Officers have spent months investigating the case, said to involve “an individual in a position of responsibility”, after being alerted at the end of March.
Initial suspicions over a possible fraud had been raised within the Edinburgh Festival Fringe Society, which runs the annual extravaganza, two months earlier. Independent accountants were called in to review its processes and ensure lost funds were identified and recovered.
The police were called in despite the Fringe managing to recover the full sum of money involved in what the festival has described as “a deliberate and sophisticated crime.”
It has revealed details of the case less than two weeks before the start of this year’s Fringe.
Officials said income from ticket sales and public funding received by the body were not affected by the “complex financial disbursements” at the centre of the alleged fraud.
Chief executive Kath Mainland said the festival been the “victim of a sophisticated fraud campaign conducted by one individual” over the course of eight years.
She added: “The disappointment at having identified the crime is certainly alleviated by our success in recovering the funds swiftly and being able to move on.
“The measures required to reinforce our financial processes have already been taken, although I am satisfied that not much more could have been done to prevent us falling victim to such a deliberate and sophisticated crime.
“The amount of money involved in any given year was, on average, less than one per cent of the Fringe Society’s annual turnover and not operationally impactful.
“We do take matters such as this very seriously. Despite already recovering the funds I wanted to be open about the situation and offer the opportunity to members to discuss this at our annual general meeting in August.
“This matter has had no impact on the Fringe itself, and we are looking forward to what will be a fantastic celebration of culture and entertainment from all around the world.”
A spokeswoman for Police Scotland said: “We are carrying out an investigation into a possible fraud following a complaint from the Edinburgh Festival Fringe Society.
“The complaint was made to police on 31 March. Enquiries are ongoing and the investigation is at an early stage.”