Back from the brink: Islamic school shines again

Faced with legal battles, axeing of government funding and closure, Australia’s largest Islamic school resolved its governance issues with reforms from a new board and the school is now flourishing.

In March 2016, the newly appointed interim board of Malek Fahd Islamic School (MFIS) feared the worst. The school and its community had been mired in controversy for years due to the actions of its major stakeholder, the Australian Federation of Islamic Councils (AFIC). The school was looking at having to shut its doors.

For five years, state and federal education bodies had investigated the role of AFIC and found problems. In 2011, the NSW government suspended its funding, triggering a series of court cases. By February 2016, the federal Department of Education and Training (DET) had followed suit, forcing the board to act. Distraught parents were camped outside the school principal’s office, demanding to know if their children had a future. For new chair Miriam Silva MAICD and her board, it was their worst nightmare. They faced insolvency, long-term conflicts of interest and a community backlash amid relentless media controversy.

Getting governance right

Silva’s investigations revealed the governance of the school had been inadequate for years. An experienced corporate executive, previously with ANZ and Elders, Silva knew that the first thing to do was to recruit a strong team. Jim McDowell, chancellor of the University of South Australia and Dr John Bennett, a former chief executive of the Office of the Board of Studies NSW, agreed to help. (Bennett is now the current chair). Then a member of the SA Board of TAFE (she has since stepped down), Silva had previously sat on the board of the Islamic School of South Australia in Adelaide and helped turn it around — but this was a much bigger challenge.

The first thing the board did was commission a report from accountants Grant Thornton, which identified a list of tasks it should report against. All that year, “we were very busy fighting fires on several fronts,” Silva says, “the Commonwealth and NSW governments, and AFIC”.

The trouble with AFIC

AFIC had established the school in late 1989 with a $1m grant from King Fahd of Saudi Arabia. An umbrella body for several Sunni Muslim groups and councils, it has now changed its name to Muslims Australia AFIC. Until 2016, when the school cut its ties with AFIC, the organisation had control of the board. But as was revealed in a number of court cases, AFIC had breached stringent rules for operating a school. Investigations showed that AFIC had started taking money out of the school, starting with $5.2m in “management fees” in 2010, and it had also been charging the school a grossly above-market rent.

When the NSW Department of Education investigated the school’s finances, it found it had been illegally operating “for profit” and discontinued its government funding, demanding repayment. In 2016, a federal government investigation found “a phantom loan, mystery payments and undeclared conflicts of interest”.

Touch and go

By early 2016, relationships in the boardroom had broken down and Silva was brought in to sort out the mess. The new board cut its ties to AFIC and declared itself independent of the group. It also registered new constitutions under which AFIC lost the right to appoint all or a majority of its board members. It barely had time to get its feet under the table before DET sent a letter saying it was cutting the school’s funding. After the board lobbied the department asking for more time, its funding was extended till the end of March. Then the board was forced to seek a judicial review of the decision in the Federal Court.

“Had we had gone under — which was close a couple of times — the only people who would have benefited were the people who caused the problem,” Bennett says. With the parents of almost 2500 students to manage, Silva and the board suggested the formation of a Parents’ Advisory Committee (PAC). “One of the most valuable things was getting student representatives to tell us their perspective and what we had to do to support them,” Silva says.

Ill-health forced Silva to stand down as chair in June 2017, to be replaced by Bennett. Former Reserve Bank board member John Edwards stepped in as deputy chair.

Moving forward

By the beginning of 2017, the board had appointed a new principal, Bruce Rixon. In October, it settled its dispute with the NSW Department of Education and, the following month, the Federal Court set aside the Commonwealth decision to cut funding.

In March 2018, the Federal Court dismissed the school’s appeal of the Administrative Appeal Tribunal decision upholding the federal government’s funding revocation. MFIS lodged a fresh application and continued to operate during the appeal process.

Federal funding of nearly $19 million was restored to the private school in September 2018 after the federal legal battles were resolved and a new rental agreement reached with AFIC. The Federal Department advised that the school had rectified all issues relating to its management. But the school is yet to resolve similar issues with the NSW Government over whether it is operating for-profit.

With 2,500 pupils, MFIS is now flourishing. In 2017, it jumped seven places to come 69th out of almost 600 schools across the state. “I’ve spent 50 years in education and this situation is one of the most interesting and rewarding I’ve been involved with,” says Bennett.

The school’s motto is: “Knowledge is light and work is worship”. Thanks to the board of Malek Fahd Islamic School that light now shines a little brighter.