The Auditor-General has criticised the Federal Government's management of a $220 million regional jobs scheme, finding conflicts of interest were not managed properly.

Key points: Federal auditors find ministers' funding decisions were not consistent with advice from the department

Federal auditors find ministers' funding decisions were not consistent with advice from the department Deputy Prime Minister Michael McCormack says the Government accepts the recommendations

Deputy Prime Minister Michael McCormack says the Government accepts the recommendations The report notes "various shortcomings" in the process for declaring conflicts of interest

The findings of the investigation have prompted the nation's chief auditor to issue a warning to all government agencies that they are accountable for the work of all staff, including contractors.

The Australian National Audit Office examined the Regional Jobs and Investment Packages (RJIP) program, which was a Coalition promise rolled-out after the 2016 election.

The Auditor-General looked at the scheme after receiving complaints from Labor MPs, who have accused the Government of pork barrelling amid concerns some of the funding decisions were skewed in favour of the Coalition.

The report found the decisions made by a panel of ministers were not always consistent with advice received from the Department of Infrastructure.

Two projects in the NSW electorate of Gilmore received funding from the ministerial panel, despite not being backed by the department process.

Liberal-held Gilmore was one of the most marginal electorates following the 2016 election and the Coalition ultimately lost it to Labor in the 2019 poll.

There were also four projects located in the Labor electorate of Eden-Monaro recommended for funding, but the ministerial panel opted against approving them.

Overall, the panel did not fund 28 per cent of grant applications recommended to them, and approved 17 per cent that had not been recommended.

Membership of the ministerial panel changed over time, with Darren Chester losing his seat in Cabinet and Michael McCormack taking over the infrastructure portfolio after becoming the Deputy Prime Minister.

Catherine King accused the Coalition of trying to hide the report by releasing it during the Melbourne Cup. ( ABC News: Marco Catalano )

Conflicts of interest not managed appropriately: report

The Auditor-General also found conflict of interest management was not to a "consistently appropriate standard".

Labor seized on the report's findings, with frontbencher Tanya Plibersek condemning the Government's management of the scheme.

"This is a shocking report that shows that money was directed to projects that were not recommended by the responsible department, that ministers interfered in the selection of projects that weren't recommended to be funded," she told Sky News.

Local planning committee members were required to declare conflicts, but the report notes there were "various shortcomings" in the process that resulted in errors and missing declarations.

Committee members who had declared conflicts were also not advised on how to appropriately manage them.

Contractors were also not required to sign a written declaration about any potential conflicts.

The problems prompted the Auditor-General to send a "key message" to all Australian government agencies, urging them to ensure they had specific conflict declaration processes in place.

It also warned they were responsible for the activities for all staff — including contractors.

Shadow Infrastructure Minister Catherine King has demanded Mr McCormack, who retained the infrastructure portfolio after this year's election, account for the ministers' actions.

She accused the Government of trying to bury the report's release during yesterday's Melbourne Cup and threatened to pursue the matter in the Parliament if Mr McCormack fails to address Labor's concerns.

In a statement, a spokeswoman for Mr McCormack said the Government would review the report and make improvements if needed.

"The Department of Infrastructure, Transport, Cities and Regional Development has accepted the recommendations of the report, having already implemented improved practices that address these recommendations based on the findings of an assurance review conducted by the Department in July 2018," she said.

"It is worth noting the report concluded there was no bias evident in the assessment and decision-making process concerning funding of projects in RJIP regions over others.

"The Department will continue to review delivery of all regional programs and implement improvements where and when necessary."