Fraudsters using a Defence fuel card managed to spend more than half a million dollars before anyone in the department noticed.

The embarrassing incident has prompted tighter financial checks within Defence — but officials concede the stolen funds cannot be recovered.

The Defence Department's chief audit executive, Geoffrey Brown, revealed details of the theft while appearing at a Senate estimates hearing.

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"It was a fuel card that had been obtained by a member of the public," Mr Brown told the committee.

The auditor said the total amount spent on the taxpayer-funded card was $585,000 over a 12-month period.

Under questioning by senators, Mr Brown confirmed the Defence fuel card had been mistakenly left in a minibus which the department had sold at auction.

Labor senator Alex Gallacher asked whether "reasonable steps had been taken to investigate and recover taxpayers' money".

Mr Brown told the committee a "consortium" was believed to be responsible for the theft and one person had been prosecuted, but the stolen funds could not be recovered.

"The unfortunate thing about fuel is that it's a consumable, so there's nothing left once it's used but in this instance as I understand there were no assets to collect," Mr Brown said.

The auditor added the department had since improved its process for reconciling corporate credit cards.

Defence Department secretary Dennis Richardson assured the committee corporate credit card fraud was not a big problem in the organisation.

"Fraud loss for corporate credit cards in 2013-2014 was $96,429, which represents 0.02 per cent of the total corporate credit card expenditure," Mr Richardson said.