How Hancox defrauded school
Graeme Smith recalls laughing with his friend Donald Hancox at the audacity of a school fraudster caught with his hand in the cookie jar.
The Upper Hutt College board of trustees chairman and the school’s executive officer chuckled at the idea that such a swindle couldn’t happen at their school.
Little did Smith realise that Hancox had his hand deep in the school’s purse at that very moment.
Now a report has revealed how he stole nearly $400,000, and how external audits failed to pick up his fraud.
Smith says other school boards should view Upper Hutt’s case as a cautionary tale. ’’It’s a wake-up call. Everyone who thinks it’s not going to happen to them – we didn’t think it was going to, to us, either.
‘‘I 100 per cent trusted that person. That’s the part that hurt the most.’’
Referring to the moment he and Hancox laughed at another school’s misfortune, he says: ’’If there was ever a moment I could go back and say, ’Here you go, somebody you trust will prove you wrong ...’ ‘‘
Hancox, whose role gave him responsibility for the college’s finances, used fake invoices to funnel cash from the school kitty into his own accounts for seven years.
During that period, the school received more than $20 million in funding for a building project.
There were no red flags. The school had not failed an external audit throughout the period Hancox was milking it, Smith said.
After the discovery of his fraud, the college was forced to say no to new rugby gear and library books for students, unable to recover the cash that Hancox had drained before his retirement in December 2014.
A report by auditors Deloitte, released under the Official Infor- mation Act, details the investigation into his fraud, and how he so nearly got away with it.
A limited statutory manager was appointed by the Ministry of Education in September 2014, after the discovery of financial irregularities.
It was not until the school was sent an invoice in August 2015 for a bill it had supposedly already paid that the pieces of the puzzle began fitting into place.
The invoice had handwriting on it, altering the amount payable, according to the Deloitte report.
It was discovered to be a copy of another invoice that had already been paid by the college to a real supplier.
The altered invoice had been paid to a different bank account, which linked back to Hancox.
The school notified the ministry, which engaged Deloitte to conduct a forensic inquiry into its accounts, Hancox’s school emails and computer without his knowledge.
Banking records found more suspicious payments to the account, naming three fictitious suppliers, in payments Hancox had authorised.
The report indicated other staff with authorisation to approve payments would have seen what appeared to be valid invoices.
But Hancox’s techniques – including creating fictitious suppliers and fake invoices to pay school cash into his own accounts – would have fooled them.
The suspected fraud was referred to the Serious Fraud Office, and Hancox eventually pleaded guilty to 10 criminal charges of obtaining $375,000 by deception.
In court last month, he apologised to his victims and his family as he was sentenced to two years and three months’ jail.