Counter-fraud

Audit Scotland has an important role in raising awareness about fraud as well as helping to prevent and report on fraud.

Our auditors have a responsibility to review and report on how public bodies have discharged their responsibilities in relation to fraud. Auditors also report on frauds identified by audited bodies or during the course of their audits and these reports help raise awareness of fraudulent activity across the public sector. Significant frauds highlighted by auditors may become the subject of statutory reports to the Accounts Commission or to the Public Audit Committee of the Scottish Parliament, bringing them to wider public attention.

Audit Scotland also coordinates the National Fraud Initiative in Scotland which is a data matching exercise that uses computerised techniques to compare information about individuals held by different public bodies and on different financial systems to identify anomalies that might suggest the existence of fraud or error. This exercise enables audited bodies to take action to reduce fraud and save money.

Raising a concern about fraud and corruption

Fraud is referred to as the deliberate use of deception or dishonesty to disadvantage or cause loss (usually financial) - in simple terms, it's a crime in which some kind of deception is used for personal gain. As information systems increase in complexity and public finances tighten there is a risk that internal controls are compromised. This increases the risk of fraud, error and corruption. Losing public money through fraud has a knock-on effect on the services that public bodies can provide to individuals and communities, as well as affecting their reputation.

If you believe that there is fraudulent activity going on in a Scottish public body, you can find out how to tell us and share your information with us here, or you may wish to report your concerns directly to the police.

Responsibilities for counter-fraud

Audited bodies are responsible for establishing arrangements for the prevention and detection of fraud, error and irregularities, and bribery and corruption. Audited bodies are responsible for ensuring that their affairs are managed in accordance with proper standards of conduct by putting proper arrangements in place.

As auditors, we make judgements and report our conclusions on how public bodies have discharged those responsibilities in accordance with our Code of audit practice and assess the specific risk of material misstatement, whether caused by fraud or error, as part of the audit of the accounts in line with International Standard on Auditing. We also have an important role in raising awareness about fraud as well as in helping to prevent, investigate and report on fraud.

National Fraud Initiative

The National Fraud Initiative (NFI) in Scotland is a counter-fraud exercise led by Audit Scotland, and overseen by the Public Sector Fraud Authority for the UK as a whole. It uses computerised techniques to compare information about individuals held by different public bodies, and on different financial systems that might suggest the existence of fraud or error. It means that public bodies can take action if any fraud or error has taken place, and it allows auditors to assess fraud prevention arrangements that those bodies have.

The principles and practices that should be adopted by those taking part in NFI and other data matching exercises in Scotland are set out in our Code of Data Matching Practice. Key aspects of the Code include examples of how individuals should be informed that their personal information will be used for data matching, and how data will be submitted by bodies, and data matches provided to them, through a secure online system.

The main NFI exercise takes place every two years and culminates with a national report on outcomes and participation. There are also a number of pilot exercises involving new bodies and / or data sets and these are reported on separately.

National Fraud Initiative reports

The National Fraud Initiative in Scotland 2022

Published in August 2022

The overall level of identified public sector fraud and error in Scotland has fallen slightly, according to the results of a national counter-fraud exercise.

Read the full report and other information
View the NFI Outcomes 2020/21 interactive report

Pilot exercises and previous national reports

National Fraud Initiative: Non-domestic rates - Small Business Bonus Scheme pilot

A recent pilot used data matching techniques to match non-domestic rates Small Business Bonus Scheme (SBBS) relief data between Scottish councils. This was the second pilot exercise looking at SBBS relief. This pilot extends a previous pilot carried out in 2019/20 which looked at SBBS relief in seven councils.

The 2019/20 exercise identified 480 matches which resulted in £412,974 in incorrect SBBS awards being identified. This latest pilot exercise identified 17,578 matches which resulted in £2.15 million in incorrect SBBS relief being identified in 207 SBBS awards. Councils will now try to recover SBBS relief which was incorrectly awarded.

Given the success of this pilot, consideration is now being given as to how this data match can be repeated on a regular basis as part of the full NFI exercise.

 Download the pilot report - PDF 304Kb

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National Fraud Initiative: National Entitlement Cards pilot

A recent pilot used data matching techniques to help identify National Entitlement Cards (NECs) which are still in circulation for adults over 18 years of age who have died. This work focused on the use of NECs for free bus travel.

The pilot was undertaken as part of the development of the NFI. NEC data is not currently included as part of the NFI.

Audit Scotland worked with Fife Council, the National Entitlement Card Programme Office (NECPO) and Transport Scotland on this pilot.

Fife Council provided a total of 112,044 NEC records for matching against deceased person records. This resulted in 1,737 matches being cancelled as it was established that the customers had died. Thirteen matches showed cause for concern as the NECs appeared to have been used after the death of the cardholder. Two of these cards were used for journeys to the value of almost £2,300 for one, and £240 for the other. The value of the journeys for the other 11 cards varied from £3.10 to £69.00. Investigations are continuing into the individuals who used these cards.

Consideration is being given to expanding this data matching in our future NFI work.

 Download the pilot report - PDF 196Kb

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The National Fraud Initiative in Scotland

• The National Fraud Initiative in Scotland 2022
• The National Fraud Initiative in Scotland 2018/19
• The National Fraud Initiative in Scotland 2016/17
• The National Fraud Initiative in Scotland 2014/15
• The National Fraud Initiative in Scotland 2012/13

• The National Fraud Initiative in Scotland 2010/11
• The National Fraud Initiative in Scotland 2008/09
• The National Fraud Initiative in Scotland 2006/07
• National fraud initiative 2006/07 handbook: Scotland
• No hiding place: the National Fraud Initiative in Scotland

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Our other Counter-fraud activity

Included in this section is the latest annual report on fraud and irregularity along with a number of one off reports relating to fraud and fraud prevention

Fraud and irregularity report 2022/23

A summary of the cases of fraud and other irregularities at public bodies reported by external auditors for the financial year 2022/23.

 Download fraud and irregularity report - PDF 837Kb

Covid-19 - Emerging fraud risks

The Covid-19 pandemic has brought significant challenges across the Scottish public sector as bodies seek to deliver services for individuals, communities and businesses in an extremely difficult time.

 Download the document on emerging fraud risks - PDF 546Kb

Procurement in the public sector - how red flags can help us to stop and consider fraud

Audit Scotland and Police Scotland have developed a document that highlights some red flags in procurement activity and the controls that can help to prevent fraud. Read more in Angela Canning's blog.

 Download the document on red flags in procurement - 2.6MB

Safeguarding public money: are you getting it right?

The Accounts Commission has produced this report as part of its 'How councils work' series for councillors. It includes checklists to help them make sure their councils’ money is being safeguarded.

 Download the report on safeguarding public money - PDF 2.1Mb

Dundee City Council: Report on significant fraud

Our report on the 2016/17 audit of Dundee City Council found that a £1 million fraud perpetrated at Dundee City Council from 2009-2016 was the result of failures in fundamental controls within the council’s financial systems.

 Download the 2016/17 audit of Dundee City Council report - PDF 390Kb

Other bodies