Despite stating the pound was "well run", it was also found to be non-compliant, and met "the minimum standards of welfare of the animals in the pound".
A lack of records hindered the inspectors ability to verify "that this is the case at all times".
Four major, and two minor non-compliances were identified in the report - including a lack of standard operating procedures, a lack of evidence of training, a lack of internal auditable records of pound operations, poor ability to control temperature in the facility, and a "poor ability to prevent contagious disease".
The report found the overall management, supervision and operation of the facility might be compliant with MPI Codes of Welfare, but there being no existing documentation to allow verification was "a significant failing".
"While there are obviously staff caring for the animals and keeping the pound operating, there is no evidence of standards and guidelines to ensure proper management and operation of the pound," it read.
"Urgent measures need to be initiated to correct this to ensure biosecurity of the facility (preventing disease outbreaks) and standards of animal welfare are maintained."
Increasing amounts of public criticism has been levelled at the council over the pound issue, including a call last week for the resignation of chief executive Wayne Jack.
When questioned yesterday about the lack of standard documentation, or council overview of the pound, he said as there were no national standards for animal control facilities, each local authority had to decide on its own.
"In the past year a change in management and closer scrutiny of reporting lines revealed these anomalies, which as earlier stated, have now been addressed," he said.
Napier mayor Bill Dalton reiterated most of the changes indicated by MPI in the report were already underway as the result of their realignment process and new management structure.
"I can't stress enough to anybody with concerns about the Napier Pound, that all processes and guidelines are followed, animals are well cared for, and that the Animal Control team is working collaboratively and cohesively," he said.
"We are looking forward to opening our new veterinary services area within the facility and continuing our work delivering high standards of customer service to our community."
In the report, the inspector notes changes at the pound prior to the inspection - such as Standard Operating Procedures only being available in draft form "that did not exist at the time of the complaints".
Of concern was the pounds "poor ability to prevent contagious disease". The report noted having no appropriate area outside the pound for animals to be triaged had a "significant impact on the biosecurity of the facility".
This had "obviously" been recognised by council as on the day of the inspection a veterinary room was under construction.
The release issued by the council on the audit report in December emphasised the pound was found to be "very clean and sanitary", and although it mentioned "shortfalls" did not state major non-compliance had been found.
Mr Jack said the release mentioned measures underway to meet compliance - such as a secure veterinary facility, training framework, and recruitment of a kennel attendant.
The release had highlighted the report's recommendations were achievable, he said, with most already being worked towards or already completed under their new management structure when the MPI inspector visited.
Watchdog! Spokeswoman Jessica Maxwell said the mayor, and Mr Jack "need to hang their heads in shame" for denying there were issues at the pound.
The animal advocate group were responsible for much of the scrutiny on the pound, after they made claims about its conditions.
"WATCHDOG! is very grateful to MPI for exposing these shortcomings which would otherwise have never come to light," she said. "It is an absolute disgrace and the misinformation given to the public by the mayor and CEO is inexcusable."
"WATCHDOG!'s concerns are vindicated and we deplore the fact that the Mayor and CEO have attempted to discredit us in the media."
The results of the investigation are expected to be finalised next month.
