidising the unnamed company – cash which, Dfe auditors said, “should have been used for the benefit of the academy pupils”.

Cash from fundraising and donation may also have been misspent, but, the report concludes: “We cannot put accurate figures on the potential loss to the academy”.

The investigation at Glendene Arts Academy is the latest in a series of scandals at flagship free schools and academies, which are run independently of local authorities.

The audit was completed last November, but was only slipped out by the Dfe late last Friday, when it was placed on the department’s website.

Today (Tuesday), the academy’s new management team said the investigation had triggered the resignation of the chairman of governors, while the principal, Eric Baker, is on sick leave.

In a statement, Rob Wright, who took over as chairman on August 1 – and was formerly the deputy chairman – described himself as “one of the whistle-blowers”.

He said: “We are trying to understand and unravel complex issues which came to light in the first audit following conversion to academy status.

“All donations from August 1, 2013 are being properly accounted for and used for the academy purposes intended. Donations made before this are still part of an investigation.

“Much as I would like to, I cannot comment further while this matter is under police investigation.”

The revelations prompted renewed calls for tighter accountability of the way the growing number of free schools and academies spent taxpayers’ money.

Kevin Courtney, deputy general-secretary of the National Union of Teachers, said: “Once again, a lack of accountability and democratic oversight has resulted in a police investigation into what we can only assume to be suspected criminal activities.”

The company financed by the school - set up when it was still overseen by the local authority - was meant to help in fund-raising and training, the Dfe audit states.

But it adds: “This has not happened. Instead, the set-up has resulted in the academy subsidising [redacted company name] by paying staff salaries and other costs amounting to £162,729.38.”

A spokeswoman said: “The DfE launched an investigation into Glendene Arts Academy last year. This found there had been serious mismanagement of funds.

“The EFA is recovering the misappropriated funds from Glendene Arts Academy. The first recovery was made in January 2014 and the remainder will be recovered by April.”

The school, for special needs pupils from the age of two to 19, converted to academy status in September 2012. Last April, the Duke of Edinburgh toured new facilities and unveiled a plaque.