The Australian National Audit Office is laying the groundwork for an inquiry into the Turnbull Government's $444 million grant to the Great Barrier Reef Foundation.
Concerns continue to grow around the Turnbull government's $444 million grant to the Great Barrier Reef Foundation.
The grant, announced on April 29, is the single largest investment for the reef but the nature of the funding process has caused controversy.
There was no competitive tender for the money, leaving questions around how and why the money was allocated to an organisation with only six full-time staff.
The Australian National Audit Office has now listed it as a "potential" inquiry in its 2018/19 work program but has yet to commit to a full audit.
Any audit would include "examining governance arrangements to support the effective implementation of programs covered by the partnership", the ANAO said.
The foundation previously said it did not suggest or apply for the funding, and no environment department officials were involved in a meeting to discuss the plan that led to the unsolicited grant.
Opposition leader Bill Shorten said on Wednesday the money should be returned, given concerns about the funding process.
"I can only hope that the prime minister makes a proper and detailed explanation of this whole process, and it's certainly the case that when parliament resumes next week Labor will endeavour to get a full and proper explanation," Mr Shorten said.
The federal funding is expected to deliver water quality improvements, crown of thorns starfish control, science for reef restoration, increased community engagement and improved monitoring of the reef.
Foundation managing director Anna Marsden told the ABC the grant came as a "complete surprise" when first proposed by Mr Turnbull, but insisted the organisation was well placed to use the money wisely.
On Wednesday, Environment and Energy minister Josh Frydenberg defended the funding.
Mr Frydenberg said the Department of Environment had made it "very clear" that "the Commonwealth guidelines were complied with", citing a submission to the Senate Committee.
"The Australian National Audit Office can absolutely follow the money when it comes to how it is spent with regards to the Barrier Reef Foundation," he told reporters.
"The foundation is a very reputable organisation. It's been going for nearly 20 years. It has raised an enormous amount of money from the private sector and attracted government money, both state and federal, including from the Labor Government."
Mr Frydenberg also defended the funding via Twitter on Wednesday.
But experts and advocacy groups have also challenged the government.
Lawyers from Environmental Justice Australia (EJA) said in a submission to the Senate inquiry that the grant should have been characterised as a procurement and thus subjected to a tender process.
Governance expert Professor Thomas Clarke from the University of Technology, Sydney agreed, telling the ABC the government's process was "deeply concerning".
"It should have been a competitive [tender] and I think the government has been caught out on this and is in a dilemma. It has done it and now has to try to defend it," he said.
The foundation's board is made up of representatives from the business, science and philanthropic community and supported by high-profile companies that include Qantas, Rio Tinto, BHP, Google and Orica.
Additional reporting: Nick Baker