Leicester City Council's £314m flagship plan to rebuild every secondary school is at risk after the department managing it was described as "not fit for purpose".

The Government could refuse to give further money for the ambitious Building Schools for the Future (BSF) project, which has seen only four out of 16 schools rebuilt so far.

The scheme is now three years behind schedule, putting in jeopardy new and refurbished school buildings for 13,000 pupils.

The council's cabinet has agreed to restructure the entire department handling the project, called Transforming the Learning Environment.

Until now, only nine out of 36 staff in the department are permanent – the rest are interim employees or consultants.

Helen Ryan, director of the department, was brought in to lead the restructuring.

She said it was "possible" the Government might not release all the cash.

She said: "It's difficult to put odds on it. We just have to make sure we have everything in place for the DCSF (Department for Children, Schools and Families) to see that we have the necessary strategies and vision.

"Nationally, there is a dash for cash and, unfortunately, with the Leicester project significantly behind, by about three years, we are at risk of being caught up by other authorities who are banging on the door to get the money."

Local authorities are desperate to get funding for projects before a General Election because the Conservatives have raised concerns about the affordability of the £55bn scheme nationwide.

Although in principal the Government has agreed to fund the whole project in Leicester, it only releases money when contracts for each school are signed.

An internal report to the council's cabinet said there is a "moderate" risk of the Government withdrawing support, meaning schools would "remain in a poor state of repair".

It adds: "The Transforming the Learning Environment division is not fit for purpose as it currently stands.

"The existing organisation, roles and numbers of staff within the division are insufficient to deliver this extensive capital programme.

"Delay in making the required adjustments to ensure the council has the capacity to deliver the programme will result in a risk to the whole scheme."

So far, four schools have been rebuilt – Judgemeadow College, in Evington, Soar Valley College, in Rushey Mead, Beaumont Leys School, and Fullhurst College, in Braunstone. If money is forthcoming, the remaining 12 schools are expected to be built by December 2013, with plans already being drawn up to rebuild St Paul's Catholic School and City of Leicester College, in Evington, Rushey Mead School and Crown Hills College. The new proposed structure of the department, which also manages primary school rebuilding, is expected to cost an average of £2.9m per year over the next five years.

Councillor Ross Grant, leader of the Conservative group, said: "After all the hard work to get Leicester included in BSF at an early stage, these schools could now lose out because of dithering and procrastination."

Councillor Hussein Suleman, education spokesman for the Liberal Democrats, said: "If the Government does not give the rest of the money, it would be total meltdown."