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A reported released under the new oversight regime for intelligence agencies found spies at the GCSB didn't understand their own rules for counting up the legal orders allowing them to intercept communications.
Instead of reporting the number of legal authorisations they had, the GCSB reported the number of operations it was conducting.
The issue emerged after the bureau tabled the wrong information in its annual report to Parliament -- a new requirement imposed on the agency after a law change last year.
The problem was not picked up by the Prime Minister, who signs off the legal approvals and tables the final count in Parliament.
An inquiry by the Inspector General of Intelligence and Security Andrew McGechan QC found the investigation into the blunder was a "severe experience" for the GCSB.
He said security risks prevented explaining how the error had happened.
But he said a "legacy record keeping problem" created the problem along with the bureau not understanding how to properly record its interceptions.
He said there needed to be systems in place to "provide sufficient safeguards".
In relation to the legal authorisations, he said GCSB staff "now understands the correct treatment" to be used.
"New processes are in place to ensure accurate recording."
Incoming NZSIS director Rebecca Kitteridge carried out a review of the bureau finding systemic problems throughout. She made 80 recommendations -- the latest GCSB update report stated 46 had been completed.
The Prime Minister's office rejected responsibility for the blunder, saying it was up to the bureau to maintain its own records.
"The PM's office does not keep a record of warrants and authorisations, that is rightly the responsibility of the agency involved.
Green Party leader Russel Norman said Mr Key wasn't doing his job and should have noticed signing more legal orders than were tallied up at the year's end.
"Given he is the only democratic oversight it seems to me he had a particular responsibility to pay attention to what he's approving. He should be paying close attention."
Mr Key said the GCSB was improving. "It's got a large number of initiatives it needs to undertake as a result of the Kitteridge Report. There's plenty of room for more improvement, but they are getting better."
- By David Fisher of the NZ Herald