Between 1 and 2 per cent of the two main schemes – which paid out a total of £1.6 billion – are thought to have been lost to fraud and error.
Holyrood’s Public Audit Committee heard from Audit Scotland officials on Thursday, following their analysis of the Scottish Government’s yearly consolidated accounts.
Auditor General Stephen Boyle said the Government had accepted a higher level of risk than usual given the urgent need to deliver support during the pandemic.
He said: “Headline level, the Government’s own assessment is that between 1 and 2 per cent of that spending will be attributable to fraud and error.
“So somewhere between £16 million and £32 million of that is likely to have been spent not in accordance with the associated laws.
“In our judgment, £16 million to £32 million of course is a hugely significant amount of public spending that hasn’t been spent properly.
“But in the overall materiality of the Government’s accounts, we’ve already mentioned this morning of £50 billion, we’re satisfied that the accounts are fairly stated.”
Committee member Willie Coffey asked about efforts to recover money which was distributed due to fraud or error.
Audit Scotland audit director Michael Oliphant said between 14 per cent and 30 per cent of business support applications had been rejected, which suggested there was a “good control framework” in place.
He said that at the end of the last financial year, just over £1 million had been recovered and 150 recovery cases were under way.
The committee also heard that fraud and error in benefits delivered by the UK Department for Work and Pensions led to overpayments of an estimated £65.4 million in Scotland during the year.
Following the committee meeting, Scottish Liberal Democrat MSP Willie Rennie said: “Now that the economic threat has receded, we need the Government to get on top of chasing down fraudsters and ensuring that any money paid out in error is recovered.
“As we come out of the pandemic, there will be a need to squeeze value for money from every penny to get the economy firing again.”