Ministers in the ACT government say a paedophile working for ACT Health was suspended and then sacked as soon as they knew of the serious charges he faced.
Health Minister Rachel Stephen-Smith said Bradley John Burch had been suspended without pay from his senior executive role in the administration on May 14, and sacked on May 22.
Chief Minister Andrew Barr said an investigation was taking place into this "distressing and concerning matter".
Burch was arrested on October 10 last year. In the raid on his home, police found video and still images of men having sex with very young children, one as young as three,
In online chats, he sometimes called himself "daddy" and indicated that he had sex with the child at the other end, according to evidence to the Supreme Court.
In transcripts obtained by the police, a child appears to have been told that food would be her reward if she committed sexual acts. She said she hadn't eaten for three days.
Ms Stephen-Smith told the ACT Assembly that Burch's employment contract had obliged him to notify his employer of serious charges but he hadn't done so.
The ACT Opposition's health spokeswoman Vicki Dunne had asked for more information after it emerged in The Canberra Times that senior manager Bradley John Burch had kept his job for six months after his arrest.
He had continued in internal work chat rooms where parents exchanged pictures of their children, unaware of the child exploitation charges against their colleague in the group.
Ms Dunne said the man had been in a senior executive position. "He was pretty high up the food chain," she said.
"There has been a catastrophic bungling of process and the community deserves to know why."
She was concerned the system had failed, saying: "How did the Reportable Conduct Scheme fail to highlight this and what have they done to make sure it doesn't happen again?"
Under the scheme, an allegation of child abuse has to be reported to the ACT ombudsman within 30 days. The ombudsman then decides what action should be taken to protect children, including those of other employees.
In the Assembly on Thursday, the Health Minister said she was advised "that it was not lawful for other agencies to notify the ACT Health Directorate".
ACT Policing said it didn't comment on matters before the court. A spokesperson said it abided by the "mandatory reporting requirements when investigating allegations relating to children". But it also had to act within privacy and human rights law.
Ms Stephen-Smith said Burch's former colleagues were very upset about the revelations.
When Burch was arrested in Fyshwick, the police found a computer and phone with still and video images of "pre-pubescent" girls and boys engaged in sexual acts with adult men and women.
The prosecution evidence to the court was that "on the defendant's mobile phone, police located sexualised conversations relating to children in messaging applications on the device".
One online conversation talks of giving a child the sleeping drug, Benadryl, before sex.
It is not clear if these very graphic online conversations were really with children or with an adult posing as a child.
Burch pleaded guilty to having child exploitation material on his phone and also sending child exploitation material to others. He is to be sentenced on the second, more serious charge in July.