Mayor Michael Bloomberg says most of the $600 million in cost increases for the CityTime automated payroll project were legitimate.
Prosecutors have said that almost all of the funds paid to the project's main contractor were tainted by fraud.
Bloomberg said on WOR radio on Friday that "there was an unconscionable amount of fraud" and his administration is "going after it."
But he also says the project's cost was initially underestimated.
One company and 11 people have been charged in the fraud case, and prosecutors say the project was "corrupted to its core."
Two people have pleaded guilty, two are believed to have fled to India, and one has died. The rest maintain their innocence.
They were the mayor's first words on the case since prosecutors' most recent, sweeping indictment.