A royal commission into robodebt has probed the actions of key department figures as fundamental issues with the failed scheme came to light.
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It comes after former prime minister Scott Morrison told the inquiry he wasn't privy to discussions between departments that flagged the scheme as unlawful.
Karen Harfield, who was general manager for customer compliance at the Department of Human Services, said she became aware income averaging was being applied to more recipients than previously intended by about September 2016.
She told the commission on Thursday senior staff were resistant to overhauling the scheme due to government budget targets requiring a higher number of interventions.
Robodebt involved using individuals' annual tax information provided by the ATO to determine average fortnightly earnings and automatically establish welfare debts, an approach ruled unlawful by the Federal Court in 2019.
The scheme wrongly recovered more than $750 million from 381,000 people and led to several people taking their lives while being pursued for false debts.
"The recipient would be sent a letter, whether they received the letter or not, if there was no engagement from the recipient with the department, debt would just be calculated on the basis of income average," counsel assisting Angus Scott KC put to Ms Harfield.
"And what ... you were becoming aware of was that there were significant levels of recipients whose entitlements were being incorrectly calculated because no reasonable steps to investigate were being undertaken."
She replied, "(If) they weren't providing further information ... yes."
Ms Harfield told the commission she suggested to former DHS deputy secretary Malisa Golightly, who has since passed away, the scheme required a "major response" to rectify the issues, to which the senior public servant responded angrily.
"The system was not working as it had been conceived and that was why I made the suggestion about having the major incident response," Ms Harfield said.
"Really throughout that whole sort of period I was unable to influence Malisa in terms of any sort of shift from the focus or the direction of deliver the numbers."
Early proposals for the scheme identified potential savings to the federal budget of $1.2 billion by more efficiently identifying welfare discrepancies.
Ms Harfield added that at the time her focus was less on rectifying the averaging process and more on getting those on welfare to engage by responding to Centrelink queries online before they reached the debt recovery stage.
On Wednesday, Mr Morrison was asked by senior counsel assisting Justin Greggery KC if he appreciated that robodebt asked a lot of those on welfare who were potentially in vulnerable positions.
He replied that managing Australia's social security system is a "very difficult task".
"In seeking to ensure the integrity of the system that does of course put obligations on individuals who have been the recipients of payments. That's unavoidable," Mr Morrison.
The former prime minister blamed departmental staff for omitting legal concerns from a policy proposal he presented to cabinet despite having signed an earlier briefing document in which concerns were raised.
"Had that advice come forward I sincerely believe we would not be sitting here today," he told the commission.
Commissioner Catherine Holmes SC questioned why Mr Morrison had not inquired further as to how the legislative issues had been resolved after they disappeared.
"That is how the cabinet process works," he replied.
"I was satisfied that the department had done their job."
Australian Associated Press
