A watchdog said city officials checked out just 30 out of nearly 2000 potential abuses of the disabled parking scheme in 2010-11.
Audit Scotland warned that local authority bosses risked losing money - and hurting those who really need disabled bays - by not ensuring the badges of the dead were out of circulation.
The Scottish Government body said: "If blue badge records are not updated to reflect deceased status, there is a risk of those badges being misused, resulting in financial loss to the council and, more importantly, potential inconvenience to bona fide blue badge users, who may find parking places more difficult to locate."
Council insiders have long argued that policing blue badges is extremely difficult, with large number of city centre bays occupied by people who claim to be disabled.
However, parking attendants can only act if they catch an able-bodied person "red-handed" returning to a parked car.
And the only punishment they can give is a parking fine.
Last year the council's ruling Labour group suspended a councillor, businessman Sohan Singh, after he was found fraudulently using a relative's blue badge.
However, the concerns from Audit Scotland focus not on enforcement but on checks carried out by the council on badges flagged up by the National Fraud Initiative (NFI).
Typically, these are badges in the name of dead people that have not been cancelled - and may now be abused.
Audit Scotland said: "The council's 2010/11 NFI exercise highlighted 1948 blue badge parking permit matches recommended for follow-up. These are cases where the crosscheck between the council's records and those of the Department of Works and Pensions highlighted cases where blue badge parking permits were held in the name of people who had died.
"Only 30 of these matches were followed up further by the council.
"The 2012/13 NFI exercise has again highlighted a considerable number (1498) of blue badge matches."
Council bosses said they were now checking all the 1498 tip-offs.
A spokesman said: "We have used all of the data identified in the most recent fraud initiative and also introduced new procedures to identify cases every month, rather than on an annual basis.
"This is immediately available to parking staff on the beat - allowing them to identify potential fraud."
Graeme Hendry, the SNP leader of the opposition, said: "Audit Scotland's revelation that Glasgow City Council followed up only 1.54% of potentially fraudulently used blue badges in the city is deeply concerning.
"Many of our most vulnerable citizens rely on blue badges and the access to parking they support.
"If people are allowed to abuse these badges and their privileges, in the way one Glasgow Labour councillor was found to be last year, then it undermines the whole system in the eyes of the public.
"The council leadership must do more to stamp out this abuse."