Romano Loielo, the mayor of Nardodipace in southern Calabria, was placed under house arrest on Tuesday along with the son of an 'Ndrangheta mafia boss and two local businessmen, Il Fatto Quotidiano reported.
His wife is also among 12 other people, including a local councillor and his wife, who were given orders to present themselves to police in connection with the alleged fraud involving funds that were intended to be used to pay for training courses.
The 43-year-old, also a financial police officer who had been on leave for several years, was first elected mayor in 2007 but his administration was dissolved due to suspected mafia infiltration in 2012.
He later won an appeal, which enabled him to compete in and win elections in 2013.
The 1,200 residents in Nardodipace have the lowest per capita income in Italy.