Hundreds of millions of dollars in education department grants are being given to private schools with no measures to track how the money is being spent, an auditor-general's report has found.

The state's financial watchdog has found little evidence that the money, estimated to be $676 million this year, is being used appropriately by the schools.

State education minister James Merlino says the government is strengthening reporting and accountability requirements for private schools. Credit:Damian White

More than a third of Victorian students go to private schools.

In a scathing report, acting Auditor-General Dr Peter Frost said the education department had "weak" funding agreements with the schools, no performance measurement or targets, and that the schools were unable to prove funds were spent as they were intended.