Prime Minister Scott Morrison's office was involved in suggesting which projects should be approved under a controversial sport grants scheme, a Senate inquiry has been told.

Key points: The Senate hears the offices of the PM and then-sports minister shared "dozens" of versions of colour-coded spreadsheets

The Senate hears the offices of the PM and then-sports minister shared "dozens" of versions of colour-coded spreadsheets Audit Office officials say the Prime Minister's office made direct and indirect representations to Bridget McKenzie's office

Audit Office officials say the Prime Minister's office made direct and indirect representations to Bridget McKenzie's office Officials said the PM's office indicated projects that should be included in the list of approved grants

The evidence paints a picture of Mr Morrison's office being more heavily involved than the Government has admitted to date.

More than 40 per cent of the projects were ineligible for funding by the time agreements were signed, the hearing was also told.

That was mostly because many sporting clubs had started work — or even finished projects — before inking deals with the Commonwealth.

"That just blows out of the water the Prime Minister's defence that all projects were eligible," Labor's Anthony Chisholm told the ABC after the hearing.

"The Audit Office couldn't have been clearer."

The $100 million grants scheme has been condemned for favouring marginal Coalition seats and Labor electorates the Government wanted to win at last year's election.

The Australian National Audit Office (ANAO) found then-sports minister Bridget McKenzie overlooked worthy applications, as assessed by officials, after her office ran its own assessment process.

Senator Chisholm, Labor's chairman of the committee probing the sports grants program, said the evidence about ineligible projects highlighted the Coalition's approach to the picking recipients.

"It went to the political decision making of the minister that they were prepared to basically override [ineligibility] and make their own decisions in regards to who received funding for these projects," he said.

Appearing before a parliamentary inquiry, the audit office said Senator McKenzie's office worked with Mr Morrison's office from October 2018 until April 2019.

Staff members exchanged "comfortably dozens" of emails, officials revealed, with the Prime Minister's office making suggestions about funding.

"Suggestions directly about these ones, rather than those ones," the ANAO's Brian Boyd said.

"[For example], 'These are the ones we think should be included in the list of approved projects'.

"Or passing on lists of applications, as to whether they could be included and those to be approved."

Projects in Liberal-held seats averaged about $40,000 more than those in Labor seats. ( ABC News: Matthew Doran )

Spreadsheets listing potential projects for approval were sent back and forth between the two offices, Mr Boyd said.

"There isn't a single spreadsheet, there's dozens of versions of a spreadsheet," he said.

"And for each round [of the program] there were various iterations indicating on different days — and sometimes different hours of the day — which are the projects which the minister's office were indicating were going be approved for funding."

Addressing his office's involvement last month, Mr Morrison said "all we did was provide information based on the representations made to us as every prime minister has always done".

Liberal committee member Eric Abetz downplayed the testimony: "Prime ministerial offices always involve themselves in all processes."

The inquiry heard some projects suggested by the Prime Minister's office were not always approved and Senator McKenzie was the ultimate decision-maker under the scheme.

It also emerged the Queensland Liberal National Party sent the minister a wish list of projects for the seat of Longman, which it later won from Labor at the election.

More than 40 per cent of projects ineligible, audit office says

There were also 290 projects that were ineligible to receive government money, 43 per cent of those funded, the inquiry heard.

This contradicted previous statements from Mr Morrison, who said, "the auditor-general found that there were no ineligible projects that were funded".

These projects included:

272 projects that had commenced before agreements were signed.

272 projects that had commenced before agreements were signed. Eight projects that had already finished.

Eight projects that had already finished. Five late applications.

Five late applications. Four applications that were amended after being assessed.

"The guidelines' eligibility requirements don't end just when you've lodged your application, and this is common across many grant programs," Mr Boyd said.

"If you've completed your work, or in some cases — as in this one — you've even started your work before a funding agreement is signed, you're not eligible to receive funding."

In a statement on Thursday night, a spokesman for the Government said no projects found ineligible during Sport Australia's assessment process received funding.

But that assessment process took place before funding agreements were signed — the relevant date regarding eligibility, according to the audit office.

Auditor-General defends his report following Gaetjens review

Labor and the Senate crossbench on Wednesday failed to force the Government to release the report Mr Morrison received from the boss of his department into Senator McKenzie's handling of a scandal-plagued pre-election grants program.

Senator McKenzie's fate was sealed after an investigation by the Department of Prime Minister and Cabinet found she breached ministerial standards by failing to disclose her membership of a gun club that received almost $36,000 from a controversial sports grants program she oversaw.

The Prime Minister has used the report by departmental secretary Phil Gaetjens — his former chief-of-staff — to fend off accusations of political bias.

Mr Morrison has claimed the Gaetjens review did "not find evidence" that the allocation of grants was "unduly influenced by reference to marginal or targeted electorates".

That report, completed in around a fortnight, has not been publicly released.

Auditor-general Grant Hehir stood by the 10-month investigation his office had undertaken.

"I'm not aware of the terms of reference for the [Gaetjens] review, the analysis that was undertaken, the evidence that they used, and like you I haven't seen the report," Mr Hehir told the committee.

"Nothing's come to my attention which would lead me to change the [audit office] report."