Maori development ministry Te Puni Kokiri is the lead agency for Whanau Ora initiatives, and total spending on the policy has been $138 million since 2010.
Auditor-General Lyn Provost said Whanau Ora had been a success for many families, but there have been significant problems.
"Delays in spending meant that some of the funds originally intended for whanau and providers did not reach them," Ms Provost wrote in the report.
"Nearly a third of the total spending was on administration (including research and evaluation). In my view, Te Puni Kokiri could have spent a greater proportion of funds on those people - whanau and providers - who Whanau Ora was meant to help."
Ms Provost said her team wanted to clarify for the public and Parliament exactly what Whanau Ora is, and what it has achieved so far, but "it was not easy to describe what it is or what it has achieved".
"We could not get a consistent explanation of the aims of the initiatives in Whanau Ora from the joint agencies or other people that we spoke to.
"So far, the situation has been unclear and confusing to many of the public entities and whanau."
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Ms Provost said today's report was "not my first to describe systems that are a burden for their users".
An example of this was Te Puni Kokiri requiring whanau to represented legally before funding them to prepare a plan that would improve their lives.
Despite her strong criticisms, Ms Provost said her report also highlighted successes of the policy, such as health and social services being supported to work together so people can get easier access to a range of services.
"An innovative idea should not be abandoned just because of implementation problems. I earnestly hope that those involved with the next phase of Whanau Ora are able to take my criticisms on board and learn from them."
Minister for Whanau Ora and Maori Party co-leader Te Ururoa Flavell said he welcomed the report.
He was comfortable with the amount of money spent on administration during the policy's start-up phase, and believed there had not been inappropriate spending.
"Yes, we accept there are some things that could have been done better, that's part of a development of a new project.
"Early studies indicate the lives of whanau are improving across a range of critical areas such as education, employment and health. Whanau are taking control of their situations, and planning for the future," Mr Flavell said.
"Ministers, government departments, commissioning agencies and providers
can all take some valuable lessons from the report...the success of Whanau Ora is ultimately determined by whether it improves the lives of New Zealanders."
