The Charity Commission has closed a case reviewing the high pay of a school’s head after finding that the governance at the school has been “significantly improved”.

The headteacher of Gad’s Hill School in Kent was accused of misusing funds by a former chair of governors. The headteacher, David Craggs, had had his salary increased by 381 per cent over eleven years. Concerns were also raised over expenses claims made by the head.

Craggs had started work in 2000, when his income was £35,000, but it increased to £169,000 over the next 11 years. However, according to the charity’s most recent annual accounts, Craggs had already seen his income go down to £123,000 in 2013.

It was reported in July that the Charity Commission had written to the trustees of the school following the allegations.

In February 2013 the then chair of governors, John Melville, made a serious incident report to the Commission, notifying it that the headteacher’s salary had not been properly reviewed for years, and “that increases to his salary were excessive and not commensurate with the role”. As a result of this the board of governors carried out a review and implemented additional financial controls. Craggs’s salary was also reduced accordingly.

An Operational Compliance Case was opened by the Commission following reports in the press in July 2014 which included allegations about salary increases and expenses paid to the headteacher, suggesting a number of governors had resigned as a result. The Commission said it opened the case to “examine whether the governors had carried out an internal investigation into the alleged misuse of expense claims, and to see if the headteacher’s salary had been correctly overseen”.

The Commission found that no “salary benchmarking exercise had been undertaken”. The governors accepted responsibility for not “having the good oversight on the headteacher’s salary for many years”.

The Commission found that despite the head’s contract of employment requiring an annual salary review, this had not happened and instead he had been proposing his annual salary increase on the budget, which was then agreed by the governors. The regulator said that they had put “too much reliance on the financial committee for their decision”. The chair of the finance committee has also since resigned.

The regulator also established that there had been no written policy in place with dealing with salary increases. A salary review board had been set up, which negotiated a reduction in the headteacher’s salary so it now compares with other similar education institutions.

The Commission said that the original serious incident report was misleading and failed to identify concerns raised about the head’s personal expense claims. However, the governors concluded that expense claims had not been abused. Policies have now been introduced at the school and procedures changed to increase transparency.

The governors have said that they will consider legal advice they received about the overpayment of salary when undertaking the head’s annual review.

A statement from Kirsty Hillocks, acting chair of governors at the school, said: “As a result of working closely with the Charity Commission, the governing board has taken the opportunity to strengthen its membership, extending the skills base of the governing board, supporting moving the school forward in its new exciting phase.“