Former deputy prime minister Michael McCormack has defended a regional grants scheme following scathing findings of the program in an auditor-general report.

An Australian National Audit Office examination of the former coalition government’s Building Better Regions fund found Nationals-held electorates received $100 million more than they would have if the money had been distributed on merit.

The $1.15 billion fund awarded grants to 1300 projects across the country, with 65 per cent of infrastructure grants handed out to schemes not assessed as having the most merit.

The report said while the program was well designed, money for projects could be overridden by a panel of ministers, which included Nationals MPs and former deputy prime ministers Barnaby Joyce and Mr McCormack.

While the new Labor government has vowed to overhaul the scheme, Mr McCormack said all of the projects were properly assessed.

“Local members know which project is going to serve their communities better than a bureaucrat in Canberra,” he told Sky News on Friday.

“We take on board those local decision makers’ advice and then we act accordingly.”

Infrastructure Minister Catherine King said she was not surprised by the report’s findings, coming off the back of similar grant funding scandals under the previous government.

“Australians have got zero tolerance for this,” she told ABC TV on Friday.

“Certainly, I’m determined to make sure we have clearer, fairer, transparent processes right the way across the regional grants program that I administer.”

The audit report also found 164 occasions when the panel of ministers declined applications that had been recommended by the department, while 179 decisions were not documented properly.

“While the Nationals accounted for fewer electorates (16 in each round or 24 per cent of those applicable), applications funded from these electorates out-performed those in Liberal Party and ALP electorates in terms of both average number of grants and value of grants,” the report said.

“Applications located in electorates held by all other political parties were awarded less grant funding than would have been the case had funding been awarded based on the results of the merit assessment process.”

Mr McCormack said he stood by every decision made under the grants scheme, even the ones not properly documented.

“I went out of my way to ensure that the Labor seats were looked after, the independent seats were looked after, sometimes at the expense of coalition seats,” he said.

“I’m proud of what we were able to do.”

The former Nationals leader said some councils may not have been approved for projects under the scheme due to other larger regional councils being able to pour more resources into the application.

Ms King said regional Australia had been dudded following the release of the report.

“We’ve got a big mess to clean up and the previous government has a lot to answer (for),” she said.

“This sort of behaviour in terms of grants programs; Australians’ tolerance for it is really, it’s just gone.”

The government is reviewing all grants schemes ahead of the October budget.