Prime Minister Scott Morrison has backed minister Bridget McKenzie over the sports grants scandal, but has confirmed the Attorney-General is looking at legal issues raised in the audit report.
The audit office has found that while Senator McKenzie was sports minister, her office ran its own "parellel" process for assessing community sports grants, taking into account whether grants were in seats held by the Liberal or National parties, or in Labor seats that were to be targeted at the 2019 election.
"I endorse ministers running programs that change local communities for the better," Mr Morrison said on Monday.
Asked by reporters if he saw anything wrong with Senator McKenzie over-ruling recomendations made by the agency Sports Australia, the Prime Minister said none of the projects given funds were ruled ineligible.
"What the minister did was to actually ensure that more Labor seats actually received funding under the grants program than they would have otherwise done under the recommendations and the advice that was provided by Sports Australia," Mr Morrison said.
"Now, I stress that Sports Australia cut the cheques and authorised then those payments based on the decisions that were taken, which were done in accordance with the rules."
The report raised questions over whether the minister was legally allowed to approve the grants, which Mr Morrison said he had asked Attorney-General Christian Porter to look into.
Earlier on Monday Mr Morrison said he wasn't aware of advice taken from campaign strategists or Liberal Party head office over the grant program.