The head of the Department of Communities, which oversees the centre, accepted it was a "system failure" information from the scheme wasn't used to protect children.
The Ashley worker, known as "Walter", was the subject of four abuse claims, and payouts to victims in 2008 and 2010, under the scheme.
The claims were made about alleged abuse at Ashley, which opened in 2000, and at a boys home which operated prior to Ashley on the same site.
Despite the claims, Walter, who was also the subject of six stand downs due to separate allegations he physically and sexually abused Ashley detainees, kept working at the centre until 2017.
Department of Communities secretary Michael Pervan agreed the four claims about Walter remained "utterly unknown" to his managers at Ashley.
"Most likely there wasn't anything done with that information other than to pay out the person who alleged the abuse?," counsel assisting the inquiry, Rachel Ellyard, asked.
"Yes," Mr Pervan replied.
Mr Pervan said the department considered it was unable to use claims from the scheme for disciplinary proceedings without the consent of victims.
"No one invited you to, and you didn't yourself reflect (on) reaching out to ... 172 claimants from Ashley boys home to see if any of them wanted to be part of a disciplinary process?," Ms Ellyard asked.
"No. The assumption was we could not. I should have questioned that," Mr Pervan replied.
Mr Pervan, who signed off on a report about the scheme in 2014, said the department began to analyse information from the claims in 2020.
The scheme, which ran from 2003-13, paid some $54 million to 1800 survivors.
Walter's employment at Ashley came to an end "by agreement" and he received a lump sum from claims he had made, the inquiry was told.
A commission of inquiry into child sexual abuse in Tasmania has for seven days heard harrowing evidence from former detainees about being raped, bashed and sexually assaulted by Ashley staff.
Ms Ellyard said abuse allegations were as recent as a year ago.
"(The commission) may also consider a finding that the state was aware of these allegations of abuse a number of years ago and did not ... take sufficient action," she said during closing submissions.
"It can now be seen that a number of those employees continued to work at Ashley with access to children and important records that might have helped keep children safe were ... not made available.
"Nothing we have said and heard this week will have been new to the government."
The national children's commissioner is among those calling for the centre to be closed immediately.
The state government has remained unmoved from a pledge made last September to shut the centre by 2024 and replace it with two smaller facilities.
Mr Pervan described the date as ambitious, indicating new facilities may not be ready in time.
He said Ashley had previously outlasted attempts at reform.
"Amongst a few of the staff there has been that attitude of 'if we just ... wait, there'll be a new director, a new centre manager'. I've seen emails to that effect," he said.
He apologised to survivors, acknowledging their pain will be lifelong.
Mr Pervan said he forwarded a report to government in 2016 that recommended closing the centre.
The government released the report publicly in 2018 and committed to an upgrade of Ashley.
