An overcrowded school which has been forced to convert cupboards into offices has refused to hand back #163;1.2 million in unspent funding which it wants to use to build new classrooms.
The Ockendon Academy in Thurrock, Essex has saved up the cash from its revenue budget allocations since 2006 for a new block of eight classrooms to cater for its growing roll, with pupil numbers having increased by 50 per cent over the past decade.
But after the school announced its intention to convert to academy status last June, meaning it would be funded directly by the Department for Education rather than Thurrock Council, the local authority insisted that the money - described as "one of the highest level of school balances in the country" - be returned, arguing it should have been spent on its students' day-to-day education.
The planned building work has been put on hold as a result of the dispute.
The school, which was in special measures when principal Barbara King arrived in 2000, has been rated outstanding in its two most recent Ofsted inspections, and insists it is within its rights to spend the money as it sees fit.
The school has refused to hand over the cash, which it says includes #163;400,000 earned in interest payments, and the matter will now be resolved by education secretary Michael Gove, with a verdict expected by the end of June.
A Thurrock Council spokeswoman said the school had been holding on to a surplus of 42 per cent of its revenue budget, well above the recommendation in national guidelines that it should not exceed 5 per cent in secondary schools.
Mrs King told The TES the school "desperately" needed extra classroom space after being asked by the local authority to take extra students to meet local demand.
"We don't want to ride off into the sunset with the money.
"All our classes are 30 or bigger; they are the largest in Thurrock. We even have a special needs class of 30. It's a real challenge for the students, parents and staff, and we need to alleviate the problem.
"We've had to turn cupboards into small offices, and we're teaching maths in science labs. We're not wanting to build a flashy, multi-media centre, it's about eight standard classrooms. It's not particularly sexy or over the top; it's about basic needs," she said.
Mrs King added that the council had been supportive of the expansion project until a recent change in local authority leadership.
At a council meeting in March, Thurrock's former executive councilor for education Diana Hale said: "It was money to be spent on five years ... six years of children who were at school that year in Ockendon, not to be put in a bank to accrue and to be capitalised on in the future when it suited the school."
The spokeswoman said the council brought forward a planned review of the school's finances when its intention to become an academy was made public.
"The school was notified of the local authority's determination on their balances following very careful consideration of the school's evidence and their representations on the issues.
"The school rejected the council's determination and referred the decision on claw-back to the DfE for adjudication and we await the outcome," she added.