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It was the duty of this Probationary Clerk to prepare for signature by the Head- master such cheques as might be required at the end of each month, and also to prepare vouchers in respect of any expenditure authorized by the Headmaster.
When any expenditure had been auth wrized, the bill would be presented by the Clerk to the Headmaster, and the latter would initial it. The amount of the bill would also be shown on a voucher on which the whole of the authorized expenditure for the month was set out, and this voucher would be signed by the Headmaster.
The voucher and bills would then be sent to the Education Department, and in due course a cheque would be given by the Director of Education to the Headmaster, which would include the amount of the voucher and also the amount of the month's salaries payable by the Headmaster.
75. It was usual for the second master to collect the cheque and vouchers from the department's office. He would pay the cheque into the School's bank account and deliver the vouchers to the clerk.
The clerk would then prepare for signature by the Headmaster a cheque for the salaries of the European members of the staff, cheques for any bills for European firms, cheques for certain members of the Chinese staff, and a comprehensive cheque for the salaries of other members of the Chinese staff and the amount of any bills due to Chinese tradesmen. These cheques the Headmaster would sign after checking against a statement prepared by the clerk showing the amount banked and the month's require- ments. He would not have the vouchers or bills before him when he signed the cheques, nor would he require the production of these after payment had been made. The com- prehensive cheque would be made payable to the second master who would cash it, pay the Chinese members of the staff and, in accordance with a custom of many years stand- ing, hand over the balance to the clerk in order that he might pay the tradesmen's bills.
Attempts had been made in the past to pay by cheque the bills of Chinese tradesmen, but the tradesmen had objected to this as they did not possess bank accounts.
76. The apparent defect in the arrangements for payment was that, while the Head- master initialled the bills and vouchers authorizing payment, he did not again see these documents, and the money for effecting payment was handed over to the second master who alone saw the bills and vouchers after their return from the department.
Of this defect the clerk took advantage.
He told a Chinese carpenter, who carried out the school repairs, that his bills were not properly prepared, and persuaded this carpenter from time to time to give him supplies of his bill forms.
On these he typed bills for small amounts for work which the carpenter had done, and these he presented, with the relevant vouchers, to the Headmaster who, after scrutiny, initialled them.
The clerk then typed in additional items or altered small items into large items, and forwarded the bills and vouchers to the departmental office whence they went to the Treasury. Here the bills and vouchers were passed for payment, as they were authenti- cated by the initials and signature of the Headmaster.
When the monthly cheque was issued it included the amounts of the fictitious items, and the clerk included the amounts in the comprehensive cheque payable to the second
master.
The second master had no cause for challenging the initialled bills including the fictitious items, and duly handed over the requisite cash to the clerk. The clerk then paid the carpenter the small sums due to him, stamped the bills with a Chinese receipt chop, returned the bills through the department to the Treasury, and appropriated the surplus cash.
He allocated all the fictitious items to the vote for the laboratory, on which funds were certain to be available, as the bulk of the requisite stores were ordered through the Crown Agents; and thus deferred discovery until January, 1928, when the Crown Agents' Account for 1927, plus the fictitious items, were found to have caused an over-spending of the vote.
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