Staff at state government agency Major Projects Victoria (MPV) are overpaid and underworked, the auditor-general has found.

The wages of nine senior staff and contractors at MPV take up over 25 per cent of the agency’s $10 million annual budget, auditor-general John Doyle found.

His recent review also found that contractors were often paid retainers of up to $33,000 a month, regardless of whether or not they had actually done any work.

In the report tabled in Parliament, Mr Doyle said MPV had barely changed since concerns were raised about its governance and reliance on contractors back in 2012.

“Instead, it appears intent on engaging contractors in what are essentially employee roles with remuneration levels that MPV has failed to adequately justify,” the report said.

“MPV's staffing costs are high.

“MPV does not know how many hours its contractors work each month.”

Mr Doyle said MPV appeared to take on contractors instead of recruiting skilled Victorian public sector staff.

“In comparison, in April 2015, a large Victorian government department responsible for building large, complex infrastructure advertised for a project director,” he said in his report.

“It sought this position within the VPS (Victorian Public Service) with a salary range of $141,969 to $193,078. This is significantly less than the remuneration provided to MPV's project directors.”

The auditor-general was also unsatisfied that the agency was dealing with the risk of fraud.

His scathing report questioned the very existence of the MPV.

“Given the diminishing number of major projects that MPV has to manage, there are significant questions about the value it provides to Victoria,” he said.

Public Transport Minister Jacinta Allan blamed the former LNP government for not acting on the original audit, but says she has told MPV to implement the recommendations by the end of the year.

Opposition Leader Matthew Guy says MPV must merge with another agency or be abolished if it had no work to do.