Farmer drought loan schemes under fire

The auditor-general has criticised government management of billions of dollars in low-interest loans for farmers.

Concessional loans totalling $3.55 billion have been provided to farmers through two schemes to help service debt or recover from drought since 2013.

The schemes offered five-year interest-only loans to a maximum of $1 million or up to 50 per cent of a farm business' eligible debt - whichever was lower.

The first of the loans are due for repayment in 2018/19.

A report by the commonwealth auditor-general released on Thursday found serious shortcomings in the schemes including the "absence of an economic analysis of the costs and benefits" of subsidising farms and "sufficiently robust arrangements to ensure that funding conditions were met before payments were made".

The schemes also lacked proper performance measurement and reporting.

However, while the federal agriculture department did not fully appreciate the risk involved in the first program - Farm Finance Concessional Loans - there were improvements in the rollout of the more recent Drought Concessional Loans program.

The agriculture department accepted the auditor-general's recommendations to improve future programs including better checks before funding was released, tools to test whether the programs were meeting the government's aims and public reporting on performance.