The Education Review Office (ERO) has warned that a rapid increase in enrolments by at-risk students is stretching the Correspondence School, Te Kura.
The roll at Te Aho o te Kura Pounamu (Te Kura) has spiked 40 percent since 2018.
The review office report on Te Kura says the Education Ministry is relying more heavily on the the school to take disengaged ākonga (students) because it is harder to enrol them in regular schools.
It says despite Te Kura doing a good job under the circumstance, the at-risk ākonga should be better supported through local schooling options and wrap around services.
"Provision of distance education to ākonga in isolated and rural communities no longer defines the school's primary purpose," ERO deputy chief executive Review and Improvement Services Jane Lee said.
"Although the school remains an important access point for over 400 geographically isolated kids, the school is increasingly catering for tamariki with challenges around schooling that go much deeper than geography."
The report says the school has grown quickly, and more than 70 percent of its full time students have been referred by the ministry or by Oranga Tamariki. Other students are referred by Department of Corrections and the Ministry of Education.
"Prior to being referred to Te Kura these learners are often out of education for a long period of time for a range of reasons, such as transience, expulsion and alienation from their local school," Lee said.
"A disproportionate number of these under-served learners are Māori. The number of at-risk ākonga on Te Kura's roll is now equal to that of a large New Zealand secondary school; that's around 1200 learners.
"As a whole system, we need to work together to do better for these learners."
ERO recommended the ministry and Te Kura focus on more collaboration, priority funding reviews and deeper consideration of Te Kura's role in the New Zealand education system.
It said Te Kura has developed best-practice digital delivery capability and capacity that the wider sector, particularly in a Covid-19 climate, could benefit from.
ERO last reviewed Te Kura in 2015.