A leaked Government audit of a Muslim free school has revealed a number of governors may have had conflicts of interest.
The Department for Education's (DfE) report, obtained by Channel 4 News, is reported to have found that some governors at the Al-Madinah School in Derby "are closely involved with suppliers to the school either directly or through family connections".
The audit, published in September, also said the Muslim faith school "cannot currently demonstrate that it is maintaining proper accounting records" and revealed that auditors had identified "irregular payments" of almost £20,000, according to the broadcaster.
Last month the school was branded "dysfunctional" by Ofsted, who ordered that it be placed in special measures, and Shazia Parveen, the chair of governors, announced she was to step down from her position.
Education Minister Lord Nash will today meet the governors of the school to decide on its future.
Channel 4 News said the DfE's leaked audit said the school had been left with a "complicated" governance situation after the resignations of the principal, vice principal and business manager.
According to the audit, those who had conflicts of interest are reported to be one former governor and one current governor whose companies supplied the school, one governor with relatives working as suppliers to the school and another governor with a relative working at the school.
It found further potential conflicts with one governor whose company provides HR services to the school.
There was also found to be no complete record of expenditure or receipts from September 2012 to August this year.
The report also exposed gaps in policies at the school, which it said had no guidance on what travel expenses or meals could be claimed.
Ofsted's report, published last month, condemned the running of the school, concluding that the governing body is ineffective and had failed to appreciate how poor pupils' experiences are.
It stated: ''The basic systems and processes a school needs to operate well are not in place. The school is in chaos and reliant on the goodwill of an interim principal to prevent it totally collapsing.''
Al-Madinah, which has been criticised following claims it discriminated against women, required staff to cover their hair regardless of their religion, and made girls sit at the back of the class, was rated inadequate in each of the categories Ofsted examines.
Al-Madinah, which is one of the Government's flagship free schools and is run by the Al- Madinah Education Trust, opened last September.
On its website it describes ''a strong Muslim ethos'' with shorter holidays and longer school days ''to maximise opportunities for pupil achievement and success''.
A DfE spokesman said: "Lord Nash wrote to Shazia Parveen, the Chair of the Al-Madinah Trust, on October 8 placing 17 requirements on the Trust, which they must satisfy or risk their Funding Agreement being terminated. The last of those deadlines has now passed.
"We are actively considering the responses from the Trust. It would be inappropriate to go into any further detail at this stage."