Parents' fury at finding school kept quiet on money fears two years ago

FINANCIAL trouble-shooters were secretly called in to probe the finances of a leading private school two years before it went into liquidation.

Creditors left out of pocket after the collapse of St Margaret's School, in Edinburgh, have discovered that bankers called in restructuring experts KPMG in 2008 due to concern over the school's financial affairs.

But parents of pupils are furious they were kept in the dark by the school's board of governors and were given no warning the school was in trouble before its sudden closure was announced by KPMG in June.

It emerged that the school had been losing an average of 500,000 a year for the previous five years due to plummeting pupil numbers, forcing the governors to put the school into liquidation.

Parents who mounted a last-ditch bid to take over the school claim they could have saved it from closure had they been given the full financial picture by the board.

The school's financial plight was made public on 10 June and parents made frenetic efforts to put a rescue package together, but on 24 June finally admitted they had run out of time.

School buildings are expected to go on the market within weeks while all equipment and furniture held there will be put up for auction shortly.

Many parents, some of whom had paid fees upfront for the 2010-11 school year, were trying to raise funds for a potential takeover while scrambling to find an alternative school for their children.

RBS was thought to have been the 110-year-old school's main creditor, along with the Inland Revenue.

The closure of St Margaret's — which accepted boys up to junior level and had an all-girl senior section — at the end of June affected some 350 pupils and saw around 85 jobs lost.

Paul Motion, who has been acting as legal advisor to parents left out of pocket, said KPMG had admitted it had been sent in by the bank to investigate the school's finances in 2008.

He added: "KPMG reported back to the bank and restructuring the finances was looked at in the light of the report then but was not considered possible."

The first sign of financial trouble at the school emerged in May when it was revealed that the school was freezing pay for teachers for two years.

Val Devlin, spokeswoman for the St Margaret's Parents and Friends Association, said: "We had heard a lot of rumours that KMPG were involved as long as two years ago, but this is the first time we've had official confirmation.

"We are angry and upset at being kept in the dark like this by the governors. Time and again we asked about the state of the school's finances and were told they were fine, when clearly they were not.

"It's obvious that the school was unviable long before we heard about it.If we had been told the truth we could have done something about it. We achieved a huge amount in two and a half weeks and we are furious we were not given a proper chance to save the school."

Blair Nimmo, head of restructuring for KPMG in Scotland, was unavailable for comment yesterday.