The case centres on questions over clothing expenses claimed by Audrey Wales, 80, who was mayor between 2016 and 2017.
The Ballymena councillor spent more than £2,300, but the council did not disclose the full cost when asked for details in an FoI request.
Instead its response in 2019 said Wales had spent just £190.
The entire bill was only revealed in a second FoI in 2022.
In a statement in 2022, Wales said she had sent a cheque in 2019 reimbursing the council for most of the spending to stop “electorally motivated questions”.
The cheque was received by Donaghy, but was never cashed.
Wales, who sent a second cheque in 2021 upon learning the first had not been processed, said that “at all times” she acted in line with “guidance from council officials”.
The council in 2022 commissioned a Belfast-based firm to conduct an investigation.
It found the council’s FoI response involved “a deliberate manipulation”, according to a copy leaked to the Belfast Telegraph., external
Donaghy has previously denied being involved in discussions about the FOI and said an email she sent referring to the cheque showed that she intended to cash it.
When asked at the time whether it was examining the case, the PSNI said detectives were continuing to “investigate suspected offences of misconduct in public office and under the Freedom of Information Act 2000”.
In an update, a PSNI spokesperson told News NI: “A file was submitted to the PPS in January 2025 concerning this investigation in respect of two females aged 56 and 42, and a 57-year-old man.”
It is understood the investigation file relates to alleged offences including misconduct in a public office.
The PPS does not comment on any evidence in a file while it remains under consideration.
The case emerges after Donaghy was on Wednesday convicted of two charges connected to deleting or attempting to delete an email to prevent disclosure under the Freedom of Information Act.
The 56-year-old, of Clonmore Road, Dungannon, was fined £1,500. She was cleared of a third charge of trying to have an email deleted.