A $1.5 billion contract between the Home Affairs Department and Surveillance Australia aimed at preventing people smuggling and thwarting other maritime threats has failed to meet a number of key requirements, a report by the Australian National Audit Office revealed.

The report found the department had continued to pay the full monthly rate of the contract despite the supplier not providing enough aircrew to fulfill the requirements.

First signed in 2008 for $1.19 billion, Surveillance Australia was required to provide 10 fixed-wing aircrafts, a crew of nearly 30 and 15,000 flying hours each year in order to monitor maritime borders in the country's northern reaches.

However, aircrew requirements had never once been met over the 12 years of the contract with the average shortfall of staff reaching 33 per cent, the report revealed.

The contract's value has still increased by more than 29 per cent to $1.54 billion over the period.

"Home Affairs has continued to pay the full fixed component of the service charge, in effect, paying for aircrew that have not been provided," the report said.

"A significant limitation in the operation of the contract is that the number of aircrew is not linked to the Performance Measurement System.

"Coupled with this, Home Affairs has been planning missions to fit Surveillance Australia's capability, rather than planning to meet the desired operational outcomes."

The probe also revealed record keeping of contract changes, invoices issued and payment processes had often not been up to standard.

A total of $17 million in expenditure could not be supported by any invoices.

An ANAO analysis also showed 43 per cent of invoices, totalling $452 million, lacked any evidence of having delegate approval ahead of payment.

Despite ongoing failings, the contract had been adjusted 40 times and extended beyond its initial 2019 deadline for an additional two years.

But the office also flagged no arrangements had been made for services beyond the contract's end, which would finish by the end of 2021.

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The audit office provided four recommendations, which the Home Affairs Department has agreed to.

The recommendations include not paying full costs until services had been fully delivered, linking payment to performance outcomes and implementing stronger governance systems for monitoring operations.

But the department response fell short of completely accepting the audit office's findings, adding operational context had not been "adequately reflected".

"It is not unusual to expect changes over the life of a Contract of this length, complexity, and operational nature," the department's response said.

"While the ANAO report provides valuable feedback for the department's consideration, recognition of the operational context under which the contract functions, the major contract management improvements implemented, and the commitment shown by the department's personnel to deliver critical surveillance services under extreme pressures, have not been adequately reflected."

It added, however, the lessons learned had been valuable for future surveillance planning.

The audit office said proper and robust record-keeping was essential to supporting transparency and accountability over billion-dollar contract deals with the department.

It added it had requested hundreds of files and documents from the department but had not received some due to poor record management and the destruction of some records.

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