Officials in Tasmania are now trying to determine if the man, Gary John Devine, fathered the child of the girl's 15-year-old sister, the Australian Broadcasting Corp. reported.
Devine and the girls' mother have both been sentenced to 10 years in prison. Police say the 12-year-old girl's sexual services were sold to more than 100 men.
The older sister gave birth two months ago. Police said Devine could face additional charges if DNA tests determine he is the father.
The report by the Children's Commission said the younger sister was living with her mother and that one social worker actually recommended an order of protection not be renewed.
Children's Minister Lin Thorp said police, child welfare workers and school employees knew there were family problems and failed to act to protect her.
"What happened to this little girl is appalling," Thorp said. "For the life of me I cannot comprehend how she could have been so sorely betrayed by her mother."