The immigration department has been marked down for bad record keeping and poor tendering over the service provider contracts for the Nauru and Manus Island detention centres.
Officials from the Australian National Audit Office gave evidence to a Senate inquiry examining problems at both centres on Friday.
An audit released in September found taxpayers had been slugged with unnecessary costs to pay for the detention of asylum seekers offshore because of immigration department failures.
"There are legal risks from not doing good record keeping," Deputy Auditor-Deneral Rona Mellor said.
The department did not keep good electronic records and relied on email chains.
Ms Mellor accepted that initially the department had dealt with a crisis in boat arrival numbers as it scrambled to establish the centres and the pace of work meant the procurement process could not be perfect in the first phase.
But after four years, there were expectations the process would have been cleaned up, Ms Mellor said.
The inquiry heard that before the contracts were consolidated the estimated annual cost per detainee was $201,000.
Afterwards this rose to $537,000.
The audit office was asked if the department's tender process had given preferential treatment to services group Transfield, now known as Broadspectrum.
Ms Mellor said the process had taken competition away.
Immigration department secretary Michael Pezzullo defended the handling of contracts, describing the period of setting up the centres as stressful.
"We've worked very hard to ensure... that the level of service provision is certainly comparable to what Australians in most suburban and regional settings would experience," he said.
"We're frankly at a point where we couldn't provide any more services."
Mr Pezzullo said the department had red-carded itself during the third phase of contracts and the scope of services was constantly changing.
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