The council has already retained a lawyer, Robert Bennett, to probe Barry's hiring of his girlfriend last year. In a letter to Council Chairman Vincent Gray last week, Councilwoman Muriel Bower suggested expanding the ethics investigation to include Barry's role in getting $300,000 in city money for the National Association of Former Foster Care Children of America, The Washington Post reported.
The Post said it has documents showing two employees of the association accuse the executive director, Louis Henderson, of "unethical" conduct involving another grant for $291,000.
Barry released a statement Tuesday defending his actions.
"What's going on with Mr. Henderson and the employees don't have anything to do with the community investment that the program was working on," he said.
Barry has long been a lightning rod in Washington politics. He served as mayor from 1979 to 1991 and 1995 to 1999.
His first stint as mayor ended with an arrest on drug possession charges that led to a short federal prison term for crack cocaine.