Auditor-General Grant Hehir drew attention to David Foster's job switch, but didn't criticise it, other than saying it "would have been prudent" for the Regional Investment Corporation to investigate the implications when he signalled his resignation.

The Bendigo Bank won the tender for the $2 billion of farm loans in 2018, after two banks were shortlisted for the board to choose.

In September 2019, corporation chairman Mr Foster told the board he was quitting the agency in October, having been appointed to the Bendigo Bank's board. A declaration of conflecit of interest never made it to the Regional Investment Corporation's conflicts register because of his resignation.

"As a result, no mitigation action had been identified to address any potential conflicts of interest," the audit notes.

Corporation chief executive Bruce King said Mr Foster had been appointed because of his background in banking.

"The corporation "accepts the [audit] report's finding that it would have been prudent of the RIC to record Mr Foster's declaration of interest in the RIC conflicts of interest register", he said.

"The decision at the time not to record the declaration of interest was that the potential conflict was removed on resignation."

The corporation ensured "no material decisions" were made during the weeks between Mr Foster accepting the new job and leaving the old.

A Bendigo Bank spokesman said Mr Foster, who had "deep regional bank experience" with Suncorp, had tendered his resignation in line with good governance two days after being appointed as a bank director. He had no involvement in any loan decisions at Bendigo, and under the contract with the Regional Investment Corporation final loan approvals come from the corporation itself.

"The bank's role is to only perform due diligence and assessment against their criteria and make a recommendation," the spokesman said.

Mr King said to date, 700 loans had been approved worth $733 million, mainly for drought-affected farmers. The corporation was working to improve loan processing times and efficiency.

The Regional Investment Corporation is responsible for the government's $2 billion fund for loans to farmers under different programs, including drought loans and loans to small businesses servicing drought-affected farms. It is also handling the water infrastructure loans to states and territories for major water infrastructure, although no water infrastructure loans have been taken up so far.

Farmers can get up to $2 million, with repayments and interest deferred. While the program was supposed to fund itself from interest payments, the audit said the corporation had an operating loss of about $5 million in the current year, as a result of increased costs under the contract with the Bendigo Bank. The contract was based on a base number of 300 loans, with an extra charge for each loan above that. The corporation had expected 550 loans this year but now expected 1200 loans, after the drought loans were made interest free for two years.

The biggest share of loans have gone to grain, sheep and beef farming (130 loans), followed by specialised beef cattle (69 loans).

The audit said the corporation had established "largely effective loan delivery arrangements", with none in arrears by October last year.