· In short: The New South Wales auditor-general has reported that the state's child protection system is "inefficient, ineffective, and unsustainable".

· A separate report found the Department of Communities and Justice was not complying with laws to protect First Nations children.

· What's next: The report called for the department to urgently assess the safety of children in out of home care and report it publicly.

The New South Wales auditor-general has criticised the Department of Communities and Justice (DCJ) in damning report on the state's child protection system.

The report found the system to be "inefficient, ineffective, and unsustainable", and that the DCJ had ignored numerous reviews calling for improvement.

Out of the 112,000 children deemed to be at risk of significant harm by the DCJ last financial year, three quarters received no home-based safety assessment.

"Their cases were closed without any follow up services from DCJ, and DCJ does not know the outcomes for these children," the report said.

It also found the emergency care system was "unsustainable" costing $829,000 per child, per year for those accommodated in hotels, motels and apartments.

The cost of emergency accommodation tripled from $100 million to $300 million over four years.

It also found the DCJ failed to collect sufficient data to monitor at risk children, and the effectiveness of any programs they may be referred to.

"Many children experience trauma, before, during, and after being removed from their families of origin," the report said.

"DCJ has failed in its duty of care by not assessing these children, and by not understanding how the agency's actions and decisions are affecting them over time."

In its recommendations, it called on the DCJ to urgently assess the physical and psychological safety of children in out of home care, and report that information publicly.

It also called for the department to end the use of hotels in emergency care.

Department not complying with First Nations child protection laws

A separate report was also released looking specifically at First Nations children, who represent 45 per cent of children in out of home care, despite only constituting seven percent of the population.

It found the DCJ was not complying with legislated principles for the protection of First Nations children.

"DCJ has not embedded the principles in its governance and accountability arrangements or operationalised them into its policies and processes," the report found.

It also pointed to reviews which found existing decision making structures left Indigenous families vulnerable to case worker bias, and the state government failed to deliver on a review of that issue.

"DCJ has not effectively addressed the therapeutic and healing needs of Aboriginal families," the report said.

It gave the department a year to review and implement improvements to the treatment of Aboriginal and Torres Strait Islander children.

DCJ to adopt recommendations

In a statement, Minister for Families and Communities Kate Washington said the DCJ would adopt, in principle, the recommendations of both reports. 

"For the sake of vulnerable children in families right across NSW, we are determined to fix the broken child protection system that we inherited," Ms Washington said. 

"The recommendations of these reports create a critical roadmap for reform, strengthening our drive for positive change."

The union representing social workers said the failings were due to understaffing and privatisation. 

"Most people would be shocked to learn only one in four kids reported as at risk of serious harm to child protection services by police, nurses or teachers is actually seen because there simply aren’t enough child protection caseworkers," Public Sector Association secretary Stewart Little said.

Mr Little said half of all social workers leave the sector within two years.

"It's absolutely nuts. Child protection caseworkers no longer monitor the wellbeing of children in out of home care meaning they don't have the information they need to meet their legislative responsibility to ensure kids are receiving proper care and support."