Victoria's Transport Accident Commission has suspended funding to the police force after officers were found to have faked more than a quarter of a million breath tests.
Former Victorian police chief commissioner Neil Comrie will lead an investigation into why officers simulated roadside alcohol breath tests by either placing a finger over the straw entry hole or blowing into the straw themselves to "hide or highlight productivity".
An audit of more than five years of tests by the force's Professional Standards Command found 258,463 out of 17.7 million, or 1.5 per cent, had been falsified.
"It's very disappointing that I have to stand before you today and announce some incredibly poor behaviour by members of Victoria police," Professional Standards Command Assistant Commissioner Russell Barrett told reporters on Thursday.
"Our reputation is tarnished in the eyes of the TAC and the Victorian community. We can't walk away from that.
"The TAC has suspended funding of our operations at the current time and we are currently working through that with them."
Victoria Police receives about $4 million each year from the TAC, Mr Barrett said.
He added the main culprits behind the falsified breath tests were general duties and highway patrol officers, with some rural areas over-represented.
"As disappointing as this is, it should be noted that, at this stage in the investigation, there is no evidence to suggest fraud or any criminality has occurred. Similarly, there is nothing to suggest that any of this activity has impacted on any prosecutions," Mr Barrett said in a statement on Wednesday.
The audit considered complex algorithms together with considerations on the length of time it would take to administer one test and a succession of tests to reach its conclusion.
The practice was not found at supervised drug and alcohol bus test sites.
"I don't think we can move away from the fact that it would enhance productivity of certain individuals, it would enhance their reputation if they were seen to be more productive," Mr Barrett said on Thursday.
Victoria's Independent Broad-based Anti-corruption Commission is overseeing the investigation into the scandal, to be led by Mr Comrie.
"Give the widespread nature of the behaviour, we need ensure no conflicts of interest can be levelled at Victoria Police in its investigation of itself," Mr Barrett said.
All police officers will receive workplace guidance while the investigation considers what underlying cultural and behavioural issues, and supervision and management practices, let the fake tests go unchecked.