Scott Morrison has defended embattled deputy Nationals leader Bridget McKenzie for her role in allocating $100 million in community sports grants in marginal seats.
A report by the auditor-general found while Senator McKenzie was sports minister she awarded most of the grants to seats being targeted by the coalition during the election last year.
Labor has called for the now-agriculture minister to resign and pointed to their former sports minister Ros Kelly, who stepped down from the ministry and then parliament in 1995 following a similar affair.
But Senator McKenzie is refusing to apologise and has the support of the prime minister, who said no rules were broken despite allegations of pork barrelling - funding sports clubs in marginal seats rather than on merit.
"I endorse ministers running programs that change local communities for the better," Mr Morrison told reporters in Canberra on Monday.
He said Sports Australia ultimately signed off on the cheques but the government was taking the auditor-general's report seriously.
The report also raised concerns over whether the minister was legally able to approve the grants.
Attorney-General Christian Porter has been tasked with looking at it.
"The auditor-general made comments concerning the legal basis for ministerial involvement in the relevant process," Mr Porter told AAP.
"And given the lack of any conclusive view offered by the auditor-general, the prime minister has sought further consideration of the issue, which I am attending to."
Labor small business spokesman Brendan O'Connor accused the government of corruption and scolded Mr Morrison for allowing it to happen on his watch.
"There's no doubt that having looked at what's been said by the auditor, that we have a problem with the way in which the government has dealt with this matter," Mr O'Connor told reporters in Melbourne.
"It's clear that they have politicised and corrupted the process for political gain.
"That has been dismissed this morning by Scott Morrison. But the fact is Scott Morrison clearly would have known the way in which grants were dealt with because he was the campaigner-in-chief for the Liberal party at the last election."
Leading law firm Slater and Gordon is investigating a class action, arguing tens of millions of dollars in grants was misappropriated.
Australian Associated Press