Auditors have concluded that a headteacher who earned £14,000 more than the Prime Minister "misused his position" at the school, according to a report.
Steve Maddern caused outrage when it was revealed he was on a salary of £156,000 for running West Exe Technology College in Exeter, while his wife Beverley earned £86,000 as his senior deputy.
Now, an audit carried out on behalf of Devon County Council in the wake of the scandal has identified an "unhealthy culture" between the executive head and his then head of governors, Paul Smith.
The report scrutinised their relationship and concluded there was not enough "professional distance" between the two.
Both Mr and Mrs Maddern left the school last term, while Mr Smith resigned in February. A letter sent out to parents at the 1,300 pupil school last night summarised the report, which concluded that leadership had been compromised. It identified "shortcomings" in pay, appointments, absence and expenses relating to some senior members of staff.
The report concluded that the actions had "significantly compromised" the reputation of the college.
Acting headteacher Vicki Carah told parents that senior staff and governors could not shirk their role.
She said: "We do wish to apologise here for the naivety and lack of challenge which allowed this situation to develop."
She said "enormous efforts" had been made over the last six months to correct processes and structures.