Eva Ravikovich was one of four children in the Greater Toronto Area to die in an unlicensed daycare in a seven-month period, but she was "a bit like a canary in a coal mine," said ombudsman Andre Marin.
"Her death signalled significant problems beneath the surface," he said in a statement.
Marin cancelled a planned news conference to unveil his report following shootings on and near Parliament Hill in Ottawa.
There are some 823,000 children of school age in unlicensed daycares across the province, Marin said in a news release. But the government will only conduct an inspection if it has reason to believe the facility has too many children, which usually only happens if a complaint is made.
Each year the Ministry of Education gets hundreds of complaints about unlicensed daycares and finds more than 25 per cent are substantiated, he said. However, the system for receiving and responding to those complaints suffers from "entrenched organizational malaise," Marin said. He slammed the "passive" enforcement culture and inconsistent complaint tracking.
"As lax as the rules are for unlicensed daycares, they were barely being enforced by a bureaucracy that shied away from inspections and investigations and preferred to use soft tools of encouragement instead," Marin said in a statement.
Marin is not recommending that all daycares be licensed, but is urging the Ministry of Education to consider a centralized registry and tougher standards for the unlicensed sector.
Though the Ministry of Education is already acting on the bulk of Marin's 113 recommendations, he said it's "too little, too late."
"At a certain point, you have to ask, what could be more pressing, more urgent, than protecting children?" Marin said.
Unlicensed daycare operators can't care for more than five unrelated children under the age of 10, not counting their own kids. But Marin said 29 children and 14 dogs were allegedly found amid "unsanitary and dangerous conditions" at Eva's daycare.
The ministry failed to follow up on multiple complaints, including from children's aid society officials, about the home daycare in Vaughan, Ont., Marin said.
Two Education Ministry employees were suspended after it was discovered that a number of complaints about unlicensed daycares went unanswered in 2012.
The ministry's "ineptitude allowed this brazenly illegal daycare to operate unabated for many months," Marin said.
When Eva died the government was already working on updating the "antiquated" Day Nurseries Act, but it accelerated the reforms and has introduced a bill in the legislature.
The Child Care Modernization Act marks one of two crucial changes to the system, Marin said, the other being a dedicated enforcement unit for investigating complaints about unlicensed daycares — which is already in the works.
Education Minister Liz Sandals said the ministry has also created an online searchable registry where parents can verify if an unlicensed child care provider has previous violations.
"The well-being of our children is of utmost importance and I want to assure the people of Ontario that our government will do everything in our power to keep our children safe," she said in a statement.
"Ensuring families have access to safe, modern child care is part of the Ontario government's plan to invest in people and give children the best possible start."
The ombudsman's team also found "alarming loopholes" that have allowed illegal daycares to operate "under the guise of private schools and so-called summer 'camps,'" he said.
New Democrat children and youth services critic Monique Taylor had called on Marin to launch the investigation.
"Today's scathing report is deeply disturbing for parents like me," she said in a statement.
"It reveals that this Liberal government has systematically failed to do its job to protect kids in unlicensed child care. This isn't just about an old law that doesn't work; it's about a government that has put kids at risk through 'years of bad administration and neglect,' in the words of the ombudsman."