The head of Whitireia Polytechnic in Porirua is calling for membership of student associations to be voluntary.
Police are investigating the student association at Whitireia after complaints of misappropriation of funds at the union.
It is compulsory for all full-time students at the polytech to pay a levy of $135 to join the students association.
Polytechnic chief executive Don Campbell says that needs to change.
He says students should be able to choose whether or not to join, depending on how well it operates.
But the New Zealand Union of Student Associations says a voluntary system would unfairly punish the majority of student unions.
ACT MP Sir Roger Douglas currently has a bill before a select committee, seeking to make student association membership voluntary.
Concerns about spending
The man now running the association says there appears to have been no controls for some time on how money was spent.
Acting president Tim Manu, who was appointed at the end of July, says he found controls on spending by the association's executive were almost completely absent.
"At the moment I don't think we have a system in place (to control spending). The more we look the scarier it becomes and we need to make changes."
Mr Manu, who's also a Porirua City Councillor, says he is advising all association members to cooperate with the police inquiry.
He says he had concerns about the students association after being appointed vice-president earlier this year but was unable to back them up.
Mr Manu also says tertiary institutions should have the power to step in if associations get into trouble.