A failed Indigenous boarding facility for girls that abruptly closed after just one semester will be forced to pay back $1 million to the Federal Government or risk foreclosure.

Key points: The Kaziew Rangath Academy closed after just five months of operating

The Kaziew Rangath Academy closed after just five months of operating Students from remote communities in Far North Queensland were left with nowhere to go

Students from remote communities in Far North Queensland were left with nowhere to go Operator Young Australia League must pay back the Federal Government or risk foreclosure

The Young Australia League (YAL) opened Kaziew Rangath Academy in Cairns last year, taking in high school students from across Cape York and the Torres Strait.

The academy aimed to encourage Aboriginal and Torres Strait Islander girls from remote areas to finish high school while engaging in sporting and vocational opportunities not available in their communities.

But just five months later, angry family members were forced to find a roof to put over children's heads when the West Australian not-for-profit suddenly closed down the academy.

Cairns resident Edith Pau said her niece Tanayah Mosby, who travelled more than 800 kilometres from Darnley Island in the Torres Strait to further her studies, was left with nowhere to go.

Edith Pau was forced to take in her niece when the boarding facility closed down. ( ABC News: Sharnie Kim )

"I got the call late one night on a Wednesday," Ms Pau said.

"I went to go pick her up because I thought they were fumigating, or something."

Ms Pau said her niece stayed with her from May until the end of last year.

"There was another girl from Murray Island, she ended up staying with relatives here in Whitfield," she said.

"She didn't want to go back because she wanted to finish her education. They were overcrowded in the unit she was staying in.

"Another girl went to her aunty's home and she had to sleep on the couch. It was very topsy-turvy."

Boarding house now a motel

Since the academy's closure, YAL has opened a motel on the premises in its place, charging guests around $70-90 a night.

Member for Leichhardt Warren Entsch said Young Australia League had breached their agreement by failing to operate as a boarding house after funding was spent to upgrade its facilities.

Young Australia League chairman Frank Schaper (left) with Federal Member for Leichhardt Warren Entsch (second from left) at a funding announcement for the academy in Cairns. ( Supplied: Warren Entsch )

"The money was spent but what we subsequently discovered was that the project wasn't as well advanced as was originally suggested," he said.

"They made commitments to do certain things to get it operational and unfortunately they haven't done that.

"Rather than deal with those issues and resolve those, they have decided to walk away from it."

Mr Entsch said YAL now risks losing the property if the expenses aren't recouped.

"The fact that they have not complied with that arrangement and made the decision to contravene the arrangement is a decision they're going to have to live with and will pay the consequences for," he said.

One of the Kaziew Rangath Academy rooms which was refurbished to house the students in Cairns. ( Supplied: Warren Entsch )

"Potentially they could lose that property.

"I have been encouraging the Department [of Prime Minister and Cabinet] to foreclose."

Mr Entsch said the Federal Government had undertaken adequate due diligence prior to funding the project.

"I can't be responsible for the actions of [YAL's] board, who are under contractual arrangements to deliver a particular product," he said.

"It's got to be resolved … there's no question whether or not there's a need."

The ABC's request for comment from YAL chair Frank Schaper regarding Kaziew Rangath's closure was declined.