Word of the investigation comes on the heels of last week's revelations concerning the apparently retaliatory lane closures leading to the George Washington Bridge that caused four days of massive traffic jams in Fort Lee.
CNN said federal officials are investigating whether Christie improperly used relief aid in tourism ads that featured him and his family.
News of the investigation came days after Christie dismissed two top advisers for their roles in the George Washington Bridge scandal in which his staff is accused of tying up traffic near the nation's busiest bridge in retaliation for a Democratic mayor's refusal to endorse Republican Christie's re-election bid.
Last week, Christie fired the two top aides for their alleged involvement in closing down access lanes to the George Washington Bridge in Fort Lee, N.J., last year, snarling traffic for four days. Christie said he was unaware of the action and he was "embarrassed and humiliated."
That scandal prompted two investigations.
A New Jersey State Assembly committee is investigating whether the aides ordered the lane closures as retribution. The U.S. attorney in New Jersey also opened an investigation, and Monday the Wall Street Journal reported meetings arranged between Christie's top commissioners and Jersey City Mayor Steve Fulop were abruptly canceled without reason in July.
Although the cancellation of meetings did not concern the bridge closings, they provide evidence of Fulop's claim he was cut off from the Christie after declining to endorse him, the report said. Documents obtained by the Wall Street Journal show scheduled meetings between Fulop and the Christie administration were canceled by state commissioners, the newspaper said.
Coupled with the bridge scandal, if the federal investigation into the Sandy funds finds any wrongdoing, Christie's national ambitions -- and a potential White House bid in 2016 -- could be severely damaged. The governor's actions during and after the super storm was widely considered a demonstration of his no-nonsense political brand.
In the new inquiry, federal auditors will look into New Jersey's use of $25 million in Sandy relief funds for a marketing campaign promoting tourism on the Jersey Shore after Sandy laid the state's coastline to waste in 2012, New Jersey Democratic Rep. Frank Pallone told CNN. Pallone, a Christie critic, said he asked the Department of Housing and Urban Development in an August letter to examine Christie's choices for spending the HUD-approved marketing funds.
CNN said neither the governor's office nor the HUD inspector general's office responded to a request for comment.
In the letter, Pallone said he was concerned about the bidding process for the firm awarded the marketing plan because the firm awarded the bid was charging New Jersey about $2 million more than the next lowest bidder. The winning $4.7 million bid featured Christie and his family in the ads while the losing proposal did not.
On Sunday, Pallone told CNN the inspector general's preliminary review determined there was enough evidence to begin a full-scale investigation.
"This was money that could have directly been used for Sandy recovery. And, as you know, many of my constituents still haven't gotten the money that is owed them to rebuild their homes or raise their homes or to help," he told CNN.