Australia's Auditor-General has found more than a quarter of regional grants awarded by the Commonwealth since 2018 were awarded to recipients from major cities.

A new analysis of more than 108,000 federal grants, worth more than $60 billion combined, allocated from January 2018 to June this year, was released by the by the Australian National Audit Office (ANAO) on Tuesday.

It said 27 per cent of regional development grants awarded during this time were delivered to recipients with postcodes in major cities.

But the ANAO did not break down which rural grants had been awarded to major cities and instead noted that "76 per cent of rural grants did not specify a postcode where the grant outcomes were to be delivered".

In total, the ANAO said 6,668 regional and 433 rural grants were awarded, worth a combined $2.6 billion, with $624 million of that going to recipients in major cities.

Finance Minster Simon Birmingham said the grants awarded to major city postcodes did not indicate that that was where the money was spent.

"This does not necessarily reflect where the work and community benefit will occur.

"This report highlights that almost 60 per cent of grants were focused in health, aged care, Indigenous and disability services."

But Shadow Regional Development Minister Catherine King said regional grants should go projects in "Singleton, Cloncurry, Gladstone or Launceston – not Surry Hills, Carlton or inner-city Brisbane".

"It's one thing for the Morrison-Joyce government to name-check regional towns, it's another for them to actually invest in them," Ms King said.

The ANAO analysis also found that, by value, more than 40 per cent of all government grants awarded since 2018 were granted through a "closed non-competitive process".

But it showed a trend toward fewer grants being awarded by closed non-competitive process, falling from 61 per cent, by value, in 2018-19 to 18 per cent in 2020-21.

The ANAO said that 20 per cent of all government grant funding, or $11.9 billion was awarded to recipients in the "ageing" sector, 18 per cent or $10.4 billion was awarded to "health, wellbeing and medical research" and 14 per cent or $8.6 billion was awarded under the category "Indigenous".

The analysis made no recommendations.

Latest in series of grants questioned

The ANAO's latest analysis comes amid continued scrutiny on a number of government grant decisions.

An audit by the ANAO earlier this year found that Commonwealth funding for commuter car parks had been disproportionately allocated in Liberal-held or marginal seats.

In April, questions were raised about the intervention of government ministers in the section of funding recipients allocated from the Building Better Regions Fund.

And last year, then-sports minister Bridget McKenzie was demoted from the ministry after coming under pressure following an ANAO audit of community sports grants.

Senator McKenzie has since been promoted to Minister for Regionalisation.