A Defence Force plan to cut costs by turning military positions into civilian positions has failed, the Auditor-General has found.
The audit also found that New Zealand troops' morale was low, and combined with staff attrition had led to reduced Defence Force capability.
The report - which can be found online here - was presented to Parliament this afternoon.
Government told the Defence Force in September 2010 that it needed to reduce costs so that money could be redistributed within the Force.
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"The project has had limited success," the Auditor General's office said in a statement.
It would not meet the target of converting 1400 military positions, which would have saved $20.5 million a year by 2014/15.
Instead, just 600 positions would be converted, with estimated savings of $14.2 million.