It leaves a whopping $333 million un-spent with only one financial year left.
The Investing in Educational Success policy promoted a dramatic shift in the way schools operated - from a competitive model to one of collaboration and partnership.
Schools are encouraged to cluster together in Communities of Learning (COLs) in groups of about 10.
The schools share information, expertise and ideas, and create a "pathway" for students from primary through to secondary. Within these communities, teachers can be paid more to do extra work, and share their specialist knowledge or teaching methods, to boost student performance.
Figures show $18 million has been spent on COLs, more than $4.6 million on the teacher-led innovation fund, and close to $3 million on support and resources for teachers taking part in the scheme.
Across the Bay of Plenty, including Taupo and Rotorua, there were 47,125 students in 115 schools of 14 Communities of Learning.
Bay of Plenty MP Todd Muller said he was confident the programme would succeed.
"It might take longer for all schools to step up and become engaged, but we must not resile from driving better educational achievement of our children.
"This programme helps facilitate the best of teaching to be applied to the areas of challenge across schools and within schools. In a fast changing world our kids need to be as equipped as possible to succeed and collaboration between teachers and schools must be part of that future," he said.
Tauranga Labour candidate and Merivale Primary School principal Jan Tinetti said questions needed to be asked about why the underspend was happening.
Ms Tinetti said she had heard of Communities of Learning across New Zealand operating but not getting passed the start up phase of the programme because of how rigid the format was.
Yet, the underspend was happening when schools, early childhood centres and educators across New Zealand were struggling because of underfunding.
"They are chronically underfunded, and you hear there is an underspend in another area. I know it was different pots of money but it will be very difficult for them to understand and hear that when they are trying to meet the need of their children in the best way they can."
President of the Post Primary Teachers Association (PPTA), Jack Boyle, said the Ministry was "notorious" for implementation issues. However, he'd rather "things went slow in order to get it right".
"You're going to get quality, meaningful educational change over a longer time frame," he said.
Not spending the whole budget doesn't necessarily mean the model was flawed, he said.
He wanted to see the extra money pushed into both the IES and additional funding for schools.
However, pulling the pin on the scheme now would be "disastrous", he said.
President of primary sector union NZEI, Lynda Stuart, said it was too early to say IES was failing.
However, there had been some barriers to uptake, she said, particularly in the length of time it takes COLs to prepare their collective achievement challenges and present them to the Ministry in order to release funding.
Education Minister Hekia Parata said the initiative was effectively delayed by a year because the primary teachers' union NZEI boycotted it until the end of 2015.
But 59 per cent of schools and 2 per cent of early childhood services joined COLs by December 2016. Together they have 498,655 students or 50.5 per cent of all students in schools and preschools.
"We anticipate that the full roll out will be completed by the end of 2018-19 one year later - matching the one year delay, but still occurring within the originally planned four years," Parata said.
