THE Auditor-General is to investigate claims former health minister Michael Wooldridge diverted health funds to a medical body which now employs him.

Dr Wooldridge yesterday defended himself against allegations he gave $5 million to the Royal Australian College of General Practitioners (RACGP) before he left government to help fund GP House in Canberra.

The sum included $1 million from a $7.5 million asthma program and $4 million from a program to boost specialist resources in the bush.

But Dr Wooldridge said the money was from surplus funds within his portfolio, approved by former finance minister John Fahey.

"It came from areas where the department would otherwise be required to return unspent monies to the Department of Finance," Dr Wooldridge said in a statement last night.

"In the case of the asthma and rural specialist programs, the consultation process has meant that the funding will be spent over a period longer than originally imagined.

"Neither the asthma nor the rural specialist program was in any way diminished as a result of the decision to transfer funds."

Dr Wooldridge also rejected claims the grant helped him secure his position as a consultant to the RACGP. "I held no discussions about future work with any organisation prior to the 2001 election," he said.

Health Minister Kay Patterson confirmed the RACGP had been given a federal government grant funded by unspent Health Department budgets.

Labor Health Spokesperson Stephen Smith described the grant as "an outrageous scandal of the highest order".

"What sort of government thinks that $5 million for a building for a lobbyist in Canberra is more important than $5 million for asthma prevention and rural and regional health needs?" he said.

"Wooldridge did it secretly, in the dead of the night, and after the election he pops up as a lobbyist. [His] conduct should be referred immediately to the Auditor-General. If the Government does not do that, we will do it as an Opposition."

Auditor-General Pat Barrett told The Daily Telegraph Australian National Audit Office officers would query the Health Department to ensure allocations of funds to specific programs conformed to guidelines.

Mr Barrett said the audit office would wait for the Federal Government's response to the conflict of interest allegations before launching a comprehensive audit of Health Department funding.

Cathy Powell, whose three sons Ian, 5, Kieran, 7, and Rees, 10 are all asthma sufferers, said: "I would be very disappointed if it turns out that funds have been taken from this very worthwhile and important plan to fund a doctors' headquarters."