Dyfed-Powys Police is now liaising with the Crown Prosecution Service after a report branded controversial payments to Pembrokeshire County Council chief executive Bryn Parry-Jones as unlawful.
The police had earlier said they were aware of the Wales Audit Office reports but they had not been referred to them.
But today, a spokesman for the force, added: "Dyfed-Powys Police can confirm that they are liaising with both the Crown Prosecution Service and an external force in relation to the report issued by the Wales Audit Office last week.”
The damning report published last Thursday said that allowing Bryn Parry-Jones and another senior officer to opt out of the Local Government Pension Scheme (LGPS) and receive the equivalent to the employers pension contributions in direct payments was unlawful.
The decision of the council’s Senior Staff Committee to allow the move was also unlawful because senior officers, including Mr Parry-Jones, took part in the decision making process - including the meeting when the scheme was actually approved.
Up to the end of March 2014, more than £51,000 will have been paid to Mr Parry-Jones and the other officer.
The payments made to them– so they could make their own arrangements for saving for retirement - were contrary to law, according to the Appointed Auditor, Anthony Barrett.
Throughout the report, Mr Barrett refers to the payments as “a pay supplement”.
Labour leader on the council, Paul Miller, has already called for Mr Parry-Jones to be suspended while a full investigation is carried out.