Prosecutors will be asked to decide whether a Police and Crime Commissioner should be charged with false accounting in the 2015 general election.
Conservative Devon and Cornwall PCC Alison Hernandez was responsible for election spending in Torbay, Devon.
Activists were brought in to campaign from the Conservatives' battle bus, the expenses for which were not declared locally.
Ms Hernandez has always denied any wrongdoing.
Expenses for activists brought in to campaign in Torbay were declared nationally, but critics said they should have been part of local spending returns.
Police watchdog the Independent Police Complaints Commission (IPCC) is to send the case file to the Crown Prosecution Service, the BBC has learnt.
Detectives from West Mercia Police investigated and produced a file for the IPCC.
Andrew White, chief executive for the office of the Police and Crime Commissioner, said: "This referral does not prevent the commissioner from holding the position of PCC.
"If a charge is brought this remains the case - it would not prevent her from remaining in office.
"I am certain that some will see this as a significant stage in the investigation but in British justice an individual is innocent until proven guilty in a court of law."