The two most senior executives at City & Guilds awarded themselves millions of pounds of bonuses “without authorisation from, or knowledge of” their superiors, an internal investigation into last year’s £166m sale of the vocational charity has found.

The report into the conduct of Kirstie Donnelly, the former chief executive of City & Guilds, and the body’s finance chief, Abid Ismail, sets out how the pair “directly authorised and paid bonuses to themselves” of nearly £3m combined.

It found a further £2m was paid to other senior executives and 60 more junior colleagues in a scheme run from the newly privatised company that was exposed by the Guardian in December.

A statement issued on Monday by PeopleCert, the private company that acquired the City & Guilds vocational awards business in October, said the bonuses and salary hikes “were in direct breach of [Donnelly’s and Ismail’s] duties and responsibilities as office holders and caused significant harm to the organisation’s reputation”.

The payments occurred without the knowledge of PeopleCert or the former charity owner, it said.

“In the case of Kirstie Donnelly and Abid Ismail, we intend to take all action available to ensure the recovery of these amounts (£1.7m and £1.2m respectively) and will make appropriate referrals to the relevant authorities,” the statement added.

Lawyers for Donnelly and Ismail said their clients had “acted reasonably and honestly at all times”.

Founded in 1878 by the City of London and a group of 16 livery companies, the original City & Guilds Institute developed a national system of technical education, eventually offering qualifications and apprenticeships in fields ranging from manufacturing and mechanical engineering to hairdressing and horticulture.

Up until it was sold last year, the City & Guilds brand was owned under the umbrella of a charity, City & Guilds London Institute (CGLI), which said it would use its financial windfall to continue its charitable works such as providing funding to people in need of vocational training.

Meanwhile, the newly privately owned business, City & Guilds Ltd, would continue the business of charging fees for services such as accreditations and awards, with about 60% of its income “underpinned by stable government funding schemes”.

However, in December it emerged that the newly privatised City & Guilds business had embarked on a £22m cost-cutting drive and was shrinking its UK workforce following its sale.

The Guardian then revealed that Donnelly, who had by then switched from being the charity’s chief executive to take the same role in the newly acquired City & Guilds, was one of the directors awarded huge bonuses by the new company after the sale.

The payouts came alongside sizeable salary increases for the pair, with Donnelly granted an extra £100,000 a year, lifting her salary to about £430,000. Ismail’s base pay also increased by 30%, rising by about £70,000 to £300,000.

In total, the pay of the top six executives more than tripled after the deal.

PeopleCert added: “Whilst there was no evidence of wrongdoing on [the wider executive leadership team’s] part, we will also be requesting repayment of serving ELT members’ bonus payments in full.

“All bonus payments made to the other 60 colleagues will be ratified by PeopleCert and no attempt will be made to recover the amounts, given the investigation’s conclusion that recipients were neither fully aware nor instrumental in the scheme.”

The Guardian’s reporting in December prompted the Charity Commission to open a statutory inquiry into a range of issues at City & Guilds, including “the sale and bonuses awarded to its executives”.

A week later Donnelly and Ismail were suspended “for a short period” as PeopleCert commissioned its internal investigation.

Lawyers for Donnelly and Ismail, who have previously said they would challenge the allegations in court, added: “Our clients will present all their evidence to the courts in due course. That evidence overwhelmingly demonstrates that all bonus payments referenced in PeopleCert’s statement were approved, documented and implemented as part of the wider transaction process. It further shows that both the seller and the buyer, along with their advisers, were fully involved in the structuring and approval of the bonuses paid.”