An investment banker who Housing New Zealand paid $2.3 million to help it sell state houses won the most lucrative contracts in closed tenders, an investigation has found.
The housing corporation also failed to keep an eye on the costs of the contracts, and did not follow its own rules when managing potential conflicts of interest, the Auditor General's office says.
Labour MP Phil Twyford asked the Auditor-General to investigate HNZ's contracts with Andrew Body Limited in June 2015.
The Auditor-General's office released its findings today. The report by Deputy Controller and Auditor-General Greg Schollum identified serious shortcomings in HNZ's procurement processes.
It said Andrew Body won 10 HNZ contracts over five years, worth a total of $2.3 million.
The housing corporation's policy was to go to the market for contracts worth more than $100,000.
Six of the contracts awarded to Mr Body's company were above this threshold, but none went through an open tender process.
HNZ told the Auditor-General that it did not hold an open process because the work was highly specialised and was required in a short period of time.
The Auditor-General said holding an open tender was one way of getting value-for-money from contracts - a matter which HNZ did not appear to have properly considered in its dealings with Mr Body.
"For certain elements of Housing New Zealand's procurement approach there was no documentary evidence that value for money, including overall costs, had been properly considered."
HNZ did not cap payments for any of Mr Body's contracts and only set specific deadlines in half of the contracts - increasing the risk of higher costs. In one year alone, Mr Body's company was paid $1.4 million.
The Auditor-General also said HNZ had "significant weaknesses" in its records on two potential conflicts of interest.
While advising on the sale of state houses, one of Mr Body's clients, UK-based investment fund John Laing, was expressing an interest in buying some of the state houses.
The Auditor-General said Mr Body had ended his connection with the company in 2012. It had advised HNZ to improve its conflict of interest rules.
As a result of the inquiry, it was also extending its auditing of the housing corporation.
Mr Twyford said the report was a "rap over the knuckles" for the Government.
He said the public was opposed to the sale of thousands of state houses - potentially to foreign companies and merchant bankers.
"It's even more galling when this increasingly arrogant Government can't even follow basic rules in the sell off," he said.