The Minister in charge of the Provincial Growth Fund is welcoming the Government's spending watchdog taking a closer look at its operations and finances.

National have also welcomed news that Auditor-General, John Ryan, – who acts as the watchdog of Government spending – would be taking a closer look at the Provincial Growth Fund (PGF).

Ryan this afternoon announced his office would be undertaking additional review work and an audit of the PGF.

How quickly the PGF was established and is developing, coupled with the nature of its funding proposals and the high level of public interest mean the processes and types of funding provided could be different from traditional public sector arrangements, Ryan said.

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"The fund also requires appropriations to be managed by multiple government departments and organisations, which increases the risk of unappropriated expenditure."

A spokesperson for the minister in charge of the $3 billion fund, Regional Economic Development Minister Shane Jones, said he welcomed the Auditor-General's announcement.

"The minister welcomes the fact that the Provincial Development Unit has actively sought to work alongside the [Auditor-General] and believes the public would expect the largest regional development spend per capita in the OECD would be a focus for the Auditor-General."

National's economic development spokesman Paul Goldsmith has also welcomed the review and audit.

"We would absolutely expect the auditor general to be looking closely at the Provincial Growth Fund," he said.

He added that Jones had been "shameless" in the way he had "politicised" the fund.

"It is important that close observation by the Auditor-General serves to reassure New Zealanders about the workings of the fund. We expect it to be looked into as a matter of course."

The audit will look at the way PGF manages the risk of unappropriated expenditure, as well as looking into systems and controls which are in place.

"[The Auditor-General] will review the systems and controls in place to evaluate applications, disburse funds, manage contracts, and monitor the outcomes achieved."

The review would look at the processes in place for the management of the fund by the Provincial Development Unit, as well as the way contracts are managed.

"The work will provide an opportunity for us to make timely recommendations on any improvements to the administration and accountability arrangements for the fund, both through the annual audit and through the additional review work," Ryan said.