A federal minister has refused to apologise despite the auditor-general finding she awarded grants from a $100 million fund based on electorates the coalition wanted to win, rather than merit.
The independent review of the community sports grant program has slammed the government's use of the fund, finding most of the grants were awarded in seats targeted by the coalition during last year's federal election campaign.
Former sports minister Bridget McKenzie was in charge of approving the grants, but the audit has questioned whether she had the legal authority to do so.
The report found that instead of choosing programs based on work done by Sport Australia, Senator McKenzie's office used a parallel assessment process.
The now-Agriculture Minister defended the successful applications, saying they were eligible to apply.
"No rules were broken," Senator McKenzie said.
"Every single one of those 684 projects that were funded was eligible for funding under the guidelines.
"I would have loved to have nearly $400 million to have funded every single eligible project across the country."
The audit was sparked by Labor after Liberal candidate Georgina Downer doled out a $127,000 cheque for a local bowling club in South Australia as part of the program during the election campaign.
Nine of the 10 electorates approved to receive the most money were either marginal seats or ones being eyed by the coalition.
These seats would have received less funding if Sports Australia merit assessments had been used.
More than 60 per cent of applications were funded despite not reaching the necessary assessment score.
Nine of the 10 electorates that received the least funding were Labor seats and "safe" government seats.
Labor has called for Senator McKenzie to resign, which the deputy Nationals leader rubbished.
"That is absolutely ridiculous," Ms McKenzie said.
"This is a highly successful program that's delivering real benefits on the ground to community sporting clubs."
Opposition frontbencher Tony Burke said he's never seen an auditor-general's report with such a finding, while deputy Labor leader Richard Marles called for an apology from Prime Minister Scott Morrison.
"Scott Morrison was not making decisions about community sport, he was making decisions about saving the Liberal Party," Mr Marles said.
"He owes an explanation to the hundreds of sporting clubs around Australia today about why he ignored their interests in favour of saving his own political skin.
"Scott Morrison is not a prime minister for all Australians. He's just a Liberal Party hack."
Independent MP for Warringah Zali Steggall said it shows Australia needs a national integrity commission with "real powers".
The Greens are seeking support for a senate inquiry into the issue.
Labor senator Don Farrell said the opposition would use "all of the processes available to us in parliament" to pursue the matter.
Australian Associated Press