The report said the target had "struck the hearts and minds of staff" and encouraged them to innovate, because a "business as usual" approach would not allow them to reach the goal.
The Auditor-General said Corrections had a strong emphasis on evidence-based policy such as its focus on education and drug and alcohol programmes to cut offending.
The department was targeting groups which contributed disproportionately to the rates of reoffending - remand prisoners, young people, Maori, and those with alcohol or drug problems.
About 6000 prisoners serving sentences of two to three years were released each year. This group had the highest reoffending rates, but did not usually qualify for rehab programmes. After a pilot programme showed the value in targeting rehab to remand and short-stay prisoners, this approach was now being rolled out to all New Zealand prisons.
The review expressed some concern about Corrections' scheduling systems, which often led to an offender being relocated to a mainstream unit after a rehab programme. This often meant the inmate lost skills they had learned.
Mrs Tolley said the department was addressing this problem by giving prisoners structured, eight-hour working days. Three of New Zealand's jails had become "working prisons" and eventually inmates in facilities nationwide would work, train or study in 40-hour weeks.
The report also recommended better management of prisoners in moving from jail to the community.
Corrections' crusade
Goal: Reduce reoffending by 25 per cent by 2017*
Progress: 11.4 per cent reduction to December 2013
*from a June 2011 baseline