The system was recently held up as a shining example by the Treasury, with a report quoting an external assessment of ELI as "very successful".
However, the issues paper seen by the Weekend Herald labelled parts of the system as "not fit for purpose".
It was extremely slow, taking up to nine hours to complete processing each night. Information provided was often incomplete, meaning ELI could not use it. To fix this, analysts were having to manually go back and redo the entries or collect extra data from the early childhood services.
All this was putting a huge strain on the server, the document said.
The Ministry of Education's head of sector enablement and support, Katrina Casey, said the paper was an internal document and had not been signed off by senior managers.
She said the risk of data loss was "extremely low" but if there was a failure it would move to its backup data centre which would ensure no interruption to service or data loss.
The ministry was working on a process of "cleansing" and reducing the volume of raw data, and enhancing the system.
"We absolutely reject any suggestion that this document represents a picture of 'severe issues with data management in ELI'," Ms Casey said. "This is exactly what you would expect in this stage of an IT project such as this."
However, the Labour Party's Chris Hipkins said: "The whole point of the new system was to make life easier yet it seems to be making things worse. It takes a special kind of incompetence to design a system that does that."
Early childhood union NZEI said the ministry should not rely on ELI data given it was not fit for purpose. Only a small amount of data has been published by ELI so far.
Govt IT problems
2012: Education payroll system Novopay leaves teachers underpaid, overpaid or not paid at all
2012: Privacy breach at Ministry of Social Development servers means personal details of clients can be accessed through job seeker kiosks
2014: Merger of Customs and Ministry for Primary Industries' systems three years late and nearly $30m over budget
2015: Changes to child support cause $130m blowout
2016: Overhaul of police payroll and HR system blows out by over $11m