A scathing report by Auditor-General Des Pearson tabled in state parliament said the Department of Education did not analyse or fully understand the role of the Victorian Certificate of Applied Learning (VCAL) and its impact on the state's education system.

"DEECD has failed to provide comprehensive, evidence-based advice to decision makers on this critical issue," he said.

"Despite not being able to anticipate or advise what impact changes would have, it recommended major changes to VCAL coordinator funding."

Mr Pearson said the department ignored significant commissioned work and did not model the impact of VCAL funding changes.

Key stakeholders, including schools, were not consulted about the impact of the changes.

The report said the popular program, which offers an alternative for year 12 students who want to complete an apprenticeship or work, was important for students at risk of disengaging.

The decision to cut funding for VCAL coordinators in schools will save the state government $12.3 million a year.

About 430 schools and TAFEs were previously eligible for up to $125,000 a year to co-ordinate the VCAL program.

The report also said the Department of Education had not significantly improved student completion rates over the past decade.

It said Victoria was unlikely to meet its completion targets for 20 to 24-year-old students, placing the National Partnership on Youth Attainment and transition funding at risk.

"Further, these strategies have never substantially improved completion rates for students from non-metropolitan and low socio-economic areas, who have lower completion rates than the Victorian average."

He said the Department of Education failed to collect data that could be used to assess the outcomes of its practices.

In 2010, 88.1 per cent of students completed Year 12 or equivalent.