Two senior figures in Queensland cotton conglomerate Norman Farming have been arrested over an alleged $20 million fraud involving federal funds earmarked for Murray-Darling water savings.

Norman Farming CEO John Norman, 43, and his chief financial officer Steve Evans, 53, surrendered themselves at the Brisbane watch house Tuesday morning with their lawyers at their sides.

The men appeared in the Brisbane Magistrates Court Tuesday afternoon and were granted bail.

Norman Farming CEO John Norman (L) and CFO Steve Evans leaving court in Brisbane. ( AAP: Dan Peled )

Police are alleging the rural fraud operation involved the director of the company submitting fraudulent claims, including falsified invoices related to six water-efficiency projects on the southern border property near Goondiwindi, known as Healthy Headwater projects.

Mr Evans will face charges in relation to four of those projects.

Police said the sophisticated fraud spanned seven years.

It has taken the rural arm of the major and organised crime squad more than a year to conduct what Detective Inspector Mick Dowie called, "a very protracted, very complex investigation".

Inspector Dowie said they had to trawl through thousands of documents and call in forensics accountants because of the sheer scale of the activities.

"There has obviously been a significant amount of documentation that's had to be analysed, and the offences particularly relate to the modification of invoices from contractors or service providers to the farming community," he said.

"We'll allege the company contracted harvesters or machinery operators to prepare for farming.

"And [we'll allege] those invoices were modified to show it was actually for earthworks related to the improvement of water efficiency, modified to suit the needs of the claim, and, we will allege, purely fabricated claims for use of machinery to fulfil the needs of the claims."

Queensland police have been investigating Norman Farming for more than a year. ( ABC News )

Norman Farming, a large cotton operation near Goondiwindi in Queensland's southern border region, was raided last October as part of a major criminal investigation, after a long covert operation.

At that time, the ABC's Lateline program reported the agricultural conglomerate was on the market for more than $100 million.

It also reported local farmers' concerns the Healthy Headwaters scheme had failed because there was never any checking of invoices by department officials.

According to Lateline, the Federal Government was made aware of allegations Norman Farming was diverting floodwaters in late 2016.

Police raided Norman Farming last October over the alleged fraud.

But the $154 million Healthy Headwaters budget was being administered by Queensland's Department of Natural Resources.

Inspector Dowie said in the department's defence it did not have any power of compulsion like police.

"So they can't force people to hand over documentation like we can, so they can compare original against what is produced," he said.

Inspector Dowie also acknowledged the impact these arrests would have on the local community at a time when they were battling a historic drought.

"We are very acutely aware that this is going to significantly impact on family, communities — in particular in these small, very vulnerable farming communities under a great deal of stress around drought," he said.

"These are hard times … we understand the challenges that are facing all of our farmers and pastoralists.

"I know there's very hard times for farmers, but you need to realise this goes back to 2010 and there was no drought in 2010 — in fact there was probably too much water.

"I don't put this down to desperation in terms of drought like other people that are suffering across the state."