During the pandemic, the Victorian government spent an estimated $257 million on support grants to some 9000 ineligible businesses.
An investigation by the integrity watchdog has found senior officials within the department responsible for making those payments covered up the extent of the losses from their managers.
"This was not a one-off event, nor was it due to an oversight," the Independent Broad-based Anti-corruption Commission report reads.
"Decisions were made to withhold information about the magnitude of the loss and misleading information was subsequently created and disseminated over an extended period of time."
Tabled in parliament on Thursday, the Operation Harmonia special report probed conduct by officers within the since-replaced Department of Jobs, Precincts and Regions.
It concerned their response to revelations the department had granted millions in support payments to ineligible businesses during the early days of the pandemic.
By mid-2021, then-premier Daniel Andrews' government department, was aware of potential issues relating to its use of GST as a metric, the investigation found.
When the true scale of the losses came into view, suspected to be as high as $285 million, the associate secretary and deputy secretary opted to withhold that information from their superiors.
The deputy secretary directed that all information about the suspected losses be wiped from a draft report to the then-Minister for Industry Support and Recovery Martin Pakula and the Victorian Auditor General's Office.
In 2022, after the auditor general opened an audit of the grants, the deputy secretary prepared a brief to then-Minister Ben Carroll, which contained "false and misleading" information.
That brief falsely claimed Mr Carroll's predecessor, Mr Pakula, had been aware of and approved the department's approach to assessing grants and that no payments had been made in error.
The watchdog made no adverse findings against Mr Carroll, who now serves as Victorian premier.
IBAC Commissioner Victoria Elliott said the conduct exposed by the investigation fell short of the expectations of senior public officers.
"This special report exposes serious failures by senior public officers, and informing Victorians of these findings is crucial in promoting transparency and accountability in the public sector," she said.
The investigation was triggered after whistleblowers brought allegations of corrupt conduct within the department, which was replaced by the Department of Jobs, Skills, Industry and Regions in 2023.
"I want to applaud the whistleblowers who came forward to IBAC in Operation Harmonia," Commissioner Elliot said.
"Your bravery is critical in ensuring this conduct is not only exposed but that Victoria's public sector can take these findings and apply the learnings to their own organisations."
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