Some of Scotland’s most vulnerable people are being wrongly denied hardship payments by councils, according to a watchdog.

The Scottish Public Services Ombudsman found applicants for grants from the Scottish Welfare Fund had been told they could go to a food bank instead of getting financial help, were given beds but no bedding, or refused payments because they had “a few tins of food available”.

One council turned down a grant on the basis that it couldn’t “undermine” a benefits sanction, and a woman who had moved house following a serious assault was told she couldn’t have money for carpets because she’d been given a carpet for her previous home.

In all, the council decision was wrong in a third of crisis grant applications referred to the SPSO (32 per cent) and 43 per cent of community care grant reviews.

In all the SPSO reviewed 437 decisions in its first year since taking on the job of overseeing complaints about the fund. Previously applicants who were dissatisfied had to ask the councils themselves to review a decision they were unhappy with. In an annual report, it said it was only seeing the "tip of the iceberg" of SWF claims.

It is not known if those who do not come forward after being rejected for payments are satisfied with the decision, don't know they can ask for a review or are in too much crisis to do so.

A spokeswoman for the SPSO said: "The onus is on applicants to come to us. We are only seeing the applications where people are unhappy with the decision that has been made, and have the energy to take that to a further independent review stage."

The report shows that 65 per cent of those asking the ombudsman for help with a claim had a mental or physical disability. The most reviews were requested in Glasgow, with 163 , followed by North Lanarkshire (63) and South Lanarkshire (42).

Councils are criticised for poor communications, particularly when turning down applications, and failing to seek relevant evidence.

The SPSO also changed decisions where councils had refused to pay for 'supplementary items such as pots and pans, when providing an oven, or bedding when paying for a bed. "Despite these items being relatively inexpensive, without them the applicant is unable to effectively use the primary item they have been awarded," the report says.

The Ombudsman, Rosemary Agnew, added: "We recognised that the people who ask us for a review are some of the most vulnerable and disadvantaged in Scotland. I am delighted that we have made the scheme more accessible to them."

Peter Kelly, director of the Poverty Alliance, said the number of reviews upheld showed there had been an issue with decision making in the Scottish Welfare Fund.

“That so many of these cases were a result of incorrect interpretation of information or the guidance not being followed correctly, shows a need for increased support and training for decision makers," he said.

“All decision makers should know that it is not acceptable to send someone to a foodbank instead of providing financial assistance. This does not fit with the idea of a social security system based on dignity and respect.

“It is important that the Scottish Government works with local authorities to ensure that these figures do not become a trend.

“People access the Scottish Welfare Fund at times of crisis and when they are under severe stress, it is therefore important that the welfare fund works for them rather than creating further hardship.”

A COSLA Spokesperson said the findings needed to be put in context. "Firstly and importantly Councils work to stringent regulations and guidelines, " he said. " Secondly they can be dealing with people in very difficult circumstances or even crisis situations. Finally Councils seek to be robust but fair in dealing with claims in such circumstances and there is of course an appeal process that can be utilised."