In a letter to Shadow Home Affairs Minister Kristina Keneally, Auditor-General Grant Hehir said he had commenced the audit to examine whether the awarding of grants under the Safer Communities Fund were "effective and consistent with the Commonwealth Grant Rules".

In February, ABC's 7.30 report revealed that Mr Dutton personally slashed millions in grant funding from organisations that were strongly recommended by his department to improve community safety, and used the funds to support his own handpicked list that did not follow his department's merit-based rankings.

Mr Dutton also used the funds to support grants for two councils — in the lead up to a by-election in a highly marginal seat — that his department recommended should not be funded at all.

Documents obtained under FOI contain the Minister's handwritten notes indicating that he had approved the projects because he felt they would improve public safety.

These grants were awarded under round three of the Safer Communities Fund.

Merit-based assessments can be overruled

Under the grant guidelines, the Home Affairs Minister must take into account the assessment of each project, but he can effectively overrule his department's own merit-based assessments.

7.30 also revealed Mr Dutton's office fast-tracked a one-off $880,000 grant proposal to a retail association eight days after it made a $1,500 political donation to the Queensland Liberal National Party — at an event Mr Dutton attended — for the purpose of supporting him.

The Department subsequently found the proposal represented value for money and recommend it be funded.

The association has previously donated to both major parties, and its CEO said they were not aware Mr Dutton was considering the grant application at the time of the event.

Mr Dutton said at the time: "The baseless suggestion that I have or would be influenced by a lawful donation to the LNP is false and highly defamatory."

"The suggestion that the government has done anything other than support projects worthy of support is nonsense."

The letter from Mr Hehir to Senator Keneally said the audit would examine whether appropriate guidelines were in place, whether applications were assessed in accordance with the guidelines and whether funding decisions were appropriately documented.

Senator Keneally welcomed the decision to audit the scheme.

"Scott Morrison and former home affairs minister Peter Dutton have refused to explain why community safety expert advice was ignored and more than 90 per cent of all Safer Communities Fund round three grants approved ahead of the 2019 federal election were in Coalition or marginal Labor and independent seats," she said.

"Australians deserve to know whether their community missed out on much-needed safety equipment, like CCTV cameras, and being safer because of the Liberals' pre-election Safer Seats Rorts wheeling and dealing."

The report is expected to be tabled in February 2022.

Mr Dutton is no longer the Home Affairs Minister and is now the Defence Minister.

Story By | Paul Farrell