A head teacher who was made a dame for improving a Manchester school will not face legal action, despite damning criticism in an independent report.
Dame Jean Else had been praised by the government
Dame Jean Else, 53, who is currently suspended, paid a personal friend £13,200 as an unauthorised consultant at Whalley Range High School for Girls.
Her twin sister also got a clerical post and later became assistant head.
The Audit Commission said legal action would not be in the public interest. Dame Jean has defended her policies.
She had been hailed by the government as an example of its approach to education after transforming the performance of the inner city school when she was appointed in 1994.
She saw her salary rise from £76,193 to £141,653 between 1999 and 2003.
But she was investigated by the Audit Commission after a whistleblower at the school made allegations of nepotism in October 2002.
She was suspended on full pay from her post last November.
The report said her appointment of her twin sister, Maureen Rochford, had been a "clear conflict of interest".
Ms Rochford, who was suspended along with her sister and another member of staff, Stewart Scott, in November, had been appointed in 1995.
'Lapse of judgement'
The commission said there had been "defects" in the paperwork of Ms Rochford's job application and Dame Jean had been guilty of a "serious and continuing lapse of judgement".
The value for money in appointing her sister and the amount of money paid to her and Stewart Scott was "questionable" while management costs were "disproportionately high" compared to other schools, the commission added.
The report also revealed £13,200 had been paid to a personal friend for consultancy work, but £9,000 of that sum had been paid without the knowledge of the school governors.
Dame Jean had believed that tendering for the work was "not required", the report said.
'Contrary to law'
She also said she did not accept criticism over the employment and pay of her sister.
"The considerable success of the school, which had previously underperformed significantly, was due to our policy of employing the best people in each post, whoever they happened to be," she said.
"I remain a professional head teacher committed to the highest standards in everything our school does."
The local education authority was also criticised for not supervising and supporting the school governors properly.
Manchester City Council said in a statement it was working closely with the current chair and deputy chair of governors at the school to undertake a review.
"We want to build on the strengths of the school and we are already in the process of implementing recommendations," it said.
"Whalley Range is an improving school which provides a good education to its pupils.
"In view of procedures currently being carried out by the council, it would be inappropriate for us to comment further."
The board of governors at Whalley Range High School for Girls said it remained "committed to raising even further the good educational standards at the school and the provision of quality services to the community".
"The Governing Body is fully committed to effective governance arrangements at the school and has been working constructively with the city council to ensure that appropriate procedures are in place," it added.