The confidential memo, again from Ms Gibson, sent to former deputy secretary for schools Anne Jackson, gave detailed problems with the development of Novopay and recommended options including terminating elements of provider Talent2's contract and moving to a hybrid system incorporating both the Novopay and the previous Datacom system.
After Novopay was rolled out in August last year thousands of school staff were left either underpaid, overpaid or not paid at.
The Ministerial Inquiry into Novopay carried out by Sir Maarten Wevers and Deloitte chairman Murray Jack found the ministry did not have good leadership on the project and had an unfounded optimism about the project.
"The go live decision was confirmed even though it was clear that not all testing had been completed.
"The service centre had failed some of its test and was not fully ready," it found.
Briefings to ministers remained optimistic.
"Ministers were not always well serviced. Reporting to ministers has been inconsistent, at times unduly optimistic and sometimes misrepresented the situation."
The report found the State Services Commission did not conduct its monitoring role properly and the Government chief information officer not involved to the level he should have been.
Novopay had cost $23.9 million more than budgeted and had severed relations with the sector and wider public, it said.
The report did not recommend scrapping Novopay, but said 15 recommendation should be implemented.
Acting Secretary for Education Peter Hughes would not say how long an investigation into staff would take or the grounds for that investigation.
He would not name those being investigated.
Opposition MPs have called on ministers to take responsibility and repeated calls for Ms Parata to resign.
Labour's education spokesman Chris Hipkins said accountability should rest with the Government and the ministers should have been able to pick up on misinformation.
"I fail to accept the shambles going on within a minister's department could go undetected," he said.
Greens co-leader Metiria Turei said it was unreasonable for ministers to escape blame.
"It's very clear from the report that ministers made a consistent series of mistakes and should have never signed off on allowing Novopay to proceed.
"You get advice, you can take it or you can leave it. At the end of the day ministers are responsible for their decisions.
Calls for Ms Parata to resign over Novopay have continued for more than six months. Mr Foss was stripped of his ministerial responsibility for Novopay and Education Secretary Lesley Longstone resigned.
TIMELINE: Novopay unravels
- August 2008: Talent2 signed to deliver outsourced payroll service by 2010.
- May 2010: Delivery of Novopay delayed until May 2011.
- June 2011: Cabinet decides to extend the Talent2 contract to 10 years.
- August 2011: The launch of Novopay delayed again, this time until August 2012.
- December 2011: Education Minister Hekia Parata delegates oversight to associate minister Craig Foss.
- May 2012: A back up contract is signed with existing supplier Datacom, for five years if Novopay cancelled.
- June 2012: Ms Parata, Mr Foss and Finance Minister Bill English approve Ministry of Education recommendation to go live with a flawed Novopay.
- August 2012: Novopay goes live even though testing showed 147 software defects and 6000 errors. Problems emerge with the first pay round.
- January 2013: Mr Foss loses his associate education role in the Cabinet reshuffle and Steven Joyce is given Novopay. He warns it could be cancelled. His briefing says it could take two years to fix.
- January 2013: Mr Joyce announces a ministerial inquiry into Novopay
-February 2013: Post Primary Teachers Association launches legal action over Novopay mispayments.
- March 2013: Schools receive $6 million in compensation for extra hours spent administering Novopay.
- May 2013: Mr Joyce announces Novopay will stay, but remain under review.
- June 2013: Mr Joyce releases findings of a ministerial inquiry into Novopay.
