UPDATE: Coakley is scheduled to make an 11 a.m. announcement, and it's almost undoubtedly going to be that she is running.

Massachusetts state Attorney General Martha Coakley (D) could have some problems on her hands as she prepares for a run at Sen. Ted Kennedy's (D-Mass.) seat.

The Boston Herald reports today that she appears to have used state campaign funds on her potential federal candidacy, which, at the least, occupies a gray area of campaign finance law.

Attorney General Martha Coakley, the first Democrat to pull nomination papers in a potentially packed race for U.S. Senate, spent $24,000 from her state campaign account on consultants in the past two months even though she faces no challengers for the 2010 attorney general race.

The spending comes after Coakley faced scrutiny earlier this year for spending $25,000 out of her state account on a poll asking questions about her potential federal campaign. Coakley said at the time that a portion of the poll was paid for with a legal secret account held to test the waters for a federal race. Candidates for U.S. Senate can only use money collected by their federal campaigns toward federal races, according to elections law.

Alex Zaroulis, head of Coakley’s communications for the Senate run, said yesterday she was paid $2,000 from Coakley’s state account because she was originally hired for the attorney general’s race.“There is nothing unusual about starting to prepare for the 2010 election which is only a year away. I’m sure other candidates for statewide office have begun preparing as well,” said Zaroulis yesterday in an e-mailed statement when asked about the consultant expenditures. Coakley spent about $8,000 on consulting fees during the same time period in 2005 before her first run for the attorney general’s office.

Other consultants Coakley recently paid out of her state account include $9,000 to 4C Partners, a Washington D.C. consulting company, and $4,000 to Factotum, a Westford company headed by Democratic operative Gus Bickford.