The Southland Regional Council has been criticised for not helping large ships navigate Fiordland after a cruise ship collided with the ground in Milford Sound.
French-registered passenger ship L'Austral was on a nine day cruise when it collided with the ground in Milford Sound in February last year - the ship's second crash while in New Zealand waters.
It was dark and the crew were relying on the ship's navigation systems to set their course.
A Transport Accident Investigation Commission investigation found the council did not fully consider the risks of navigating in with low visibility in the narrow passage.
The council is responsible for navigational safety in Fiordland and licensed both the pilots on-board the cruise ship.
The Commission recommended the council work out how to mitigate the risks faced by large ships navigating the limited space in Fiordland as there was "little margin for error".
No one was injured and despite scraping and denting the hull, the ship remained relatively unscathed.
However, grounding was serious as it could damage the vessel and environment, it said.
In response to the recommendation, Southland Regional Council said it was committed to navigational safety and it would confirm whether it has been able to implement the final suggestions later this year.
The Commission also found the crew knew they were off-course and were alerted by safety settings, but failed to tell their pilot until it was too late.
L'Austral also collided with rocks at Snares Islands a month before, in an area the Commission said was not suitable for safe navigation.
The Commission released an earlier report, recommending the Department of Conservation Director-General appoint a qualified person to manage navigation safety in the sub-Antarctic islands as shipping activity would likely increase in the future.