Ombudsman Deborah Glass called for an overhaul of parliamentary expense rules after an investigation into allegations referred to her by the Labor government in a political tit-for-tat.

The Andrews government dobbed in the Liberals and Nationals MP Emma Kealy to Ms Glass before the 2018 election, while Labor was still taking heat for its misuse of taxpayer dollars in the 2014 poll.

But in a report released on Thursday, Ms Glass found the Liberals did not know of the invoice fraud being committed by former state director Damien Mantach, who was convicted and jailed for his years-long scam in 2016.

Labor alleged the Liberals should have known their parliamentary funds were being misused.

Ms Glass also cleared Ms Kealy of any wrongdoing over an errant email sent by an inexperienced local newspaper staffer about invoicing dates for advertisements to avoid rules during election periods.

But Ms Glass said all of these issues would be avoided if politicians did not approve their own expenses, and changes to the system do not go far enough.

"It is becoming increasingly difficult to see why the expenses of members of parliament should not be subject to the same robust scrutiny that applies to public servants and the broader public sector, who cannot simply self-certify their entitlements from the public purse," she said.

Opposition Leader Michael O'Brien, who was one of the 40 Liberal MPs referred to Ms Glass, said Labor's attempt at distracting from its own scandal was a failure.

"Once again, the Labor Party has used public resources to try to smear its political opponents but it has backfired severely," he said.

Nationals Leader Peter Walsh also called the referral a "grubby tactic" and was pleased to see his colleague cleared.

Treasurer Tim Pallas told reporters the government had already changed the rules for expenses.

"I just wonder exactly how far we go beyond the processes we already put in place," he said.

Australian Associated Press