The Labour Party has asked the Auditor-General to urgently consider the parliamentary funding of United Future.
Last week, United Future asked the Electoral Commission to be formally deregistered because it could not guarantee that it had 500 paid-up members.
To the dismay of Opposition parties, Parliament's Speaker David Carter on Thursday ruled that United Future remains recognised under parliamentary rules, as it should be given time to put the matter right.
New Zealand First has been calling for the party to pay back funding it receives to support its leader, Peter Dunne, claiming that United Future has been collecting taxpayers' money under false pretences since 2011.
Under parliamentary rules, party leaders are entitled to receive $100,000 to fund the leader's office, plus $64,000 for each extra MP. United Future receives only $100,000, as Mr Dunne is its sole MP.
The Speaker told Parliament that Peter Dunne has assured him the party will file for re-registration early next week, but it will take the Electoral Commission six to eight weeks to finalise the matter.
"In the meantime, the United Future party remains a recognised party under Standing Orders. The consequences of loss of recognition are significant, and I consider I should follow fair and proper process in determining this matter," David Carter said. "The member and his party should have a reasonable opportunity to put the matter right."
This was strongly challenged by New Zealand First, Labour and the Greens. Senior Labour MP Trevor Mallard told MPs that Mr Carter's ruling is wrong.
"There is no United Future party in this House Sir, and he (Peter Dunne) should be treated on the confidence vote this afternoon as an independent member, because he cannot be the member of a party which does not exist - and he accepts that it doesn't."
After Mr Carter refused to change his ruling, New Zealand First's seven MPs walked out of Parliament in protest, as did Trevor Mallard following a fractious exchange.
Mr Mallard has now written to Auditor-General Lyn Provost asking for an investigation into whether funding for the office of Peter Dunne is being spent within the correct scope and purpose. He said the appropriated funding is for the party - not for Mr Dunne as an MP - and should be revoked if she agrees.
"I want her to use her powers to indicate to the Speaker that he should not be allocating money outside the allocation outside the estimates, which were currently going through to Mr Dunne - that is a breach of the Public Finance Act."
Peter Dunne on Thursday rejected a call to pay back parliamentary funding, saying he completely disagrees with New Zealand First's claim that United Future's funding in past years has not been legitimate. "We've been a registered party up until last Friday, so there's no issue about the status, or otherwise, of our funding."
Shabby day for democracy - Peters
Outside the House, Winston Peters told reporters that the Speaker must explain why he has gone against Parliament's Standing Orders.
"This is a shabby day for democracy in New Zealand - real shabby.
"And I'm expecting that the public will demand like we have: Show me the basis in the law on which you made your decision - because you're not going to get away with making it up with it as you're going along. And we don't care how high you sit in this country's office, you've got to abide by the law like everybody else."
Mr Peters said David Carter's ruling is wrong. "The Speaker has to give justification for why he's gone against the Standing Orders and why he's going against the funding, which is in the estimates for the United party.
"It's based on their legitimacy, it's based on them being recognised. To be recognised, you must be registered. They have been deregistered. What you've got is someone here calling black, white - it won't work."
Electoral Commission not investigating further
The Electoral Commission said it relies on the accuracy of previous declarations from United Future on its paid-up membership and does not intend to investigate them further.
United Future's president said it is now just 10 supporters short of the necessary number of financial members and would apply to re-register next week. Robin Gunston said final verification would be carried out this weekend before a statutory declaration is resubmitted to the commission.
As long as a party is registered with the commission it is entitled to funding, and the commission said it is satisfied that United Future's declarations are legitimate.
Mr Gunston told Radio New Zealand's Morning Report programme on Thursday that United Future has great confidence in Peter Dunne as leader and believes in his credibility.