A Victorian council has formally rejected $1 million in Commonwealth drought-relief funding, as Labor seeks an inquiry into the coalition's multi-billion dollar assistance package.
Moyne Shire mayor Mick Wolfe said councillors unanimously decided they had no need for the federal government money.
The council has urged the government to reallocate the money to another area in need.
"We are not in a drought down here, we are doing fairly well," Mr Wolfe told Sky News on Tuesday.
"We appreciate the offer, but give it to somewhere that really needs it."
Moyne was one of 13 local government areas given the drought relief last week, as part of an additional $100 million support package.
But the southwest Victorian council area is flush with water after great spring rains, with green paddocks and plenty of feed for cattle and sheep.
Even so, the infrastructure department is standing by its data, which shows the area is eligible for access to drought funding.
Scott Morrison attempted to fend off questions about the head-scratching use of taxpayer funds, claiming he was happy being accused of being "too generous".
Asked why the prime minister was being "defensive" and "narky" about the issue, Agriculture Minister Bridget McKenzie said, "I'm not sure."
"I think he's just keen to get the money out the door and make sure our farmers have the support they need," she told the Nine Network.
Labor's agriculture spokesman Joel Fitzgibbon suspects there are at least two other local council areas in a similar position to Moyne.
Mr Fitzgibbon has asked the auditor-general to investigate all of the government's drought programs.
He wants the auditor to examine "inexplicable" claims the coalition is spending $7 billion on drought initiatives, and to measure the value and effectiveness of each program.
Labor also wants to drill into the criteria underpinning the Drought Communities Program, and the government's apparent reluctance to release a report from its drought coordinator.
"As large parts of Australia suffer the worst drought on record, the government's response has been ad hoc, confusing and lacking in direction," Mr Fitzgibbon said.
"Farmers and rural communities are tiring of prime ministerial drought tours, empty talk about dams, exaggerated funding announcements and now, what appears to be political favouritism and pork barrelling."
Opposition frontbencher Tanya Plibersek said the real problem was that genuinely drought-affected regions were missing out on funding.
"It makes farmers in particular feel like the government just doesn't know what's going on on the ground," she said.
Water Resources Minister David Littleproud and Treasurer Josh Frydenberg will embark on a three-day tour of drought-affected northern NSW and southern Queensland towns on Wednesday.
Australian Associated Press