Taxpayers lost $170,000 because police did not include a vital clause in Clint Rickards' employment contract.
An Ombudsman's report shows police could have paid out the disgraced assistant commissioner $130,000 - based on three months' notice - if they had specified a "limited notice period".
But because therewas no such clause, Mr Rickards was able to claim $300,000 based on the 13 months remaining in his five-year fixed contract.
Chief Ombudsman Beverley Wakem was critical of the absence of such a clause, which she said contributed to the public-interest argument that details of the settlement be made public.
The amount of Mr Rickards' resignation package was revealed this week as a result of the Ombudsman upholding a complaint by the Herald. Police had refused the Herald's request, made a year ago under the Official Information Act.
In her decision, Ms Wakem said: "My understanding is that fixed-term employment agreements in the public sector should incorporate measures [such as limited-notice periods] to minimise the exposure of the agency to large liabilities in the event of early termination.
"I have reviewed Mr Rickards' employment contract, and I have not identified any such provision.
"If, as a result, he is entitled to a payment equivalent to 13 months' salary, then there is a very substantial public interest in the police being publicly accountable for this situation and the financial exposure that has resulted."
The police general manager of human resources, Wayne Annan, yesterday said Mr Rickards did have a requirement in his contract to give at least three months' notice of resignation but it was not limited and he gave 13 months' notice effectively the balance of his five-year contract.
Police had a choice between pursuing the disciplinary process, during which Mr Rickards would have continued to be paid and to accrue leave entitlements, or reaching an agreement.
Mr Annan said the disciplinary charges were brought under a system where a judicial process based on district court rules applied. This was prone to delay and open to appeal, and there was no guarantee it would be completed within the 13 months, so a decision was made to pay out Mr Rickards' contract.
The police internal disciplinary regime has been overhauled since charges against Mr Rickards were brought. The new process was expected to be quicker.
