Former council senior storeman Geoff Hadley is serving a jail sentence for his role in a million-dollar fraud committed between 2005 and 2009.

But it was during its own investigation of Hadley’s fraud that the ICAC uncovered a much wider culture of incentives from council suppliers to council employees across the state.

During the three weeks of hearings in Sydney, ICAC Commissioner David Ipp heard stories of several council employees across the state who had accepted gifts from suppliers running into several thousand dollars.

Typically, these gifts took the form of gift vouchers which could be redeemed for groceries or other household items. Other gifts included iPods and wine.

The ICAC also heard details of how Hadley and a co-accused, businessman Robin Newman, systematically rorted Bathurst Reg-ional Council’s ordering processes to rip off ratepayers to the tune of an estimated $1.4 million.

The pair each pleaded guilty in April to a $757,647.15 fraud but, while giving evidence before the ICAC last month, Hadley admitted the true value was probably double that. Despite the huge figures involved, though, it seems unlikely heads will roll at council.

General manager David Sherley and corporate services and finance director Bob Roach gave evidence before ICAC on the last day of hearings on Friday, October 21 and both made it clear they were stunned by the sheer size of the fraud committed by Hadley.

Mr Roach, when asked by counsel assisting the ICAC Steve Campbell SC how Hadley could have got away with his fraud for so long, described Hadley’s method of disguising large [fraudulent] orders.

“In my opinion, he knew the system well enough to get invoices to expense them off to a maintenance and repair type of account so that it didn’t go through the stock area,” Mr Roach said.

“When he got the invoices and made the goods received dockets out he allocated the cost centres to smaller amounts of money to various or numerous cost centres. So, therefore, you wouldn’t pick up a large amount of money coming into any of the cost centres.

“Some of the invoices that I saw he had four, six, eight cost centres for each being $1500. And in council’s overall budget it’s a very small amount of money in those areas when it’s done on the basis that he did it.”

Mr Campbell: “So he was smart, in terms of he knew where to hide things. Is that correct?”

Mr Roach: “I’d agree with that.”

But Mr Campbell also raised concerns about council’s inventory control. In the most famous case, Hadley ordered more than 400km of safety mesh – enough to line the highway from Bathurst to Sydney and back – and yet none, or very little, was ever delivered.

Mr Roach said this was again a case of Hadley rorting a system he knew well.

“Well, it’s not inventory when it comes as a direct purchase,” Mr Roach said. “He would purchase the mesh, for argument’s sake, and it would be expensed out against five or six or seven areas and it would not go through the stock control account.”

When asked by Mr Ipp if there were controls in place to ensure that ordered items had been delivered, Mr Roach replied: “There was control because there was a goods received docket to say that they had received.

“The storeman would then put them into an area within the store under his care and control and, as an employee wanted a pair of gloves or a cable tie or something like that, he would ask for one and they would remove it from that area and give them to them because they had been expensed out.”

But while it’s now clear that there were serious flaws in council’s ordering system – especially the trust placed in Hadley having “end-to-end” control of the ordering and auditing controls – it appears this was not a problem that was unique to Bathurst.

Mr Campbell suggested to Mr Sherley that “those standard measures adopted across your industry in the government sector proved entirely ineffective.” Mr Sherley replied: “In this case, yes.”

The problem at Bathurst was that an employee, Hadley, chose to abuse the trust placed in him.

Mr Sherley has since told the Western Advocate that council has implemented a new auditing system to close some of the loopholes exploited by Hadley and Newman.

“We have an enhanced system in place since details of the fraud became available,” Mr Sherley said. “We’ve implemented new a stock crediting system that is fully computerised.

“Since 2009 council has implemented an internal audit function where we have a joint agreement with Dubbo and Orange to employ an internal auditor and we’ve also implemented an audit and risk management committee with two independent members, including the chairperson.”

Mr Sherley also outlined the changes during his evidence at ICAC and Mr Campbell commended council on its actions.

In the November issue of its monthly newsletter Corruption Matters, the ICAC says it “will be finalising its report into this investigation over the next few months”.

“The report will include a number of recommendations designed to prevent corruption related to gifts, benefits and procurement.”