A school run by one of the country’s best known headteachers is the subject of an investigation by Government auditors, The TES has learned.

The Audit Commission has confirmed that the Manchester district auditor’s office is looking into the affairs of Whalley Range high school for girls, the inner-city comprehensive turned round by high-profile head Dame Jean Else.

Dame Jean has been head at Whalley Range since 1994 and is credited with the school’s remarkable improvement. She was made a dame in 2001 and enjoyed a good relationship with former education secretary, Estelle Morris, who used to attend the school.

A commission spokeswoman said the investigation was not part of the district auditor’s routine work with schools. She said it had begun at the end of 2002 as a result of concerns that had been raised about the school, but would not give further details.

The TES has also learned that the school has paid out thousands of pounds to a former member of staff claiming unfair dismissal. There is no suggestion that this payment is the subject of the district auditor’s investigation.

In the past nine months three unfair dismissal cases against the school were due to go to employment tribunals. But none were heard in public after confidential, private, settlements were reached.

The TES has seen papers showing that pound;8,500 was paid out to Kevin Cheetham, a former caretaker in December 2002 in a “compromise agreement”.

The second case, due to be heard the same month, involved Peter Strang, the creative design co-ordinator employed to give the school a makeover that included purple and lime green walls with gold, plastic Grecian maidens.

The most recent case was due to be heard last Thursday and involved Martin Delemare, a former assistant headteacher.

There is no suggestion that the school admitted liability in any of the three cases.

Dame Jean has often hit the headlines during her time at Whalley Range high. This May the former PE teacher, usually a supporter of Labour education policies, announced the funding crisis had left her school with a deficit of pound;600,000. She said she would rather resign than see her good work at the school undone.

In March 2001 she urged the Government to cut state benefits for parents of persistent truants. And later that year she had to defend her decision to send a Muslim pupil home for wearing a traditional neck-to-toe dress.

An Office for Standards in Education inspection in February 2003 found that Whalley Range was a very good school with very strong leadership that provided good value for money.

When The TES contacted the school for a comment it was referred to Manchester education authority. A spokeswoman said: “We haven’t carried out any special reviews of the school’s finances other than providing assistance to the Audit Commission in carrying out their work.”

She confirmed the three tribunal applications: “All three have been resolved privately by the LEA and confidentiality agreements entered into which preclude either us or the individual concerned commenting further on these matters,” she said.