Australia's Council for International Development says the government's aid agency's made it clear that fraud is an issue.
The comment follows the Herald Sun newspaper's reports of the misuse of aid funds, mainly in Papua New Guinea and Indonesia.
The council's executive director, Mark Purcell, says the head of AusAID told a Senate Committee in June that 66 cases of fraud, totalling almost 880 thousand US dollars, were being investigated.
"The report in the media here is slightly different, it says there's more cases but a lesser amount of money but whichever way you cut it, there's definitely cases that are being investigated and the focus is on Papua New Guinea."
Mark Purcell says it's good the Australian government is investigating aid fraud but it needs to do more to stop it from happening in the first place.