NISS received $1 million a year in government support.
Judge Hubble said he had been prepared to send Hamilton to jail.
"It was supposed to be for young Ngapuhi who were in trouble. A lot of the young people up there are desperately in need and that money was supposed to be for them," he said. "Your fall from grace has been dramatic."
The judge said factors which changed his mind included letters of support from former colleagues and a young person helped by Hamilton who went on to become a doctor, a lack of previous convictions and that he was considered a low risk of reoffending.
Outside the court, Hamilton told the Herald in te reo Maori that he felt shame and would let his work atone for his actions.
But when asked if he regretted spending NISS money on a nightclub - which had nothing to do with helping Ngapuhi children - Hamilton said: "Now that's actually interesting because that nightclub did service young people."
He refused to be drawn further.
Whanau members and Ngati Manu members who did not want to give their names said the evidence was "damning" but they had to stand by Hamilton as he'd done a lot of good in the community.
SFO acting director Simon McArley said the sentencing would hopefully provide some justice for those affected by Hamilton's actions.
- NZPA