Chair of governors accuses Department for Education of racism after Andrew Cutts-McKay says he went to Ofsted with concerns

The former headteacher of the troubled Al-Madinah free school in Derby has revealed himself as one of the whistleblowers who raised concerns over the governance and leadership of the Islamic school.

Andrew Cutts-McKay told the Guardian that he quit his post as principal in the summer having become ill with stress and diabetes, after "repeatedly and unsuccessfully" raising concerns with the school's trust and governing body about financial mismanagement and the inexperience of certain staff members, governors and trustees.

The chair of governors at the school, Shazia Parveen, hit back, calling Cutts-McKay "evil" and accusing the Department for Education (DfE) of racism.

She said she had provided officials from the DfE and the Education Funding Agency (EFA) with evidence of Cutts-McKay's "bullying". "But no one has taken any notice. No one has listened because unfortunately we have a different colour of skin from them," she told the Guardian on Tuesday. "The only word I can use for that man [Cutts-McKay] is 'evil'," she added.

Cutts-McKay, who is trying to set up another free school in Newark, Nottinghamshire, said such claims were ridiculous. He noted that the Ofsted inspection carried out in the school in October, several months after he had left the school, concluded that the governing body was to blame for the school's "dysfunctionality".

"Failures in leadership and management are at the heart of the school's dysfunctional situation," the Ofsted report said, adding: "Despite their commitment to the vision for the school, the governors have failed the parents of this community who have placed their trust in them."

In a statement given to the Guardian on Tuesday, Cutts-McKay said problems began in spring 2013, halfway through the school's first academic year of operation.

"In particular, some aspects and behaviours by a minority of members of the trust/governing body, led me to the conclusion that things were not as they should be. These included: finance issues, operational leadership issues [and] ability and experience concerns," said Cutts-McKay, who helped set up the school and was in position when it opened in September 2012.

He said he tipped off the DfE and EFA only after being stonewalled by the school trustees. The EFA is to release a report shortly looking at alleged financial irregularities and mismanagement of funds.

"Having repeatedly and unsuccessfully tried to raise these matters internally and directly with the trust/governing body, and on the back of increasing unhappiness from the staff, I came to the conclusion that independent inspection of these issues at the school was needed and that the appropriate authorities should be alerted to these problems," said Cutts-McKay.

"I therefore informed the Education Funding Agency, informed the Department for Education [and] made the decision to resign from my position at the school."

He said he had been working 90 hours a week because the governing body scrimped on staff costs in order to save up for a sports centre, including a women-only swimming pool. He claimed that when he left he was acting as vice-principal of the primary school and secondary school in addition to supporting the special educational needs department and his job as overall principal.

"I developed diabetes and became so sick that my wife said, 'sweetie, let it go, you can't fix this'. She was genuinely worried that I would die if I tried to sort the school out myself," said Cutts-McKay.

Parveen categorically denied that the former principal had ever raised concerns with her about finance, operational leadership or staff inexperience – "not in an email, not in a letter".

She added: "At no governors' meeting has he ever raised issues with governance."

Her claims were immediately refuted by Cutts-McKay, who forwarded the Guardian an email he had sent in April to Parveen and two other trustees in which he said more money needed to be spent on pupils' education rather than saving up £350,000 towards a sports hall.

He said there were hundreds of similar emails that had been wiped when the school had IT problems, erasing his hard drive. Parveen in turn accused him of wiping his hard drive himself.

A current teacher at the school, who did not want to be named for fear of losing their job, said they had been present when Cutts-McKay had raised such "serious problems" long before he resigned.

Cutts-McKay said he regretted ever agreeing to work at Al-Madinah, saying of the trust and governors: "The worst mistake I ever made was getting involved with that shower of scoundrels."

He claimed Ofsted-qualified inspection staff acting as external advisors who visited the during his tenure – in December 2012, and May and June this year – were largely positive about the school and praised his leadership.

"At no point were teaching, achievement, behaviour and safeguarding, or leadership and management ever considered to be inadequate up until the point when I departed," he said.

In a report he prepared for governors in June, seen by the Guardian, Cutts-McKay reported that the independent advisers had said all areas of the school needed improvement but that there were no concerns about safeguarding.

Despite it all, Cutts-McKay said he is proud that he helped to create the Al-Madinah school.

He said: "The initial vision for the school – which I helped to shape – was, 'We will engage young people, their families and communities in learning and provide outstanding teaching, support and care.' And this original vision is something that I still believe in."

Tuesday was one of the deadlines the education minister Lord Nash gave Al-Madinah when he wrote to warn that the school could lose its funding unless rapid changes were made.

Nash said he wanted to see evidence by 22 October of nine things, including a document setting out how the school will ensure that it is "welcoming and attractive to students of all faiths and none".

A serving teacher at the school said on Tuesday they hoped the local authority would step in and replace the governors with an interim executive board (IEB): "We're still committed to teaching here and giving children the best education we can provide. By Christmas we hope that the governors and their acolytes will have moved on and an IEB will be in place so that we can get on with doing our jobs to the best of our ability."