The Eastern Cape provincial government gave R540,000 to the National Youth Development Agency, but it was instead used to fund the ANC Youth League, City Press reported on Sunday.
The money was intended to fund eight "youth summits" organised by the NYDA.
Although these summits were held, once the NYDA had completed its work, the youth league took them over, the paper reported. ANCYL conferences were held at the same venues as the NYDA summits, using the same funds and service providers, and even the same delegates.
High-level elections took place, with nominees for national youth league positions chosen, at the summits in May and June last year.
ANCYL provincial secretary Mziwonke Ndabeni said the league had paid its own way, but failed to provide proof to the paper.
City Press also reported, in the same edition, that NYDA chief executive Steven Ngubeni, had given a R22 million catering contract to his wife's uncle.
The NYDA said Ngubeni had not been in a position to know if a relative was involved in the companies which were awarded contracts for the World Festival of Youth and Students in December 2010.
However, the agency's board chairman Andile Lungisa said Ngubeni had noticed a potential conflict of interest before the contract was awarded, and a note had been made of this.