Major reform has been promised to fix a $2 billion out-of-home care system after a review found it fails to meet the needs of vulnerable children or show that taxpayer funds are being properly spent.
The analysis of NSW's outsourced foster-care system included an investigation into how funds were being used by non-government providers.
It found it was often not possible to work out if public funds were being used to meaningfully support vulnerable children and young people.
The report, presented to the state government in October and released on Monday, described NSW's out-of-home care system as not fit for purpose and "characterised by a profound lack of accountability and ineffective oversight".
The review also found poor data management and the failure to share crucial information about children in care created unnecessary administrative burdens and inconsistent delivery of services.
The $2 billion system, overseen by the Department of Communities and Justice, was described as "overly complex, fragmented and slow to respond in the best interests of children and young people".
"We could not follow the dollar on the actual delivery of services to children and young people," the authors said.
The review was led by former NSW Police assistant commissioner Gelina Talbot and a former senior departmental official.
They made 13 recommendations, including greater financial transparency between providers and foster carers as well as boosting accountability with more regular audits.
Carers should also expect more timely access to funding and support services.
Premier Chris Minns said the report was sobering to read.
"In out-of-home care, we're dealing with the most vulnerable people in our community, those that are in a desperate situation and need the very best care," he said.
Families and Communities Minister Kate Washington said the report laid out a roadmap to rebuild accountability and oversight in the system.
"It's shocking that some out-of-home care providers are failing to provide basic supports to children, despite being paid hundreds of thousands, and in some cases, millions, of taxpayer dollars to do so," she said.
The NSW government will review the report's findings and recommendations before formally responding within months.
It moved to ban so-called "alternative care" arrangements from February, putting an end to the use of unaccredited emergency accommodation such as hotels and motels to house children at a cost of up to $2 million per person each year.
Public Service Association general secretary Stewart Little said the child-protection system needed to be returned to state hands.
"Kids deserve to be in family-like environments, like with foster parents, not placed with for-profit entities which spend their whole time trying to wring as much cash as they can out of each child," he said.
Hundreds of child protection workers walked off the job in May calling for NSW to recruit an additional 500 staff to help fix the embattled sector.
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