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A Melbourne independent school is facing a federal government demand to repay taxpayer-funded disability payments worth nearly $23 million.
Hester Hornbrook Academy, a special assistance school, announced deep cuts to programs and staff numbers on Tuesday after the school was told by the Education Department that it had claimed $22.9 million in disability funding to which it was not entitled.
It is the largest instance of alleged over-claiming that has been made public since the federal government began cracking down on what it called “inaccurate claiming” of its $5 billion Commonwealth schools’ disability funding.
The sum being reclaimed from Hester Hornbrook dwarfs the combined $12 million the department had recouped from 300 schools in the four years to March 2026.
Hester Hornbrook principal Sally Lasslett told staff on Tuesday that the school did not accept the department’s assessment and would fight against the demand to pay back the large sum.
But in a “change impact statement” sent to workers on Tuesday, Lasslett conceded that “increased scrutiny on evidence and consistency” by the government, meant that the school would have “significantly” less money in the coming years.
Teachers, youth workers, education support employees and other staff at the school have been summoned to meetings on Wednesday morning to learn if their jobs are to be cut as the school slashes costs.
Auditors were sent in by the Commonwealth Department of Education this year, as part of a broader national crackdown on schools’ over-claiming disability funding.
The auditors found that Hester Hornbrook had classified more than 90 per cent of its students in the highest “extensive” bracket of disability support needs, against a national average of 2.8 per cent.
The school, founded in 2017 by Melbourne City Mission, caters for young people who are disengaged from mainstream education, charges parents no fees and is largely funded by grants from the state and federal governments.
The academy has grown rapidly, from fewer than 40 students at one site in South Melbourne, to more than 700 enrolments across five campuses last year.
The school’s Commonwealth grant revenue – 82 per cent of its total income – has soared from under $21 million in 2023 to more than $36 million last year, according to financial reports lodged with the charities regulator.
Hester Hornbrook students were funded at about $64,000 each in 2024, three times the average rate of children at Victoria’s government schools and well in excess of students at Victoria’s most expensive independent school, Geelong Grammar, who were funded at $48,000 each in 2024.
Students are nominated for disability payments at their school’s discretion and without medical diagnoses, but schools must, under the rules, be able to demonstrate that the money is used to provide disability “adjustments” for the children.
Education Minister Jason Clare and his department hoped to save about $463 million over four years by cracking down on what they call “inappropriate allocation” of government funding, with $40 million allocated in the May budget to greater scrutiny and accountability for the payments.
Clare’s office declined to comment on the Hester Hornbrook audit and the Education Department said it would not publicly discuss “compliance” matters.
A spokesperson for Melbourne City Mission, which still owns the academy, said the school had tried to comply with the funding guidelines, which are set out by the Nationally Consistent Collection of Data (NCCD) framework.
“Hester Hornbrook Academy has always acted in good faith to comply with the NCCD guidelines and has participated openly in all audit and review processes,” the spokesperson said.
“We don’t accept the department’s draft determination and are carefully considering a range of options available under the Education and Training Reform Act to ensure we can continue to deliver the most effective outcomes for our students.
“We are committed to continuing to offer this support to students and their families and are keen to work collaboratively with the Department of Education.
“At this stage, our priority remains supporting our students and working constructively towards a positive resolution while planning responsibly for a range of possible outcomes.”
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