The chief agency AusAID has 175 cases of fraud under investigation stretching across 27 countries.
Documents released under federal Freedom of Information laws show a criminal trail through some of the world's poorest countries with widespread theft of money and forging of receipts.
They also show how food and other supplies are being diverted from dirt-poor communities and sold onto the black market at inflated prices.
While AusAID insists it is improving fraud control, the documents also reveal police are often reluctant to intervene and charge local criminals frustrating the Canberra-based agency's attempts to recover missing aid money.
In one extraordinary case, the Eritrean Government in 2006 seized food and other supplies from the United Nation's World Food Program, saddling Australian taxpayers with a probable loss of $1.25 million.
The revelations will do little to boost public confidence in a foreign aid program that is forecast to nearly double to $8 billion a year by 2015.
Papua New Guinea has emerged as corruption central with 71 cases of identified fraud, 40 per cent of the AusAID total, involving millions in missing funds.
In one case, a corrupt local official tried to bank a cheque for $522,000 before being caught by a diligent bank executive, while another five-year-old fraud investigation of illegal purchasing is likely to see $258,391 written-off.
Indonesia, which will receive $458 million in Australian assistance in 2010-11, has 31 fraud cases followed by the Philippines (20) and Solomon Islands with 19.
AusAID director-general Peter Baxter said fraud levels compared "very favourably" with domestic agencies like Centrelink.
"The level of fraud in our program from 2004-05 until December 2010 was 0.017 of 1 per cent of the $20 billion that had been appropriated to AusAID during that period," Mr Baxter said.
He denied that fraud was on the increase, despite 16 cases being reported in one month, November, alone.
Australia is one of the biggest aid donors in the world, focusing on the Asia-Pacific although the Government wants to expand its aid funding into Africa over coming years.
The FOI documents reveal the difficulties of managing a $4.5 billion budget while dealing with some of the most corrupt nations in the world.
One investigation in Fiji, involving fraud of $37,670, has been closed with AusAID declining to report the matter to the police "due to the highly sensitive political environment" in the Pacific island.
An unknown amount of AusAID funds has been caught up in a major scandal involving the African country of Mali, with health workers allegedly embezzling hundreds of thousands of dollars.
Foreign Affairs Minister Kevin Rudd has announced a review of the foreign aid program following an investigation last year that found millions of dollars were being wasted and gobbled up by highly paid consultants.
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