In a statement to Hungarian news agency MTI, Budapest's government control office (KEHI) said a four-month-long probe ordered by Prime Minister Viktor Orban's right-wing government into Norway-funded NGOs had revealed "irregularities" in 61 of 63 projects.
KEHI said it would submit a criminal report against the Okotars Foundation, the main disburser of the funds, "on suspicion of mismanagement, budget fraud, forgery of private documents and unauthorised financial activity".
Budapest has insisted Okotars and other civil society groups have a politically biased "left-wing" agenda, a claim refuted by the NGOs who say they are victims of a government crackdown on civil society that has included police raids.
Hungary's cabinet chief Janos Lazar told reporters Wednesday that Okotars had "failed to do its job" by using "subjective" criteria for evaluating grant applications, and had "abused the trust of the Norwegian government".
Okotars head Veronika Mora told AFP her organisation denied the accusations.
"If charges are pressed we will seek legal remedies in an independent court," she said.
Hungary's squeeze on foreign-funded NGOs has been criticised by Norway and the US.
In a July speech Orban called the organisations "paid foreign activists", sparking comparisons with Russian President Vladimir Putin's crackdown on activist groups described as "foreign agents".
US President Barack Obama last month included Hungary in a list of countries where "endless regulations and overt intimidation increasingly target civil society".
Orban, who has faced accusations of taking Hungary down an authoritarian path since he took power in 2010, replied that Obama's remarks had "no factual basis".
Relations between the US and Hungary sank further last week when Washington issued entry bans to six unnamed Hungarian government officials it suspected of corruption.
The US charge d'affaires in Budapest, Andre Goodfriend, told AFP on Tuesday that "intimidation of civil society" as well as "centralisation of authority lack of transparency, and corruption" could prevent the US continuing as an ally of Hungary.