Hundreds of millions of dollars in education department grants are being given to private schools with no measures to track how the money is being spent, an auditor-general's report has found.

The state's financial watchdog has found little evidence that the money, estimated to be $676 million this year, is being used appropriately by the schools.More than a third of Victorian students go to private schools.

In a scathing report, acting Auditor-General Dr Peter Frost said the education department had "weak" funding agreements with the schools, no performance measurement or targets, and that the schools were unable to prove funds were spent as they were intended.

"My audit found that there is limited assurance that grants are used for their intended purpose or are achieving intended outcomes," Dr Frost said in the Grants to Non-Government Schools report, which was tabled in Parliament on Wednesday.

"The absence of clear, appropriate governance by [the education department] has led to poor grant administration, including inadequate monitoring ... of whether grants are used as intended."

In a sample audit of 22 schools, none could prove that their funding was not used on capital works, which is forbidden.

And only 20 per cent of schools receiving student disability grants could prove that they were used for the purpose that they were intended.

In his opening remarks, Dr Frost launched a blistering attack on the Catholic schools' administrative arm, the Catholic Education Commission Victoria, which accused the watchdog of conducting a biased report.

The audit revealed that due to a funding model that relates only to Catholic schools, some wealthier Catholic schools received substantially more in government grants than they would have under the department's funding arrangement, while poorer schools received less.

Government funding for Victoria's nearly 500 Catholic schools is distributed by the Catholic Education Commission Victoria.

The Catholic Education Office's chief executive, Stephen Elder, said the audit was "limited in scope" and the auditor-general was trying to endorse previous criticisms it had made to media about school government grants.( Elder criticises every report critical of Independent schools)

"It is hard not to conclude that the scope was intentionally designed to serve this purpose, given that a broader scope would have challenged many of VAGO's findings," Mr Elder said.

Dr Frost rejected the criticism, saying that the audit "may not have been the one the CECV [Catholic Education Commission of Victoria] wanted".

The auditor-general investigated more than $640 million in non-competitive grants given to private schools in 2014 and found most of it was "untagged".

The report made a range of recommendations to the education department, advising that it improve its record keeping and reporting requirements.

Independent Schools Victoria's chief executive, Michelle Green, pledged to work with the department to improve the administration of grants.

"The public has a right to know how taxpayers' money is spent," she said.

An education department spokeswoman said the department accepted all of the recommendations presented, and would "work closely with the non-government schools sector to deliver greater clarity, transparency and accountability for state funding".

A spokesman for Education Minister James Merlino said the government "has already undertaken significant reforms" to strengthen reporting and accountability requirements for private schools. ( Yeah...OK I'll be interested to see that when/if it happens!)

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