Corrections is paying a private contractor for drug and alcohol counsellors that do not exist, according to a Howard League spokesman.
Care NZ is contracted by Corrections to run drug treatment programmes in eight prisons around the country and is the largest provider of such services in prisons.
According to drug and alcohol counsellor and Howard League spokesperson Roger Brooking, when Care NZ accepted the Corrections contract to run the drug units it took on more than it could handle.
"At one prison I understand there is supposed to be four full-time and one half-time person and that for most of the last couple of years there's only been two staff there.
At another DTU (Drug Treatment Unit) there's a similar situation."
Care NZ chairman Michael Bird admitted that in some cases it was taking money from Corrections for counsellors it had yet to employ.
He said prisons were tough places for people to work and there was a lot of staff churn, but at present the treatment unit at Rimutaka Prison was the only one that was understaffed.
Care NZ was not making huge amounts of money by taking cash from Corrections for positions it had yet to fill, he said.
But he acknowledged its contract with the department was different to the one it held with DHB's where it was only paid for the number of counsellors it actually employed.
Care NZ was pocketing money from the taxpayer without providing the service it was contracted to provide, Mr Brooking said.
"What it appears Care NZ does is if somebody resigns or gets fired, they move staff from one DTU to another.
"So they're permanently shifting staff up and down the country trying to fill vacancies and keep each of the DTU's going."
Corrections' Southern Regional Commissioner, Ben Clark, told Morning Report the focus was on making sure prisoners start and finish programmes.
"If we had cause for concern that Care NZ weren't delivering an effective service to our offenders, and weren't giving the taxpayer good value for money, then absolutely we would look to put that money elsewhere, but so far we have no evidence of that being the case."
Mr Clark said the contracts had been reviewed, and Corrections had a good relationship with Care NZ.
But a Corrections commissioned review last year found the department was failing to select the right people to go on the drug treatment courses and that two thirds of them failed to meet the department's own criteria for deciding if an inmate had a serious problem with drugs or alcohol.
Criminologist, professor Greg Newbold, said the problem was that bodies such as the parole board rather than clinicians were deciding who went on programmes.
"If the parole board perceives someone to have a specific problem, an alcohol problem or a drug problem, the parole board will say you need to do a programme.
"Unless you do the programme you're not going to get out of jail so those people have to line up for a programme irrespective of whether or not they're actually suited to those programmes."
RNZ News understands the drug treatment unit at Rimutaka Prison is currently being used to house an overflow of inmates from the main part of the prison.
Former inmate and now consultant Paul Wood said this would undermine the effectiveness of rehabilitation programmes.
"Specialist units like that are designed to create a safe environment where people are able to be vulnerable and honest about their own issues and addictions.
"When that space is not populated by people who share similar motivations you remove the comfort zone that people have in terms of sharing their own issues honestly."
Corrections was confident that Care NZ's staffing levels were sufficient to support the programmes they delivered in prisons
"While the contract details an expected level of staffing, we accept that, as with any employer, there may be reasons for reduced staffing numbers. When this occurs we work with the provider to ensure that if any concerns are raised, they are addressed appropriately." Corrections southern regional commissioner Ben Clark said a statement.
We do not consider that there is any link between Care NZ staffing numbers and the recent effectiveness results of the drug treatment unit programme that they deliver."