After Congress sharply restricted the use of earmarks, Safety Net's funding stopped, and the nonprofit closed last year.
Safety Net received $771,137 in Fattah-sponsored federal earmarks between 2009 and 2011, and $365,000 from the Pennsylvania Commission on Crime and Delinquency, the audit said. In all, the audit said, 62 percent of Safety Net's spending of federal funds was unallowable, unsupported, or unreasonable.
The audit said the review was forwarded to the inspector general's investigations division, which according to its website, develops "cases for criminal prosecution, civil, or administrative action."
Jones, 50, who was a City Council candidate in 2007, said he and the auditors had a "different interpretation of the regs" governing the spending of public dollars.
"Not to disparage the Department of Justice, we kind of differ on a number of things," Jones said in an interview Wednesday.
Jones - who said he worked with Fattah for 10 years, both in Washington and when Fattah was a state senator in the 1980s - stressed that the audit was a civil matter, not a criminal issue.
"We are not under some criminal focus. There's a difference," he said.
When asked about the audit's statement that information had been passed to the investigations division, he said he had been unaware that the division handled criminal probes.
Jones said State Sen. Vincent Hughes (D., Phila.) "shepherded through" a request for state grants from the Pennsylvania Commission on Crime and Delinquency.
Jones used some of the public funds for his own expenses, the audit said. It said he did not repay Safety Net for $2,218 in personal spending in 2009, including paying off $393 in parking tickets, a $286 hotel room, and cash withdrawals totaling $1,149. The audit also said Jones used $1,171 in state funds in 2008 to pay for clothing and restaurant bills.
Hughes spokesman Ben Waxman said the senator "played a role in securing funding" for Safety Net because he believed it was important to help stem Philadelphia gun violence.
He said there was "no indication that funds would be misspent" when state grants were requested.
Fattah's chief of staff, Maisha Leek, said in a statement that "Safety Net took more guns off of Philadelphia streets than any other effort ever."
The statement also said Safety Net "should correct any shortcomings pointed out by the audit."
Jones said Safety Net took 3,500 guns off the streets.