The Defence Force says the Steven Wilce case has caused it severe embarrassment and led it to apologise to New Zealand's allies.
Mr Wilce, the former director of the Defence Technology Agency, had high-level security clearance and resigned in September this year after claims he embellished his CV.
He had made some extravagant claims over the five years he was employed, including that he had been on the British Olympic bobsled team, was a Commonwealth Games swimmer, and that he held a Master's Degree in aerospace systems and astrophysics from Cambridge University.
A Court of Inquiry has found Mr Wilce misrepresented his work history and qualifications. The report stops short of saying he lied but said his embellishments were misleading.
At a news conference on Thursday, Defence Force chief Lieutenant-General Jerry Mateparae said Mr Wilce misrepresented his work history, military career, achievements and academic qualifications.
"It appears Mr Wilce's failings were almost entirely those of omission. Although the court finds that some of his embellishments were misleading, there's no evidence that he lied about his qualifications."
Lieutenant-General Mateparae confirmed the Defence Force has apologised to New Zealand's closest allies, but would not say who.
The Defence Force said Mr Wilce is unlikely to become a national security risk of real significance.
Though Mr Wilce has resigned, there will be audits into his travel and expense claims, and into claims that he had an unacceptable number of unexplained absences from work.
Defence Minister Wayne Mapp says the findings from the court inquiry have raised questions about another appointment that needs to be reviewed.
Changes to recruitment process
Lieutenant-General Mateparae admitted that some "dumb decisions" were made in Mr Wilce's hiring process and has directed that changes be made.
He said Mr Wilce's actions have highlighted poor performance in the recruitment process and the granting of security clearances.
"I have directed as a matter of urgency that my head of personnel remedy the deficiencies of the existing Defence Force order in respect of panel preparation and reference checking."
The Defence Force would also review what role outside agencies should play in the recruitment process and how they should be managed, he said.
Employment consultants Momentum conducted the checks into Mr Wilce.
