Three Cabinet ministers - Bill English, Hekia Parata and Craig Foss - signed off on Novopay despite being advised there were "bugs" in the system.
Steven Joyce - the "super" minister drafted in to fix the disastrous payroll system - revealed advisers had warned of the gremlins but said it should go ahead anyway.
The troubled payroll system was rolled out in August and problems became apparent in September.
Teachers have been overpaid, underpaid, or not paid at all, schools have gone into the red, Education Secretary Lesley Longstone has quit and Foss was stripped of his associate portfolio in the fall-out.
"The reality of it is that all the advisers the Crown had on this said 'it's time to proceed', Joyce said.
"There was definitely knowledge that there were bugs at the outset of going live.
"But the advice of all those involved was that the thing should proceed. I doubt the advice would be the same today.
"There is always bugs in a system like this when it starts. The question is are they the sort of bugs that cause problems."
Asked if Novopay was a "a dog" Joyce replied: "As it sits today, yeah, it's one with a few fleas."
Joyce held a press conference this afternoon to provide an update on the problems, just over a week after he was appointed.
As well as a ministerial inquiry, Joyce confirmed officials had initiated a contingency plan which could involve scrapping Novopay.
He said a technical audit by Deloittes was now examining the stability of the software, while Ernst and Young were already carrying out an annual audit of the Ministry of Education's systems which would feed into this.
Simply dumping Novopay would not be a "simple solution," Joyce said.
"You would have to actually wind back a significant amount of what's been done and then go forward again, and ... it's not a decision you would take lightly at all," the minister said.
"If the underlying data is in good shape - and its generally expected that will be the case - then we will look to start and modify with where we are, rather than try to jump horses and this point."
But Joyce and acting education secretary Peter Hughes have already held talks with Datacom, the previous supplier. Datacom made an unsuccessful bid for the present $30 million contract.
Joyce said the education ministry would be more involved with schools, document their feedback and provide more training., but he said it was "too challenging" to say when teachers would begin to be paid properly, but this remediation plan stretched "to weeks, even months".
The government has set aside contractual discussions with Talent2, the Australian provider, for the time-being and would stump up extra cash to get the problem fixed.
Joyce admitted this outlay could be significant and run into the millions.
But he said the government's contract with Talent2 could be broken, possibly without a financial penalty.
"I'm sure it could," he said.
"I can't give an absolute guarantee but I think the balance of probabilities would be in the Crown's favour."
Joyce will take his proposals for a ministerial inquiry to Cabinet on Monday. It fixing the problem was likely to take up to four months - but stressed it should not get in the way of fixing the system.
Labour leader David Shearer said a ministerial inquiry wouldn't boost teacher confidence that they would be paid. The government has "bungled" it and teachers deserved better, he said.
"They should have road-tested it before they put it out there," Shearer said.
"That was the recommendation that was put up to Hekia Parata. She didn't read it and didn't follow it. That's why we are in the situation we are in at the moment."
English said advice suggested the system was ready to go.
"Of course in hindsight we might have done it differently because we didn't want this result," he said.
The complexity of the system was underestimated, "and also the challenge of doing it all at once", he said.
Parata said: "I think hindsight is a wonderful thing. We are where we are now.
"All the advice we received from all the people involved, with significant technical information and knowledge, was that we should proceed."
- © Fairfax NZ News
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