One former employee of an unnamed NSW government agency was paid continuously up to June 2025, despite having left the agency seven years ago, according to the state audit office.
Another was overpaid almost $300,000 over three years, leaving the agency scrambling to try and recoup the overpayments.
Overall mistakes in agency financial records dropped from 88 to 55 in the 2025 financial year but the value nearly doubled, from $232 million to $397 million.
The auditor found long-term contract workers were a significant strain on state finances, with more than 200 external employees holding roles for more than five years.
"There were 17 contingent workers paid more than $550,000 each, placing them in a salary range equivalent to, or above, Band 4 senior executive level," the state agencies final report said.
"While justification for these salaries may be reasonable due to specialist skills, detailed assessment and market evaluations should be performed."
The NSW government has attempted to reduce its reliance on contractors but one of the state's top union bosses says more needs to be done to protect the public sector.
"Outsourcing is a false economy and provides a poor return to NSW taxpayers," Unions NSW general secretary Mark Morey said.
"It's both more expensive and it strips the NSW public sector of expertise."
The auditor called for agencies to prove they actually have a shortage of suitable candidates internally before hiring contractors to stop more wasteful spending.
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