Warrnambool City Council says it has already put into action a number of recommendations from an audit into local government fraud controls of its grants program.
The city council was one of six from across the state to participate in the Victorian Auditor General's Office report which also included the Southern Grampians Shire.
"We found that the audited councils lacked focus on preventing fraud and corruption in their grant programs," the report says.
"As a result, many of their control areas are weak or inconsistent."
The council's chief executive officer Peter Schneider said it was pleased to be selected.
"The report is ultimately aimed at making us a more effective, accountable organisation and this accords with our values," Mr Schneider said.
"The report makes a number of recommendations for all Victorian councils and Warrnambool City Council has accepted all of them.
"Council has already taken many of the recommended actions."
The audit covered more than $388,000 worth of grant spending by Warrnambool council.
Mr Schneider said the council had eligibility and assessment criteria for all grant programs, and it had reviewed all non-competitive grants.
"We consistently advise unsuccessful applicants why a grant application has been rejected," he said.
"We have over-arching processes covering conflict-of-interest in our staff and councillor codes of conduct."
The report drew attention to historical grants made by the council to organisations - some for up to 25 years without review - and included the Coast Guard and Warrnambool Surf Life Saving Club.
"As a coastal city which is a popular visitor destination these contributions have been justifiable," Mr Schneider said.
"There were queries over the fact these grants had not changed or increased.
"This is a reflection of tightening budgets under rate capping.
"Certainly the message from VAGO is that if these grants were to change then evidence for doing so would be required."
The council had also stopped automatically paying two grants to two sporting organisations worth $21,000 a year because they were not benefitting the community or lacked relevant approvals, the report says.
Mr Schneider said the council would develop an over-arching grants policy that detailed:
IN OTHER NEWS:
Our journalists work hard to provide local, up-to-date news to the community. This is how you can access our trusted content:
Now just one tap with our new app: Digital subscribers now have the convenience of faster news, right at your fingertips with The Standard:
Have you signed up to The Standard's daily newsletter and breaking news emails? You can register below and make sure you are up to date with everything that's happening in the south-west.
Sign up for our newsletter to stay up to date.