Special boarding school bad value
Aran Hall school in Dolgellau, Gwynedd, caters for up to 26 secondary-age children with challenging behaviour andor severe learning difficulties such as autism and epilepsy.
Estyn inspectors, who visited the school in June, praised provision for post-16 students, and good results in PE and music.
But in every area of the school's work, including standards of teaching and learning, and leadership and management, inspectors found some good features but also important shortcomings.
The school must now produce an action plan for raising the quality of education and meet Welsh Assembly registration requirements for independent schools.
Peter Black, Liberal Democrat chair of the Assembly's education and lifelong learning committee, called for an investigation into the school's spending. Meanwhile, the school's new owners - who took over in May, six weeks before the inspection - say they are offering a valuable service.
Brian Jones, chief operations officer of The Senad Group, which runs six schools across Britain, said: "We have a lot of work to do. People see us as a profit-making company, but we provide specialist care and provision for children whose needs would not otherwise be met by local authorities."
Estyn inspectors concluded standards at Aran Hall have improved since a previous critical report in November 2004. But they criticised senior managers for not paying enough attention to improving education, and for not making the staff sufficiently aware of the school development plan.
Managers were also criticised for not providing an annual account of income and expenditure for pupils funded by local authorities. The school declined to reveal its fees, but said they were high, wide-ranging and based on the individual needs of pupils.
Estyn found money was spent on resources that did not match pupil needs, and that the school is not providing value for money.
Inspectors also found the academic performance of some pupils, who all come from England, dipped after they arrived. Some teachers could not handle bad behavioural problems, while a small minority of pupils frequently bunked off lessons to stay in their lodgings with residential workers.
Attendance rates overall were only 80 per cent. And pupils, and sometimes teachers, were not always on time for lessons.