The Federal Government's controversial decision to grant nearly half a billion dollars to a small charity for projects on the Great Barrier Reef was based on advice that failed to comply fully with rules designed to ensure transparency and value for money, the auditor-general has found.

Key points: Auditor-General said most departmental advice about funding allocation followed the rules

Auditor-General said most departmental advice about funding allocation followed the rules But he criticised the department's assessment of the grant's value for money

But he criticised the department's assessment of the grant's value for money The department said the findings were "based on an incomplete assessment of the evidence"

In April last year, the Turnbull government announced it was giving $444 million to the Great Barrier Reef Foundation (GBRF), which at the time had annual revenue of about $10 million and only six full-time staff.

The move came under intense scrutiny, with the Greens senator chairing an inquiry into the funding decision describing it as a "captain's call" and Labor arguing the grant should have been made through a competitive tender process.

The Coalition defended the move, saying due diligence was done ahead of awarding the grant.

Sorry, this video has expired Malcom Turnbull defending the $440 million grant in August, 2018.

Now, the Australian National Audit Office (ANAO) has weighed in, tabling a detailed investigation into the grant-making process.

Goals too 'vague'

It concluded all ministerial decisions around the grant were informed by departmental advice, and most of that advice was sufficiently detailed and complied with commonwealth rules.

But the auditor-general and his office found the department failed to properly follow government rules around making grants, supporting arguments made by environmental lawyers and reported by the ABC in August last year.

Government rules require that a program receiving a grant must be given clear and specific objectives for the funding.

"For non-competitive grants, assessment criteria provide a transparent means of assessing whether the particular proposal under consideration is of a satisfactory standard that approving a grant would represent value for money," auditor-general Grant Hehir wrote in his report.

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He said the objectives of the Great Barrier Reef Foundation's grant were too broad and general in nature.

They included ambitions such as "improved management of the Great Barrier Reef" and "management of key threats to the Great Barrier Reef".

The auditor-general compared these targets to smaller, reef-related grants that had very specific targets associated with them, like reducing water pollution by a specific amount.

In a response provided to the Auditor, the Department of Environment and Energy said it did not agree the targets were not detailed enough.

It wrote: "Setting of quantitative targets in the guidelines would have given an unrealistic impression of the precision with which outcomes can be predicted in the very early stages of this intervention in a highly dynamic and complex biophysical and socio-economic system."

Sorry, this video has expired Josh Frydenberg announcing the 'largest investment in reef restoration' in April, 2018, when he was environment minister.

Value for money?

The auditor-general also criticised the department's assessment of the grant's value for money.

In particular, the government had said the small charity was the right group for the grant, partly because of its ability to leverage funds through fundraising.

But the Auditor said the department's scrutiny of the charity's actual fundraising performance was inadequate.

Environment Minister Melissa Price has released a statement saying the report confirmed the decision was, "based on comprehensive policy development and detailed advice".

"None of the findings or recommendations affect the conclusion that the partnership is an effective way to boost the health of the reef," she said.

Labor had previously said that, if elected, it would claw back the remaining money from the Great Barrier Reef Foundation, and environment spokesman Tony Burke reiterated that on Wednesday after the new report.

"This is a government that is reckless with other people's money," he said.

"The simple message to Scott Morrison and Josh Frydenberg is: 'It's not your money, it's not your money to throw away to your corporate friends.'"

The department has defended the decision to allocate the funding, despite criticism. ( Supplied: Queensland Museum, Gary Cranitch )

Department hits back

The department said the auditor-general's findings were, "incorrect or based on an incomplete assessment of the evidence".

"The department's conclusion that the proposal represented value for money for public resources was reasonable and based on a clear understanding of the objectives and desired outcomes the Government was seeking from the grant," the department said.

"Keeping in mind the outcomes that we all want to achieve for Australia, this grant is well targeted to improve the health of the Great Barrier Reef and to leverage additional funding to further boost outcomes.

"Already, the foundation has successfully delivered early milestones and established an ambitious fundraising target of $300-400 million.

"Further, the partnership serves as an innovative model that could be adopted to address other policy priorities for Australia."

Anna Marsden, managing director of the Great Barrier Reef Foundation released a statement saying the charity was moving forward to spend the grant effectively.

"The GBRF is focused on fulfilling the obligations of the partnership because we are committed to protecting the reef and serving as a good guardian of taxpayer funds," she said.

The auditor-general made six recommendations to the Environment Department designed to improve the transparency and performance of the grant.

The department "agreed" to three of the recommendations and "noted" the rest.