UPDATE 2-Olympics-Australian Games chief slams funding report

* Report wants more funding for popular sports

* Australia Olympic chief says fringe sports in firing line

* Sports organisations divided (recasts, adds details, quotes)

By Ian Ransom

MELBOURNE, Nov 17 (Reuters) - Australia's Olympic chief has criticised a government-commissioned report that dismissed calls for extra funding for elite sports, saying its recommendations would harm fringe sports and slash the country's medal counts.

The independent report released on Tuesday, touted by the government as the biggest review of Australia's sports policy in more than a decade, said the country's obsession with medal counts was hurting participation rates and diverting badly needed funding from grassroots sports.

Australian Olympic Committee (AOC) chief John Coates described the report's assertions as "nonsense" and said its authors were not qualified to make recommendations.

"I think you'll find Australians are immensely proud of our Olympic athletes and Olympic record. Olympians have inspired this nation for decades," Coates told reporters.

The AOC had requested an extra A$100 million (US$93.63 million) for each of the next three years, on top of the current A$140 million budget, to arrest a potential slide down the medal standings.

But the review, which advocated holding elite sports funding at current levels, said the government should give the priority to popular sports with higher participation levels.

It called for more funding for grassroots and community sports development and infrastructure, amid rising healthcare costs from lifestyle diseases like obesity.

"The Panel does not believe that the medal count is an appropriate measure of Australian performance or that 'Top Five' is a sensible target," the report said, referring to the AOC's goal for Australia's medal standing at the 2012 London Games.

"If we are truly interested in a preventative health agenda through sport, then much of it may be better spent on lifetime participants than almost all on a small group of elite athletes who will perform at that level for just a few years."

OLYMPIC HEROES

Coates said if the report's recommendations were followed it would mean the exclusion of fringe sports, already unable to draw funds through gate receipts or broadcast rights revenues, from the public purse.