Lincoln University has repaid $1.5 million in government subsidies after an investigation found it had taught fewer hours than it should have.
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The Tertiary Education Commission said there was significant under-delivery of teaching hours in four certificate courses in farming, horticulture and arboriculture at the university's Telford division.
Three of the courses were taught under contract by another organisation.
"It's serious enough that significant money has come back to the Crown," said commission chief executive Tim Fowler. Lincoln was taking remedial action, he said.
University spokesperson Joan Grace said the quality of the education was never in question.
"We do regret that we didn't have the oversight of the learning hours"- Joan Grace
The university is seeking legal advice about recovering money it had to repay from its partner organisation and the focus was on making sure it could not happen again.
"The key thing is about changing our processes and asking the delivery partners to keep greater records that they provide to us about the hours that students are involved in both their own interaction with tutors and also the self-directed hours."
Mr Fowler said the commission has increased its monitoring and expected similar cases to emerge.