The Local Government Authority (LGA) has suspended Thinadhoo city Mayor Saud Ali and Deputy Mayor Nasrullah Ali.
LGA said Saud was suspended for three months, while Nasrullah was suspended for one month.
The authority further advised the remaining councillors and urged them to refund the money they have allegedly taken illegally.
LGA Director Ali Abdullah Rasheed told a news conference on Wednesday that the decision was taken after an inquiry into 19 cases received from government agencies and the public.
He said that statements were taken from council members and administrative employees and documents related to the cases were obtained for the inquiry.
The complaints investigated by LGA include the council's failure to respond to government agencies, disobedience of orders and abuse of office.
Some councillors were also accused of taking undue salaries and allowances, while the mayor was accused of depositing funds into his account.
While the mayor and deputy mayor were suspended, council members Ahmed Waheed, Aminath Naseema, Ahmeema Ahmed and Mohamed Zaleef Abdulla were cautioned.
LGA has also decided to advise the city's women's development committee chairperson Jeeza Hassan to return the allowance and other funds she allegedly took unlawfully.
Mayor Saud told Adhadhu on Wedensday that they were suspended due to political reasons and the council was prepared for the judicial process.
"In fact, this is a political attempt by the Local Government Authority to discredit the council. The Local Government Authority is no longer an administrative body. It is a political body," Saud said.
He alleged that most of the complaints were submitted by Thinadhoo North MP Saudullah Hilmy ahead of the upcoming local council elections.
Saud denied the accusations, but admitted that some administrative improvements can be brought to the council operations.
Meanwhile, the main opposition Maldivian Democratic Party (MDP) condemned their suspension "to discredit the council."
In a press release, the MDP said the decision was taken to deprive MDP councillors of their powers before next year's local council elections.
