Key Points:

New Zealand First today made a donation to Auckland's Starship children's hospital, as a way of paying back the money the auditor-general said was illegally spent on the 2005 election.

NZ First leader Winston Peters today made a personal explanation to Parliament to say he had handed over a cheque this morning for $158,000.

The money was going to the hospital for paediatric research which meant some good would come from "this shambles", he said.

He believes Auditor-General Kevin Brady got it wrong when he ruled the money had been illegally spent.

Mr Brady identified $1.17 million in unlawful spending, of which Labour owed the lion's share with $768,000.

Parliament passed legislation to validate the spending but most political parties said they would pay it back, and did.

Mr Peters told his party conference in October that all $158,000 of the money would be repaid and the reason for the delay was that it had been placed in a term deposit that did not mature until November.

But today he continued to reject the argument that NZ First had to pay the taxpayer money back.

"We have always contested and continue to contest the findings of the auditor-general's report against both New Zealand First and United Future because both had their expenditure pre-approved by Parliamentary Services and the Chief Electoral Office."

Mr Peters said he had written to Mr Brady "advising him of the donation and explaining at least now some good will have come from this issue".

He told reporters NZ First had made the donation because it was never going to win the argument while the media kept asking when the party was going to pay the taxpayer money back.

"We believe the auditor-general's opinion should have been legally tested in court but the issue became one on which the court of public opinion had already made its final ruling and a hearing before the 2008 election was not certain."

NZ First had been the "most careful party and transparent party when it comes to public expenditure. Ask anybody from Parliamentary Services," Mr Peters said.

It did not accept the argument put out by the media and the public that "New Zealand First had somehow misappropriated public funds".

The $158,000 had been raised by NZ First members and supporters.

The party had chosen to give the disputed amount directly to Starship Hospital rather than see it lost in the coffers of the Wellington bureaucracy.

The party's board had chosen Starship and "I'm happy with that and so is the Starship Hospital".

Mr Peters said he had made a personal contribution to the donated amount but he was not disclosing that publicly.

He also said today he did not know why the Inland Revenue Department had never prosecuted the National Party for not paying a GST bill.

National had failed to account for GST in its election television advertising spending, leaving several broadcasters $112,000 out of pocket. If it had paid the debt it would have breached its broadcasting spending cap.

National earlier made a charitable donation to cover its GST bill.