Prime Minister Scott Morrison has maintained public money was not used for political purposes or to entrench the government's power in the sports rorts scandal, where grants were prioritised to marginal seats over more deserving projects.
He also defended ministers overruling public officials on funding decisions.
After an address at the National Press Club, Mr Morrison was asked if on principle, using public funds for private political interests was wrong.
"That is not why we did it," the Prime Minister said.
Mr Morrison maintained the grants program had not broken any rules as no project that had been funded had been ruled ineligible, but when pushed on whether the guidelines had been followed was less definitive.
"As the Auditor-General found, the rules were followed," he said.
"Guidelines are separate issues."
Members of Parliament "live and breathe" in their communities, giving them a better sense of what is needed than public servants, the Prime Minister said.
When he was social services minister, Mr Morrison said grant decisions made solely by the department led to playgroups and emergency cash relief payments being cancelled, and he had to overturn the decisions.
"Politicians, ministers, members of parliament, we're part of our community. We know what is happening in our community. We are in touch with our community. We know the things that can make a difference in our community.
"It is important, because we are accountable to those people in our communities, for getting stuff done that is going to make a difference in their communities."
The Prime Minister repeated defences already made of the community sports infrastructure program. Auditor-General Grant Hehir found that Senator McKenzie, then sports minister, had ignored recommendations from Sport Australia. The agency had assessed the grants, and deliberately distributed grants in the $100 million program according to who held the seat - targeting marginal seats in the 2019 election.
On Tuesday, the ABC revealed some projects that received the most points under Sport Australia's grading of applications missed out on funding, while others with significantly fewer points in marginal or safe Liberal electorates got the most money available.
While maintaining all the projects approved deserved the funding, Mr Morrison signalled projects that missed out could still get money from the government.
"There are many, many more worthy projects in this area, I agree with that. I will work with the Treasurer to see how we can better support even more projects in the future."
Secretary of the Department of Prime Minister and Cabinet Phil Gaetjens is due to return his investigation into whether Senator McKenzie breached the ministerial standards within days, after it was revealed a gun club she was a member of got funding under the program.
Attorney General Christian Porter has been tasked by Mr Morrison to investigate the legal question of whether Senator McKenzie had the authority as minister to make the funding decisions.
But on radio in Perth, Mr Porter continued the argument that ministers made better decisions on funding than departmental officials.
"I fundamentally think that ministers have and should exercise their ultimate discretion over grants. I've done that myself on many occasions and many times the department has not liked that at all."
Ahead of the first sitting week of the year Labor has said it will move to establish a committee to investigate the use of public funds under the community sports grants scheme.
The inquiry would investigate which applications were rated highly but weren't approved for funding, which applications were assisted by MPs after due dates and who else was involved in the decision-making.
Labor's sport spokesman Don Farrell said he had spoken to Senate crossbenchers about the issue, and he was confident of having their votes to establish the committee.