Prime Minister Scott Morrison has referred Bridget McKenzie's alleged misuse of a $100 million sports grant program to Prime Minister and Cabinet secretary Phil Gaetjens to investigate.
In a statement late on Wednesday, a spokesperson from Mr Morrison's office confirmed he had referred the minister to the department over a possible breach of ministerial standards last Friday.
It came seven days after a scathing Auditor-General report found Senator McKenzie's office sidelined meritorious applications to the Community Sport Infrastructure Grants program in favour of those from seats the Coalition was targeting at the 2019 election.
As recently as Tuesday, the prime minister's office and Treasurer Josh Frydenberg swatted away questions about whether Senator McKenzie had breached the code.
But it emerged on Wednesday the Nationals deputy leader failed to declare she was a member of the Wangaratta Clay Target Club before awarding it $36,000 for a new toilet block under the grants program in February.
The former sports minister had visited the club a month earlier, her "second visit in months" according to the club website, and been gifted membership for 2019.
Mr Morrison's office also confirmed that matter had been referred to the Department of Prime Minister and Cabinet for investigation.
Under the ministerial standards signed by Mr Morrison in 2018, ministers must "ensure that they act with integrity - that is, through the lawful and disinterested exercise of the statutory and other powers available to their office".
Ministers must also "observe fairness in making official decisions" and "act honestly and reasonably".
Former Justice of the Supreme Court of NSW Anthony Whealy told The Canberra Times on Tuesday it was clear Senator McKenzie had breached these rules.
Meanwhile the club at the centre of the political firestorm says it was justified in receiving the money.
Wangaratta Clay Target Club vice-president Brian Reid said Senator McKenzie saw for herself the "unusable" state the previous toilets had been in during her visit.
"It could no longer be used, it was unhygienic, it had a whopping big hole in the floor where the sump that holds the effluent was, so when you opened the door, if you walked in you would fall in the water," Mr Reid said.
But Mr Reid rejects the assertion the club had any favours done because of its association with Senator McKenzie.
"The only way I can answer that is our grant application - hand on heart - was legitimate," Mr Reid said.
"We feel it was certainly necessary what we got."
The club has a long history of association with the Access for All Abilities program, which allows people of all ages with a disability to become involved in sport.
However the only wheelchair-accessible toilets were at the pub behind the club.
Access to the pub toilets had been recently hampered when the hoteliers fenced off the back to create a beer garden.
Since the club put in the pre-fabricated, unisex toilets, it had become more accessible for disability groups to come through, Mr Reid said.
"It's been a godsend for the gun club; it was badly needed. We were fortunate enough to present our case and our grant application was successful," Mr Reid said.
It couldn't have come at a better time either.
The club was shut down for several months in 2016 after the Environmental Protection Authority found there was an issue with its lead bullets contaminating the adjacent football oval.
The shooting and football clubs had shared the reserve since the 1960s, and shooters had to reconfigure the range in order to re-open.
The shooting club also had to permanently shut down its skeet shooting traps because of the proximity to the oval, which meant it lost members.
"We lost membership, we lost income. We shoot practice twice a week in Wang and we get good revenue from that but it was also lost [during the shutdown]," Mr Reid said.
The club has been slowly rebuilding, and Mr Reid said having the toilet block "encouraged people to come back".
"The demographic of shooters is ageing. If you're old and handicapped you can still shoot, but you need a toilet which is nice and close," Mr Reid said.
The club's website had said "Bridget signed up to our club as a full fee-paying member", but Mr Reid confirmed the membership had been a gift.
Senator McKenzie's office told the Nine newspapers the membership was valued below $300, so it did not have to be declared under the Senate rules. Senator McKenzie did not respond to questions from The Canberra Times.
Mr Reid said he could not recall exactly which tier of membership it had signed Senator McKenzie up for, but it was certainly below that threshold.
Asked about clubs that were overlooked due to Senator McKenzie's handling of the program, Mr Reid said: "I'm not in a position to comment about other clubs that have missed out and how they feel, that's best directed to them."
"The fact is our club has been under the pump for the last three years. And we've survived it," Mr Reid said.
But this club, and the 600 others who received sporting grants, are now under a cloud because of the way the process was corrupted, experts say.
Geoffrey Watson, who is a former counsel assisting for the NSW Independent Commission Against Corruption, said process had been completely "perverted" for political gain.
"In a sense, the people in the Wangaratta Clay Target Club are innocent victims," Mr Watson said.
'They were probably high up on the needs-based assessment and had it been done properly, probably would have gotten money."
However the fact that some organisations that received money were worthy was not the point, Mr Watson said.
"The point is the process was perverted, and perverted for a very bad reason," he said.
"It was designed to manipulate the outcome of an election. The fact they used taxpayer money in an unfair way for base political purposes just appalls me."