Bridget McKenzie has stared down Labor’s calls for her to resign over a decision to target marginal electorates with $100m of sports grants, even suggesting she was engaged in “reverse pork-barrelling” because Labor seats benefited from her intervention.

On Thursday the deputy Nationals leader and former sports minister refused to apologise or resign over the controversy, even refusing to rule out a repeat of her decision to favour Coalition-held and target marginal seats for $100m of sports grants.

McKenzie made the comments on Thursday while defending her handling of the community sport infrastructure grant program after the auditor general, Grant Hehir, found she had ignored the merit-based assessment undertaken by Sports Australia for almost half the successful projects.

The Australian National Audit Office found the successful applications were “not those that had been assessed as the most meritorious in terms of the published program guidelines”.

The ANAO found that McKenzie’s office had run a “parallel” assessment process in deciding how to hand out the funds, with a focus on marginal electorates held by the Coalition as well as electorates held by other parties or independent members that were to be targeted by the Coalition at the 2019 election.

On Thursday, Labor’s shadow minister for sport, Don Farrell, accused the Coalition of “pork-barrelling on an industrial scale” and called on McKenzie to resign or be sacked by Scott Morrison

On Thursday McKenzie described the program as “hugely successful” – citing the fact it was “oversubscribed” and the large demand for women’s facilities in male-dominated sports.

“Right now, as a result of our investment, parents are watching their kids get active on a Saturday morning instead of going down to Bunnings and cooking sausages to earn money,” she told Radio National.

McKenzie repeatedly said all of the projects granted funding were eligible and “no rules were broken” but did not dispute the characterisation of the program as pork-barrelling.

Asked about the distributional bias in the award of grants, McKenzie replied: “Ministerial discretion was actually written into the guidelines for a purpose.

“And what that that actually meant was that there were more projects supported and funded in Labor seats than if that ministerial discretion had not been deployed.”

Later, McKenzie told reporters in Canberra that originally 26% of the recommended projects were in Labor electorates, a figure boosted to 34% after her intervention.

“If anything … there’s a case of reverse pork-barrelling going on,” she said, describing calls for her to resign as “absolutely ridiculous”.

Asked on Radio National if the government would use the sports grant program in the same way in future, McKenzie replied that the audit report had found a “significant increase in applications from areas that are represented by the Coalition and obviously that will be reflected in decisions”.

The minister repeatedly refused to rule out targeting marginal seats, saying only that she would “continue to use taxpayer funds appropriately and distribute [them] according to approved guidelines”.

McKenzie said that Sport Australia had agreed to three recommendations about improving its practices for assessment and avoiding conflicts of interest.

“There are three recommendations for Sport Australia going through how they assess projects, dealing with internal conflicts of interest etc and they’ve accepted those and taken very swift actions to look at their internal processes.”

By contrast, the finance department merely “noted” – but did not agree – to the auditor general’s call for uniform rules on commonwealth grants made by ministers.

The Labor deputy leader Richard Marles accused the Morrison government and its ministers of “making decisions to save the Liberal party” at the 2019 election.

“Scott Morrison owes an explanation to the hundreds of sporting clubs around Australia today about why he ignored their interests in favour of saving his own political skin,” Marles told reporters in the Blue Mountains.

The ANAO was tasked with examining the program after Labor questioned how the Liberal candidate for Mayo, Georgina Downer, was able to present a giant taxpayer-funded $127,373 cheque to the Yankalilla bowling club in February 2019.

The program awarded a total of $100m to 684 projects across three rounds in the months before the election, out of a total of 2,056 proposals seeking more than $396.6m.

Hehir said that had a merit-based process been followed, the cut-off score would have been 74 out of a possible 100. More than 400 projects received funding that were below this score, in defiance of recommendations made by Sports Australia.

The audit found that in each of the three rounds of funding, Sports Australia’s recommendations were not followed or even considered.

In the first round, 91 of the projects (41%) approved were not endorsed by the Sport Australia board. In the second round, 162 (70%) of the approved projects were not recommended, and in the final round 167 (73%) of the approved projects were not recommended.

The auditor found that the design of the program was deficient in a number of areas. There was potentially no legal basis for the minister to approve successful projects, and “it is not evident to the ANAO what the legal authority was”, which it said was a “significant shortcoming”.

He found the guidelines were “well structured and included clear assessment criteria with transparent weightings”, even if these were ultimately ignored.