A novelty cheque presented to a South Australian bowling club by Liberal candidate for Mayo Georgina Downer will be investigated by the National Audit Office to assess whether the grant was politically motivated.

Key points: Commonwealth auditor-general Grant Hehir confirmed the investigation in an online letter

Commonwealth auditor-general Grant Hehir confirmed the investigation in an online letter The money was a grant under the Community Sport Infrastructure Program

The money was a grant under the Community Sport Infrastructure Program The results of the audit are expected to tabled in September this year

Federal Labor referred the $127,373 grant to the auditor-general and accused Ms Downer of inappropriate conduct and misusing a taxpayer-funded grant for political purposes last month.

When questioned about the appearance, Ms Downer insisted she had not broken any rules and that the large novelty-sized cheque with her name and face on it was clearly not "legal tender".

But Commonwealth Auditor-General Grant Hehir confirmed in a letter last night that further examination would consider whether the grant was politically motivated.

Mayo MP Rebekha Sharkie with a letter announcing the successful grant application. ( Facebook )

A photo of the presentation was posted to Ms Downer's Facebook page, prompting the Labor Party to write to the auditor-general accusing Ms Downer of "inappropriate" conduct in presenting the cheque instead of the local MP for Mayo, Rebekha Sharkie.

Ms Downer, the daughter of former foreign minister Alexander Downer, told ABC Radio Adelaide last month she was "not presenting Commonwealth money" because the cheque was "not legal tender".

But the Liberal candidate for Mayo faced immediate accusations of misleading voters with Shadow Attorney-General Mark Dreyfus writing a letter to the auditor-general.

"The cheque purports to be issued by Ms Downer and the Liberal Party and bears Ms Downer's image and Liberal Party branding," Mr Dreyfus wrote in his letter.

"However, the $127,373 provided to the Yankalilla Bowling Club was not a gift from Ms Downer or the Liberal Party.

"It was in fact a grant from the Australian Government under the taxpayer-funded Community Sport Infrastructure Program."

'No-one thought it was legal tender'

Ms Downer defended her actions, saying she wrote the bowling club a letter of support and was "absolutely thrilled" to hear its grant application had been successful.

Ms Downer defended her actions when probed on the matter last month. ( ABC News: Tom Fedorowytsch )

"They asked if I would prepare for them a novelty cheque, which again I was delighted to do," she said.

"It's a novelty cheque. There was absolutely no-one in the room who thought it was legal tender.

"They wanted a moment to celebrate, they wanted a moment to take their photo, and I was very happy to support them in that. We had a glass of bubbles."

In his letter confirming the investigation, Auditor-General Grant Hehir said the ANAO would examine whether the award of funding "was informed by an appropriate assessment process and sound advice".

The money was a grant from the Australian Government under the taxpayer-funded Community Sport Infrastructure Program.

Mr Hehir said the investigation would examine whether the program was well designed and if applications were soundly assessed in accordance with the program guidelines.

It will also assess whether funding decisions were informed by clear advice consistent with program guidelines.

The audit is expected to table in September this year.