Patrick Clarke, from Mill Hill Court in Castlewellan, County Down, is an independent elected member of Newry, Mourne and Down District Council.
He was given a suspended sentence at Downpatrick Magistrates' Court after being convicted of a number of charges.
They included breaching his probation for a previous fraud offence in 2010.
A prosecuting lawyer told the court that in the most recent fraud case, Clarke was accused of defrauding Â£750 from the Dundrum Village Association in September 2014, by lodging a cheque from the Housing Executive meant for the village group into his own account.
The offence came to light a year later, and when arrested and interviewed, Clarke made "full admissions" to the police, the prosecution said.
Around the same time in September 2015, Clarke was arrested when his neighbour told police Clarke had "forced his way in" to his home, armed with a hammer, and smashed a ceramic cup.
The probation breach was a result of Clarke failing to turn up for community service work as part of his sentence imposed for an earlier fraud case.
During that previous case, the councillor had admitted defrauding a fund set up to rebuild a church hall out of almost Â£2,000.
A defence barrister told the court her client was "deeply regretful" and has repaid the money he took.
She said he was now re-engaging with probation which was helping him to address his mental health difficulties.
The judge imposed a seven-month jail term, suspended for three years and warned Clarke he would go to prison if he committed any further offences.
A councillor who defrauded a community group of hundreds of pounds and forced his way into his neighbours home, armed with a hammer, has avoided jail.