A top-level review of the Ministry of Social Development's fraud investigation tactics has found serious gaps in training and oversight.
The independent assessment was ordered after the Privacy Commissioner's scathing report which said the ministry had been systematically misusing its powers while pursuing suspected fraud.
Released in May, that report found some of the ministry's investigations into suspected benefit fraud were excessive and even illegal.
Commissioner John Edwards blasted the practice of collecting large amounts of personal information from banks and telcos, without the peoples' knowledge, and said changes had to be made.
MSD ordered its own independent assessment and that report has just been released.
It identified a lack of ongoing training for experienced investigators, weak oversight, as a well as a failure to regularly review and update policies and procedures.
MSD deputy chief executive Stephen Crombie said they will be working to fix that.
"In this area it's very complex, and there's new practices, so it just highlights that we need to keep the training material up-to-date, keep our people trained and keeping that consistent across the country."
Mr Crombie said there's now a stricter process to stop investigators simply bypassing beneficiaries and going straight to third parties for information.
"There's a very formalised process which we introduced in May to make sure that the individual circumstances are taken into account and there is definitely a number of eyes across that to make sure we are making the right call," he said.
MSD has suspended the practice of asking for information from the police and phone companies, pending a further review.
The report is little comfort to Sue Moroney, the chief executive of Community Law - the organisation that raised the alarm with the Privacy Commissioner in the first place.
"We're still not confident that MSD understands how badly it let down the beneficiaries who were exposed to that process," she said.
MSD is asking people to get in contact if they think investigators may have breached their privacy, but Ms Sue Moroney said it should be much more proactive.
"Very few people who were affected by this know that they may have been affected by it - that's the problem. MSD does have records of people who probably were affected by their unlawful actions."
MSD should be getting in touch with people directly, letting them know what happened, and telling them how they can seek redress, she said.
Ricardo Menendez-March from Auckland Action Against Poverty said the Social Development Minister, Carmel Sepuloni, needed to keep a closer eye on how the fraud investigation team is run.
"In order for the unit to do the work that they're supposed to do,. the minister needs to step in and ensure that they're abiding by their own practices."
MSD said it will have started work on implementing the recommendations from this latest report by the end of the year.