More details have emerged following the dramatic 13-hour raid of Frigiliana town hall this week.
According to court documents, mayor Alejandro Herrero and five other members of the PSOE-led government are now under investigation.
The potential charges include misconduct in public office (prevaricacion) and misuse of public funds (malversacion).
The development comes after a judge lifted the secrecy order surrounding the investigation.
The probe is being led by Investigating Court No. 1 in Torrox.
The Guardia Civil carried out an extensive operation on Tuesday, spending almost the entire day searching Frigiliana Town Hall before leaving at around 11pm.
Officers examined files, copied invoices and gathered large amounts of documentation for further analysis.
The investigation also extended beyond the town hall, with officers searching a well-known bar in Frigiliana as part of their enquiries.
It suggests investigators are examining documentation linked to businesses as well as the local authority.
No arrests have been made.
Speaking after officers left the town hall, Mayor Herrero said the operation had gone smoothly.
‘They collected data, invoices and documentation,’ he said. ‘We’ve spent the whole day making photocopies.’
According to reports, Guardia Civil officers also interviewed members of the municipal corporation during the operation.

Witnesses said nobody was allowed to enter or leave the town hall while the searches were underway.
PSOE calls for caution
Following Tuesday’s raid, the PSOE’s Malaga branch said it had learned of the operation through media reports.
In a statement, the party called for ‘caution’, expressed its ‘full respect’ for the judicial investigation and pledged its complete cooperation with the courts.
The investigation remains ongoing, and none of those under investigation have been charged with any offence.
Under Spanish law, being placed under investigation (investigado) does not imply guilt but means a person is formally being investigated as part of a judicial inquiry.
It is the latest investigation to take place along the Costa del Sol in recent months.
Just this week, it emerged Benahavis town hall is being investigated over alleged misuse of public land.
Meanwhile, the mayor of Estepona appeared before a judge in an ongoing investigation into a so-called ‘ghost employee’ – who is accused of receiving a municipal salary for a job she never performed.
Read more Andalucia news at the Spanish Eye.
