The Coalition gave an “unprecedented” $400,000 grant to the administrators of a now-closed aged care home in the electorate of Nationals MP Damian Drum, prompting Labor to question why other financially stressed providers have missed out.

The government said the grant, given to Murchison Community Care which operates the DP Jones aged care home, was for operating losses incurred while attempts were made to find an alternative provider.

In November, Drum, the MP for the Victorian seat of Nicholls, said the financial assistance from the federal government meant the centre was “staying open, end of story”, claiming “there are no conversations about shutting the place down”.

The $400,000 was provided over a three-month period after DP Jones went into liquidation in November 2019.

But despite the financial injection, residents from the 40-bed home have been relocated and employees made redundant, with the home shutting its doors last week.

The failure of the grant to stave off closure has devastated the Murchison community, but has also raised questions about the process that led to the grant being allocated, particularly given aged care homes in Labor seats have closed after missing out on government assistance.

Labor’s shadow aged care minister Julie Collins said it was “deeply concerning” that residents had been forced out of the Murchison nursing home despite the “unprecedented funding”.

“The Morrison government must come clean on why it has provided this unprecedented funding while other nursing homes across the country at risk of closure have not,” Collins said.

“With so many nursing homes across rural and regional Australia at risk of closure the government must answer questions about this process.

“The care of vulnerable older Australians in rural and regional Australia must be above politics.”

Collins pointed to two recent closures on the New South Wales central coast to highlight the financial difficulties facing homes in regional areas.

According to data from the industry’s benchmark survey, StewartBrown, 67% of aged care facilities in rural and regional Australia are operating at a loss.

In October, the head of the agency overseeing the financial health of aged care in Australia told parliament he was concerned the sector was not financially viable or sustainable, with a “sizeable proportion” of residential care providers making a loss.

The Department of Health told the Senate the decision to provide financial assistance to the Murchison centre was made by the government, not the department.

“This was a decision of government. The department has not provided funding of this specific nature before,” the department said in response to a question on notice.

It said the department was first alerted to financial viability concerns of the centre in August 2019, and the minister’s office was advised in September 2019, after which the minister had sought “regular advice” about a range of matters relating to the facility since that time.

A spokesman for the aged care minister, Richard Colbeck, said the “process is ongoing” to help the Murchison home, but his office would not comment on the nature of the one-off grant, nor why other at have missed out.

“The Australian government is funding the administrator of Murchison Community Care Inc, of which DP Jones aged care facility is an asset, for operating losses incurred while attempts are made to find an alternative provider for the facility. This process is ongoing,” he said.

“It would be inappropriate to comment further about this funding while discussions occur with potential future operators.”

He said that in the future, aged care providers experiencing financial stress would be able to apply for assistance through the $50m Business Improvement Fund, which will be limited to those in “severe financial difficulty”.

Drum did not respond to Guardian Australia’s request for an interview on the centre’s future, but told the Shepparton News the government was “still trying everything we can” to reopen the centre.