UPDATED: The investigation into how Budget-sensitive material was accessed at the Treasury has been terminated by State Services Commissioner Peter Hughes and a fresh inquiry has been launched.
Hughes said the integrity of the current investigation, led by Murray Jack, had been compromised.
"A key member of Mr Jack's investigation team failed to declare a conflict of interest," he said.
"It is very disappointing this has happened. Unfortunately, this person has not met my expectations or Mr Jack's expectations."
Hughes did not specify the conflict of interest but the Herald understands that a member of the review team is in a relationship with someone who works for the National Party.
The investigation was commissioned after Budget sensitive documents were accessed by the National Party in the lead-up to the Budget by searching the Treasury's public website -
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He has appointed Jenn Bestwick to lead a fresh investigation, which will commence immediately.
Hughes said he had the option of continuing the investigation but was not prepared to risk any possibility of compromise.
"Starting the investigation again is the right thing to do. Near enough is not good enough when it comes to integrity."
The inquiry will be conducted using the Commissioner's powers under the State Sector Act 1988.
Hughes said the objective of the investigation was to address concerns about the security of the Treasury's Budget process, focusing on what happened, why it happened, the lessons learned, and the actions the Treasury needed to take to ensure that a similar incident would not happen again.
The terms of reference would be the same as the original investigation and interview transcripts and other material gathered during the course of the current investigation would be reused to the extent possible.
Hughes said he expected the total cost of the inquiry, including the new investigation, would be completed within or near the original budget of $250,000.
The new investigation was expected to report at the end of February.
The review is separate from the investigation by Deputy State Services Commissioner John Ombler into the actions of former Treasury Secretary Gabriel Makhlouf in handling the debacle.
Budget sensitive document were accessed by a National Party staffer four days before the May 31 Budget by search tool on the Treasury's public website - but Makhlouf claimed the department had been systematically hacked and called in the police.
The investigation found that Makhlouf failed to meet the standards expected of a public service chief executive, saying he should have consulted more and taken greater personal responsibility - and should have done so publicly.
Commenting on the latest development, National's finance spokesman Paul Goldsmith said: "This bumbling government first botched the Budget and have now botched the investigation."