The Department for Education and Skills admitted in response to a Freedom of Information Act request that it signed off the contract for the Cambridge Latin e-learning package last year. It said it had been unaware of any problems when it signed.
But after more than two years of work, Granada Learning has still failed to produce software that works on school networks, according to a source close to the project.
The firm says it is committed to the project and the software will be out in September. An earlier release date, in September 2003, was dropped.
Classicists hope that the two DVDs, which allow non-specialist teachers to take pupils through the Cambridge Latin course at key stage 3, can help halt the decline of the subject. If trends continue, there will be no Latin in state secondaries within 12 years, and in private schools in 25 years.
Peter Jones, of Friends of Classics, said the Government should make Granada return the money. He said: "There are serious implications for the project, and possibly even the survival of Latin in schools, if Granada does not get the material out by September.
"What can one say of a department that hands over millions of pounds of public money to Granada and then cannot even be bothered to check whether the material actually works? The answer is a lot, most of it unprintable."
He called for the work to be handed over to the Cambridge Schools Classics Project, a not-for-profit firm that produced the DVD content, which says its programmers could get at least part of the course ready for September.
A DfES spokeswoman said when the contract was signed off they believed its requirements had been met.