Vulnerable children living in residential care units will be moved into foster care under a $43 million plan from the Andrews government.

The sector is struggling with a shortage of foster carers and hopes the new investment will allow existing carers to expand their work as well as encourage others to become involved.

Struggling: Foster carers Keeryn and Stephen Longmuir are delighted at news of a funding injection from the state government. Credit:Jason South

There is a major shortage of home-based care in Victoria which has seen hundreds of children placed in residential care units. At June 30 last year, more than 500 children were staying in these units.

There have been reports of serious physical and sexual abuse and exploitation in residential care units. The state's commissioner for Children and Young People, Bernie Geary, is investigating sexual exploitation and abuse in residential care units. His report is due in the next few weeks.