Islamic School 'fees' fund AustFederation of Islamic Council

Both are not-for-profit organisations, with the school entitled to a range of tax concessions as a charitable institution.

In 2008, a lease was signed between the school and AFIC that set annual rent for the Greenacre property at $1.3m, but documents reveal that in 2009 the lease was changed to increase the rent to $1.5m a year. The agreement was backdated to January 2004, resulting in a one-off payment of $2.59m going to AFIC.

According to the school's last financial report, another deal saw the school hand over a lump sum of $2.2m in backdated management fees to AFIC, with another $959,800 handed over for management costs in that year.

Neither the school nor AFIC can explain what the management fees are charged for.

AFIC president Ikebal Patel, who has held the role since 2007, is also the chairman of directors of the school. He was briefly removed from the position of AFIC president by the AFIC congress in 2008, but was reinstated after a complex federal court challenge to the legitimacy of the vote.

When asked by The Australian how he explained the fees being charged to the school and where and how AFIC was spending the funds, Mr Patel said: "The financial statement is out there. If you want to discuss anything else I'm happy, but I'm not going to discuss any of this."

Mr Patel has not replied to questions in writing about how the large fees were justified or where the money was being spent.

Mr Patel would also not answer questions as to how much he or other members of the AFIC executive were personally drawing in income or any other payment from AFIC funds.

Intaj Ali, the school's principal, told The Australian that "all questions about the school's finances should be directed to the school's director, Ikebal Patel".

However, it is understood that Dr Ali - a respected educator who has been principal since the school's inception in 1990 - is privately furious over the manner in which AFIC has been using the school's funds.

Senior figures at the school and in the Islamic community are angry the school is being denied its funds to reinvest into the school, which has large classes and generally caters to students of non-English speaking backgrounds and of lower socioeconomic groups. The school receives proportionately larger government funding for this reason.

The Greenacre school site was purchased by AFIC in 1989 for about $2.2m with funds from the Saudi royal family. The school, which charges fees of about $1200 a year, has been responsible for funding the construction of its own buildings.

Along with Mr Patel as chairman of directors of the Malek Fahd, the school's board also has several other AFIC executives. These include AFIC vice-president Hafez Kassem, treasurer Mohamed Masood and assistant AFIC treasurer Ashraf Usman Ali.

Neither the commonwealth nor the NSW education department has provided comment on the matter, but The Australian understands the school's funding issue has been brought to the attention of NSW Premier Barry O'Farrell's office.