The Securities and Exchange Commission failed to follow federal guidelines and spent in excess of $100,000 on living and travel expenses for a former senior agency official, the SEC's watchdog has found.

In a report obtained through a Freedom of Information Act request, SEC Inspector General David Kotz criticized the agency for how it reimbursed Texas professor Henry Hu, who served from 2009 through the start of 2011 as the head of the new Risk, Strategy and Financial Innovation Division.

SEC Chairman Mary Schapiro tapped Hu to help launch the new unit, designed to serve as the agency think tank, to look ahead at the fast-changing landscape of trading and financial instruments.

In an unusual move, first reported by Reuters in May, the SEC decided to offer him a compensation package that designated his hometown of Austin, Texas, as his duty station.

In doing so, it made him eligible to receive thousands of dollars a month in per diem payments toward his meals and long-term stays in a Marriott-owned apartment in Chevy Chase, Maryland, as well as flights back to Austin.

The package drew criticism from many staffers within the SEC, in part because many other employees who live in other cities often pay their own way.

Kotz's report found that the SEC spent about $120,000 to cover Hu's housing, meals and airfare through his tenure, in addition to $314,198.26 for his salary.

Hu was hired on a temporary basis through a special arrangement with the University of Texas known as an Intergovernmental Personnel Act assignment, or IPA.

IPAs are often used by the government, particularly in recruiting academics. Generally, the employee will work for the government for a limited time. In exchange, the government will often pay for a portion of the person's salary and benefits.

The Office of Personnel Management's guidelines do allow federal agencies to give employees a per diem allowance, but those allowances should only be for short-term assignments.

The arrangement to pay Hu's living expenses was not short-term as OPM guidance indicates such arrangements should be, Kotz wrote.

Kotz also said the SEC went against typical SEC practice by failing to cap relocation expenses at $9,000. The SEC also erred in keeping his duty station in Austin instead of Washington, D.C., where his actual office was located.

The report did not fault Schapiro's office for the arrangement, but said that former SEC Executive Director Diego Ruiz was primarily responsible for setting it up.

Ruiz, who left the agency earlier this year, was not interviewed for the report and declined to comment.

Kotz's report urged the SEC to develop guidelines on IPA agreements.

John Nester, a spokesman for the SEC, said the agency is in the process of implementing the report's recommendation.

(Reporting by Sarah N. Lynch; editing by Tim Dobbyn)