A Melbourne court has heard details of an elaborate rorting scheme by a former public servant.

Nino Napoli used his position as the head of the Victorian education department’s school finance unit to orchestrate the payment of over $500,000 to companies run by his relatives.

Mr Napoli has pleaded guilty to one charge of conspiracy to defraud and another charge of conspiracy to attempt to pervert the course of public justice.

He was found to have personally gained $95,000 from the scheme, spending ill-gotten public funds on wine, a TV and even $2,000 worth of hairpiece maintenance.

His cousin Carlo Squillacioti pleaded guilty to the same charges after personally gaining $58,000.

Mr Napoli worked in Victoria’s education department for 38 years, including running a unit that administered its $5 billion budget.

The position allowed him to orchestrate a system that paid out over $500,000 to seven separate companies run by his relatives, including Mr Squillacioti and a distant cousin, Daniel Calleja, out of Mr Squillacioti's mechanic shop, Cobra Motors.

The scheme involved Mr Napoli sharing sensitive information about tenders to his relatives, so they could win the contracts.

He also instructed others to write up invoices for printing, graphic art work, IT and data management, consultancy and other services.

The services were either provided by companies other than those on the paperwork, or were not provided at all.

“He concealed his connections [to the companies] from the department,” prosecutor Andrew Grant said.

“Mr Napoli's failure to declare his conflict of interest is evidence that he knew he was acting dishonestly.”

Many of payments to suppliers and service providers were by the department and so-called “banker schools”, which distribute funds to other schools.

“The school authorising payment may not know if the work was done for another school in the area,” Mr Grant explained.

Defence lawyer Jim Shaw represented both men, and told the court that the scheme involved “relatively modest” sums of money. However, he conceded there had been a breach of trust by Mr Napoli and “a misuse of Mr Napoli's position in the department”.

Hearings will continue next week.