The Victorian Ombudsman has questioned staff and seized files from the state's new water agency as part of an investigation into multimillion-dollar taxpayer-funded contracts awarded without public tender to former National Party advisers, retired public servants and other consultants.
Ombudsman George Brouwer's involvement poses a political risk to Water Minister and senior Nationals MP Peter Walsh, whose office has overseen the development of the Office of Living Victoria, an agency at which three former National Party ministerial advisers were placed in top jobs that were never advertised.
Mr Walsh's office has declined to say whether the minister or any of his staff have been interviewed by Mr Brouwer's investigators.
The Age believes the Ombudsman began examining the OLV late last year. A spokeswoman for Mr Brouwer on Monday declined to discuss whether there was any investigation of the OLV.
However, The Age has spoken to several sources aware of the probe, which has involved the Ombudsman's investigators questioning several past and present OLV staff.
Victoria's Auditor-General John Doyle has told opposition water spokesman Martin Foley that he was considering acting on Labor's request for an examination of the OLV's use of public funds.
Mr Doyle also suggested he might refer concerns about the OLV to Victoria's most powerful anti-corruption watchdog, the Independent Broad-based Anti-corruption Commission.
''I should also inform you that VAGO is obliged to inform IBAC when it becomes aware of conduct that appears to be corrupt and may do so in this matter,'' he wrote in a letter to Mr Foley.
One of the former National Party advisers, Simon Want, was paid hundreds of thousands of dollars as a consultant to develop the Victorian Coalition's water policies in 2011 and 2012 before being appointed head of the OLV in March last year. His job was not advertised.
Before his appointment as OLV head, during his time as a consultant in 2011 and 2012, Mr Want helped draft speeches for Mr Walsh. Part of an invoice lodged by Mr Want for his 2012 consultancy work was paid out of Mr Walsh's office budget.
Scientist Peter Coombes worked closely with Mr Want in 2011 and 2012 on drafting the policies that led to the formation of the OLV. After receiving hundreds of thousands of dollars for his consultancy work, Dr Coombes was made OLV chief scientist last July on a two-year $1 million contract. His job was not advertised.
The man who oversaw the appointments of Dr Coombes and Mr Want, former senior bureaucrat and BHP Billiton executive Mike Waller, led a 2011 ministerial council on the OLV that reported to Mr Walsh. Mr Waller became the OLV's second chief executive in March last year. He replaced the initial CEO, former Melbourne Water executive Chris Chesterfield, who resigned in 2012 after only months in the top job.
The OLV has courted controversy since its 2012 establishment by forcing Victoria's water authorities and corporations to move to increased stormwater collection and water recycling based on modelling prepared by Dr Coombes.
Several senior Victorian water industry figures have fallen out with leading OLV figures and privately question the agency's procurement methods and unwillingness to subject its scientific and economic modelling to independent peer review.
The Age revealed on Monday how the OLV used $3 million from a community projects fund in 2012 to pay its consultants and renovate a city office. Mr Foley said the Ombudsman's probe showed ''the Water Minister's pet project of shonky deals for National Party mates has come unstuck''.