Another $561 million was spent on consultants.
The 62-page report noted the state government made an election commitment in 2018 to reduce external spending on 10 enduring public service functions.
It then directed the public service to slash spending on professional services by 50 per cent and labour hire by 25 per cent by 2022, with the Victorian Secretaries Board setting targets for each department the following year.
The Victorian government did not publicly report progress against the targets but the auditor-general found public service spending on contractors and consultants grew.
"This may lead to fewer opportunities for the public service to develop and maintain in-house skills and knowledge," Auditor-General Andrew Greaves said.
Spending on contractors and consultants across eight Victorian government departments went from $2.84 billion to $4.18 billion over that span, a rise of 47 per cent.
Five departments increased their overall spending on contractors and consultants, while three reduced their expenditure.
Victoria Community and Public Sector Union secretary Karen Batt said the report exposed a "massive and embarrassing own goal for Labor".
"Their public service budget cuts prove expensive and counterproductive, with agencies forced to engage contractors instead to get the work done," she said in a statement.
Shadow special minister of state David Hodgett said it amounted to a broken promise.Â
"Yet again Labor is trying to hide the scale of their financial mismanagement," he said.
Opposition frontbencher David Hodgett says the government has broken another promise. (Penny Stephens/AAP PHOTOS)
Premier Jacinta Allan blamed the 2019/20 black summer bushfires and COVID-19 pandemic for not hitting the targets.
"From time to time governments will need to engage with contractors, we will need to engage external expert advice," she said in question time.
"Particularly in times of responding to natural disasters, responding to health pandemics."
Before last year's Victorian state election, Treasurer Tim Pallas promised Labor would save $200 million over the next four years by cutting consulting and labour hire costs if it was re-elected for a third term.
The state budget also targeted $2.1 billion in savings over four years by cutting up to 4000 public service workers, on top of scaling back the use of labour hire and consultancy firms.
The auditor-general made three recommendations to all departments to improve monitoring, record-keeping and categorisation of contractor and consultant spending.
One was directed specifically to the health department about procedures for recording spending and another to the Department of Treasury and Finance over reviewing financial disclosure guidelines.
All were accepted in full or principle.
The COVID-19 pandemic has been blamed for Victoria not hitting consultancy spending cuts. (Joel Carrett/AAP PHOTOS)
SPENDING ON CONTRACTORS AND CONSULTANTS IN 2018/19 AND 2021/22:
Department of Education: $196 million to $161 million (down 18 per cent)
Department of Energy, Environment and Climate Action: $337 million to $303 million (down 10 per cent)
Department of Health/Department of Families, Fairness and Housing: $1.5 billion to $2.46 billion (up 64 per cent)
Department of Justice and Community Safety: $34 million to $19 million (down 45 per cent)
Department of Jobs, Skills, Industry and Regions: $124 million to $148 million (up 19 per cent)
Department of Premier and Cabinet: $75 million to $105 million (up 40 per cent)
Department of Treasury and Finance: $48 million to $87 million (up 81 per cent)
Department of Transport and Planning: $526 million to $891 million (up 70 per cent)
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