Liberal frontbencher Michaelia Cash has denied a health and hospital grant program from the former Morrison government was pork-barrelling despite a scathing auditor-general report into the scheme.

The report into the administration of the Community Health and Hospitals Program found it was "ineffective and fell short of ethical requirements" and breached legal requirements.

The Australian Government Solicitor found no legislation could be relied on to authorise the spending.

The $1.25 billion initiative was announced in December 2018, five months before the 2019 federal election, with a further $747 million committed for associated projects.

Funds were provided in grants to primary health networks and state and territory governments in a bid to ease pressure on community services and hospitals.

However, the audit report found the governance of the funding arrangement was not effective and more than half of the grants chosen were selected outside the expression-of-interest period.

Senator Cash said the funding scheme was not used as pork-barrelling ahead of the 2019 federal election.

"That program itself was actually developed to deliver local health and hospital services in every state and territory," she told ABC radio on Tuesday.

"The Albanese Labor government has continued to use this grant program to support health services across the country."

The audit report found just two of the projects were deemed highly suitable.

"Executive oversight, risk and fraud management were deficient," the report found.

"Projects funded under grant agreements with primary health networks and non-government organisations were designed, assessed, established and managed in a manner ... largely inconsistent with the Commonwealth grants rules and guidelines."

The report made four recommendations, including ensuring advice to government was consistent with the Commonwealth's grant rules and that assessments supported value-for-money recommendations.

Senator Cash said she supported action by the health department to implement the recommendations.

"It is important that there are robust processes ... between the department and the ministerial office to ensure that the programs are implemented effectively and following proper process," she said.

"We would support any sensible actions taken by the department to strengthen those robust processes."

Health Minister Mark Butler said the program exemplified the Morrison government's time in office, which was "all announcement and no delivery".

"I've directed my department to run the ruler over the remaining projects that have stalled to ensure Australians get value for money," he said.

Independent MP Sophie Scamps, who worked as a doctor before entering parliament, said the misuse of health funding put lives at risk.

"As a doctor, I find it incomprehensible that health funding could be rorted for a political advantage," she said.

"Our health system is in crisis, and the fact the former government politicised health care for political gain is symptomatic of just how sick and corrupted the Morrison government was."

Dr Scamps has proposed a bill for restoring integrity and trust in government.