Public Services Commissioner Peter Hughes has reprimanded the Government's public housing agency Kāinga Ora after Newshub revealed a cover-up in 2021.
Newshub revealed last year that Kāinga Ora brazenly took steps to cover up the fact it was using a Labour Party candidate in its taxpayer-funded advertising, risking political neutrality.
While the agency knew Arena Williams - now MP for Manurewa - was planning to run for Labour in 2020, emails showed it hid the fact, choosing to act like it was unaware.
Kāinga Ora was dobbed in to the Public Service Commission by its own Housing Minister, Megan Woods. The watchdog confirmed in November it would investigate.
The Public Service Commission released the findings on Thursday.
Hughes said in a statement that Kāinga Ora got it wrong when it considered the principle of political neutrality, which he said was fundamental in the New Zealand Public Service.
"Kāinga Ora failed to do the right thing when it became aware the person it was to feature in a Kāinga Ora sponsored article was a candidate," Hughes said.
"The email suggesting the agency pretended it did not know about Ms Williams' candidacy was unacceptable. All parties agree.
"I expect Public Service agencies to consider whether it is appropriate for public funds to be used to give positive exposure to a political candidate in this way. Government advertising must always be impartial and free from partisan promotion of government policy and political argument."
Hughes said Kāinga Ora has assured him appropriate actions have been taken to ensure there will not be a repeat of the incident.
"I'm satisfied the chief executive has owned it, fixed it and learned from it. That is what I expect."
The Housing Minister wrote to Kāinga Ora chair Vui Mark Gosche on Thursday informing him of her disappointment.
"The manner in which Kāinga Ora conducted itself in relation to the OneRoof sponsored article fell well below my expectations for an agency in the public sector in terms of the judgement applied to the publication of the article and the subsequent responses when shortcomings were identified," Woods wrote.
"The review by the Public Service Commissioner reiterated some pertinent points which align with my expectations for Kāinga Ora including aligning the organisation's view of political neutrality to incorporate the broader context in every interaction, not just about the motivation of the person or the content of the matter at hand or limited to pre-election timing."
Gosche said on Thursday the agency "fully accepts" that the report has shown its handling of the matter was wrong.
"It wasn't good enough. I have said publicly previously that I was not satisfied with the decision by Kāinga Ora and its subsequent handling of the matters. I have made it very clear that it was unacceptable and I expect that it will not happen again."
Gosche said in the past few months Kāinga Ora has further developed its training, advice and guidance when it comes to how it approaches political neutrality.
"I am confident that Kāinga Ora has learnt from this experience, that changes to its organisational systems and processes have already been put in place, and that it will continue to work on further improvements to ensure that this kind of situation will not occur again."