CANBERRA, Dec 6 - A damning audit released on Wednesday says the education department has not set up "sufficiently robust arrangements" to make sure school systems have needs-based funding arrangements that comply with the law.
As well, the Australian National Audit Office found arrangements to make sure authorities have accounted for their funding are weak and the department is limited in its ability to ensure the money spent is boosting educational outcomes.
Only nine of 33 education authorities had published details of how they distributed government money among their schools.
"Overall, the arrangements established by the department have not delivered the level of transparency and accountability envisaged," the audit concluded.
School funding laws passed by the Gillard Government required states and private school systems to submit implementation plans saying how they were going to spend the extra "Gonski" money to improve student achievements.
But the Coalition won power before the new funding system began in 2014 and then-Education Minister Christopher Pyne ditched what he labelled "Canberra command and control measures" - although they remained a legislative requirement.
The audit found the department had not established robust arrangements to monitor these implementation plans or used them to measure progress on education reforms.
Auditors have told the department it must monitor compliance with such legislative requirements, increase transparency around how money is allocated and make sure it is being distributed according to need, enforce laws to measure progress on boosting student performance, and make more use of available data to understand the impact of funding on educational outcomes.
The department has agreed to all the recommendations.
"The department recognises the need for enhanced accountability and transparency to ensure that record levels of Commonwealth schoolfunding are used in accordance with the legislative framework," it said in its response to auditors.
It noted new funding arrangements starting in 2018 - the so-called Gonski 2.0 package - would be simpler and more transparent.
The new National School Resourcing Board would provide greater independent oversight of federal funding, the department said.
Education Minister Simon Birmingham said taxpayers must have confidence their money was being spent effectively and appropriately.
"Despite calls from state education authorities to reduce the regulatory burden of accountability for Commonwealth funding, it's clear strong oversight is needed," said in a statement.