Its investigation also identified housing as a major issue.
Some mental health patients were being discharged to live in caravans, and others were going to unsafe places.
Some were staying in inpatient wards for up to two years because of a lack of housing in the community.
''The lack of suitable accommodation can mean that vulnerable people are living in loosely regulated and unsupported environments, and sometimes living with several unwell or dependent people,'' deputy auditor-general Greg Schollum's report said.
Released yesterday, the report looked at all 20 DHBs, including three unnamed DHBs in more depth.
However, the findings are not specified by DHB.
The report focused on those needing acute mental health services.
More than 160,000 New Zealanders accessed specialist mental health and addiction services in 2015.
About 15,000 of them were admitted to an inpatient unit.
Some inpatient units had high occupancy rates, sometimes beyond their capacity, the report found.
Plans for patient discharge were frequently late, incomplete, or inadequate.
''This means that people with mental health problems can be discharged from hospital without a plan for their broader needs, such as getting help with housing, their finances, or support from their employer or family,'' Greg Schollum's report said.
''In my view, improvements are urgently needed for discharge planning to be more effective in enabling better outcomes for people with mental health problems.''
DHBs were following up about 66% of service users within a week of discharge.
The national target for follow-ups is 90%.
The report recommended urgently improving co-ordination between inpatient and community mental health workers for better discharge planning.
The most significant ''service barrier'' identified in the investigation was accommodation.
''The cost of accommodation is particularly a problem in some regions, and there is a shortage of accommodation options for people with complex needs.
''Work-arounds are sometimes put in place, such as discharging people to caravan parks.
''Some people stay in an inpatient unit ... because of problems with access to suitable accommodation.''
Life Matters Suicide Prevention Trust chairwoman Corinda Taylor told the Otago Daily Times there was ''no accountability'' in health boards when discharge planning was inadequate.
''Service users' complaints are not listened to and their families are often excluded from the care and can feel isolated in the process.
''Treatment plans [and] early warnings signs risk sheets are often not done with the carers, families and people who use the services.
''There is little education and support for families who try to engage with the services.
''Service users often reach out to emergency services, because the care in the community was inadequate, only to be turned away from emergency services and told to go back to the community team,'' Mrs Taylor said.
Last night, a spokeswoman for Health Minister Dr Jonathan Coleman said it was ''important to continue to improve standards of care across the system''.
''This audit was taken 14 months ago and considerable work has been undertaken since that time to address some of the concerns raised,'' she said.
