A trust with close ties to the Government - including former All Black and National Party supporter Michael Jones - was given a $500,000 charter school contract without going to tender.
The E Tipu E Rea Trust, a new body set up to promote and support the controversial schooling model, was awarded the funding directly despite education officials acknowledging it "may not result in the most capable entity being selected".
Opposition parties are now accusing the Government of cronyism, saying it's giving its "mates" public money to push Act Party policy, and disregarding what's best for children.
However Act party leader and education under-secretary David Seymour says the decision not to go to tender was justified because the policy was "sufficiently distinctive", and the trust members were high quality.
Members include Jones, who has publicly endorsed National; arts philanthropist Dame Jenny Gibbs, one of the Act Party's biggest donors; Rob McLeod, the former chair of Ernst & Young New Zealand; Tariana Turia, the former leader of the Maori Party; and two experienced principals.
Charter schools, which are privately run and publicly funded, were introduced as part of Act's confidence and supply agreement with National.
The first tranche opened in 2013, and there are now eight schools, with two more expected to be announced this week. Funding for seven more schools, and E Tipu E Rea, was announced in this year's Budget.
"There has been less interest from the business and philanthropic sectors, and the pool of sponsors has not been as diverse as originally envisaged," a ministry memo said.
The documents show the Authorisation Board - chaired by former Act Party president Catherine Isaac - was "aware" of people who may have wished to be involved in setting up and financing a new entity.
In December 2015, E Tipu E Rea was formed as a charity.
Education minister Hekia Parata signed off on the funding early this year without a tender process, after officials said it would be quicker to go direct to a single organisation.
Officials recommended the decision to form the body despite acknowledging it might ruffle feathers in the education sector and appear as though the charter model was getting preferential treatment.
To identify and mitigate any risks the ministry ran an evaluation, finding the trust's self-funding model might not be sustainable; other education organisations might challenge the awarding of the grant to E Tipu E Rea; and that there was a potential conflict of interest with Jones, as he owns a charter school.
National and Act are paying their mates with public money to advocate for their charter school experiment.
It also evaluated the trust members, and said largely they were of high quality - although one assessor raised the inclusion of Dame Jenny, writing: "Does this person understand education?"
Seymour said the evaluation process had been robust. He said trustees were unpaid, and the Ministry of Education would ensure that the provider would be able to manage any conflicts of interest.
He said there was no concern about the quality of charter school applicants, but there were "many" good proposals from potential sponsors that could have been better with extra help.
However, Labour Party education spokesman Chris Hipkins said the whole process was "cronyism plain and simple".
"National and Act are paying their mates with public money to advocate for their charter school experiment," he said.
The Green Party's Catherine Delahunty said it seemed the Government was trying to create a justification for the policy.
"People with experience of education are not lining up to open a school. It's just a political move. It's not about what's best for children."
E Tipu E Rea chair Rob McLeod could not be reached for comment. Neither could Jones.