Cash-strapped councils have been warned to beef up their anti-fraud measures after a former tax collector embezzled over £1m in Aberdeen.
Michael Paterson exploited his role at Aberdeen City Council by embezzling a total of £1,087,444.47 from his employer over a 17-year period. The 59-year-old started siphoning off funds from the local authority in November 2006.
He spent the stolen sums on luxurious holidays abroad, dining out, Apple goods and his flat. In total, he made 622 false refunds to himself while he had “unrestricted and unmonitored access” to two computer systems used by his employer.
And in 2019, he attempted to cover his tracks by getting money paid into a second account after learning the council was introducing counter-corruption methods that would alert it to payments made to an employee’s bank account. Paterson’s scheme was eventually unravelled in September 2023 when a colleague became suspicious.
The worker raised her concerns to a senior member of staff after she spotted an odd transaction followed by an illogical explanation offered by Paterson. He was jailed for four years after admitting to stealing the funds at the High Court in Edinburgh in June last year.
Now, Aberdeen City Council will be expected to recover the lost cash, with no loss to the taxpayers whose accounts were affected. The Accounts Commission for Scotland has warned local governments to ramp up controls to safeguard public money.
The watchdog is concerned that while Aberdeen City Council had a system of measures in place, they were not adhered to and lacked scrutiny. These cracks allowed Paterson’s actions to go unnoticed for nearly two decades.
And a year since he was charged, the watchdog says the local authority is yet to complete improvement actions that remain outstanding. It has warned local governments to implement effective systems and checks to monitor, manage and review financial systems.
And, it wants to see councils act quickly on recommendations from internal and external auditors to address identified weaknesses and risks in key processes.
Andrew Burns, deputy chair of the Accounts Commission, said: “This is a cautionary tale. All councils in Scotland need to learn from this prolonged and significant fraud. It isn’t enough to have controls to counter fraud; checks need to be followed, weaknesses identified, and routine testing of systems carried out. This case shows the risks when internal controls aren’t followed.
“The member of staff who identified and spoke out must be praised. It shows the value and importance of whistleblowing policies and procedures. These are critical to ensure staff across the public sector have the confidence to quickly escalate concerns if they suspect fraud.”
An Aberdeen City Council spokesperson said: “Aberdeen City Council will carefully examine the findings of the Accounts Commission. A report will be brought to the Council for consideration, including the Accounts Commission’s recommended actions and the Council’s proposed response to the recommended actions.”
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