Fraudbusters uncover £10million lost or stolen from the taxpayer

A total of 9.7 million was found to have been paid out as a result of fraud, overpayment, or errors, said Audit Scotland, the spending watchdog.

This included 186 pensions being paid out where someone was dead, and more than 1,500 housing-benefit cases involving public-sector pensioners.

The drive also resulted in 969 "blue badge" disabled parking permits being cancelled when investigators found the holder had died.

And payroll frauds or irregularities were uncovered.

One council found an employee had received 20,000 in sick pay over a two-year period – while working for a health board.

The scams were uncovered by the National Fraud Initiative, which formed part of the auditing process for 74 public bodies, including councils, the police, health boards, the Scottish Public Pension Agency and the Student Awards Agency for Scotland.

Information on dead people, public-sector employees and pensioners, benefit applicants and others was scrutinised for "inconsistencies", and was then cross-checked.

Some 49 housing-benefit cases have already been passed on for possible prosecution, and this number is expected to rise, said officials.

The investigation also led to 17 employees being sacked or resigning.

Authorities are trying to recover around 2.8 million in overpayments, and will also save about 3.9 million by stopping pensions being wrongly paid out.

A previous exercise in 2004 and 2005 led to "at least" 75 successful prosecutions.

Robert Black, the Auditor General for Scotland, said: "This is the second time the National Fraud Initiative has been carried out extensively in Scotland.

"I am very pleased that more public bodies took part this time and that, as a result, 9.7 million of frauds, overpayments and errors were identified."

One case involved a pensioner living in a nursing home. He died in October 2004, but his pension was not cancelled until October 2007.

By that time, 25,000 had been overpaid.

Another case involved a council tenant who was working with the council while he was receiving benefit.

An interview revealed that the tenant's partner was also a council employee wrongly receiving benefits.

The combined overpayments came to 100,000 and both are to be reported to the procurator-fiscal.

An NHS domestic assistant was found guilty of benefit fraud after receiving housing benefit, council-tax benefit and income support overpayments totalling 19,000.

And a retired police officer who claimed housing benefit without disclosing an occupational pension is awaiting sentence after receiving housing and council-tax benefits of more than 17,000 dating back to 1998.