The Ministry of Maori Development says it is satisfied that a trust with links to the Mongrel Mob has fulfilled the requirements for funding it received under Whanau Ora.
Four members of the We Against Violence Trust have been charged with misuse of $20,000 in Government funding.
The Dunedin police say the four are known Mongrel Mob members.
The names of the men, three of whom have also been charged with cannabis-related offences, are on an official document of the We Against Violence Trust.
The ministry, Te Puni Kokiri, says the organisation is a registered charitable trust based in Dunedin and has secured contracts worth close to $50,000.
The police investigation is looking at $20,000 of funding paid out under the Whanau Ora health and social services delivery programme.
The ministry says the application was subject to the full range of due diligence and the current information has since been reviewed.
It says the appropriate documentation is in place and is of sufficient standard to justify the payments so far.
However it says it is now examining the outcomes expected of the trust to "further assure" itself the money's been spent appropriately.
Whanau Ora Minister Tariana Turia confirms the matter is under police investigation. She says her department is looking into it, but has assured her they were unaware of any misappropriation.
Ms Turia has acknowledged the programme is risky, but she says if funding is too tightly targeted it will not reach the people who need it most.
Mrs Turia says the whole point of Whanau Ora is to get the money to the most vulnerable families.
New Zealand First leader Winston Peters, however, says Whanau Ora money is being wasted on pet projects of the Maori Party and should be wound up.
Mr Peters says the Whanau Ora programme is open to abuse, and should be closed down.