The Defence Force mismanaged its handling of four officers who double-dipped on their housing allowances, the Auditor-General says.
Between 2001 and 2008, the officers, who were seconded to the United Nations, made false declarations to receive an accommodation allowance from both the Defence Force and the UN.
The false declarations were made because the officers feared they might be worse off if paid only under the UN system.
But the Auditor-General says that assumption was incorrect, and some officers might actually have been better off.
New Zealand Defence Force spokesperson Lyn Provost says the matter was mismanaged from start to finish and the whole saga was unnecessary.
Ms Provost says the culture within the Defence Force contributed to the problem.
Defence Minister Wayne Mapp says the Auditor-General's findings will be included in a broader review of the force.
Mr Mapp says considerable steps have been taken since the practice was highlighted in 2008.