Counter-fraud

Audit Scotland has an important role in counter-fraud. Some of this is required by particular International Standards on Auditing while other counter-fraud activity is undertaken as part of our wider scope public audit as described in our Code of Audit Practice.

Under International Standards on Auditing, our responsibility is to assess the risk of material misstatement caused by fraud as part of the audit of the accounts. International Standards on Auditing do not place any requirements on external auditors to actively seek out and/or investigate fraud. We report on the adequacy of our audited bodies’ arrangements for preventing and detecting fraud or irregularities as part of our wider scope audit. We also report any instances of money laundering identified through our work to the National Crime Agency.

Management in our audited bodies are responsible for implementing effective systems of internal control to safeguard public assets and prevent, detect, and investigate any instances of fraud, irregularities, bribery or corruption. Our auditors are then responsible for reviewing those systems and arrangements.

Under our wider scope responsibilities in our Code of Audit Practice we report on instances of frauds identified by both audited bodies and auditors. The aim is to help prevent similar circumstance happening in other bodies by sharing details and highlighting control weaknesses.

As part of our wider scope work, we also co-ordinate the National Fraud Initiative (NFI) data matching exercise. Participants submit data and computerised techniques compare information about individuals held by different public bodies to identify anomalies that might suggest the existence of fraud or error. This exercise enables audited bodies to take action to reduce fraud.

We also publish ad-hoc counter-fraud reports, for example, Covid-19 Emerging fraud risks.

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 2024

Published in August 2024

A data matching exercise detected £21.5 million worth of fraud and payment errors across the Scottish public sector.

The National Fraud Initiative (NFI) helps detect and prevent fraud and error by matching data sets across public bodies. Savings are identified, for example, by checking eligibility for council tax discounts against the electoral register. The initiative runs every two years.

Read the full report and other information

Our other Counter-fraud activity

Included in this section are one off reports relating to fraud and fraud prevention.

Fraud and irregularity

Instead of publishing an annual fraud and irregularity report, from 2023/24, we will share information where control weaknesses have contributed to fraud and irregularity on a quarterly basis in our Technical Bulletins.

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