Parents worried about staff or incidents at childcare facilities are being urged to go straight to police rather than centre directors because of the financial incentive to cover up wrongdoing.
A NSW parliamentary inquiry into child care is examining the industry.
The call for parents to be more proactive in reporting comes as allegations of sexual offences in the childcare sector have increased by almost 50 per cent.
NSW Police Child Abuse Squad Commander Linda Howlett said her advice to parents and others would be to not approach childcare directors because they don't want to lose business.
"They're tipping off the educator or the centre about what's taken place," Ms Howlett said.
The inquiry was also told checks designed to protect children from abusive childcare workers were being ignored by centres when hiring.
The revelations of major breakdowns in the safety of almost 500,000 infants, toddlers and pre-schoolers were exposed as working with children's checks were put under the microscope.
Banned workers were allowed to continue working for years without oversight, the inquiry was told.
Inquiry chair Abigail Boyd said internal government documents showed dozens of workers were banned each year but few children's checks were cancelled.
In one case, an educator banned in 2019 was approved for a new check in 2021 and continued working until 2023 before being stopped.
Nearly half of the banned staff reported to the Office of the Children's Guardian over three years did not even have a check to cancel, Ms Boyd said.
Acting Children's Guardian Rachael Ward said the childcare regulator was not required to report which staff it had banned, to allow for checks to be cancelled.
"They haven't broken any law by not sharing that information," she said.
Ms Ward, in the role for five months, was unaware her office had only cancelled 21 checks of the 235 prohibited workers reported between 2021 and 2024.
There was a "growing safety crisis" in NSW, where 460,000 children attended a care service, said non-profit Body Safety Australia, which educates children on protective behaviours.
The proliferation of labour hire agencies and casual workers had allowed unchecked people access to vulnerable children, chief executive Deanne Carson said.
"We have educators who work for agencies who may never even meet anyone," Ms Carson said.
"They upload their qualification and all of a sudden they're being placed in spaces where they've never worked."
Body Safety Australia listed several gaps offenders had taken advantage of, including workforce instability, inadequate training and qualifications, inconsistent oversight and confusing reporting frameworks.
Acting Early Learning Minister Courtney Houssos said on Wednesday providers that consistently fell foul of quality guidelines would have funding cut under government reforms being considered.
Some of the sweeping changes include installing security cameras in centres, publicising safety issues and imposing bigger fines on dodgy operators.
An independent review by former NSW deputy ombudsman Chris Wheeler in June found the childcare regulator's performance was hampered by national laws and frameworks.
It was also not "sufficiently transparent" about its investigations, and was less open about its compliance work than counterparts in Queensland and Victoria.
NSW's childcare regulator sits inside the education department.
The inquiry comes amid nationwide scrutiny on the regulation and safety of childcare after shocking reports of children allegedly being sexually abused, left restrained in high chairs for hours and receiving substandard meals.
G8 Education, the operator of a centre where educator Joshua Dale Brown allegedly abused children, said in a submission its staff were struggling emotionally while working through the fallout of the abuse revelations.
Brown is accused of abusing eight children aged under two at a centre in Melbourne between April 2022 and January 2023.
Lifeline 13 11 14
Kids Helpline 1800 55 1800 (for people aged 5 to 25)
1800 RESPECT (1800 737 732)
National Sexual Abuse and Redress Support Service 1800 211 028