Inspectors said teaching, management, levels of achievement and overall effectiveness at New Monument primary in Woking are inadequate.
The governors resigned last year in a row over the role of Muslim values at the school, where 90 per cent of pupils are of that faith. Surrey county council replaced them with an interim executive board in November after approval from Ms Kelly. The new board was drawn up in consultation with the local mosque.
In its latest report on the school, Ofsted says standards in Year 6 are exceptionally low: "Pupils of all backgrounds and abilities are not achieving well enough.
"There has been a rapid turnover of staff, and the leadership has failed to evaluate the school's performance with sufficient rigour, grading itself more optimistically than inspectors. The overall quality of education provided is inadequate and the school offers unsatisfactory value for money."
Children were given work that was sometimes too easy and sometimes too hard, inspectors said, because of weaknesses in assessment.
They also found too little account was taken of linguistic needs at the school, where almost all children speak English as an additional language.
Inspectors noted that the head and deputy head of New Monument were on long-term sick leave, and that most teachers were either on short-term or supply contracts.
On the positive side the school was praised for its enjoyable assemblies and for celebrating the children's culture through attractive displays.
A parent, who said he wished to remain anonymous, described the way the county council had run the school as "a disaster".
Anna Wright, Surrey's director of schools, said New Monument school was increasingly popular, with so many joining that a completely new "bubble" class had been created that took both Year 1 and 2 pupils. Ms Wright said there had been a good response from parents to advertisements for a new governing body, which the council hoped to have up and running by the end of this term.
She said the number of teachers on short-term contracts had been reduced from six to three, and consultants appointed by the council to help improve the school had reported good progress.
"The school is still vulnerable, because there is quite a lot to address," she said.
"It takes a while to turn round a school. You don't get improvement overnight."