The Accounts Commission says lessons must be learned after a local authority worker in Aberdeen was allowed to steal more than £1million undetected over a period of 17 years.
Michael Paterson, 59, misused his position at Aberdeen City Council to fraudulently issue himself council tax refunds into his own bank account between 2006 and 2023.
The council was tipped off by another member of staff who grew suspicious of Paterson in 2023, by which time he had already deposited 622 refunds into his account, totalling £1,087,444.
He was sentenced to four years in prison after pleading guilty to embezzlement at the High Court in Edinburgh in July 2024.
Paterson began working for the council in 1988 and after a series of promotions he landed a job as a council tax and recovery team leader with a salary of £35,000-a-year.
His position gave him the authority to pay council tax refunds up to the value of £3,000 and change payment details on accounts, which he eventually directed towards his own bank by setting up an internal pathway to transfer funds to himself.
He began embezzling payments in 2006 as a means to pay off debts, but by the time he was caught, he was spending on expensive holidays, dining out and high-end tech devices.
Aberdeen City Council says it expects to recover all of the funds and has ensured the public that they will not be left out of pocket, but the Accounts Commission says Paterson’s crime must act as a warning to all of Scotland’s 32 local authorities.
They voiced their continued concern that Aberdeen City’s fraud protections lacked sufficient scrutiny and urged all councils to learn from the mistakes made in the granite city, saying officers have a duty to protect the public purse from fraudulent activity.
“At the heart of this is having and implementing effective systems and checks to monitor, manage and review financial systems,” the watchdog said.
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“They must also act on recommendations from internal and external auditors to address identified weaknesses and risks in key processes.”
Aberdeen City Council say they have acted quickly to identify key improvements to safeguarding public money but now the city has been told it needs to pick up the pace in competing outstanding objectives.
Andrew Burns, deputy chairman of the Accounts Commission, urged councils to ensure the rules against fraud are being followed.
He 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.”
A spokesperson for Aberdeen City Council 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.”
To date, 1,400 of the 5,700 accounts affected by Paterson have been identified, but the report states that no attempt has been made to contact tax payers and no refunds have been made.
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Michael Paterson, 59, misused his position at Aberdeen City Council to fraudulently issue himself council tax refunds into his own bank account between 2006 and 2023.
The council was tipped off by another member of staff who grew suspicious of Paterson in 2023, by which time he had already deposited 622 refunds into his account, totalling £1,087,444.
He was sentenced to four years in prison after pleading guilty to embezzlement at the High Court in Edinburgh in July 2024.
Paterson began working for the council in 1988 and after a series of promotions he landed a job as a council tax and recovery team leader with a salary of £35,000-a-year.
His position gave him the authority to pay council tax refunds up to the value of £3,000 and change payment details on accounts, which he eventually directed towards his own bank by setting up an internal pathway to transfer funds to himself.
He began embezzling payments in 2006 as a means to pay off debts, but by the time he was caught, he was spending on expensive holidays, dining out and high-end tech devices.
Aberdeen City Council says it expects to recover all of the funds and has ensured the public that they will not be left out of pocket, but the Accounts Commission says Paterson’s crime must act as a warning to all of Scotland’s 32 local authorities.
They voiced their continued concern that Aberdeen City’s fraud protections lacked sufficient scrutiny and urged all councils to learn from the mistakes made in the granite city, saying officers have a duty to protect the public purse from fraudulent activity.
“At the heart of this is having and implementing effective systems and checks to monitor, manage and review financial systems,” the watchdog said.
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“They must also act on recommendations from internal and external auditors to address identified weaknesses and risks in key processes.”
Aberdeen City Council say they have acted quickly to identify key improvements to safeguarding public money but now the city has been told it needs to pick up the pace in competing outstanding objectives.
Andrew Burns, deputy chairman of the Accounts Commission, urged councils to ensure the rules against fraud are being followed.
He 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.”
A spokesperson for Aberdeen City Council 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.”
To date, 1,400 of the 5,700 accounts affected by Paterson have been identified, but the report states that no attempt has been made to contact tax payers and no refunds have been made.
Find Out More...