The controversy over the refurbishment of Boris Johnson’s Downing Street flat was given fresh fuel when the Electoral Commission announced there were “reasonable grounds” to suspect an offence may have occurred.

Here is a look at what the watchdog will be investigating and what the renovations row is about.

– What will the Electoral Commission do next?

The body that monitors party spending said there were “reasonable grounds to suspect that an offence or offences may have occurred” during the financing of the revamp of the Prime Minister’s No 11 flat, with a formal investigation established to probe further.

“The investigation will determine whether any transactions relating to the works at 11 Downing Street fall within the regime regulated by the commission and whether such funding was reported as required,” a commission spokesman said.

– Does the watchdog have power to act if there has been wrongdoing?

There are a range of powers the commission has at its disposal, including referring investigations to the police for the worst offences.

According to its policy document, the watchdog can issue fines of up to £20,000, with most cases deciding whether to impose a sanction if it is satisfied beyond reasonable doubt that an offence has occurred.

But it can also refer investigations under the Political Parties, Elections and Referendums Act 2000 to the police or prosecutors.

Investigators can demand documents, information and explanations, and could potentially seek a statutory interview with the Prime Minister as part of the process.

– What does the Prime Minister have to say about all this?

Mr Johnson has continued to protest his innocence, telling the House of Commons on Wednesday he “paid for Downing Street refurbishment personally”.

– So what’s the problem then?

Questions have been mounting since former aide Dominic Cummings accused Mr Johnson of wanting donors to “secretly pay” for the renovations to his No 11 residence in a “possibly illegal” move.

Reports have also suggested that the Conservative Party loaned the Prime Minister the money and that he is now repaying the party.

The Government said on Wednesday that the newly-appointed independent adviser on ministers’ interests Lord Geidt will look into the details of the renovations and “advise the Prime Minister on any further registration of interests that may be needed”.

– What sort of cash are we talking about here for the renovations?

Some reports suggest the upgrades at No 11 hit the £200,000 mark, well above the £30,000 annual allowance prime ministers receive to renovate their Downing Street residency.

Last week, the Daily Mail published details of an email from Tory peer Lord Brownlow in which he said he was making a £58,000 donation to the party “to cover the payments the party has already made on behalf of the soon-to-be-formed ‘Downing Street Trust’”, a development that has added credence to the reports of a party loan being involved.

– How could the Prime Minister have spent so much?

According to the Mail, Mr Johnson told aides he could not afford the revamp of his living quarters as the costs started to spiral.

The newspaper reported that he had said the cost was “totally out of control” and that his fiancee Carrie Symonds was “buying gold wallpaper”.

When aides asked the Prime Minister how much the upgrades were costing, Mr Johnson is said to have replied: “Tens and tens of thousands, I can’t afford it.”

The company Soane, co-founded by Lulu Lytle and said to have been commissioned by Ms Symonds, has wallpaper on its website in “old gold” and “yellow gold”.

Ms Symonds, 33, reportedly saw the lavish Downing Street overhaul as necessary to rid the Prime Minister’s residence of the “John Lewis nightmare” left behind by former occupant Theresa May, according to Tatler.