In short:

An audit has found "significant record-keeping shortcomings" with the Tasmanian Community Fund (TCF) after it awarded a $558,000 grant to an organisation backing the Yes campaign last year.

The grant was used as part of a national media campaign, but the TCF board has disputed many of the audit's findings and argued it supported the Yes campaign when all other parties were in favour.

What's next? 

The Tasmanian government says it will amend laws governing oversight of a public grant fund by the end of this year.

An organisation that campaigned for the Yes vote in the Voice referendum received a $558,000 publicly funded grant, but the process lacked documentation and was flawed, an audit has found.

The board of the Tasmanian Community Fund (TCF) agreed to give the grant to Australians for Indigenous Constitutional Recognition (AICR) in June last year.

The report found the AICR used $120,000 for a national cross-media campaign including television advertisements, social media posts, opinion pieces and media releases, and a further $51,000 on video production and a media consultant.

It found half of the grant was used for "information about the referendum", including workshops and promotional material to libraries, while $100,000 was unused.

Tasmania's auditor-general investigated the grant, and in a report released on Thursday found that the TCF board — which administers public grants for "community purposes" — agreed to publicly support the Yes campaign in February last year.

But the audit found the board "did not record its reasons for supporting a Yes vote", and did not seek advice on whether it was prudent for a state entity to support a referendum outcome.

"The TCF's position statements supporting the Yes vote could have created a perception that any subsequent funding decisions were not objective," the report reads.

Its processes for declaring and managing conflicts of interest were also not documented.

Directors of the TCF released a statement saying they "strongly disagree" with the findings.

The TCF board issued the grant because it believed it fell under the "educational purposes" category, but the audit questioned whether this was the case.

"At the time the grant was assessed a significant portion was to be used for a media campaign with the aim of securing a successful outcome at the Voice Referendum, and it was not documented how this would support education in Tasmania," the audit report reads.

"Specific invoices relating to payments made for Tasmanian media allocations were not available as payments 'were made in lump sum at a national level'.

"It is therefore not clear what percentage of these funds were for advertisements aired in Tasmania."

The grant constituted 7 per cent of the TCF's revenue for 2022-23.

TCF directors say they were denied 'procedural fairness'

TCF directors rejected the findings that there was insufficient evidence to support the board's decisions, and that it had failed to consider relevant matters in supporting the Yes vote.

TCF director Alex McKenzie said that while "some [of] its documentation could have been better", he rejected the claim that not enough rigour was applied to its decision-making.

He said the board had shown "long-standing support" for grants that assist Tasmanian Aboriginal communities.

"Failing to take a wholistic (sic) view of the processes relating to the decision to support Yes and the funding decision to the AICR means the TAO did not consider the many factors that provide important context to our decision," Mr McKenzie said.

Mr McKenzie said the media campaign was limited to Tasmania.

The TCF chose to support the Yes campaign at a time when all three main political parties supported the case, prior to the Liberal party withdrawing its support.

The board has obtained legal advice, arguing it was denied procedural fairness by the audit office, and there was "no basis" to any claim that the board had a conflict of interest.

Government to amend laws governing grants

Community Services Minister Roger Jaensch said the government will consider amending laws that govern the TCF in response to the audit report.

"The use of public funds for political purposes does not meet community expectations and the government did not endorse, or approve, this use of these funds," he said.

"The government and the Tasmanian community expect a high degree of diligence, transparency and accountability in the use of public funds."

Mr Jaensch has requested "urgent advice" to bring the TCF board's accountability and governance obligations into line with other statutory boards.

The government intends to legislate the changes by the end of the year.

The decision to award the grant generated public interest and requests for the Audit Office to examine it.

Tasmanian Liberal senator Jonathon Duniam referred the matter to the auditor.

He said the board's actions "went well beyond its legislated remit".