He resigned last month amid controversy surrounding Mary Easley's hiring.
He has been subpoenaed to testify in front of a federal grand jury about the hiring of Easley on Wednesday.
Last Monday, questions about Easley's hiring and Nielsen's severance package forced Oblinger to also resign. NC State's Board of Trustees fired Easley hours later.
Woodward said a letter offering Nielsen the position in 2005 was approved by the board, however, the board did "not consider nor approve" his resignation letter on May 13.
Woodward said therefore his conclusion was that "key elements" of the letter were invalid.
"Chancellor Oblinger did not have the authority to fundamentally alter the contents of the employment agreement, the June 22, 2005 letter, without first getting approval of the Board of Trustees," Woodward said. "This approval was not given nor was it sought."
He said because of the findings, Nielsen's annual salary will remain at $298,700 for six months. After November 22, Nielsen's pay would be reduced to $156,715, which is comparable to other faculty members in the Department of Forestry and Environmental Resources according to Woodward.
Nielsen served as provost since 2005, before that he was dean of the College of Natural Resources.