Government auditors found a research body issued invoices to the value of £1.8m for equipment that had not yet been bought.
This, they said, was "outside accepted practice" in the managing of public money.
The auditors were investigating the 2016/17 accounts of the Agri-Food and Biosciences Institute (AFBI).
At the time the invoices were issued, it had not bought the equipment listed on them, though it was later purchased.
AFBI, an arms length body, carries out agri-food research and development for the Department of Agriculture and Environment (DAERA) and private companies.
The invoices were issued to maximise eligibility for grants and bypass the rules of a funding scheme which meant money had to be spent in-year or be lost.
The report said it was behaviour which fell "far short" of the standards expected from a public sector body.
AFBI is the responsibility of the Department of Agriculture and Environment (DAERA). The department said the findings were "disappointing" but noted that AFBI had committed to learning lessons.
AFBI said it had strengthened its rules to ensure there was no repeat of the problems.
The Agri-Food and Biosciences Institute entered into a four-year deal with the Centre for Innovation and Excellence in Livestock (CIEL), as part of a UK-wide strategy to improve livestock efficiency.
In the 2015/16 year it did not buy any equipment but issued CIEL with invoices for £500,000.
In 2016/17 it spent £436,000 but sent invoices to the value of £1.267m.
It issued the "pro-forma" invoices to ensure that CIEL would be eligible for government money and that AFBI could draw down its full budget allocation across the four year funding period.
The money was spent on state of the art research equipment for its dairy, beef, sheep and pig projects at its Hillsborough site.
The Comptroller and Auditor General Kieran Donnelly said his report's findings were "concerning."
He said the invoices had not been recorded in the 2016/17 accounts and that AFBI had also not disclosed them during several months of the audit process.
What was of most concern, he said, was that this was done with the knowledge of senior management and the approval of two separate chief executives.
AFBI did not draw down any money from CIEL until equipment had actually been bought.
New funding deal
Under the four year funding deal, AFBI was to benefit from a £3.6m grant to improve facilities at Hillsborough in order to make the livestock sector more profitable.
AFBI told the auditors, the funding arrangement was a new way of working for it and it had put in place a number of measures to prevent further problems.
These include only issuing invoices when equipment has actually been bought.