Victoria’s anti-corruption watchdog, the Independent Broad-Based Anti-Corruption Commission (IBAC) has released a report (Report) which reveals serious and systematic corruption within the Victorian Department of Education and Training (DET) and the wider public school system. The Report follows an inquiry composed of public examinations, phone taps, seized documents, bugged café and surveillance photos – all to reveal the inner workings of a DET “boys club” which rorted millions from the public school system.

In an article released last year, School Governance reported that former DET finance manager, Mr Nino Napoli, had admitted to engaging in ‘corrupt’ behaviour while employed by the DET. While it was initially alleged that Mr Napoli and other DET executives had taken $2.5 million in corrupt payments from ‘banker schools’ across Victoria, the Report now confirms that Mr Napoli redirected $1.9 million to his relatives and associates and a further $4.4 million in suspicious transactions and contracts through false invoices and questionable contracts. Mr Napoli acted alongside former acting secretary of the DET, Jeffrey Rosewarne and sacked regional director John Allman, who formed an “unofficial boys club” in order to filter money from public school funds.

IBAC is now preparing a brief of evidence to the Office of Public Prosecutions, and a number of key players may face serious criminal charges.

Background

In April 2015,  IBAC began investigations into the conduct of ‘corrupt’ officers of the DET and their use of ‘banker schools’ to redirect funds from the public education sector into their own pockets. The investigation examined allegations of serious corruption in the DET, including claims that:

• current and former DET staff had established banker schools to allocate funds to schools for goods and services that were not always provided;
• DET staff, school principals and business managers received financial and other benefits as a result of the scheme;
• the corrupt system was facilitated by personal family and business connections between DET staff, school principals and business managers, and the suppliers of the goods and services; and
• illegal transactions from banker schools was made easier due to ineffective DET systems and practices around procurement, financial management, the allocation of funding and the awarding of contracts.

Corruption in the banker school system

A ‘banker school’ is a school designated by the DET to hold funds and administer them for specific purposes on behalf of a cluster of schools and/or regional office. The banker school system is a means of quickly moving money and allows schools to share funds with nearby schools when needed. The system has been a fixture of the DET for at least 20 years, despite a 2010 department audit concluding that the practice was unlawful as money was being spent on international travel, vehicles and alcohol without any financial safeguards.

IBAC’s investigations reveal that Mr Napoli used the banker school system to redirect money to nine relatives and associates. Mr Napoli formed part of an influential “boys club” of senior department members including Jeffrey Rosewarne, John Allman and Darrell Fraser. Mr Rosewarne has also been found to have spent public funds on Christmas parties, coffee machines, overpriced office furniture, wine purchases and a lavish 50th birthday party valued at $6000.

The way money moved around:

By November 2010, it was reported that a total of $20 million was deposited into banker schools. While banker schools have now been abolished, IBAC has raised “considerable concern” that principals and school business managers actively colluded in the corrupt scheme, failing “in their financial management duty by not questioning the invoices,” according to the report. IBAC Commissioner Stephen O’Byran QC states that “serious and systemic corruption” had been exposed at the DET, and urgent action needed to be taken in order to prevent future corruption in public sector bodies.

Systematic failures

IBAC’s Operation Ord investigation into DET corruption found that there was an embedded culture in which “misconduct and corrupt conduct was able to flourish for at least seven years, and probably significantly longer”. This is particularly problematic as, according to Mr O’Bryan QC “the Victorian community vests considerable trust in the public sector employees who are responsible for running the state’s education system and giving our children the best possible start in life”.

The systematic failures identified by IBAC are:

The future of the DET

In statements to the Herald Sun, DET secretary Gill Callister said those involved “should be held accountable” for their “completely unacceptable” and “quite shocking” conduct.

Alongside its findings, IBAC has released a series of recommendations to the Victorian DET. These include:

• the exclusion of people and entities who have been found guilty of corrupt behaviour from obtaining work with the DET and in schools;
• the complete abolition of the banker school model and the development of new approaches to facilitate joint purchasing by school groups;
• comprehensive auditing of banker schools to identify principals and business managers involved in the scandal;
• implementation of stronger financial controls and compliance, particularly in relation to schools and school councils; and
• the building of an Integrity Division within the DET to report directly to the secretary.

IBAC has recommended an overall DET “reform program” and will report on any changes by December 30 this year.

In a statement to The Age, Judy Podbury, president of the Australian Principals Federation’s Victorian branch, said executives “found to be responsible, have done enormous damage to the reputation of the department, those unwittingly involved, and to the public education system”.