Carol Todd, who represents Babergh District Council, said last night she would not be resigning her post and claimed she had made an “accidental mistake”.
Todd, 60, who is also a member of Great Cornard Parish Council, was given a conditional discharge and was ordered to pay £100 costs when she appeared before magistrates in Sudbury yesterday.
Babergh said it was not duty-bound to dismiss the councillor, who committed the fraud before she was elected seven months ago.
The prosecution, brought by the Department of Work and Pensions, found that Todd, of Chelsworth Avenue, Great Cornard, had failed to notify anyone of her change of circumstances when she claimed disability living allowance between November 2005 and July 2006.
She pleaded guilty to the charge yesterday and was given a one-year conditional discharge and made to pay £100 costs to the government department.
Current electoral rules dictate that Todd would have been prevented from standing in her Great Cornard (North) seat had she been convicted prior to the election.
But a spokesman for Babergh said: “The Code of Conduct for Members presently only applies to a councillor acting in their official capacity.
“This is not, therefore, a standards issue as it relates to conduct in the councillor's private capacity.
“Changes are due to be implemented next year (under the Local Government and Public Involvement in Health Act 2007) so that the code also applies to private conduct where a councillor is convicted of a criminal offence”.
Earlier this year, the EADT reported on Babergh's “perpetual war” against fraudsters with officials bringing cases involving a total of £115,000 in less than a year to court.
Speaking after the case, Todd said: “I failed to report a change in my condition but it was just an accidental mistake. I never had any intention to defraud anyone and I have no intention of resigning.”