The English Schools Foundation, set up during British colonial rule to offer English-style education in Hong Kong, is at the centre of a political storm following the publication of a damning investigation by the Audit Commission.

Leaders of the ESF had to face the Legislative Council last week in response to a catalogue of failings related to excessive spending and poor management.

The commission was invited by the ESF’s new chairwoman, Felice Lieh Mak, to inspect the foundation following a series of crises earlier this year, including revelations by former chief executive Jonathan Harris of poor management. Mr Harris, previously Cornwall’s director of education departed in June 2003 after just six months in the job. Heather du Quesnay. chief executive of the UK’s National College for School Leadership, takes his place in February.

Education minister Arthur Li Kwok-cheung said he felt “vindicated” by the auditor’s findings after coming under attack from parents campaigning to defend the ESF’s public funding - which accounts for about 27 per cent of its income - since he first questioned its operations two years ago.

The audit report calls for a review of ESF salaries, finding that for 20034, its teachers were paid an average HK$947,400 (pound;62,875) a year, compared with $391,000 to $813,000 paid by leading Hong Kong international schools.

The foundation was also criticised for spending as much as $1.1 million (Pounds 73,000) on recruitment.

The ESF has responded to the criticisms by launching a radical reform of its governance, including the disbanding of the 132-member foundation which meets annually to oversee it. It plans to replace it with a 25-member university-style council.

Professor Li urged the foundation to reform and review its management.

“First of all I was the bad boy. Now I have been proved right,” he told The TES. “Are school fees still going to be spent on oyster lunches?” he said.“If the results are not good, the taxpayer will have to think about whether to continue funding.”

The ESF will face further hearings in front of the legislative council’s public accounts committee before legislators vote on continuing funding the foundation.