The council has put its own staff in place during the enquiry
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Staff have been suspended and the local council has taken over the running of a high-profile school following an Audit Commission investigation.
Whalley Range High School in Manchester - where the head teacher had been made a dame - has been taken under the control of the local authority.
Manchester City Council refused to say whether head teacher Dame Jean Else would stay in post during inquiries.
The intervention followed the draft report from the Audit Commission.
The council says it has put its own staff in place to help run the school - but refuses to say the nature of the investigation.
The school had been praised for its record of achievement - and Jean Else was made a dame in the 2001 New Year's Honours.
Inspectors have described it as "a very good school with many strengths and few weaknesses ... exceptionally well led and very efficiently managed and administered".
The school also received the endorsement of visits from the former education secretary, Estelle Morris, who had been a pupil there.
An investigation was launched last year - as concerns had been raised with district auditors.
The response on Tuesday from Manchester City Council includes plans for further investigations by the local authority.
This is only a draft report - and the council refuses to give further details until it receives a final report and its own investigations are completed.
It also refuses to say which staff are suspended during the next stage of inquiries - or whether this is linked to any financial investigation.
The statement from the council's chief education officer, Mick Waters, says: "Manchester City Council has taken steps, in the public interest, to withdraw management delegation from the school with immediate effect."
The Audit Commission says it is unable to comment until the final report is published.