PALMVIEW – The city of Palmview is under review by the U.S. Department of Justice.

The city is reporting they have improperly used thousands of federal dollars.

Depending on the outcome of the review, Palmview may owe the government over $200,000. The Palmview director of finance describes as a hard hit for the small city.

Palmview’s asset forfeiture program, the city manager says, is operated by the police department. It includes taking property that was involved in crimes.

The money from the confiscated property is then returned to the city.

Palmview was hit with a notice from the DOJ Monday.

Part of it reads, “MLARS (Money Laundering and Asset Recovery Section) determined that the internal controls pertaining to the program do not provide reasonable assurance that program funds are protected against waste, fraud, and abuse."

City manager Leo Olivares says, “They did appreciate that we self-reported, but they were clear that there are consequences. We told them, ‘We understand that,’ and we offered our cooperation.”

Olivares explains funds from their Asset Forfeiture Program were transferred into the city's general fund.

Finance director, Rachel Chapa adds, the federal dollars were also misused on travel expenses.

“They were paying for the Christmas parties, which you cannot pay for food or drink, unless it’s an operation expense. They were also paying for the civil process fees and also paying independent contractors without any contracts,” says Chapa.

Olivares says this is a case of clean money turned dirty.

Because of the violations, the city's Asset Forfeiture Program is not only suspended, but also under review by DOJ.

While under review, the city cannot touch any AFP money.

“Our assets are frozen, so we can’t pay any bills with those funds right now,” says Olivares. “We may be dropped from the program; from any proceeds, and we may have to pay back all these funds.”

City expenses that were affected include paying off a communication software loan for regional dispatch.

Olivares is still positive the investigation will not hurt police department activities.

“Our P.D. is responding to calls. The services will continue without any break in services,” he says.

The fate of the city's Asset Forfeiture Program won't be sealed until the DOJ is done with their review. The city is unsure of when that will be.

Officials believe the mishandling of money has gone on for at least six years.