Liberal Democrat leader Tim Farron called Labour "careless" for spending European Union (EU) money on ineligible projects and the Conservatives "mean-spirited" to use flood relief money to repay the wrongly used funds.
The government blamed Labour's "mismanagement" of the money.
Labour has been approached for comment.
Local government minister Andrew Percy, revealed in a written statement that £15m EU Solidarity Funding received in respect of the winter 2015-16 floods would be "offset" by the £14.5m repayment.
The UK was "legally obliged" to make the repayment because there had been "ineligible spending under the Labour administration" of 2007 funding.
The remaining £500,000 was "only eligible to reimburse" the government for financial support given to affected areas, he said.
Westmorland and Lonsdale MP Mr Farron said the two parties had "combined to deprive flood-hit areas of much needed funds".
"Labour's overspending has hurt the North and all those affected by last year's floods," he said.
"But it is the Conservative's mean-spiritedness which means they have chosen to use this money to pay the fine, instead of passing this money on to flood-affected areas and paying the fine from Treasury coffers."
In response, Mr Percy said the government had delivered £300m to help flood-hit communities.
"Liberal Democrats are misleading the public by suggesting there's some EU magic money tree," he said.

The 22-year-old, who spent the latter half of last term on loan at the Dons, returned this summer as part of the deal that took Jonny Hayes to Celtic.
"They didn't want to sell me, they weren't interested in that, they wanted to put me back out on loan instead, which was positive to me," he said.
"It comes across that they still think I have a chance to break in there."
Christie signed a four-year deal with Celtic when he joined them from Inverness Caley Thistle in the summer of 2015.
He spent the first half of the 2015-16 season on loan at the Highlanders and, following his deal with the Dons last season, is looking forward to spending the whole of the 2017-18 campaign at Pittodrie.
And he says he feels no pressure to prove anything to Celtic manager Brendan Rodgers.
"It's more about proving to myself," added Christie, who hit seven goals in 15 games for the Dons last season. "I enjoyed playing and scoring last season. I wouldn't say I have anything to prove but I need to keep my consistency high.
"It's a very big season for me, the onus is on me to step up and continue some good form. If I keep my consistency up over the full season, I'll hopefully be in a better place come next season."
Aberdeen have finished as league runners-up to Celtic for three years running but the club have lost key players in Hayes, Niall McGinn and Ash Taylor.
Manager Derek McInnes chose to remain at Pittodrie after holding talks with Sunderland and he has been busy reshaping his squad with several new signings and the promise of more to come.
"It will be difficult," added Christie. "Everyone thinks Aberdeen might fall away but the mood in the camp, the positivity, we know that we have more than enough strength to replicate last season certainly."
The Dons kick off their campaign at home to Siroki Brijeg in Europa League qualifying next Thursday.
Rangers and St Johnstone lost their first round ties but Christie believes Aberdeen can get the better of their Bosnian opponents over two legs.
"We want to make a big impact in Europe as well," he said.
"Everybody in Scotland wants every Scottish team go as far as they can so it is unfortunate to see the others go out."
About £15m of funding intended for UK communities hit by floods last winter will instead be used to cover a "fine" for misspending a previous grant.
[NEXT_CONCEPT]
Ryan Christie is confident his long-term future lies with Celtic, despite a second loan move to Aberdeen.