Senator Bridget McKenzie has quit Cabinet and resigned as deputy Nationals leader in the wake of the so-called sports rorts affair.

Key points: A report found Bridget McKenzie breached ministerial standards

A report found Bridget McKenzie breached ministerial standards Senator McKenzie said she did not receive any personal gain, but accepted the report

Senator McKenzie said she did not receive any personal gain, but accepted the report The PM said the report did not find evidence sports grants were handed out "unduly influenced by reference to marginal or targeted electorates"

Senator Mckenzie's fate was sealed after an investigation by the Department of Prime Minister and Cabinet found she breached ministerial standards by failing to disclose her membership of a gun club that received almost $36,000 from a controversial sports grants program she oversaw.

The report by secretary Phil Gaetjens was handed to Prime Minister Scott Morrison on Saturday night.

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On Sunday afternoon Mr Morrison announced Senator McKenzie would stand down as Agriculture Minister.

Mr Morrison said Mr Gaetjen concluded "the timing is such that the potential conflict should have been clear" in relation to Senator McKenzie's membership of the Wangaratta Clay Target Club.

The Wangaratta Clay Target Club in north-east Victoria received $35,980 to upgrade its facilities from round two of the sports grants program, in a decision announced in February 2019.

Senator McKenzie spruiked the funding on her Facebook page, standing alongside the Nationals candidate for the electorate of Indi, which the Coalition was hoping to win.

"By failing to put appropriate arrangements in place to avoid potential conflict such as asking another minister to make any decisions relating to organisations of which she was a member … the Minister failed to do that and the secretary found this was in breach of the ministerial standards," Mr Morrison said.

The former sports minister weathered more than two weeks of intense scrutiny after a damning auditor-general report revealed she disproportionately allocated grants to sport clubs in marginal seats and electorates the Coalition wanted to win ahead of last year's election.

The National Audit Office report found her office ignored merit-based assessments made by the government agency Sport Australia.

Mr Morrison said Mr Gaetjen's review did "not find evidence" that the allocation of grants was "unduly influenced by reference to marginal or targeted electorates".

"While there may be differing views about the fairness of the process the Minister used, the discretion she was afforded accordingly, the secretary concludes 'I do not believe there is a basis to find the Minister had breached standard in that respect'," Mr Morrison said.

"He notes that data indicates applications for marginal or targeted seats were approved by the Minister at a statistically similar ratio of 32 per cent compared to the number of applications from other electorates at 36 per cent.

"And he said 'I find no basis for this suggestion that political considerations were the primary determining factor'."

Bridget McKenzie has been under sustained pressure following revelations about the sports grants program. ( ABC News: Matt Roberts )

In a statement on Sunday afternoon, Senator McKenzie said she accepted the report's conclusions and would remain in the Senate.

I have always taken my role as a Minister of the Crown very seriously and I understand that the community expects parliamentarians to abide by the highest standards. I accept the Prime Minister and Cabinet report, in relation to my previous role as a sports minister. I maintain that at no time did my membership of shooting sports clubs influence my decision making, nor did I receive any personal gain. However, I acknowledge that my failure to declare my memberships in a timely manner constituted a breach of the Prime Minister's ministerial standards. Elected representatives are responsible for public expenditure and take advice, not direction, from the public service and others. The operation of ministerial discretion is important to our democratic process. My support for the sport of shooting is well known and fully disclosed through my public advocacy. I will continue to back our sporting shooters against the ongoing, often misinformed, public debate about a sport that routinely wins Australia medals at the Olympics.

In a statement thanking Senator McKenzie for her work, Nationals leader Michael McCormack indicated the deputy position would be discussed at a party room meeting on Tuesday.

Mr McCormack said he would act as Minister for Agriculture until a replacement was found.