Kathleen Duncan was told she had been spared "years in custody" because the sheriff sentencing her "was obliged to take into account what the impact would be" on her sick children.
Duncan had submitted hundreds of faked taxi receipts for up to £160 a time, with forged drivers' signatures, to NHS Fife "almost daily" for 13 months.
She even forged signatures of NHS staff to confirm her attendance at hospital.
Duncan was then handed cash by NHS staff - with her crime only coming to light when the amount of money needed to be held in the hospital cash room had to be increased.
Kirkcaldy Sheriff Court heard two of her three children, Cody, six, and McKayla, four, suffer from Hurler's Syndrome., which leaves sufferers physically and mentally disabled, with most living an average of 11 years.
The court heard the children both required regular hospital treatment - both as in-patients and out-patients.
Fiscal depute Dev Kapadia said Duncan was granted permission by NHS Fife to travel by taxi when bringing the children to, or visiting them at, Victoria Hospital or Forth Park Hospital in Kirkcaldy.
Duncan, 34, of South Queensferry, pled guilty on indictment to defrauding NHS Fife of £38,019 between August 2010 and August 2011.