A $252 million program for amalgamated NSW councils improperly allocated public money on a politically partisan basis that was "a clear abuse of the grants process", a parliamentary inquiry has found.
A NSW upper house committee on Tuesday released its findings after investigating the government's Stronger Communities Fund, which issued grants to councils affected by amalgamations in 2016.
Some 95 per cent of the $252 million was paid to councils in government-held or marginal electorates in the lead up to the 2019 NSW election.
Inquiry chair and NSW Greens MP David Shoebridge said the fund was "an alarming example of the lack of transparency and accountability" in grant programs and called it an electoral "bribe".
The NSW Office of Local Government conceded in the inquiry it had done no merit assessment of projects that received grants.
Mr Shoebridge said the fund was "a brazen pork-barrel scheme".
"The coalition designed a scheme with so few checks and balances that $252 million of public money was handed out on a purely political basis to sort out the coalition's political problems," Mr Shoebridge said in the report.
"(It was) to gain an advantage in the 2019 state election and to punish any council that had objected to being forcibly merged."
Mr Shoebridge also said no attempts were made to ensure the grants were administered in the public interest and "it was always about the politics".
The inquiry found Hornsby Shire Council in Sydney's north received a grant of $90 million, more than a third of the entire program, and this "went against the original intent of the Stronger Communities Fund".
It found this was in part related to the resolution of legal disputes involving Hornsby Shire Council and Parramatta City Council.
The committee recommended that the NSW government update its guide for grants administration, establish enforceable minimum requirements and publish half-yearly reports on current grant processes.
It also recommended the NSW government create a "central website" which would publish all grant application information and projected timelines.
The power of the NSW auditor-general should also be boosted, it found.
Furthermore, the committee recommended the inquiry report and its evidence be sent to the Independent Commission Against Corruption. However this will require a resolution from the NSW upper house.
Sarah Lau, a senior policy adviser to Premier Gladys Berejiklian, told the committee in October she had shredded the written records showing the premier had approved $141.8 million of grants funding.
Another $61.3 million was approved by Deputy Premier John Barilaro.
It was later found that Ms Berejiklian's office broke NSW record-keeping laws by shredding the documents and seeking to delete electronic copies.
Ms Berejiklian admitted the program was administered to "curry favour" but defended her government's conduct, saying it was "not an illegal practice".
Mr Shoebridge said the grants system is "broken" and needs to be overhauled.
He said the provision of grant funding to local councils should be replaced by a multi-year funding formula linked to councils' existing planning priorities.
The upper house committee will continue to look into the NSW government's $177 million bushfire relief fund, which is also accused of being a pork-barrel scheme for coalition-held and marginal seats.
Mr Barilaro has denied that allegation.
"The Stronger Communities Fund is just one example of how NSW government grant processes lack transparency, accountability and oversight. Not only is the vast array of grant programs wasteful and inefficient, but grant programs are also currently open to abuse," Mr Shoebridge said.
The committee will hold hearings on the bushfire fund next month.
Ms Berejiklian's office declined to comment but Natalie Ward, a coalition MP on the committee, said the report was a "biased, partisan sham and a waste of taxpayers' money" and a "cheap, political attack".