NEW YORK (AP) – Christine Quinn was widely thought to have a shot at becoming New York’s first female and openly gay mayor, but her ascent to the top may be complicated by revelations that the city council, under her leadership, allocated millions of dollars to fake organizations.

Quinn admitted last week that the council has appropriated some $17.4 million dollars since 2001 to groups that didn’t exist, listed in the budget under made-up names like the Coalition for Strong Special Education and Senior Citizens for Equality.

Quinn, who is considered a likely Democratic mayoral candidate for the race to succeed Mayor Michael Bloomberg next year, has tried to make open government a hallmark of her agenda. With federal and city investigators now looking into the fake funding and other council finance issues, she could end up paying the political consequences.

Political analysts said the scandal would let opponents raise questions about her leadership and fiscal competence. Those are traits that will be particularly important as city voters elect a successor to take over from Bloomberg, a billionaire businessman who has been praised for his handling of the city’s finances and who has enjoyed high approval ratings in his second term.

Doug Muzzio, professor of public affairs at Baruch College, said Quinn’s opponents could have a potentially powerful weapon to use against her.

“They’re going to say, implicitly or explicitly, ‘How can she expect to run an operation with a $60 billion budget plus a couple hundred thousand employees if she can’t control her own shop?”” he said.

The Democratic field is expected to be crowded next year, with a potential mix that includes U.S. Rep. Anthony Weiner, City Comptroller William Thompson Jr. and Brooklyn Borough President Marty Markowitz. Possible independent and Republican challengers include Police Commissioner Ray Kelly and billionaire businessman John Catsimatidis.

Quinn, who is in her third year as speaker of the 51-member council, is the third council speaker since 1989, when the position was created. It is widely considered to be the second-most powerful seat in city government, largely because of its influence over budget matters.

In addition to possible attacks from political opponents, Quinn may get heat from other directions. A nonpartisan budget watchdog group on Friday said there was “no excuse” for hiding public funding, and laid the responsibility on Quinn.

“All elected officials bear responsibility for the budgets that they adopt, and Speaker Quinn, in particular, should be held accountable for the City Council’s fiscal practices,” the Citizens Budget Commission said in a statement.

After the story was first reported in the New York Post last Thursday, Quinn said she first learned about the practice of faking budget appropriations last spring while working on the fiscal 2008 budget plan.

The maneuver of setting aside what she called “reserve funds,” which could then be doled out later in the year, dates back at least 20 years, she said. Using phony names to conceal where the money was going goes back to 2001, she said.

She insisted that she ordered an end to the reserve fund practice when she learned of it, but said her staff kept doing it anyway.

She said she did not know it was still going on, and that bogus names had been faked in the budget, until a few months ago when the council was pulling together information at the request of federal and city investigators for a broader probe into council finances.

“I was obviously deeply troubled when I found out about this information. I had no knowledge of it,” she said. “It’s something that I believe is completely inappropriate and should not have gone on and will no longer go on.”

Democratic stragetist Hank Sheinkopf said she was smart to cast herself as trying to halt the shady budgeting practice, and if her story ultimately proves true, it lessens the political fallout for her in a mayor’s race.

“If she’s successful in portraying herself as the one who blew the whistle, she will be well-positioned,” Sheinkopf said. “A year in politics is a long time – the public may very well forget about this and see her as a victim of a staff that didn’t listen.”

Quinn’s tenure in City Hall has been noted for the way it changed the tone between the speaker’s office and the mayor, a political relationship that historically is characterized by high drama and animosity.

Asked last Thursday about the practice of concealing money in the council budget, Bloomberg said he was not aware it was going on and said he would not have signed budgets if he knew they included fake appropriations.

However, two of his aides who deal with budget and council matters used to work in the City Council finance division before joining his administration.

It’s likely some on Bloomberg’s staff knew about the process of setting aside “reserve funds” but it’s unclear whether they were aware that millions were being appropriated that way or that fake names were being used.