A former minister wanted to split the department responsible for overseeing the robodebt scheme into four agencies despite concerns about the impact on services, the former secretary in charge says.
A royal commission is examining how robodebt operated for several years despite it being unlawful.
Hundreds of thousands of Australians were incorrectly sent debt notices under the robodebt scheme, which operated between 2015 and 2020 and unlawfully recovered more than $750 million.
Former human services department secretary Renee Leon appeared before the commission on Tuesday.
She became secretary in October 2017, two years into the scheme, and her employment was terminated in December 2019.
Professor Leon described the strained relationship between herself and then-minister Stuart Robert when she advised against his plan to split the department, an idea modelled on the Service NSW platform.
Mr Robert wanted to divide the department into different agencies that would oversee information technology, service delivery, compliance and design, Prof Leon said.
The idea was supported by former secretary Kathryn Campbell, but Prof Leon disagreed with it due to the impact on services and because it would have resulted in a dismembered department.
"The Department of Human Services is quite a different beast to Service NSW and we couldn't have progressed the plan the minister was proposing without a very considerable impact on service delivery," she said.
"The minister had to be advised not only by me but by others in the public service that it wasn't possible to dismiss everyone in human services and still keep service delivery running."
Prof Leon said she was put in the "unfortunate" position of providing a minister with advice they would not want to hear.
"I was 'the bad cop' advising against the policy whereas Ms Campbell was encouraging and promoting the idea of the minister," she said.
Wider cultural problems within the department were brought to Prof Leon's attention when she became secretary, including aggression and public shaming.
"When people at the senior levels get exposed to that kind of behaviour ... we end up with a situation where people are afraid to raise risks or say something negative because they might get humiliated or yelled at," she said.
"It certainly was put to me that contractors were much less likely to raise concerns because if they were in any way seen as difficult then they could just not be given more shifts."
