The Education Department owes schools almost $2 million in refunds for teachers on leave which principals say has caused an increase in the controversial practice of grade-splitting.
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The Age this week revealed grade-splitting is endemic in primary schools despite concerns it is harming children's learning.
Students are divided into small groups and distributed among other year levels when a teacher is absent to save on the cost of a casual relief teacher.
Australian Principals Federation president Chris Cotching said there was an "insidious reason" why grade-splitting was even more common this year - schools had not been reimbursed for short-term teacher absences.
"Some schools are owed in excess of $30,000," Mr Cotching said.
Education Department spokesman Simon Craig said the delay in payments for long-service leave and paid family leave had been caused by "issues encountered" during an upgrade of the online system.
"Based on the submission received from schools to date, less than $2 million is owed to schools for these types of leave events," Mr Craig said. "These payments have commenced flowing to schools and will continue during term four as the system is introduced for all schools."
Mr Cotching said the department was holding onto "every zack" it can.
"The money has been owed since February - it has put principals in an invidious position."
He said schools were often grade-splitting on the first day and then using specialist teachers to fill in on subsequent days which meant students missed out on subjects such as art or physical education.
Glenn Butler, the principal of Ormond Primary and deputy president of the Victorian Principals' Association, said schools were out of pocket thousands of dollars.
"It would cause people like me to grade-split, [otherwise] you end up with a significant blow-out because you don't get reimbursed."
Parents Victoria executive officer Gail McHardy said the department's excuse was not good enough.
"Businesses can't say to customers 'Sorry, we can't trade for seven days'," she said.
Ms McHardy said schools should tell parents if they are grade-splitting.
"If it is a one-off that's reasonable but some schools are doing it as a planned strategy and that is not solving the problem. They wonder why we are having low performance rates - all these little things add up to big things."
