Half of the country's regional councils are not annually monitoring effluent compliance on each of their dairy farms, a Forest & Bird report has found.
These councils cover three quarters of New Zealand's dairy farms.
The report, Cleaning Up: Fixing Compliance, Monitoring and Enforcement in the Dairy Sector, analyses how regional councils are enforcing the rules around dairy effluent management.
Based on information compiled between July 2016 and June 2017, it found 5000 dairy farms were not inspected for dairy effluent compliance.
There were 425 reported cases of serious non-compliance in the period, but Forest & Bird said due to "patchy monitoring", there could have been up to 349 additional cases.
Freshwater advocate Annabeth Cohen said some councils were failing the basics of managing the significant environmental risks posed by dairy effluent.
Every farm that was collecting dairy effluent should be checked annually, she said.
"If a dairy farm is not inspected, it potentially could be polluting unchecked."
The most concerning part of the report was that untreated effluent was flowing into waterways.
"We know the serious impact dairy effluent can have on the environment, and dairy shed effluent is something we can control.
"We should be watching out and making sure none is going into our waterways."
The group also highlighted inconsistencies in how councils responded to offending.
Of the farms found to be seriously non-compliant, 38 per cent did not receive any formal enforcement action, such as an abatement notice, an infringement notice or a prosecution.
One farmer in Northland received four abatement notices and eight infringement notices, but was not prosecuted.
"When councils don't address poor farming practice, it's unfair to the many farmers who are doing great work and following the rules," Cohen said.
The group issued report cards based on its findings of council performance in detecting and responding to dairy effluent serious non-compliance.
The biggest dairying region, Waikato, was graded F, and Southland graded E.
Waikato had about 4520 dairy farms, 36 per cent of the country's total.
There were 104 monitored cases of serious non-compliance, which represented 24 per cent of the total reported cases of serious non-compliance, but only 2 per cent of the region's dairy farms.
Forest & Bird said Waikato had the second-lowest rate of monitoring, 26 per cent, and estimated there could have been an extra 291 cases of serious non-compliance.
Cohen said in Waikato nine seriously non-compliant farms had not been inspected for more than 10 years.
"They could have been polluting for a decade without being checked."
Waikato Regional Council has called the report "outdated, inaccurate and misleading", although it acknowledged some of the data it provided Forest & Bird was incorrect.
Resource use director Dr Chris McLay said the council took more than 180 enforcement actions for breaches of the Resource Management Act on dairy farms in 2016/17, including four prosecutions – the third highest number in the country that year.
"While no one likes to be rated poorly, I am confident we are doing a good job," McLay said.
"The Waikato farming sector is well aware that when we find non-compliance, we hold people to account.
"Only in the past week a Waikato farming company was convicted and fined $41,000 for environmental breaches. That is a clear message in anyone's books."
In other regions Auckland was given an E, Manawatū-Whanganui and the West Coast a D, Marlborough a C, Canterbury, Northland, Otago, Bay of Plenty were graded B and Wellington, Taranaki and Tasman an A grade.
Forest & Bird said it supported the Government's plans to establish an RMA oversight unit.
It also recommended the Government analyses and report on all serious non-compliance, investigates inconsistencies, and establishes a recommended ratio of staff to consents requiring monitoring.