The $54 million neighborhood recovery initiative was set up during and after Chicago's murderous summer of 2010 while Gov. Pat Quinn was running for re-election.
"We've got to make sure we have programs to protect the public safety," Quinn said. "And make sure we don't have violence."
But a state audit concluded that the program was poorly managed. Some of the recipient programs serving violence-wracked neighborhoods paid salaries to politically connected individuals, including Cook County Circuit Clerk Dorothy Brown's husband and State Representative Will Davis' wife.
"Unfortunately, we've seen this story before," said Bruce Rauner, republican candidate for governor. "It tends not to end well."
Rauner said the program was a "political slush fund."
"It's a sad day for Illinois that we have yet another governor under federal investigation for corruption," Rauner said.
A comptroller's office spokesman said investigators were sent lists of vendors contracted by the program.
A Quinn spokesman said the administration identified the problems two years ago, disbanded the agency and re-assigned its responsibilities.
"We fully support it," Quinn said about the federal inquiry. "We have zero intolerance for any mismanagement at any state agency."