Labor is accusing the Coalition of operating a secret election slush fund worth nearly $1 billion, splashing cash exclusively on community projects in largely Liberal and National party held seats.

Opposition spokesman for Regional Services, Territories and Local Government Stephen Jones said he had demanded an audit of the Community Development Grants Program after its existence was revealed in the federal budget.

The Department of Infrastructure and Regional Development has for several years issued the grants ranging from thousands of dollars to sporting organisations to $15 million upgrades on public infrastructure.

Mr Jones said the program had no competitive process where the merit of each community project was assessed, despite $940 million having already been committed to date.

"Overwhelmingly they are in Liberal and National Party seats, the ones that aren't in seats that Labor won off the Liberal and National Party at the last election," he said.

"What is obvious here is the government has used this as a slush fund in its marginal and held seats as a way of helping it win the election.

There should be probity, there should be a proper transparent process and there simply has not been."

Stephen Jones said Labor MPs were not made aware of the existence of the grants even when pitching-up regional projects to responsible ministers.

"I'm not saying that the vast majority of them might not be valid projects, what I am saying is they should be open to every MP and every community, not just the ones in Liberal and National party seats," Mr Jones said.

"When we quizzed the departmental heads and the minister about it at Senate Estimates Committee this week all that we can work out is the way you get access to it is you know the minister, you write them a letter, you pick up the phone," he said.

"But there is no open transparent process and this is nearly a billion dollars worth of public money."

Government hits back at Labor claims

In response, Regional Development Minister Fiona Nash has taken aim at Labor's community grants program when it was in government, and accused Stephen Jones of a misleading and hypocritical attack.

A spokesman for Senator Nash said the Australian National Audit Office had slammed Labor's Regional Development Australia Fund for pork barrelling Labor electorates.

"Labor overturned 74 recommendations made by the Department of Regional Development "at the expense of projects located in electorates held by the Coalition", the Audit Office Found," he said.

The spokesman justified the awarding of the grants in largely Liberal and National seats.

"A key part of democracy is the ability for Government and Oppositions to make election promises to the people and then deliver them," the spokesman said.

"More promises were made in Coalition seats in 2016 because the Coalition held 93 seats while Labor held 55, and also because coalition seats are huge compared to Labor's seats in the city," he said.

"The Coalition honoured all promises in all seats."

Mr Jones said the application process for the Regional Development Australia Fund, unlike the Coalition's program was transparent and subject to approval from local advisory groups.

A review of the Community Grants Development Program is being considered in the Australian National Audit Office's planned audit coverage for the coming year.

The ANAOs work program, which is designed to inform the Parliament, the public and government entities of planned audits, will be published in July 2017.