The action affects an $850,000 state grant the city was to use to construct a bike path and walking trail system.
Randy Battey, assistant chief engineer of operations at MDOT, tells The Commercial Appeal (http://bit.ly/Agugx6) that the funding will be delayed "until the city gets a clean bill of health from the state auditor's office."
In November the auditor's office announced that Davis had to repay about $170,000 to the city for unauthorized charges to both his city-issued and personal credit cards.
Southaven Planning Director Whitney Choat said if the investigation continues for another two years, the city could lose the funding.
"This news is disheartening because we also want to be good stewards of taxpayer money by providing residents with amenities that provide a better quality of life," Choat said. "It is sad that it has come to this."
She added that the funding delay will affect three other road projects in the city.
Lisa Shoemaker, a spokeswoman for Mississippi Auditor Stacey Pickering, said she did not have a timetable on when the Davis investigation would be completed.