A disgraced former education department executive could face criminal charges after the anti-corruption watchdog found he mishandled more than $6 million earmarked for disadvantaged schools.
In a long-awaited report handed down on Friday, the Independent Broad-Based Anti-Corruption Commission (IBAC) named disgraced former executive Nino Napoli as the "principal player" in a corrupt ring that allegedly fleeced millions of dollars from schools through false invoices and questionable contracts.
IBAC has linked Mr Napoli to at least $1.9 million in profits which benefited his relatives and associates, and a further $4.4 million in suspicious transactions and contracts. This exceeds the $2.5 million in corrupt payments the watchdog had initially identified in public hearings about a year ago.
Mr Napoli, who oversaw a $5.5 billion budget at the department, was part of a coterie of executives who allegedly falsely invoiced schools for lavish parties, alcohol, generous overseas travel and personal expenses.
School funds were also directed to a series of companies run by Mr Napoli's family between 2007 and 2014, the report said.
The watchdog is now preparing a brief of evidence for the Office of Public Prosecutions, and a number of the key figures could face criminal charges.
Mr Napoli accessed the school funds by "carefully selecting and grooming principals and business managers", the report found. He gave the schools a small cut of the transaction and other incentives.
"The conduct uncovered during IBAC's investigation was underpinned by a malevolent culture of non-compliance and entitlement," the report said.
"Evidence suggests this practice to be pervasive and of long standing."
Mr Napoli, Mr Rosewarne and sacked regional director John Allman formed an "unofficial 'boys club' that engaged in drinking, lunching and endowing preferential treatment when it suited their purposes."
Officials who questioned their rule report they were bullied, harassed or made redundant.
The watchdog has raised "considerable concern" that principals and school managers either wittingly or unwittingly "colluded" in the corrupt scheme, by signing off on false invoices.
"A number of principals and business managers ... are considered to have failed in their financial management duty by not questioning the invoices," the report said.
"Evidence suggests that some principals and business managers had a sense that banker schools were being used for purposes that were not entirely legitimate."
IBAC Commissioner Stephen O'Bryan QC said "serious and systemic corruption" had been exposed at the department, and urgent action needed to be taken by public sector bodies to prevent it.
The watchdog recommended that the education department implement a "reform program" and report on its progress December 30 this year.
Department secretary Gill Callister said she accepted the recommendations, and had taken action before the report was handed down.
She said the banker school system had been abolished.
"The conduct involved here is completely unacceptable," she said.
"None of the people involved are working here."
Ms Callister estimated 15 employees were no longer with the department as a result of the investigation.
Mr Napoli was sacked from his position in the department shortly before IBAC's public hearings began in late April 2015.
Julie 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".
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