A woman working for Child, Youth and Family (CYF) started a sexual relationship with a boy in the teen unit where she worked.
The Herald on Sunday can reveal the woman, who worked at Te Maioha o Parekarangi in Rotorua, was moved to another unit after the relationship was uncovered. She has since left.
Authorities called in police but because the boy was 17 at the time, no laws were broken.
A police spokeswoman confirmed officers had investigated: "No criminal offence was identified and there is no further police action," she said. It is unclear whether the woman was stood down after CYF's investigation.
Nova Salomen, general manager residential and high needs services for CYF, said the inappropriate relationship came to light last year.
"The Ministry does not discuss individual HR issues but we can confirm the staff member is no longer employed at the residence."
Salomen said CYF could not go into detail about the incident because it needed to protect the privacy of the boy.
Youth justice facilities are under investigation as part of a wider review into CYF, expected to be completed by December.
Labour's Corrections spokesman Kelvin Davis said although no laws were broken, the sexual relationship between an authority figure and a vulnerable child was a form of abuse.
"It raises questions around what type of screening goes on before they're employed and what supervision they have," he said. "It's another case of abuse by somebody in power who took advantage of a vulnerable young person."
Te Maioha o Parekarangi provides 24-hour secure care for up to 30 high-risk children aged 12-17. The children are either remanded or sentenced by the Youth Court because they pose a danger.
Associate Social Development Minister Jo Goodhew said Ministers were unable to get involved in employment issues.
"We have a duty of care to the young people in our custody and government has strengthened vetting procedures for those working with children and young people," she said.
"While Ministers can't get involved in employment issues, in this case CYF took the appropriate action by investigating and referring the matter to police."
*A previous version of this story stated Goodhew was unable to comment. We regret the error.