Elaine Dewsbury's carpenter boyfriend Robert McKeown is said to have been offered £20,000 to act as fall guy by saying he charged Annie Lennard School in Smethwick vast amounts of money for building projects most of which were not carried out.
But the prosecution alleges that the instigator of the scam was headteacher Michelle Hollingsworth who is said to have persuaded traders, including McKeown, to accept cheques for excessive amounts and then pay her back the difference after they had taken a cut.
When the fraud began to unravel, McKeown was approached to take the rap and a flowchart produced explaining what he had to do and say.
On it was written: “If anyone catches on to this, things will blow up massively and the investigation will go on for years.”
Dewsbury, 28, admits that she wrote the note but told Wolverhampton Crown Court that she did not know what it meant, claiming she was writing down what McKeown told her to because he was dyslexic.
The flowchart is said to have been created during a family meeting involving her father Michael Dewsbury and her uncle Joe Hollingsworth, the headteacher's builder husband.
Asked about another note in her handwriting, about paying for a top barrister from London to represent McKeown and Michelle Hollingsworth, she claimed she could not remember anything about the flowchart.
More coverage of the trial:
Mr Mark Jackson, prosecuting, challenged her: "Are you not asking questions? What's being described here is fraud involving your Aunty Michelle and your fiance."
She replied: "It didn't mean anything to me", adding "If it was important, I would have remembered it, that's how memory works."
In other questions about the document, she repeated: "These are Rob's thoughts I've written down."
Mr Jackson suggested she knew "full well" what Robert McKeown and her aunt had been doing and that her own involvement was "far greater" than she was prepared to admit, including her dealings with the flowchart. She responded: "That's absolutely absurd."
Dewsbury, who split with McKeown after eight years over his gambling debts, said she had no idea he was involved in any criminal activity to do with the school during their relationship.
Her understanding was that he had accidentally been overpaid for work at a school and was having to pay the money back to Sandwell Council.
Michelle Hollingsworth, of Hatherton Park, Cannock, denies all charges against her while her husband and his brother-in-law Dewsbury, and niece Elaine Dewsbury, also both of Hatherton Park, Cannock, plead not guilty to attempting to pervert the course of justice.
McKeown has admitted conspiring to defraud.
The case continues.