Under an arrangement with the Victorian Education Department, private providers are able to enrol students at host schools – which students never attend – to access government funding.
They are also able to access additional government training subsidies for some of these students.
Some principals have hit out at the scheme, saying it is an abuse of much-needed funding for public schools.
However providers say they are offering an innovative alternative to traditional classroom learning and have lifted the profile of vocational education and training.
SEDA, which has links to the AFL and delivers Victorian Certificate of Applied Learning and Vocational Education and Training sports programs, has grown from 18 students in 2007 to more than 2000 students across Victoria, the Northern Territory and Western Australia.
A 2013 audit by the Victorian Registrations and Qualification Authority found SEDA was non-compliant with minimum standards and provided misleading advice about job prospects in the sport and recreation industry.
The audit, which was obtained by The Age through Freedom of Information laws, said SEDA students were unsure or unaware of the host school they were enrolled at. "None reported that they had attended their school since enrolment," it said.
It found no evidence that the host schools were responsible for the health and wellbeing of these Year 11 and 12 students.
SEDA has since lifted its game and is now compliant.
Bendigo Senior Secondary College principal Dale Pearce said private providers should not be tapping into schools funding.
"This looks like an abuse of schools funding," he said. "There's little enough of that to go around legitimate school students."
"The schools aren't initiating the program, the students don't attend the school and the private provider does all the delivery."
He said SEDA was no longer a re-engagement program, and was providing an alternative to school. "If SEDA wants to be funded like a school they should apply to be registered as a school."
But SEDA chief executive Dominic Cato said the program was innovative and challenged the status quo of teaching. "It also challenges those in the education sector who are uncomfortable with a partnering approach between schools and other registered providers," he said.
"We have people in education who support our innovation and the results we have achieved, but also critics who believe that a school should be fully responsible for education delivery. The thing that I find most disappointing is that the critics never take the time to speak with parents and students about the program."
SEDA currently receives up to $8000 of government funding per student for 506 of its students, with host schools retaining a small administration fee. It also charges students fees of almost $4000.
Mr Cato said 92 per cent of SEDA students completed the senior VCAL in 2015, compared to 78 per cent in government schools.
An Education Department spokeswoman said many schools entered into partnerships with external providers to deliver VCAL.
It recently released new guidelines for schools which have contracts with non-school senior secondary providers like SEDA to ensure they meet their obligations.
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