Jeremy Pocklington, Permanent Secretary at the Ministry of Housing, Communities and Local Government, said he was "comfortable" at the "clear criteria" used to decide which areas would benefit from the Government's controversial Towns Fund.
Labour claims Ministers may have chosen which towns would be selected for the scheme "for political gain" in the 2019 General Election, as a number were picked despite being deemed 'low-priority' under the Government's own criteria.
Stocksbridge, Brighouse, Todmorden and Morley, all of which were in battleground seats at last year's General Election, were among the 16 Yorkshire towns invited to bid for up to £25m from the Towns Fund last year.
MPs on the Commons Public Accounts Committee were told that the government decided to pick towns based on assessments by local teams and judgements by Ministers rather than a competitive process where local areas would bid for the money.
Mr Pocklington said this was because some of the towns most in need of help may not have the resources or leadership to bid successfully for the money. The committee was also told that although civil servants suggested Ministers may want to consult elected metro mayors on which towns to pick, they chose not to do so.
In total 101 towns across England were chosen to bid for up to £25m from the Towns Fund last September, with the amount of money ultimately awarded depending on the strength of investment plans drawn up locally.
The Government says the funding will help local leaders "transform their town’s economic growth prospects with a focus on improved transport, broadband connectivity, skills and culture".
The Yorkshire towns of Castleford, Dewsbury, Doncaster, Goldthorpe, Keighley, Rotherham, Scarborough and Stainforth were selected automatically after being graded as high priority by MHCLG.
Brighouse, Morley, Stocksbridge and Todmorden were chosen despite being rated as 'low-priority' and Goole, Shipley, Wakefield and Whitby made the list after being ranked as 'medium-priority'.
The NAO report shows 61 of the towns were chosen at the discretion of Ministers led by Robert Jenrick, the housing and communities secretary. An analysis shows that all but one of them were either Conservative-held seats or Tory targets before the election.
In Morley, Conservative Andrea Jenkyns was defending a 2,104 majority from Labour, while in Stocksbridge, Tory Miriam Cates was looking to overturn a 1,322 Lib Dem majority.
Brighouse and Todmorden both fall in the constituency of Calder Valley, where Conservative Craig Whittaker was defending a 609 majority from Labour.
Mr Pocklington said: "In assessing the medium priority towns, it's very clear that Ministers wanted a geographical spread within regions and between types sizes of towns. For the lower priority towns, often Ministers have been focused on towns with a specific investment opportunities, so I know Morley in Yorkshire and Humber looking to invest in its transport hubs, in Southport there was a particular opportunity to invest in the digital infrastructure network which was set out in the local industrial strategy.."
He said another consideration was a particular company was potentially in decline, adding: "So, Stocksbridge is an example of that, which was very reliant on the steel industry, so is considered a vulnerable town."
Mr Pocklington said a number of criteria were considered when deciding how to allocate the money, with income deprivation the most important.
But he said: "This is not an issue that can be simply reduced to the matter of one number or seven numbers, because there is a breadth of issues and a degree of judgement that needs to be applied.
"What we had is a rational, reasonable and balanced approach that recognises the circumstances we're dealing with, protects the taxpayer and crucially, the towns that have been selected they don't automatically receive the money.
"They are invited to join that process that actually the money does depend on the town developing the town investment plan, and having a strong delivery plan and business case to protect the tax payer."
Labour's Sheffield MP Olivia Blake questioned why the rationale was not published for towns that were not selected, adding: "I'm sure there towns and taxpayers up and down the country, wondering why they're not able to bid for this fund."
Mr Pocklington said there would be a competitive round where towns who were not selected would be able to bid for funding, but he was unable to offer details on how this would work.
A total of 13 towns are in the first cohort being assessed by civil servants, with a decision due on how much funding they will get expected by the end of October. The remaining towns will be assessed in the coming months.