A $20 MILLION state government fund for out-of-school-hours care is available to primary schools.
But a local 'OOSH' provider says the grants would be better spent supporting existing care programs.
School principals can apply for grants of up to $20,000 from the 'Before and After School Care Fund'.
Moss Vale Out of School Hours care program owner Rozz Sparks said the money would set up a service.
But sustaining the costs of out of school hours care had to be drawn from user-pays fees, Ms Sparks said.
In an area as geographically dispersed as the Southern Highlands, small programs struggled, she said.
"I've spoken to small schools and they just don't have the numbers to make programs viable," she said.
"These communities are safe in people's minds, so they let their children go home with other children.
"And when you tell parents there are fees, they say, 'We'll send them home to grandma's'," she said.
Ms Sparks' Moss Vale program includes a courtesy bus to bring children in from Exeter and Bundanoon.
Other Southern Highlands schools access the program using Berrima Buslines' services, Ms Sparks said.
Network of Community Activities is the peak body for 1200 out-of-school-hours care programs in NSW.
Chief executive Robyn Monro-Miller said the funding had been intended to expand OOSH care services.
"This money was a result of huge waiting lists from schools unable to accommodate the numbers," she said.
Ms Monro-Miller said new programs drawing children away from existing ones would "undermine the whole process".
"If OOSH is established in a school, it might detract from where the children are in other programs," she said.
Most out-of-school-hours care programs were delivered through neighbourhood centres, Ms Monro-Miller said.
But non-school based facilities were not entitled to apply for the Before and After School Care Fund grants.
"This $20 million is the greatest investment in OOSH we've ever had, but also the greatest waste of money because of the lack of collaboration with us as the peak body to talk about planning needs for OOSH in NSW," she said.
"It's so frustrating because the money is welcome, but the lack of consultation is just so wasteful."