A Tasmanian department received its first complaint about disgraced out-of-home care provider Safe Pathways in May 2016, but children were not removed from its care until the end of that year, an audit has revealed.

An Auditor-General's report shows the for-profit organisation Safe Pathways paid back almost $850,000 of Tasmanian Government funding it was supposed to spend on children in its care.

The audit into out-of-home care was prompted by the ABC's Four Corners "Broken Homes" program, which identified Safe Pathways as running its residential care on a limited budget with inadequate placement of children in appropriate care and deficiencies in recruitment, training and therapeutic care packages.

The Tasmanian Government removed 11 children from Safe Pathways' care in December 2016, and formally terminated the funding agreement in August 2017

A report from the Tasmanian Auditor-General, which examined 16 separate reviews into Safe Pathways, was tabled in Parliament on Tuesday.

It found the first complaint about Safe Pathways was received by the Department of Health and Human Services (DHHS) in May 2016, three months after the first Tasmanian child was placed with the provider.

It was from an employee alleging no or minimal staff training and the hiring of staff without doing referee checks or clearing "working with vulnerable children" checks.

The report found between August and November 2016, DHHS received "multiple other serious complaints involving six different children" with Safe Pathways.

It was not until October 2016 that DHHS wrote to Safe Pathways flagging the intention for a review.

After the review commenced, further complaints were made to the department but children were not removed from Safe Pathways' care until December, after the Four Corners program.

Government acted too slowly: Labor

Labor's Sarah Lovell said she was concerned to learn that the first complaint about Safe Pathways was made as early as May 2016.

"These were very concerning complaints about some of the most basic matters, about an organisation that was entrusted with caring for some of Tasmania's most vulnerable children," she said.

She said the Government should have acted sooner.

Sarah Lovell says the Government cannot be trusted to act quickly enough. ( By Rhiana Whitson )

"Their track record shows that they can't be trusted to handle these complaints and act quickly enough to protect Tasmania's most vulnerable children," she said.

The Minister for Human Services, Roger Jaensch, spoke in Parliament on Tuesday night to offer fresh reassurances that service providers were being held accountable.

He said he wanted to address specific concerns about service providers not passing on special care funding to vulnerable children in out-of-home care.

He said although there were limited options for children in Tasmania, he had ensured the language used in funding agreements between the Government and providers was bolstered to remove any doubt.

"I'm advised that since the review with the arrangements with Safe Pathways, actions have been implemented to ensure greater transparency about how costs are allocated by providers," Mr Jaensch said.

The Auditor-General quotes another internal review from DHHS from July 2017, which found Safe Pathways was non-compliant on several matters, including:

failing to obtain valid "working with vulnerable people checks for all staff

failing to obtain valid "working with vulnerable people checks for all staff poor staff recruitment and induction practices

poor staff recruitment and induction practices inadequate staff training and support

inadequate staff training and support case management and documentation matters

case management and documentation matters adequacy of complaints management processes

It found no children in the care of Safe Pathways were harmed, however concerns were raised that there was "limited evidence the six children received care that was aligned to their therapeutic plans".

That internal review also found DHHS could improve several of its practices, including monitoring of providers, complaints processes and governance of funding agreements.

The report contained nine recommendations, including the termination of the agreement with Safe Pathways.