The affair stems from allegations that an employee of the branch office of the German migration agency (BAMF) in the city of Bremen may have granted asylum to 1,200 migrants in exchange for money or gifts in kind.
Investigators opened a probe in April into "organised abuse of the asylum procedure" as well as for "corruption or bribery" and Merkel's government has pledged a thorough inquiry.
The employee insists she was simply overwhelmed by the large number of cases landing on her desk with Germany having received than a million asylum seekers since 2015.
However, the former head of BAMF, Frank-Juergen Weise, added fuel to the political fire when he accused Merkel of knowing about wider problems at the agency since at least last year and neglecting to deal with them.
"The failure lies in the inaction (of the government) when the challenges that Germany would face with the arrival of the refugees became clear," Weise told news weekly Der Spiegel.
"The crisis could have been prevented," added Weise, who said he personally informed Merkel on two occasions of irregularities in 2017 without concrete action being taken.
Asked for comment, a government spokesman said only that "the chancellor remained in contact with Mr Weise from the time he became head of the BAMF until the end of his tenure".
Weise led the BAMF from late 2015 until the end of 2016 and in late 2017 published a final report about his term at the agency.
Doubts about Germany's ability to grapple with the arrival of around 1.2 million asylum seekers over the last three years have eroded political support for Merkel, who is now in her fourth term as German chancellor.
The work of the BAMF, which answers to the interior ministry, has come in for particularly intense criticism for chaotic handling of the asylum process.
The mass influx in 2015-2016 put the service under intense pressure, forcing it to more than double its staff to 7,300 from 3,000.
Merkel's junior partner in her "grand coalition" government, the Social Democrats (SPD), on Sunday demanded "explanations" from her.
"This is quite simply the chancellor's failure," SPD vice chairman Ralf Stegner told Berlin's daily Tagesspiegel.
"You can't say 'we can do it' (Merkel's slogan during the refugee influx) and then sit with your arms crossed when the agency responsible loses control due to a lack of resources," he added.
READ MORE: Cash for refugee status - the scandal rocking the German asylum system
Comments