Prime Minister Scott Morrison says a report that identified shortcomings with how a $444 million grant was handed to the Great Barrier Reef Foundation has proven ministers did not act improperly.
But Opposition Leader Bill Shorten says the grant process "smells of a scandal" and maintains a Labor government would claw back whatever it can of the money, to spend on the reef in a different way.
The independent Great Barrier Reef Foundation was paid the grant in a lump sum by the federal government last year without soliciting it or going through a competitive tender process.
In a report released on Wednesday, the Australian National Audit Office said all decisions that led to the grant being awarded were informed by advice from the Department of Environment and Energy.
Guidelines were paired with the funding, as per commonwealth grant rules, and included "relevant and appropriate eligibility requirements".
But the auditor-general says the guidelines also had two key shortcomings, being the level of detail provided on desired outcomes for the program and a lack of clear assessment criteria.
"The approach taken in the guidelines for this $443.3 million partnership grant did not enable an appropriate assessment of whether a partnership proposal represented value for money," his report states.
Mr Morrison says the report has "hit out of the park" criticism of how the government handled the grant.
"The fundamental issue which the government was accused of was an impropriety, by the Labor Party, on the behalf of ministers," he told reporters in Fiji on Thursday.
"That was an outrageous slur and it has been rejected by the auditor's report.
"When Bill Shorten wants to apologise, he can."
Mr Shorten said the way the grant has been given has resulted in "triple handling", with government agencies such the CSIRO now forced to go to a private foundation to request government money.
"The whole thing's a mess. We'll take it back and we'll just protect the reef," he told reporters in Queensland on Thursday.
The Senate's environment committee is investigating how the Great Barrier Reef Foundation received the grant last April.
A report from its inquiry was originally due last August, but will now be handed down on February 13, possibly following more public hearings and submissions.
Australian Associated Press