Scottish local authorities should learn lessons from Aberdeen City Council’s weak financial scrutiny that “enabled” an employee to pocket £1 million over 17 years without being noticed, a watchdog said.
Money-mad Mike Paterson, a council tax and recovery team leader, transferred 655 refunds totalling £1.109m into his own bank account.
The payments were meant to compensate taxpayers who had overpaid and were eligible to request refunds.
Instead, the public’s money went towards funding the greedy £35,000-a-year public servant’s extravagant social life of overseas travel with high-end hotel stays.
The Accounts Commission found “weaknesses in internal controls” and “no scrutiny” were to blame for “allowing the perpetrator’s actions to go unnoticed” for so long.
Andrew Burns, Deputy Chair of the Accounts Commission, described the case as “a cautionary tale”.
‘Checks need to be followed, weaknesses identified’
He said: “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.”
Mr Burns added that the significant fraud perpetrated by Paterson, 60, had revealed “the risks when internal controls aren’t followed”.
He also praised one of Paterson’s unnamed colleagues whose report of his suspicious activity to her bosses was the swindler’s undoing.
Whistleblower ‘praised’ for taking down greedy embezzler
“The member of staff who identified and spoke out must be praised. It shows the value and importance of whistleblowing policies and procedures,” he said.
“These are critical to ensure staff across the public sector have the confidence to quickly escalate concerns if they suspect fraud.”
Paterson was sentenced to four years in jail after the case called at the High Court in Edinburgh last July.
Audit Scotland published its conclusions on the former Torry Academy pupil’s scheme in a report discussed at a meeting of the Accounts Commission last month.
The report criticised Paterson’s “unsupervised authority” that, along with “failures in controls” and “a lack of segregation of duties and monitoring” was the perfect storm.
Despite recognising the local authority was “quick to respond” once alerted to Paterson’s dodgy accounting, the Accounts Commission highlighted the council’s slow speed at making improvements.
“The Commission is pleased to see evidence that the council is taking the matters highlighted by this fraud seriously, including the segregation of duties immediately following the issue coming to light, the development of an improvement plan by the service, and the engagement of internal audit to further strengthen key controls.
“However, controls have yet to be embedded in a way that fully addresses all the issues identified.
“December 2024 was identified as a key implementation date for improvement actions, but the absence of interim milestones makes it difficult to assess progress on the ground.
“As a matter of priority, the Commission asks the council’s ‘Task and Finish’ Group to confirm to elected members and management team when all actions will be complete, given it has now been more than a year since the perpetrator was charged.”
Council says it will ‘carefully examine the findings’
The Press and Journal asked Aberdeen City Council to comment on the report’s findings.
A spokesperson told The P&J: “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.”
Paterson’s transactions spanned 2006 to 2023, however, the council expects to recover the lost funds, with no loss to the taxpayers whose accounts were affected – the Accounts Commission said.
In December last year, this newspaper revealed that more than 5,700 residents were affected by the embezzlement, however, the council had made “no attempt” to contact or refund any taxpayers defrauded by the former corrupt official.
At the time of the article being published, the council had only identified “around 25%” of the accounts affected more than a year since Paterson’s swindle was discovered.
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