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The country's biggest chain of child-care centres has been overclaiming more than $1.6 million after charging for teachers who were listed as being in two places at once.
Kidicorp was also found to have claimed money from the Ministry of Education for daycare teachers who were away from their centres.
The inquiry which identified the payments came after a whistle-blower said managers at the company were "manipulating computer records" to get higher funding, according to documents released under the Official Information Act.
The ministry found there were incorrect funding claims in about 50 of its 176 services.
It was "sufficient confirmation" of the whistle-blower's claim to ask the Serious Fraud Office to investigate.
No charges were laid but an audit by the ministry from 2007-2010 found $1.6 million wrongly claimed over that time.
The extra claims boosted the amount funding through a formula that financially rewards centres which have higher percentages of qualified teachers.
The ministry's report into the issue showed auditors found corporate staff were being listed as teachers at child-care centres when they should not have been claimed for at all. It found "records where staff were shown to be working in different centres at the same time".
The auditors told Kidicorp it was not allowed to charge taxpayers for corporate staff who were not actually working with children.
Audit staff also found information for 20 registered teachers at five of the audited services had been deleted. Other information was corrupted.
Ministry group manager for early childhood education Karl Le Quesne said the money had been reclaimed from Kidicorp and the ministry had power to suspend or cancel early childhood education licences. "If we had ongoing concerns we would consider further steps in taking action around the licence."
Kidicorp chief executive Wayne Wright said the company had a different view to that of the ministry around what could be claimed.
He said he believed Kidicorp was being held to a higher standard than other centres because of the automated system it had introduced.
Mr Wright also said the business had 3500 employees at centres across the country.
"I think it was a result of human endeavour and human error in a very complicated system," he said.
"We've tightened up our system. The ministry had a legitimate concern. We addressed it in conjunction with them.
"They deducted money and life went on. I'd rather have $1.6 million than not. In the overall scheme of things it wasn't a lot."