An independent investigation shows the Taratahi Agricultural Training Centre repeatedly delivered less education than it was paid for.
The Tertiary Education Commission (TEC) has ordered the centre to repay $7.5 million of government money following an investigation that was sparked by a tip-off in August last year.
A subsequent review by consultants Deloitte found the training centre, which is based near Masterton but delivers courses throughout New Zealand, had enrolled 67 of its own staff in a course, but had not delivered much, if any, teaching.
It also found eight other courses where the amount of education provided was less than the government was paying for, and repeated instances where students were not sure what they had enrolled in or how much study they were supposed to do.
The report said the centre's two main courses for young people learning to work on farms were delivered simultaneously, resulting in a study-load equivalent to two full-time courses.
Such a high load has to be approved by the Tertiary Education Commission, but was not.
In addition, the amount of teaching provided for those courses was about 80 percent of what it should have been.
Another group of five courses taught by other organisations under sub-contracts provided as little as 24 percent of the expected teaching and never more than 59 percent.
And a course in general farm skills worth about $1.7 million a year to the centre was being delivered in as little as one week instead of the 13 weeks normally required.
Deloitte spoke to 79 students who had enrolled in the course and 80 percent said they had completed no more than 20 percent of the course.
Tertiary Education Commission chief executive Tim Fowler said its rules were clear.
"As a tertiary education provider Taratahi is obliged to deliver to its students what it has agreed with the TEC and with NZQA. While NZQA is confident that Taratahi has met NZQA's assessment requirements, the TEC has found in some cases Taratahi has not provided the teaching it was funded to deliver."
"This effectively means that between 2009-2014 Taratahi received $7,549,000 to which it was not entitled."
In a separate interview, Mr Fowler told Morning Report that some of Taratahi's paperwork and practices did not add up.
"There was a very clear situation where they had something that was approved by NZQA, in terms of their qualifications approval process, but the practice on the ground was entirely different.
"All of their accountability documents, all of the information that we had received back from Taratahi, showed that nothing was untoward."
He said the training centre would pay back only about $1 million this year, so it could continue operating.
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The Serious Fraud Office has confirmed it is investigating, but the centre said the problems were caused by failures in its administrative processes and systems.
Acting chief executive of the centre Linda Sissons said it grew quickly and its processes failed to take account of the correct rules for recognising students' prior learning.
It could count students' existing skills toward a qualification, but was not supposed to claim funding for teaching those skills.
"New Zealand Qualification Authority and the TEC confirm there is no question about the quality of the programmes, the teaching, or the qualifications awarded to students. This is about administrative processes and the systems behind them."
Taratahi has 135 staff and more than 2000 students. Its main campus is near Masterton, but it has outposts throughout the North Island and in Southland.
It said the repayments related to six of its courses.
Taratahi is the third institution in less than a year to be exposed for claiming more funding than it is entitled to.
Last year, the Tertiary Education Commission forced the Western Institute of Technology at Taranaki (WITT) and Te Whare Wananga o Awanuiarangi to repay millions of dollars each, because students had done less work than required.
The Tertiary Education Commission investigated six other tertiary institutions in the wake of the Awanuiarangi and WITT cases. It said it had cleared five of those organisations, but the investigation into the sixth continued.