HOUSTON -- Note: The following story is a verbatim transcript of a Troubleshooters story that aired on Wednesday, July 5, 2006, on KPRC Local 2 at 10 p.m.

Dozens and dozens of animals are stuck in the city's shelter and most will never leave there alive. Now, some say there is a bigger problem at the pound that's causing more and more pets to be put down.

KPRC Local 2 Troubleshooter Stephen Dean has more on the money concerns that could be costing lives.

These dogs were up for adoption as our hidden cameras went inside the city of Houston dog pound.

A city task force reported nine months ago that only 20 percent of the animals that are brought in ever make it to these cages. The rest are put down.

Michelle Haberland euthanized hundreds when she worked at the pound and she blames the way money is being spent by pound leaders.

"They just seem to want to pour their money down the drain," she said.

She says families who are adopting new pets from the city are often bringing them back, dying after a few days in their homes.

"They come back and they return them because they have distemper or parvo, and you have to look those people in the face and say, 'I'm sorry. I don't know what else to say. The city is not giving us the money that we need to buy the drugs that we need to treat these animals,'" Haberland said.

But here's what the city does have money for -- new cement sculptures in the lobby and contemporary pet artwork worth nearly $2,000. The city says the money comes from another account. The goal: to make the pound seem friendlier for those who want to adopt.

"I'm sure that it does have a warming effect when people come in. But if there are no animals there to adopt because they're all dead of their upper respiratory infection or because we've had to euthanize them because they're sick, the artwork gets us nowhere," Haberland said.

But the questionable spending doesn't stop in the lobby. Our hidden cameras found this city veterinarian -- the man in blue. He and two other vets on the city payroll aren't allowed to handle a key job they've always performed at the pound.

"In this day and era of having to do more with less, this sounds like this is a situation where we're doing less with more," Houston City Councilman Jarvis Johnson said.

The three city vets aren't allowed to perform surgeries like this, to spay and neuter pets to make them ready for adoption.

The city says they're now focused on routine health care for animals. Now, tens of thousands of dollars are being paid to an outside firm for neutering.

So, is the city paying twice?

"If we lessened the load or lightened the load of those vets, did we lighten their pay along with it? And if that didn't take place, then we certainly need to take a look at it," Johnson said.

City records show this $23,000 contract and invoice after invoice, from $2,700 to $11,550 for those surgeries to be performed by this man's organization.

"We never entered into an arrangement as a profit center," said Sean Hawkins, the president of Saving Animals.

Sean Hawkins was a longtime associate of the city pound leader who offered him this contract.

"It's certainly never been viewed by our organization as a cozy relationship or an insider relationship," Hawkins said.

"How does that happen? They suddenly come along, this agency that is historically underfunded, and they say, 'Hey, we got this money for your outfit if you can come in here and do this for us?'" KPRC's Stephen Dean said.

"That's a cheap shot. That's not what was said," Hawkins said.

Hawkins says his group specializes in spaying animals from Mexico and other private shelters in Houston so his team can spay more of Houston's animals, leading to a higher adoption rate.

But he admits Saving Animals is only spaying city animals two days a week instead of the four days a week the city vets used to handle at the pound, known as BARC.

His group is bringing outside animals to BARC for surgery on the other days and former pound worker Haberland says the city is paying for some of the supplies, something Hawkins denies.

"BARC has so little to give to the animals that we pick up. We give them so little and yet what we do have, we give away. I was appalled," Haberland said.

"There was a need and we were able to, within a week or so, to put a team together and step in and provide these services, and frankly, save the lives of thousands of animals," Hawkins said.

Health Department director Stephen Williams just hired a brand new manager for the pound. Kent Robertson has been on the job two weeks.

"Our expectations are going to be high. The bar is being raised," Robertson said.

Tonight, the new pound boss says he's asked a staff member to look into the vets being paid not to do surgery. But that staffer was once on the payroll at that private group, Saving Animals.