Auditors uncover £15m in fraud and errors and urge vigilance against dangers posed by pandemic

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Audit Scotland has identified more than £15m in potential fraud and errors across Scotland’s public sector in the past two years, with auditors warning the pandemic has brought “additional fraud risks”.

The increased dangers include a rise in remote working, and a greater threat posed by cybercriminals perpetrating phishing attempts and other attacks.

More than 120 public bodies participated in the National Fraud Initiative, which is coordinated by Audit Scotland every two years.

The initiative compares data about individuals held by public bodies to identify “potential errors or fraud” and to ensure pensions, housing benefits and other services are going to the right people.

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It identified that since the last report in 2018 there had been £15.3m in fraud and errors, including an estimate for prevented future losses.

This amount included £4.9m in reduced or removed council tax discounts, £3.2m in occupational pensions not being paid out and £2.8m in housing benefit payments stopped or reduced.

The report on the initiative included the results on a pilot with seven Scottish councils and the Scottish Government to identify businesses inappropriately claiming Small Business Bonus Scheme relief, which found £412,974 in incorrect awards and “system weaknesses”.

Audit Scotland warned the Covid-19 pandemic had brought additional fraud risks, with public sector staff “working remotely under extreme pressure” and the potential for less scrutiny in applications for government stimulus packages for individuals and businesses.

Other risks included an increase in cybercrime as more public sector staff were connecting remotely, and an increase in phishing emails and scams trying to get staff to click on links that allow “fraudsters access to public sector systems”.

“These results demonstrate the value of data-matching to Scotland’s public finances at a time when Covid-19 has put budgets under intense pressure,” Audit Services director Fiona Kordiak said. “The pandemic has also brought additional fraud risks that will be important for public bodies to identify and manage. Many staff are working remotely under extreme pressure which makes good governance and sound controls more important than ever.”

The report recommended all participants take “appropriate and preventative and detective action” given the risk of fraud during the pandemic. Where local auditors had identified specific areas for improvement, the report recommended these be acted on as soon as possible.

It said Audit Scotland had been working with the Cabinet Office to “identify, develop and promote data matching facilities to help address some of this increased fraud risk” during the pandemic.