A school which costs the tax-payer almost pound;100,000 per pupil every year could face closure after children were found to be enjoying trips to bowling alleys and the cinema but had no structured timetables.
Fees at Tudor Lodge, a small private boarding school for children aged 11-16 with severe behavioural problems, are four times more expensive than fees at Eton.
Local councils pay pound;97,658 a year to send pupils to the school in Purley, Surrey, after they have been excluded from other schools.
Inspectors who visited the school in June found that its seven pupils do not have to follow structured timetables and can wander freely in and out of classrooms.
"They select the room they wish to go to for each session and also decide when to leave," they said.
Classes often start late. "There is little structure in the school day," said the inspectors.
Now, in a damning 11-page report, Ofsted has ordered the school's owners to improve or face possible closure. Inspectors said there was little specialist teaching in certain subjects, resources were limited and staff made too many allowances for bad behaviour.
They noted that "additional activities", such as trips to London, the local cinema, ice rink and bowling alley, helped pupils' personal development.
But they said there was "little expenditure" on teaching resources, and classrooms were poorly equipped and inappropriate to pupils' needs.
Staff turnover was high, with almost no support for new teachers, and there was little expert teaching in geography, history, languages, music, PE and personal, social and health education - a major flaw given that the school is set up to care for vulnerable teenagers.
But inspectors praised the relationships between staff and pupils, and said a small number of children achieved well in art and design classes.
Overall, the school failed to fully meet five of the seven registration standards required by the Department for Education and Skills.
The school's owners must now devise an action plan to resolve the problems or face closure.
The school has just five boarding pupils - four boys and one girl - and charges local councils pound;97,658-a-year for the service. A further two day pupils are charged pound;33,200.
Despite repeated attempts by The TES, no one from the school was available for comment.
Claire Dorer, chief executive of the National Association of Independent Schools and Non-Maintained Special Schools, said: "It is reasonable for Ofsted to have high expectations of the standard of education in all schools, even if they are dealing with children with extreme special needs.
"But it must also be recognised that it is possible to make progress in other areas than the classroom. Many of these children have had exceptionally negative perceptions of schooling - many have been excluded from maintained schools - and just getting them to sit down for an hour to concentrate on one subject may be seen as a triumph."
She said the fees charged by Tudor Lodge were well within the price range of other private boarding schools for children with severe behavioural difficulties.