Australia's smaller government agencies could go unaudited for 20 years, a parliamentary inquiry has been warned.
The Australian National Audit Office forecasts its annual number of audits will fall to 38 without a cash injection of $6.5 million, which would allow its target of 48 to be met.
Auditor-General Grant Hehir has on Friday told an inquiry this will reduce pressure on agencies to maintain their performance and compliance.
"With a reducing number of performance audits, many smaller agencies may not be audited for extended periods of time, potentially over 20 years," he said in his opening statement.
Former finance minister Mathias Cormann had asked the ANAO to conduct a pilot program on mandatory audits of government agency performance statements.
Mr Hehir said he was ready to start rolling it out on core service delivery agencies like the tax office, the National Disability Insurance Agency and the Department of Social Services.
"It's really important," he said.
"I think it's time to get on with it."
Such audits would look at non-financial performance reports from government agencies.
"Let's start with the core (agencies) and get that right," Mr Hehir said.
Crossbenchers have teamed up to try and get the ANAO more funding.
Last year, the auditor-general found a community sports grants program scheme favoured coalition and marginal seats, noting the use of colour-coded spreadsheets and a memo which spoke of federal election target seats.
The report led to Bridget McKenzie resigning from the ministry.
The auditor-general also referred the Leppington Triangle land sale to the Australian Federal Police for investigation over possible fraud.
The federal infrastructure department paid $30 million for land worth $3 million near the Western Sydney Airport.
Friday's inquiry looked at the laws underpinning the auditor-general.
Deputy chair of the committee, Labor MP Julian Hill, said the auditor-general's list of potential audits resulted in "mild panic to abject terror" for agencies.
"It has a catalysing effect on performance if you think the auditor might come hunting, and that's a good thing in a big system."
