Instead, Mr Nardella moved to an Ocean Grove caravan park in 2014 owned by a family member so he could continue claiming a lucrative second residence allowance, a report from parliament's auditor's PwC found.

The fresh evidence against Mr Nardella and former speaker Telmo Languiller has left Labor MPs "white hot with anger" about the continued damage it was inflicting on the Labor government.

The decision to pay just $200 a fortnight to a family member, the report said, gave the impression that Mr Nardella was simply trying to maintain the second residence payment.

In February, The Age revealed that both men were claiming a lucrative second residence allowance designed for country MPs by moving their homes away from the western suburbs they represent to Ocean Grove and Queenscliff.

Labor MPs, including ministers, want the pair thrown out of parliament, but on Thursday morning Mr Andrews said he expected them to remain.

The scandal is doing major damage to the government, including risking the election next year. Caucus members are furious that there has been no action taken.

"It is killing us," one senior MP told The Age.

Another said MPs were suffering and being kept in the dark about the Premier's plan on how to deal with the issue.

"This is a disaster. There is no plan to stop this," another said.

Others believe that Mr Andrews wants to avoid byelections in Labor's western suburbs over fears there would be a voter backlash and how that would reflect on the Premier.

And MPs want action swiftly with parliament rising on Thursday afternoon and not returning until May 2.

The PwC report said that when Mr Nardella left his Ballarat home after the breakdown of his relationship in 2014 he should have taken the "simpler option" to live in a St Kilda property he owned or in his Melton electorate.

"The Member already had a second residence in Melbourne so that, at the time, a simpler option might have been to relocate to the second residence in Melbourne or Melton his constituency. The Member stated that the accommodation in St Kilda (second residence at the time) was not spacious enough," the report said.

"Viewed from the perspective of the average person on the street, an objective observer, a position could be taken that the arrangement in this period with the Member's close family may have been entered into to ensure that the member would continue to receive the second residence allowance."

The auditors recommended that all allowances be removed and replaced with reimbursement for business-related expenditure. The audit also said second residence allowances should be tied to an MP's electorate rather than their choice of home base.

Despite being the Melton MP, Mr Nardella had chosen to live outside the electorate since 2010 and had claimed $174,836 in allowances for living outside Melbourne.

He told the auditors he moved to the Ocean Grove caravan park in 2014 after the breakdown of his relationship.

The report also revealed Mr Nardella failed to provide tax returns, travel records to and from his declared home base, and an address for health insurance or banking correspondence.

The only evidence Mr Nardella provided to prove Ocean Grove was his home base was a drivers licence, vehicle registration, electoral enrolment and receipts for capital improvements.

The full report, tabled in parliament on Thursday, confirmed former speaker Telmo Languiller had intended to move his home base to Queenscliff but, due to family circumstances, he spent little time there.

He has repaid the $37,834 he claimed but issues remain over his electoral enrolment, with accusations that moving his voter details to the area without living there was a criminal act.

Similar allegations were raised in parliament by the Opposition over Mr Nardella's enrolment and whether or not that made him eligible to be in parliament.

The Premier was hammered in parliament, with his caucus looking flat in question time. Mr Andrews said it was not within his powers to force Mr Nardella to pay back the cash, and that he couldn't comment on other matters because police were investigating.

Opposition Leader Matthew Guy said the Pemier did have the power to force Mr Nardella to pay back the money and accused Labor of running a protection racket.

"This matter is going to go on like a weeping sore for this government, for Daniel Andrews, until he finally does something," Mr Guy said.

Serious flaws identified in the second allowance process by PwC included:

• A lack of definition of what constitutes principal place of residence.
• No documentation required to prove a home base.
• Inconsistent requirements for statutory declarations