Housing New Zealand is taking legal action against a maintenance contractor for fraud.
The subcontractor allegedly invoiced the corporation for work on state houses that wasn't completed.
Last year Housing New Zealand spent $400 million on maintaining and upgrading state houses - more than double what it had in previous years.
Housing New Zealand chief executive Glen Sowry has told Parliament's Social Services Select Committee that the company concerned was stood down as soon when the allegations came to light.
He said an audit team was assessing the work done by the contractors.