WASHINGTON (Reuters) - About 130 Washington DC municipal employees may have scammed the city by collecting jobless benefits while still at work, the District of Columbia said on Monday, in the latest scandal to hit the local government.

The District's attorney general is investigating and those alleged to have committed fraud will be placed on administrative leave pending possible prosecution, it said.

The District also will seek to recover money improperly paid out. The probe began last spring and spurred "serious concerns about the way the program had been administered over the last several years," the District government said in a statement.

The alleged fraud is the latest potential blow to the District government, which has about 32,000 workers.

A City Council member resigned last month after being charged with taking thousands of dollars' worth of district property and filing false tax returns.

The District also is stepping back from a first-in-the-nation plan to launch Internet gambling after questions were raised about the awarding of the contract.

(Reporting By Ian Simpson; Editing by Paul Thomasch)