The Crown body which funds tertiary institutions is being told it is at risk of infringing Te Tiriti o Waitangi.
The Tertiary Education Commission has trimmed $1.9 million from Te Wananga O Raukawa's budget due to poor performance.
The financial sanction relates to course completion rates - only 43% of undergraduates finish their studies.
However, the founder of Otaki-based Te Wananga O Raukawa, Professor Whatarangi Winiata, says the Tertiary Education Commission is failing to measure performance by kaupapa and tikanga values.
He says the wananga has set 104 of its own targets - and is achieving 74% of them.
Professor Winiata says Maori have tino rangatiratanga, or sovereignty over their taonga, or treasures - and included in taonga is matauranga Maori, or knowledge.
The Tertiary Education Commission says all institutions are measured in the same way - by course and qualification completion, and student progression and retention.
The commission says it's working with Te Wananga O Raukawa to increase the course completion rate - starting with a target of 55%.