Although CYF could not go into specific detail about what went wrong, police checks were made into Scott's background and he was found to have no convictions or domestic violence incidents in New Zealand or Australia.
The three children in his care were removed and placed with other caregivers, and CYF made changes to its caregiver assessment policy.
In Rotorua District Court this year, Scott was sentenced to 100 hours' community work and 12 months' intensive supervision.
A report that followed the case found "the quality of the initial caregiver assessment and approval carried out in 2004 had not been robust".
Smith said he was deeply disappointed that a CYF caregiver had been convicted of indecently assaulting a child. The man was the legal guardian of the girl, another child in the house, and a child in CYF custody. "All three children were removed from the care of this man as a result of the allegation and are safe.
"It is both tragic and unacceptable that this should happen to any young person and I'm particularly appalled that a man who had sought legal guardianship of two children and who was an approved Child, Youth and Family caregiver would commit such a gross breach of trust."
Smith said he had ordered an immediate review after the charges were laid. It concluded the quality of the initial caregiver assessment in 2004 was poor, and subsequent review and support of caregivers was not acceptable.
Smith said: "It is always distressing to me when children have been abused in this way by an adult entrusted with their care."
Child abuse prevention group Shine works closely with CYF and child abuse cases. Executive director Jane Drumm said when CYF decided to remove a child from his or her parents, it was a last resort.
"It's really important that they're very careful about where the child is placed. It's got to be a much better option for the child."
