The federal government handed more than $1bn in funding to Victoria for the second stage of the East West Link project before an independent body was convinced of the merits of the project, a Senate inquiry has been told.

John Fitzgerald, acting head of Infrastructure Australia, said he could not comment on whether the project would benefit public transport and traffic levels in Melbourne.

“We’re still in the process of assessing the project, so we haven’t formed a view on [whether it is a worthwhile project]”, he said.

But the Department of Infrastructure has admitted that the commonwealth handed over the $1bn funding in June 2014 without receiving a business case or in-depth impact statement on the project. It was also still awaiting a cost-benefit analysis, the Comprehensive Impact Statement, tender process and final route of the tunnel.

Construction on the second stage of the controversial road and tunnel project is expected in early 2016.

The department has signed an agreement with the Victorian government to refund the money if the project falls through.

“The broad understanding of the memorandum of understanding is that if the project doesn’t proceed then the funding is returned,” said deputy secretary of the department, Lyn O’Connell, adding that it would carry out a cost-benefit analysis of the project.

Fitzgerald told the committee that Infrastructure Australia did not know when the analysis would be completed.

“It’s in the hands of the Victorian government as to when we get that. I can’t be explicit about that.”

The opposition has questioned the acting CEO’s impartiality after it was revealed earlier this year that Fitzgerald worked for consultancy firm KPMG on the East West Link project.

“He was a paid hack,” Labor senator Stephen Conroy told the committee.

“Mr Fitzgerald is the most conflicted public servant I’ve met in a long time.”

Fitzgerald denied being a full-time employee or partner of the consultancy and said he was “contracted to KPMG as a part-time consultant”.

The controversial East West Link is a key issue in the upcoming Victorian election.

The second stage of the project is estimated to cost $5.3bn, $1bn of which is commonwealth funding. The whole project is estimated to cost just under $15bn.

Labor has accused the prime minister of breaking an election promise by providing the Victorian government with the funding before seeing a cost-benefit analysis.

“This transparent attempt to boost the budget bottom line of his Liberal colleagues in the Victorian state government in the lead-up to this year’s Victorian election represents yet another broken promise,” shadow infrastructure minister Anthony Albanese said in a statement.

Just days before last year’s federal election, Tony Abbott said the federal government would only fund big infrastructure projects after undertaking an audit of the plans.

“I have given a commitment that we won’t spend more than $100m on any single infrastructure project without a published cost-benefit analysis,” Abbott said in an address to the National Press Club.

• This article was amended on 24 October 2014. The original article referred to provision of a business model.