Nationals deputy leader Bridget McKenzie says “no rules were broken” in the distribution of $100 million of community sports grants after the auditor-general found the program favoured marginal and targeted seats in the lead up to last year's federal election.
In a scathing report, Auditor-General Grant Hehir found the program, overseen by Senator McKenzie as sports minister at the time, gave grants to marginal and targeted electorates while ignoring merit-based recommendations.
The auditor-general found evidence of “distribution bias” in the spread of funding and questioned the legal authority of the minister to make the final decision.
But Senator McKenzie refused to apologise for her handling of the program on Thursday.
Senator Bridget McKenzie, Treasurer Josh Frydenberg and Zali Deep from the Swans Academy, are seen during a media event at the Sydney Cricket Ground, Sydney. Source: AAP
She denied taxpayer money had been misused as a slush fund for the Coalition's re-election campaign, insisting the grant program was “incredibly successful”.
"The Auditor-General's report is really, really clear. No rules were broken, every single one of those projects that was funded was eligible," Senator McKenzie told reporters in Canberra.
"My intervention actually increased the number of projects being delivered to local sporting clubs in Labor Party electorates."
Nine of the 10 electorates awarded the most money through the program were either marginal seats or ones the Coalition was hoping to win at the May election.
“Applications from projects located in those electorates were more successful in being awarded funding than if funding was allocated on the basis of merit assessed,” the auditor-general's report said.
These seats would have received less funding if government agency Sports Australia's merit assessments had been used, rather than it being left up to the minister to make the final call.
The report found 41 per cent of the approved projects were not on the list recommended by Sports Australia.
Senator Bridget McKenzie plays a game of Wheelchair Rugby with Paralympic athletes. Source: AAP
In one round of funding, projects located in "marginal" and "targeted" seats accounted for 36 per cent of the total amount sought by applicants – and received 47 per cent of the money distributed.
During the first round of the program, 41 per cent of approved projects were not on the list of those recommended by Sports Australia. This figure rose to 70 per cent in the second round and in the third reached 73 per cent. 
Labor has called on the prime minister to stand down Senator McKenzie, who is now agricultural minister.
Prime Minister Scott Morrison and Senator Bridget McKenzie. Source: AAP
Opposition sports spokesperson Don Farrell said the program was a shameless politicisation of taxpayers' money.
"This betrayal of the sporting community means it is now impossible for clubs to have any faith that this government will assess their grant applications on merit," Senator Farrell said.
The audit was sparked by Labor after Liberal candidate Georgina Downer gave out a $127,000 cheque for a local bowling club in South Australia during the election campaign.
The office of Senator McKenzie used its own criteria to award applications, the report said.
"The award of funding reflected the approach documented by the minister's office of focusing on 'marginal' electorates held by the coalition," it said.
"As well as those electorates held by other parties or independent members that were to be 'targeted' by the coalition at the 2019 election.
"The award of grant funding was not informed by an appropriate assessment process and sound advice."
The audit also found there was "no legal authority evident ... under which the minister was able to be the approver of CSIG program grants to be paid from the money of Sport Australia".
It made a number of recommendations to Sports Australia and one to the finance department.
Sports Australia agreed to strengthen its assessment records, have employees declare conflicts of interest and to design grant programs based on expected demand.
The finance department noted a recommendation to ensure grant funding guidelines apply to government ministers in situations where they are the decision-maker.
The current Sports Minister, Richard Colbeck, said the government would take action on the audit's findings.
But he defended the program, saying it had made "positive impacts" on communities.
Independent Warringah MP Zali Steggall says the spending shows Australia needs a national integrity commission with "real powers".
The Community Sports Infrastructure Grant Program was launched in 2018, aiming to increase participation in sport through upgrades to local sporting clubs including more female change rooms.
Additional reporting by AAP
