Newcastle City Council said Facebook has not yet been used to identify people who are claiming benefits they are not entitled to. But the social networking tool could be used by the councilin the future.
Reports claimed fraud investigators were checking claimants out on Facebook to see if they are telling the truth.
The council said its comments had been taken out of context and that it has not yet used Facebook to detect fraud. "It was merely a suggestion by a reporter," it said.
Lynne Hubbick, principal benefit fraud officer at the council, said investigators use a variety of sources to gain information and build a picture of the individuals it suspects are benefit cheats.
"Our investigations are intelligence led and we use all tools available at our disposal. This can range from using information in the public domain to that which is only available to investigators using the correct legal gateways."
"Social networking sites are one of many modern tools available to gain intelligence on individuals. At this stage it is something we are looking at, but not yet employing," said Hubbick.
The invasiveness of Facebook has been used before in legal cases. In December 2008,lawyers in Australia served court papers to a couple via Facebook. Despite several attempts to get in touch with the couple, lawyers had no luck and were allowed to serve the court papers via the social networking site.
A judge in Australia's Supreme Court allowed lawyers from the Canberra-based firm Meyer Vandenburg to serve the papers via the site, after being satisfied that the profiles the lawyers had found belonged to the defendants in question.