Of the $20 billion in New Jersey Sandy aid approved by Congress and the Obama administration, the Department of Housing and Urban Development earmarked $25 million for the state to spend on a marketing campaign to promote the Shore.
The Christie administration awarded what Pallone said was a $4.7 million contract to a firm that featured the governor and his family in ads promoting the rebuilding effort at the Shore.
"We're stronger than the storm," Christie declared in the ads.
The second-highest bidder offered $2.5 million "for similar work," according to Pallone. It did not plan to feature Christie in its ads.
In an Aug. 8 letter to HUD's inspector general requesting an investigation, Pallone wrote: "It is inappropriate for taxpayer-funded dollars that are critical to our state's recovery from this natural disaster to fund commercials that could potentially benefit a political campaign."
Pallone said Monday the Office of Inspector General had conducted a preliminary review of the matter and had decided to proceed with a full audit.
Ian O'Connor, a spokesman for HUD's Office of Inspector General, said, "We can neither confirm nor deny investigations taking place."
Christie spokesman Colin Reed said in a statement that the review was "routine and standard operating procedure with all federally allocated resources," and that the ad campaign was approved by the Obama administration.
"We're confident that any review will show that the ads were a key part in helping New Jersey get back on its feet after being struck by the worst storm in state history," Reed said.
MWW, the advertising firm that won the state contract, disputed the assertion that it had promised to star Christie in its ads.
"The decision to include the governor was arrived at after the contract was awarded, based on timing, availability, and federal expenditure rules," the company said in a statement.
The company also said that after accounting for all labor, production, and advertising costs, its bid came in lower than any other firm's.
Critics have nevertheless seized on the issue.
Barbara Buono, the Democrat who lost to Christie in November, accused the governor during the campaign of appearing in thinly veiled campaign ads. After the Asbury Park Press reported on the bids in August, Buono stood before a Sandy-ravaged house and called on Christie to give $2 million of his campaign money to victims of the storm.
At legislative hearings, residents who had not been able to return to their homes said they had grown weary of the ads.
In November, Sen. Rand Paul (R., Ky.), who like Christie is weighing a run for the presidency in 2016, called the New Jersey governor's appearance in the taxpayer-funded ads "offensive," though he did not mention Christie by name.
Yet the campaign was popular with tourism officials and even some Democrats.
"As that campaign grew legs, we started to make up the losses," said Diane F. Wieland, director of the Cape May County Department of Tourism.
Christie, she said, had a "superstar attraction" that helped send the message to tourists that beaches in Cape May were open.
Sea Bright Mayor Dina Long, a Democrat who endorsed Christie for reelection, said she didn't object to his appearance in the ads. "As the face of Sandy during the crisis, I understand the logic of making him the spokesperson to say, 'The Shore is open for business,' " she said.
Also Monday, Christie's office released a report by MWW that said a number of indicators - including hotel tax receipts and beach-pass sales - showed that the "Stronger Than the Storm" campaign helped fuel a better-than-expected summer at the Shore.
The federal probe, first reported by CNN, comes as state lawmakers are investigating and the U.S. Attorney's Office is reviewing the bridge scandal that enveloped Christie last week.
Documents emerged indicating that at least one member of Christie's senior staff and at least one of his appointees at the Port Authority of New York and New Jersey conspired to shut down two of the three access lanes from Fort Lee to the George Washington Bridge in September in an apparent attempt to punish the borough's mayor.
Fort Lee Mayor Mark Sokolich, a Democrat, did not endorse Christie for reelection.
Two top Christie appointees at the Port Authority have resigned, and last week he fired his deputy chief of staff and severed ties with his former campaign manager.
Inquirer staff writer Maddie Hanna contributed to this article.