The state auditor’s office is conducting a first-of-its-kind review of how the Dallas County district attorney’s office used — and potentially misused — its forfeiture funds.

Questions about spending from the fund arose last year during the tenure of District Attorney Craig Watkins, who lost his race for re-election.

Among the potentially problematic expenditures was the settling of a lawsuit after Watkins rear-ended another driver on his way to give a speech. The agreement required the other driver not to speak about the crash or the settlement.

Watkins paid the driver of the other vehicle nearly $50,000 and shelled out more than $11,000 to a repair shop using money from the forfeiture fund.

This is the first time the state auditor has conducted such a review of forfeiture funds overseen by a district attorney’s office or a police agency since the Legislature gave the auditor the authority in September 2011.

The forfeiture funds come from money and assets seized from those accused of criminal wrongdoing. The law requires that the money be used solely for law enforcement reasons.

State Auditor John Keel sent a letter, called an “engagement letter,” in February to current District Attorney Susan Hawk informing her of the audit.

The letter, obtained Thursday through an open records request, told Hawk, “Auditors should exercise professional skepticism and increased awareness to detect potential noncompliance, fraud and abuse.”

A spokesman for the auditor’s office declined to discuss details of the audit.

Watkins, a Democrat who served two terms, could not be reached for comment. But while he was in office, his spokeswoman repeatedly said the money was used properly.

Hawk, a Republican who took office in January, did not respond Thursday to requests for comment. Hawk used the issue of forfeiture spending in her campaign to unseat Watkins.

Attorney John Helms, who is not involved in the audit, said the auditor will have to make decisions about whether expenditures such as last year’s settlement were legitimate.

“Obviously there are some questionable uses of the forfeiture fund that have been reported pretty widely,” he said. The settlement agreement “releases Craig Watkins personally, so it was giving him a personal benefit, and that’s worth something.”

‘Just waiting to see’

Dallas County Commissioner Mike Cantrell, a Republican who has been outspoken about the need for such an audit, said that since the state auditor has never conducted such a review, he’s not sure what to expect.

“It’s a good practice to have those forfeiture funds audited, as well as the federal forfeiture funds … especially with a new DA,” Cantrell said. “I’m just waiting to see what they find.”

The Department of Justice is also auditing the office’s use of the federal forfeiture fund. Federal auditors visited the DA’s office in November while Watkins was still in office. A justice department spokesman said Thursday that the review is ongoing.

Also in November, a partial audit of the state funds by the Dallas County auditor raised questions about some expenditures, including the crash settlement. The state auditor’s office requested the county audit before conducting its own.

Watkins also used forfeiture funds to buy back a Porsche after the office did not realize it had been towed and subsequently sold at auction, and to pay lawyers after he was held in contempt for not testifying at a hearing.

Legitimate use of funds?

Helms said he does not believe the settlement after the crash was a legitimate use but said “it’s not cut and dry.” Paying the attorneys’ fees, he said, “that’s closer to what you want the fund to be used for.”

Any negative findings from the audit will be forwarded to Texas Attorney General Ken Paxton. His office did not return calls Thursday seeking comment.

Misuse of the fund could result in fines up to $100,000 for the DA’s office or an individual. In rare instances, criminal charges could be filed, but Helms doubts that will happen.

The state auditor’s letter to Hawk also said investigators will request a list of outstanding lawsuits and settled “during a period to be determined.” The state report could be issued as early as May.