Fraud and forgery-related charges have been stayed against Geraldine Cockerill, the mayor of Leaf Rapids, Man.
Cockerill, 57, had faced a total of 28 charges related to her employment at the northern town's post office.
The RCMP launched an investigation after complaints surfaced that government cheques had been forged.
All the charges against Cockerill were stayed by the Crown during a court hearing in Thompson, Man., earlier this month.
Police claimed they had received several complaints in May 2010 by Canada Post and federal Employment and Income Assistance officials.
Investigators said they identified a number of fraudulent transactions, including forged signatures on employment and income assistance cards and cheques.
After she was arrested in December 2012, Cockerill told CBC News she believed the case stemmed from a misunderstanding involving an individual who was not living in Leaf Rapids anymore.
Cockerill has been the mayor of Leaf Rapids, located about 750 kilometres by air northwest of Winnipeg, since the fall of 2010.