SAO PAULO (Reuters) - Brazil will overhaul rules for selecting projects to reduce deforestation supported by the Amazon Fund, which is financed by Norway and Germany, after discovering irregularities in spending, Environment Minister Ricardo Salles said on Friday.

FILE PHOTO: Brazil's Environment Minister Ricardo Salles gestures during a meeting with a Senate committee in Brasilia, Brazil March 27, 2019. REUTERS/Ueslei Marcelino

Salles said non-governmental organizations (NGOs) had failed to account for the way they use money disbursed to them from the $1.28 billion fund administered by Brazilian state development bank BNDES.

Salles, a climate change skeptic, told reporters he and BNDES had agreed that the governance and rules for awards must be changed to better direct spending.

Salles said 82% of the awards that the ministry had inspected were granted without a bidding process and that he was recommending no new funding of projects for now.

The Norwegian embassy said it had neither received nor agreed to any proposal to change the management of the fund or the criteria for allocating resources.

“Norway is satisfied with the robust governance structure of the Amazon Fund and the significant results that the entities supported by the Fund have achieved in the last 10 years,” it said in a statement.

BNDES declined comment.

The fund supports Brazil’s environmental agency Ibama in its efforts to go after illegal loggers in the world’s largest rainforest, which scientists see as vital to fight climate change because it absorbs vast amounts of carbon dioxide.

At the local community level, the fund helps develop sustainable livelihoods on forest products so they do not need to cut down trees.

Members of Brazil’s new right-wing government believe climate change is a leftist conspiracy aimed at hindering economic development and they accuse foreign NGO’s of meddling in its affairs.

President Jair Bolsonaro has said he wants to open the Amazon region to commercial agriculture and mining.

After he took office in January, his government withdrew its offer to host the 2019 United Nations conference on climate change, maintaining that Brazil’s sovereignty over the Amazon was at stake.

Norway has donated $1.2 billion to the fund, and Germany $68 million, with Brazil’s state-run oil company contributing $7.7 million. More than 60% of awards have gone to environmental projects by federal, state and municipal governments, though awards have ground to a halt since Bolsonaro took office.

Its annual funding is linked to Brazil’s success in reducing Amazon deforestation in the prior year. Norway has cut its support for the fund in the past when deforestation increased.

Announcing a $70 million donation for 2017 in December, the Norwegian government said it was concerned over a new surge in destruction of the Amazon rainforest.