The department made duplicate payments of some contracted-out rebates between the tax years of 1997-98 and 2000-01. It has since recovered the money which totalled about £62m.
The department confirmed that the problem of identifying duplicate payments has been resolved. A spokeswoman said, "We have put in further enhancements to the IT system and also clerical checks to ensure that it does not happen."
Officials said that a lack of clerical checks at the department played a major part in the overpayments problem. "The majority of earnings information came in the form of paper - we didn't put in place the correct paper-based checks," a spokesman said. He confirmed, however, that the Nirs2 system originally had insufficient checks built into it to identify duplicate earnings information mistakenly provided by some employers.
"We had not told it to make the right amount of checks," the spokesperson said.