The Scottish Government was told about the funnelling of charity funds for general spending by NHS Tayside four years ago, it has emerged.
But Health Secretary Shona Robison and her predecessor Alex Neil said it had not been flagged up as a concern by accountants or civil servants.
The health board was exposed in April for dipping into its endowment fund and transferring £3.6 million to cover core expenditure.
Ms Robison was told that it was “disingenuous” to claim the Scottish Government was kept in the dark about the dodgy practice when it was included in an annual report into NHS Tayside in June 2014.
The PwC report, which was sent to the Scottish Government and the Auditor General, said trustees of the endowment fund approved submissions resulting in the transfer £3.6m, which went towards the health board’s day-to-day spending.
Referring to the report at Holyrood’s public audit committee, Tory MSP Liam Kerr said: “It was there to be seen by the Scottish Government, by the Scottish NHS.”
Christine McLaughlin, the Scottish Government’s director of health finance, admitted the transaction was detailed in the report, but it “does not suggest it was an inappropriate transaction”.
Ms Robison said: “Auditors would normally escalate matters of concern to the Scottish Government.
“That is what part of their role is and that did not happen on this occasion.
“If it had happened Alex Neil at the time or me later would have taken action, in fact it wasn’t escalated to the Scottish Government and never came to the attention of ministers.”
Jenny Marra, the committee convener and a Labour MSP, said: “I think it’s disingenuous for the Scottish Government to say that they didn’t know, when this report with this information landed on your desk.”
Mr Neil, an SNP MSP on the committee, was health secretary when the report was sent to the Scottish Government in June 2014, before leaving the post in November of that year.
“There’s a big difference between the documents being submitted to the Scottish Government and to the cabinet secretary’s office,” he told the committee.
He said if every document from health boards was put in the health secretary or chief executive’s in-tray then their jobs would be impossible.
A Grant Thornton report published this week into financial management at NHS Tayside said the Scottish Government Health and Social Care Directorate received the final copy of Tayside’s financial statements in June 2014.
It said: “We have been unable to identify any evidence that demonstrates the use of endowments was raised and discussed with SGHSCD.”
