The former defence secretary Liam Fox has been ordered to repay £3,000 of expenses after allowing his friend Adam Werritty to live rent-free at his taxpayer-funded second home.

The parliamentary standards commissioner, John Lyon, said Werritty had received "a considerable financial benefit" from using Fox's London flat for a year.

Fox, who resigned in October over his controversial relationship with Werritty, was also criticised for allowing their Atlantic Bridge thinktank to be run from his parliamentary offices. After an inquiry by Lyon, MPs on the cross-party standards and privileges committee told Fox to repay £3,000 of his allowances and apologise in writing for breaking parliamentary rules.

Werritty, who came to prominence last year after promoting himself as an adviser to Fox, stayed at the Tory MP's London flat for a year from October 2002. He was there "most weekdays" although he was away for eight weeks of the year, according to the standards commissioner's report.

Werritty gave the flat's address as his own when he registered a directorship with Companies House in October 2002. Fox told the commissioner that Werritty stayed in a spare bedroom.

Lyon said Fox was "clearly, in my view, giving his friend a considerable financial benefit, made possible because of the claims which Dr Fox made against his parliamentary allowances to support him in his parliamentary duties".

The Green Book rules on the now abolished additional costs allowance (ACA) for MPs' second homes stated that it should not be claimed for the living costs "of anyone other than yourself".

Fox resigned from the Cabinet last October, apologising to MPs for allowing the distinction between his ministerial role and his friendship with Werritty to become "blurred". The unofficial adviser had met him 40 times at the Ministry of Defence or on trips abroad. Fox was found by the then cabinet secretary, Sir Gus O'Donnell, to have breached the ministerial code.

The commissioner said Fox had breached the rules from October 2002 to October 2003 because his claims for ACA did not "take account of the living costs of his friend who was living there". In addition, Lyon said it was a "serious" matter that Fox allowed the Atlantic Bridge, which was run by Werritty, to be based in his parliamentary offices from September 2003 to June 2009.

"It is a matter of some concern that a member should think it is acceptable to use parliamentary resources for non-parliamentary purposes," Lyon said. But he added that the breach was "substantially mitigated" by the fact that he had raised it with the house authorities in May 2006.

"Dr Fox made no secret of the fact that the organisation was run from his parliamentary office and the house authorities should have given him clear advice about the propriety of this when he first approached them in April 2006," he said.

Fox told the commissioner in a letter that he accepted his conclusions.

"I naturally regret that I did not take more care when allowing someone to stay in my flat, but I am grateful for your recognition that there is no evidence of significant extra costs being incurred and of the state of the rules in place at the time, a decade ago," he said.

On the Atlantic Bridge's use of his Commons offices, Fox added: "I regret that the rules were breached but again I am appreciative of your view that the breach was substantially mitigated by the lack of advice from the house authorities."

The standards and privileges committee, which considers the commissioner's findings, called on Fox to repay £3,000 of his ACA claims from the time when Werritty stayed at the flat.

"We also recommend that Dr Fox apologise in writing for his breaches of the rules in permitting his friend to use his ACA-funded flat for a year and in permitting the Atlantic Bridge to use his parliamentary offices," it said.

"We would have proposed a heavier penalty if Dr Fox had not raised the use of his office with the house authorities." Lyon's investigation followed a complaint from the Labour MP John Mann.