Labor ministers and their advisers should have known a grants program to give money to some childcare workers was going to run out quickly, according to an audit.
The audit of the Early Years Quality Fund is damning of the education department, saying it didn't tell ministers of its concerns about the program and poorly managed grant applications.
Labor set up the $300 million fund to give childcare workers a pay rise.
But the fund only offered enough money to cover about a third of the workforce and grants were to be given out on a first-come-first-served basis.
It was exhausted 13 hours after applications opened.
The Abbott government shut down the fund when it won office and used the remaining money for professional development.
The audit report, released on Tuesday, found the idea for the fund was cooked up by advisers to then-prime minister Julia Gillard and her finance minister Penny Wong in consultation with the union United Voice.
Cabinet didn't approve the final program.
The audit says problems should have been foreseeable and preventable.
It found the education department had concerns, particularly about the first-in, first-served system, but didn't tell its minister because it thought the government had already decided to proceed.
When it came to taking grant applications, the audit found the department's use of email wasn't suitable and didn't keep applications in the order they were submitted.
One application was delayed by almost two hours between when it was sent and when it arrived in the inbox, dropping it 238 places in the queue.
Some resubmitted applications and were approved even though they arrived after the fund was exhausted.
Significant decisions during the grant assessments weren't fully considered and the audit couldn't find any records for more than half the applications.
The auditor recommended the education department stick to grant rules and guidelines and keep better records.
The department has promised to incorporate key lessons in any future programs.
Responsibility for programs around childcare moved from the education department to social services in December.
Labor's early childhood spokeswoman Kate Ellis responded to the audit report by saying there was a "crisis" in the child care workforce.
"Educators are fleeing the sector and it is increasingly difficult to attract the workforce we need to ensure quality child care," she told AAP.
"We will never apologise for supporting low pay workers."
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