THE NSW government has frozen funding to Sydney's largest Islamic school after an Education Department audit found the school's owners were charging the school millions of dollars in improper fees.

The department last night confirmed it had ceased funding of about $4.5 million to Malek Fahd school, after an investigation into the payments the school made in management fees and backdated rental fees to its owner, the Australian Federation of Islamic Councils, the nation's peak Muslim body.

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