The program has been caught up in months of bickering between the state and federal governments over who should provide funding.

The state government released an independent report on Friday recommending the program be dissolved and its funding diverted.

The KPMG report found that the program's "social benefit exceeds social cost".

But it also cited problems with the program including trouble meeting its aim of short-term care at late notice.

The report suggests funding instead be shifted to the underused Adult Community and Further Education (ACFE) subsidy, assisting parents with child care while undertaking education and training.

Children and Early Childhood Development Minister Wendy Lovell said the program was being inappropriately used to address gaps in general childcare services.

Jamila Rizvi, a spokeswoman for federal Early Childhood and Childcare Minister Kate Ellis, said the Baillieu government should stop misleading families and follow the lead of other states in committing funding for this type of child care.

"The federal government also funds an unlimited number of childcare places in Victoria in long day care, family day care and outside school-hours care so existing childcare services can expand and new services can be created," Ms Rizvi said.

Opposition Children and Young Adults spokeswoman Jenny Mikakos said the report offered a flimsy excuse to refuse funding.

Ms Mikakos said the KPMG report also outlined strengths, including a safe and welcoming environment, health benefits and reduced social isolation. "For Ms Lovell to now rubbish this program when she has spent the past nine months calling on the Commonwealth to fund it smacks of hypocrisy."