Headteachers might have forgiven their staff last week if their shoes got extra scrutiny or queries about their summer holiday seemed slightly pointed.

Any trips on the Orient Express? Exotic trips to the Middle East? And is that a new outfit, headteacher? Very smart.

With perfect timing, on the eve of a new school year, Colleen McCabe began a five-year prison sentence for fraud - 12 months for every year she plundered the finances of St John Rigby RC college in Bromley, Kent. In staffrooms the essential question was how did she get away with it?

As one former St John Rigby teacher told The TES this week she ruled with a mixture of bullying and charisma, school leaders’ and governors’ groups urged their members to keep an eye out for warning signs and not to give in to intimidation.

The National Governors’ Council is to take up the case with schools minister David Miliband, urging better financial training for board members.

Neil Davies, the NGC’s chairman, said: “In the light of this case, between us we need to look at ways of tightening things up so this is never repeated.”

Police said it was impossible to know exactly how much McCabe stole from the school’s pound;3 million-a-year budget, but it is estimated to be around pound;500,000.

A routine inspection by the Office for Standards in Education in May 1996 - 16 months after McCabe started swindling the school - concluded the college “manages its finances well” and gave “good value for money”.

It called the auditors’ report “excellent”, adding “there is a well-informed bursar and the governing body has within it members with considerable financial expertise”.

McCabe was singled out for praise and for bringing about “profound changes”.

An Ofsted spokesman said inspectors were not auditors, and had reported on what they found.

But jurors heard a very different story. As the fraud became more daring, students spent an entire winter shivering as a broken boiler went unrepaired. Rats infested outside classrooms. A video shot by one pupil showed library shelves bare of books.

One former St John Rigby teacher - who asked not to be named - said he believed colleagues had been left effectively “unemployable” by McCabe’s reign. Out of dozens of staff to leave the school in her wake, few left for promotion.

“The damage was immense,” he said.“My career suffered. We’d been de-skilled. After she left, the new head talked to me about staff development. I had to ask him what he meant.”

Pupil data such as cognitive test scores were kept from teachers.

“She said people didn’t want to sit around talking about policies - people liked to be told what to do and get on with the job. There was a lot of power kept in one place.”

The school’s grant-maintained status helped perpetuate McCabe’s fraud - and not just because council auditors were kept out. The prevailing ethos of intense competition between schools - particularly strong in Bromley - meant teachers rarely spoke to colleagues outside St John. “There wasn’t a healthy dialogue between schools. We were in competition, we had tough kids and we didn’t need anybody else’s help.”

Going back to local education authority control offered further cover for a while as many GM schools were complaining that their budgets were being cut. “We all accepted that going back to LEA control would mean sacrifices.

It was easy to portray the LEA as the bully.”

Parents considered her a tough cookie, firm but fair.But after her arrest, discipline fell apart - not least because of the sense of betrayal, according to Ofsted. But her former colleague said: “Some people said ‘At least she made the trains run on time’.”

He added: “She did instil a sense of right and wrong - if you got drunk on a Saturday night you’d think God, I hope Colleen doesn’t see me.”

Towards the end, she started reorganising the school, merging heads of year with heads of department, an arrangement which was immediately scrapped by her successor - and creating classes of “sink students”. “You don’t have to worry about them now,” she told teachers.

“It was like someone losing their grip,” the teacher said. “People ask me all the time if I’m furious. But I think of her as a mentally ill person.”

McCabe’s fraud was uncovered in November 1999, when Bromley Council sent in auditors for a routine inspection. It took them a few hours to see that something was badly wrong. But it was not until early January that she was finally suspended and arrested.

The former teacher said: “People say how did it happen? Who countersigned the cheques? But there was no reason not to trust her, even if you hated her.”

But last week former colleagues said they had always suspected something.

They tell tales of extravagant flower arrangements in her office while dirt piled up in corridors, and bottles of empties left after management meetings while staff training budgets were cut. They said they were too frightened to speak out.

Chris Gale, governors’ representative on the General Teaching Council for England, said it was governors’ duty to stand up to heads, no matter how intimidating. “That’s what finance committees are for. Even with a bullying head, I’m sorry but you have to stand up to them. It’s unequivocal.”

Most fraud would not be on McCabe’s scale, and therefore might be hard to spot for governors with little financial expertise. The NGC’s Neil Davies admits it can be difficult then, especially when heads are often given discretion to spend certain amounts without reference to the board.

Warning signs might include big year-on-year differences under budget headings.“If maintenance spending has gone down by 10 per cent, question it,” Davies said. “Don’t be aggressive, but ask away.”

The Department for Education and Skills has just introduced a common reporting format for school finances, so budgets should look the same from school to school which should make discrepancies easier to spot.

Governors have a legal right to see the books; teachers do not. But a reluctance to show staff the books can be a warning sign in itself. Martin Ward, deputy general secretary of the Secondary Heads Association, said:

“Deputy heads should ask to see accounts as a matter of course. In most schools they do and they’re discussed at school management team meetings.

In any school where they’re not, quite apart from any consideration of irregularities, staff should know how funds are being spent - otherwise, how can they advise the head?”

If they suspected irregularities, they should tactfully approach the head directly, he said. If they still are not satisfied, or if they feel too intimidated to speak to the head, they should approach the chair of governors or the local authority.

But in the end, it comes down to the courage to act on their convictions.“Clearly it’s very difficult for junior staff in this sort of situation,” Mr Ward admits.

“Any kind of whistle-blowing is nerve-racking and difficult. Just remember, there are protections.”

Ofsted’s 1996 report

* “The principal and the senior management team provide strong leadership.”

* “The level of textbook provision is excellent.”

* “The college manages its finances well.”

* “The principal has brought about profound changes ... which have resulted in a marked improvement in the quality of education.”

... and its 2001 verdict

* “The school has had a very troubled 12 months, owing to serious mismanagement and financial irregularities ... College badly neglected.”

* Accommodation “shabby”.

* “Many pupils in Year 11 disillusioned and angry with the college.”

* “The college’s budget and financial management are being closely scrutinised”