Ms Milnes became a board member at the commission in November. Before being hired, she had worked as a business journalist for 10 years and then in welfare and social policy positions. She was made acting chief commissioner after Carl Davison stepped down in February.
Mrs Bennett's office said four people applied for the chief commissioner position, and two were shortlisted. One of them pulled out a day before the interview and Ms Milnes was the only candidate to go before an independent panel.
The minister told the Herald: "Because Ms Milnes had worked for me previously, I was particularly careful to ensure an absolutely transparent and proper process be followed in accordance with [State Services Commission] guidelines and I'm satisfied that was done."
She added: "Ms Milnes is the right person to lead the Families Commission ... If we were to disqualify people purely on the basis of their links to others, it would be difficult to make any appointments ..."
Labour's social development spokeswoman, Jacinda Ardern, said the party would be seeking an assurance that Ms Milnes' past role with the minister did not influence her appointment.
While in Government, Labour appointed former MPs or members, including former party president Mike Williams, to the boards of three state-owned enterprises.
Judy Callingham, a former adviser to Helen Clark, was appointed to the board of NZ On Air, and former MP Dianne Yates was appointed to the Food Standards Australia NZ board.
Labour's state services spokesman, Chris Hipkins, said National had been "far more political" in its appointments: "Cronyism is rife under this Government."
He said Labour did not oppose all appointments of former politicians. But there was big difference between appointing a former insider to a board of directors and appointing one to a role where they would have to advocate on policy.
"In that case, their political connections do become an issue."
Party posts
• Belinda Milnes - sister of Cabinet minister Amy Adams, former adviser to Cabinet minister Paula Bennett, now Chief Families Commissioner. Board also includes Education Minister Hekia Parata's husband, Sir Wira Gardiner.
• Jackie Blue - former National MP, Equal Opportunities Commissioner.
• Robert Kee - friend of Justice Minister Judith Collins' husband, Director of Human Rights Proceedings.
• Katherine Rich - former National MP, Health Promotion Agency board member. Board includes former National electorate chairs Lee Mathias, Jamie Simpson.
• Stephen McElrea - former electorate chair to Prime Minister John Key, on NZ On Air board.
