On Tuesday, the board of Malek Fahd Islamic School in Sydney's west announced it would fight the Federal Department of Education's decision after a nine-month investigation into the school found it had been operating for profit and had ongoing governance concerns.

The school, which is the largest Islamic school in the country, has been embroiled in an internal civil war for more than a year.

In November the NSW Supreme Court heard it was in "turmoil" following three changes of chairman amid allegations that it was operating for profit.

In June 2015 the federal department launched an investigation after a string of sackings among senior staff members and principals, allegations of financial mismanagement and concerns over the delivery of the curriculum at a number of Australian Federation of Islamic Councils (AFIC) schools, of which Malek Fahd is the largest.

Despite being a private school, the Greenacre institution survives almost entirely off Commonwealth funding.

According to MySchool data, the Sydney school received $17.5 million in taxpayer funding in 2013, making up 75 per cent of its income.

Division within the school climaxed in October when a chairman who had been ousted by the school allegedly visited with 10 supporters shouting "I am the chairman" and "I can appoint and remove anyone".

When Fairfax Media visited the school in December, parents and teachers were distressed about their children's future.

"I'm sick of our school being in the newspaper," said a teacher as she marshalled children towards their parents outside the school gates.

"I love this school but I don't care if the government takes it over anymore, there is too much politics in this place," said a mother of a girl in year 7.

Federal Education Minister Simon Birmingham said that funding should be exclusively used for the education and welfare of students.

"Unfortunately, the authority that operates Malek Fahd Islamic School was not able to demonstrate to my department that they had addressed the significant concerns about their financial management and governance arrangements raised during the formal compliance review of their operations," he said.

He said he had been working with NSW Minister for Education Adrian Piccoli to ensure that no students would be left without schooling should the school be forced to close when funding ceases in April.

"We have also been in discussion with the Association of Independent Schools to make sure that all bases are covered," he told ABC radio on Tuesday morning.

The school, which has also been developing multi-million dollar campuses in Hoxton Park and Beaumont Hills has been simultaneously fighting a legal battle with the NSW Department of Education over its state government funding after Mr Piccoli declared it had been operating for profit in October.

In a cross claim Malek Fahd accused the state government of breaching racial discrimination laws in ordering it to repay $8.5 million in taxpayer funding.

The case with the NSW Department of Education is ongoing.

Five other schools associated with AFIC remain under investigation by the Federal Department including the Islamic College of Brisbane, the Islamic College of Melbourne, the Islamic College of South Australia, the Islamic School of Canberra and Langford Islamic College in Western Australia.

Mr Birmingham urged the public not to see the investigation on religious grounds.

"The department has undertaken similar initiatives in the past, who are of different denominations. This should not be seen as a matter that only relates to Islamic schools, this relates to school governance."

Speaking on behalf of Malek Fahd, lawyer Rick Mitry said that further evidence would be provided to the secretary of the Federal Department of Education so that it could undertake a review.

"The Board of Malek Fahd hope and expect that the outcome of the review will be favourable. In the meantime, the school will continue to function normally," he said.

With Louise Hall