Children in the Northern Territory are four times more likely than the rest of the nation to have contact with the child protection system, a Productivity Commission report has found.
The number remained extremely high despite well above half a billion dollars being spent per year by the Commonwealth and NT Government, the draft report on Expenditure on Children in the NT released on Thursday said.
About 27 per cent of children lived in areas with high levels of socio-economic disadvantage, far higher than the national average.
About 42 per cent of the 63,000 children living in the NT are Aboriginal.
The risk of harm was exacerbated by higher poverty, unemployment, overcrowding, mental health issues, substance abuse and family violence.
In 2018/19, governments collectively spent about $538 million, through nine funding agencies and more than 700 grants to over 500 service providers.
But significant taxpayer funds were wasted because the Commonwealth and NT made funding decisions in relative isolation which lead to "fragmentation, inefficiencies in service delivery, and significant overlap in expenditure effort", the report found.
One example was the North Australian Aboriginal Justice Agency receiving funding in 2018/19 from 11 different grants totalling $6.5 million from the Department of Prime Minister and Cabinet - all for the provision of legal services in the NT.
There was some goodwill and good practice but a fundamental change in approach was needed to better coordinate funding decisions between the two governments, Productivity Commission Chair Michael Brennan said.
"Governments are operating in isolation. We saw too many examples where one agency didn't know what others were doing," he said.
"The system is so fragmented that governments can't know where all relevant services are being delivered and whether they're having an impact on the lives of children and families.
"There are overlaps, gaps and duplication in services."
There should be external oversight of the reforms by NT Children's Commissioner Colleen Gwynne, it said.
The report recommended local communities work with regional government staff to decide what they needed with "fewer decisions made in Canberra and Darwin".
"Grants are too short and too uncertain. Longer contracts and more certain funding is needed to deliver children and family services in the Northern Territory," Mr Brennan said.
The study originated from the Royal Commission into the Protection and Detention of Children in the Northern Territory, which followed the airing in 2016 on ABC's Four Corners of violence by guards against youths at the Don Dale Detention Centre.