Residential care providers in a state child safety system are using profits to buy gold, cryptocurrency, luxury cars and pay out salaries of more than $600,000, an inquiry has been told.
The probe into Queensland's child safety system - the third of its kind since 2003 - is looking to overhaul what the Crisafulli government has described as a regime marked by neglect and disarray.
Counsel assisting Tom Diaz told the inquiry on Tuesday that for-profit players dominated the sector, which was confronting a "financial catastrophe" as costs exceeded $1.1 billion per year.
Some bosses were being paid above market rate, with executive salaries often more than $400,000 and in some cases above $600,000, Mr Diaz said in his opening address.
"Some for-profit providers are using profits they generate from their services to acquire non-core assets such as investments in gold, cryptocurrency, or purchasing expensive vehicle fleets that include Mercedes Benz cars," he said.
The purchases and large pay packets meant the funds were not being reinvested in services for the children in their care.
"Financial transparency is lacking across the board, with the department slow to detect that providers are declaring large dividends of up to $5 million," the commission's lawyer added.
The inquiry was told 2388 children in Queensland remained in residential care, which is reserved for those unsuitable for home-based care.
By comparison, 2767 children were in residential care across the rest of Australia, making the Sunshine State an "outlier and alarmingly so".
The cost of residential care has surged to $500,000 per child annually, with $500 million in state funds funnelled to 125 unlicensed providers in the 2024/25 financial year.
Some 750 children were being cared for by such providers, with limited oversight by government officials, and there were just 38 licensed providers statewide.
"Of those unlicensed providers at least 20 received more than $5 million per year in funding and one unlicensed provider received more than $30 million in funding," Mr Diaz said.
"The numbers are important because they contextualise the extraordinary growth in and reliance upon the now $1 billion residential care sector.
"And though there are many figures that highlight the financial catastrophe that residential care has become, the problem extends beyond the numbers."
Several senior government officials are due to give evidence at the inquiry this week.
Commissioner Paul Anastassiou has flagged the two-week hearing block will focus on spiralling costs and greater use of unlicensed providers threatening the system's viability.
In February, hearings in Toowoomba focused on the link between out-of-home care and the youth justice system, with harrowing claims of emotional and physical abuse in state care.
The state family and child agency previously warned too many children were in residential care, with official targets missed on reducing numbers and lifting standards.
The inquiry is due to make recommendations to the state Liberal-National government by May.
