It’s not good news for the Prime Minister, who has been under increasing pressure to reveal who initially covered the costs of the work, although he repeatedly says he has paid.
For while the Electoral Commission’s (EC) role normally just involves investigating political parties, it can also extend its powers to cover people when it has “reasonable grounds to suspect that a person has failed to comply with the law” on party finance.
The Prime Minister could now face being asked personally for relevant documents and information – and a failure to comply, or indeed any “intentional obstruction” are regarded as criminal offences and could lead to prosecution.
Dominic Cummings, Mr Johnson’s former chief adviser, could also find himself with an enforcement order asking for all the information he holds on the matter.
He has already claimed the Prime Minister intended to have Tory donors “secretly pay” for the refurbishment of the official Downing Street flat, and has described the handling of payments for the redecoration as "unethical, foolish and possibly illegal”.
Mr Cummings said they “almost certainly broke the rules on proper disclosure of political donations if conducted in the way he intended”.
Now the EC has said it believes there are “reasonable grounds to suspect that an offence or offences may have occurred” and will attempt to establish if that is indeed the case.
So what could happen if the investigation finds that Mr Johnson and/or the Conservative Party failed to meet their obligations in the declaration of funding?
It the political watchdog is satisfied “beyond reasonable doubt” that an offence has been committed, it could impose a financial sanction ranging between £250 and £20,000 depending on the severity of the offence and it can, if appropriate, refer the matter to the police.
When the investigation is into an “impermissible or unidentifiable donation or loan”, it can also apply to the courts under civil law to “seek forfeiture of an amount equivalent to the donation or restoration of the loan”.
How the EC decides on a sanction depends on a number of factors relating to how the offence occurred, the seriousness of the offence, the extent to which it was “inadvertent, reckless, or deliberate” and any financial gain or advantage to the person concerned.
The decision also depends on any "deliberateness, dishonesty, deception or misrepresentation by the person concerned when committing the offence”, and the “acceptance or otherwise of responsibility for the offence” and whether the matter was “voluntarily reported”.
While it will generally only sanction where it is “appropriate to do so to meet our enforcement aim and objectives” or indeed when it is in the public interest, the EC says once a final notice is imposed, the person or party involved can no longer be convicted of the offence.
Any potential sanctions remain a long way off and the full investigation may not even lead down that path.
But despite Mr Johnson’s protestations at Prime Minister’s Questions, there are many outstanding questions around the funding of the refurbishment, and the whole story may well only be revealed through the EC’s investigation.