A scathing audit has found that former Sports Minister Bridget McKenzie handed out grants based on marginal electorates rather than expert advice, after an investigation of complaints that included money for Wodonga's Martin Park.
Auditor-General Grant Hehir said the selection of successful grants "was not informed by an appropriate assessment process and sound advice".
While Sports Australia did assess applications and provide a list of projects for funding to the minister, the minister's office ran its own "parallel" assessment process, which ultimately determined where grants went.
"The award of funding reflected the approach documented by the minister's office of focusing on 'marginal' electorates held by the Coalition 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 audit released on Wednesday said.
"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 against the published program guidelines."
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Asked if she accepted the auditor-general's comments that there was a "distribution bias" in the grants program, Senator McKenzie said that "all projects selected for funding were eligible".
Former Indi MP Cathy McGowan complained to the Australian National Audit Office, after more than $3 million worth of federal grants were hidden from her during the election campaign, including the February announcement of $205,000 to upgrade lighting at Martin Park.
Her successor Helen Haines said on Wednesday she was very disappointed and called on Prime Minister Scott Morrison to outline the consequences.
"Sport is a national institution and it's appalling to see this taxpayer-funded program abused in this way," she said.
"I think of the numerous community clubs - many small, some large - and their members who work so hard as volunteers to apply for these grants in good faith, only to be brushed aside for political purposes.
"I know they will be feeling so upset about this."
She called on the federal government to create another funding round, allowing the Sport Minister Richard Colbeck to reconsider applications recommended by Sport Australia, but were denied funding due to the "parallel process" identified by the auditor's office.