When Art Acevedo took over as chief of the Austin Police Department, he requested a financial review, or audit, of APD.

What he learned has sparked an investigation.

"We have a responsibility to make sure we follow the rules, and when we looked at some things that looked on the surface to be questionable - we're going to investigate it," said Acevedo.

In July, Acevedo received the report from APD's interim financial manager.

It details budget concerns, including questions surrounding money seized during criminal investigations and whether that money's use was within federal guidelines.

The auditor says:

"Seized funds began running negative cash balances in June 2007, mainly due to the use of these funds to balance the FY 2006 budget. "

That practice was stopped, but on Wednesday an assistant city manager defended the policy.

"You have the ability to do that, which we do every year at the end of the year to try to reconcile. If there was equipment purchased, and it's within seized funds guidelines, then it's appropriate to apply those funds to that particular area," explains Assistant City Manger Mike McDonald.

He says if the investigation reveals money was misused, it will be reimbursed.

"There's nothing to indicate that during that time last year when we were reviewing everything, that there was anything inappropriate done at that point," McDonald adds.

An audit also revealed that a 2006 jail contract payment of more than $1 million had not been made, which led to the resignation of the Chief Financial Manager in February 2007.

In an August 7 memo to the mayor and council from City Manager Toby Futrell, she describes the "financial disarray at APD," "absence of budget monitoring" and "inaccurate reporting and payment errors."

"I will tell you this, from this point forward, I will be making the determination as to how we spend asset forfeiture funds," said Acevedo.

The current year end estimate shows a shortfall predicted at $1.7 million.

Acevedo is working on cutting back overtime to try and make up some of that money.

He says the investigation into the budget should be complete by the end of next week.