Ombudsman Deborah Glass says there is not enough evidence to warrant further investigation of the scandal, which found Labor misused $388,000 of taxpayer funds to pay casual electoral staff to campaign in marginal seats during the 2014 election.
"It is time to end this debate," she wrote in a report tabled in state parliament on Thursday.
"I cannot, of course, rule out that further evidence may yet come to light, but with the passage of time and difficulty in proof I am not prepared to spend further public resources on these matters."
No criminal charges were laid after her first report in 2018, despite 21 past and present Labor MPs being found to have breached parliamentary guidelines, although the party repaid the money.
Nonetheless, the integrity agency reopened its investigation into the scandal after a motion, brought on by former Labor powerbroker Adem Somyurek, was passed by the upper house in February.
The motion specifically asked the state's watchdogs to probe any role Premier Daniel Andrews may have played in the scheme.
Ms Glass last week described the Andrews government's response to her 2018 investigation as "tepid" when handing down another report into branch-stacking within the party's moderate faction, previously led by Mr Somyurek.
The joint inquiry with the Independent Broad-based Anti-corruption Commission renewed scrutiny of the red shirts scheme's architect John Lenders, leading him to resign from Labor's campaign committee ahead of this November's state election.
The former Victorian treasurer was identified as having the "greatest share of culpability" for the scheme in Ms Glass' 2018 report, but was not the subject of the joint Operation Watts probe.
In a transcript of an interview for Operation Watts with IBAC Commissioner Robert Redlich, Mr Andrews said he probably understood "the essence" of Mr Lenders' scheme.
"I had no concerns at that time given, you know, I wasn't acting to stop him doing it," the premier said.
