Ministry of Foreign Affairs officials did not have authority for emergency payments given to New Zealanders caught out overseas by the coronavirus and now needs to rectify the situation in Parliament.
The unappropriated spending was flagged in the Controller and Auditor-General's update on the government's Covid-19 spending.
The update said that MFAT acted with urgency to assist New Zealanders overseas when the pandemic struck and to help them return home "while working to minimise the cost to the taxpayer".
In some cases it advanced money to New Zealand citizens, under its "Consular Services" expense appropriation, with the requirement that the money be paid back promptly.
While MFAT has the authority to incur expenses, it is not lawfully able to lend money without express permission from the Finance Minister, and a parliamentary authority.
The watchdog said that MFAT identified the issue and had taken steps to resolve it.
"Our auditors will be working with MFAT to confirm the details of any loans, including the amounts involved, and this will be reported in MFAT's annual report and in the Financial Statements of the Government for the year ending 30 June 2020. Parliament will be asked to validate this expenditure in due course," the update said.
In the meantime, MFAT is working with ministers to improve the process for providing such assistance to New Zealanders overseas in future.