The Health, Social Security and Housing Scrutiny Panel held- a six month-long review of Child and Adolescent Mental Health Services (CAMHS).
It said the service was failing to fully support patients and families and referral waiting times had increased.
The Health Department said it was considering the report.
The panel said it was calling for a service that was appropriate for the needs of the island and individuals after its investigations received more than 50 submissions from service users.
Source: Health Scrutiny Panel report
The report said parents "did not believe their child was on a pathway to get well".
The panel said the complexities of mental health meant it could not be viewed as a nine-to-five illness, which is currently when CAMHS operates on weekdays.
It said that, outside working hours - including 10:00 to 12:00 at weekends - parents had had to call police or the island's hospital emergency department for help.
Some children had been in cells or children's hospital wards because there was nowhere else for them to go.
The panel heard that, at times, patients prone to violent outbursts at home left parents with no choice but to call police.
Investigators were "alarmed" to discover that, on occasion, police cells had been used to hold them "due to a lack of adequate facilities".
The Health and Social Services Department said it would respond fully to the report after it had had a chance to discuss it.
The health minister was due to publish an official response within six weeks, the panel said.
Young mental health patients have been kept in police cells because of a lack of adequate facilities in Jersey, a report says.