Aberdeen City Council employee who embezzled £1m ‘cautionary note’ from local authority

Scottish authorities must learn lessons from problems that allowed a local authority employee to steal £1.1 million undetected over 17 years, the Accounts Committee has said.

The local government watchdog has warned Scotland’s local leaders after a theft at Aberdeen City Council.

Michael Paterson (59) set up an inside track within the local authority which allowed him to fraudulently refund council tax to his own bank account.

Between 2006 and 2023, Paterson, who was employed as a council tax and collections team leader, issued 622 refunds totaling £1,087,444.

In July, the High Court in Edinburgh sentenced him to four years in prison after pleading guilty to a charge of embezzlement.

The theft was not stopped until another employee became suspicious and notified the council in September 2023 – almost two decades after he began defrauding his employer.

The Council expects to be able to recover the lost funds without any loss to taxpayers whose bills have been affected.

However, the accounts committee is concerned that although the council had an audit system in place, it was not followed and lacked control.

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Chiefs said the council acted quickly, identifying corrective actions and taking immediate steps. However, one year after the perpetrator was charged, the Council must increase momentum to complete the unfinished corrective actions.

A recent Commission report found that officers and councilors of all Scottish councils have a duty to protect public money and guard against fraud by implementing effective systems and controls to monitor, manage and review financial systems.

They must also act on recommendations from internal and external auditors to eliminate identified weaknesses and risks in key processes.

Andrew Burns, deputy chairman of the Accounts Committee, said: “This is a cautionary tale. All councils in Scotland must learn the lessons of this prolonged and significant fraud.

“It is not enough to have controls to prevent fraud; controls must be followed, vulnerabilities identified, and routine testing of systems performed. This case demonstrates the risk of failure to comply with internal controls.

“The member of staff who identified this situation and spoke up should be commended. It demonstrates the value and importance of whistleblowing policies and procedures. These are essential to give public sector workers the confidence to escalate concerns quickly if they suspect fraud.”

A spokesman for Aberdeen City Council said: “Aberdeen City Council will carefully review the findings of the Accounts Committee. A report will be presented to the Council for its consideration, setting out the actions recommended by the Accounts Committee and the Council’s proposed response to the recommended actions.”

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