A schools "super head" was paid a £160,000 "second salary" from public money at a top academies trust where investigators uncovered a host of other significant financial failings.
Liam Nolan who is an executive headteacher of the Perry Beeches Academy Trust was paid for his chief executive role on top of his £120,000-a-year salary, via another company, according to a report by the Government's Education Funding Agency (EFA).
An investigation also found that despite paying a supplier company nearly £1.3 million for various services, the trust had no written agreement with that firm and had an incomplete invoice record for the services it had paid for.
In a report resenting its findings, the EFA said "urgent action" was now needed after uncovering a series of damning short-comings in the trust's governance, financial procedures and management arrangements.
The Department for Education (DfE) has issued the trust with a formal written notice to improve its performance or risk being stripped of its funding and in the interim, has had financial decision-making revoked by the Government.
The EFA inquiry was triggered by a tip-off from a whistle-blower who was spoken to in autumn last year.
Investigators subsequently uncovered failures by Mr Nolan and the trustees to "maintain high standards of probity and stewardship over the management of public funds", and "weak governance", which had led to a host of breaches of the financial rules which bind taxpayer-funded academies.
It was found that the trust had paid third-party supplier Nexus Schools Ltd for the services of a chief executive officer (CEO), which then in turn sub-contracted the role out to another company called Liam Nolan Ltd - whose sole director is Mr Nolan.
The report stated: "The academy paid Nexus £72,000, including VAT in 2013/14 and £88,800 plus VAT in 2014/15 for the CEO role."
This arrangement was concluded to be a breach of rules governing academies' compliance with tax avoidance guidance set down by the Treasury.
Payments made to Mr Nolan - who is also the accounting officer - for his chief executive services were also not disclosed in the trust's 2013/14 financial statement.
Concluding its report, the EFA said: "Evidence confirms that the accounting officer of Perry Beeches multi-academy trust is being paid for his services as the chief executive officer (CEO) through Nexus and then Liam Nolan Ltd, in addition to his salary as executive headteacher."
Furthermore, despite the trust spending £1,297,712 paying Nexus for various services, including the chief executive role, over the two academic years to 2015, the academy trust never had a written contract with the company.
It was also found that "all invoice for consultancy, which include the CEO salary, are invoiced and paid upfront before service has been delivered".
When financial investigators were carrying out their inquiry they found Perry Beeches had an incomplete record of the sub-contractor invoices for services for which it had been charged by Nexus.
The EFA concluded that "without access to underlying invoices it would be extremely difficult for the academy to confirm the costs it is paying are correct and accurate."
The academy trust tendering policy was also described as inadequately detailed, while the EFA also identified "inherent conflicts of interest with Nexus that have not been adequately disclosed or managed".
The authors of the financial management and governance review report stated: "Urgent action is required to strengthen governance, financial procedures and management arrangements and ensure trustees fully understand their obligations as company directors and charity trustees."
The Perry Beeches trust is made up of five schools including Perry Beeches Academy and four free schools, all based in Birmingham, and in 2014/15 received £11.5 million in public money.
In the past the multi-academy trust has been praised by Prime Minister David Cameron, and both the present and previous Education Secretary.
A DfE spokesman said: "Following an investigation we have identified serious weaknesses in financial management, control and governance at Perry Beeches The Academy Trust, and have issued a financial notice to improve to the trust.
"The trust has already put in place an action plan and is working with us to urgently fix the weaknesses we found.
"We will monitor progress closely, and if we don't see significant improvement we will not hesitate to take further action.
"Academy trusts operate under a strict system of oversight and accountability - more robust than in council-run schools, which has enabled us to identify these issues and take swift action to address them."