OzChild, Victoria's longest-serving not-for-profit welfare agency, yesterday confirmed it was "in discussions" with Community Connections Victoria (CCV).

OzChild chief executive officer Tony Pitman said his organisation was trying to determine the best way forward.

"The outcome is contingent on various state and federal funding bodies, partner agencies and our own due diligence," Mr Pitman said in a statement.

"The highest priority should be given to protecting children and families, staff and carers and community resources."

Details of the proposed merger were revealed last Friday. It is understood that CCV informed the Department of Human Services (DHS) that it would cease to exist as a legal entity and would be exercising the wind-up clause in its constitution in favour of OzChild.

DHS withdrew more than $4 million in funding for residential and foster care programs run by CCV after an investigation last year revealed concerns about the ways the programs were being managed. It has continued to fund other programs including integrated family services and disability and housing programs, but these will be open to tender from July 1.

The Department of Justice also axed funding to CCV for its financial counselling and gambler's help programs after a review found "serious concerns and evidence of non-compliance".

CCV's chief executive officer Bruce du Vergier said the proposed OzChild merger had been in the planning stages for two years but discussions had "hastened" because of "recent defunding decisions".

Neither agency has provided any information about the proposed new management structure, whether existing jobs are guaranteed or whether OzChild would assume responsibility for former staff entitlements.

Another funding body, Victoria Legal Aid (VLA), said it was only told about the proposed merger last Friday. Its civil justice access and equity director, Kristen Hilton, said VLA had not received any details about the possible merger or how it would affect the operations of the South West Victoria Legal Centre, which it operates under a service agreement with CCV.

"VLA is aware that there have been a number of issues with Community Connections over the last 12 months," Ms Hilton said.

"We are currently reviewing whether they are still able to meet their obligations under their service agreement.

"We have a responsibility to ensure that funding provided for legal assistance services is managed effectively and efficiently for the benefit of marginalised and vulnerable people who need legal help."

She said local residents unable to access legal assistance through South West Community Legal Centre can call VLA's free legal help line on 1800 677 402.

The federal Department of Families, Housing, Community Services and Indigenous Affairs, which also provides funding to Community Connections, did not respond to inquiries from The Standard yesterday.