Questions have been raised about whether a shake-up of the NSW foster care system does enough to help vulnerable children.
Family and Community Services Minister Brad Hazard has flagged plans to introduce stricter standards for people caring for children in group homes.
The government will also pour $8.5 million in new funding towards therapeutic care for children entering foster care.
Thursday's move follows recent revelations of failures within the residential care system, including the high-profile case of a 15-year-old girl who was allegedly repeatedly raped at a UnitingCare-run facility in Sydney.
A coronial inquest into Girl X's death heard she had been used, abused and lured into the world of drugs, and probably prostitution, by some of the adults who were meant to care for her.
The government should be applauded for recognising that foster care children need specialist care, Bravehearts founder Hetty Johnston says.
But Mr Hazzard's plan to reduce the number of children in residential care from 670 to zero is not realistic, she said.
"There will always be vulnerable children that need to be put in homes and it's great that adults will be trained to deal with them, but there needs to be extra avenues in place for children to report potential abuse in a safe way," she told AAP on Thursday.
"There also needs to be other training offerings for those overseeing the system, so they are able to flag when a child may be in an at-risk situation," she said.
Labor's spokeswoman for Family and Community Services, Tania Mihailuk, has criticised the government for not allocating "a single cent towards providing tougher oversight measures or sanctions" for foster centres.
"This is not reform, this is just a measly amount of money being thrown at a broken system," she said on Thursday.
"Tougher contractual requirements need to be introduced for centres which breach their obligations of care to children," she told AAP.
Ms Mihailuk said it was "shocking" residential care workers weren't already being trained in trauma or therapeutic care.
The government's measures include stricter rules governing the hiring of carers such as probity checks.
Mr Hazzard has also written to the chief executives of non-government residential care providers, warning them they will be shut down if they don't comply.
"Despite the dedication and good intent of most in the sector, still there are failures when it comes to protecting our most vulnerable," the letter said.
"This is not acceptable".
The new system draws heavily on reforms in New York and Illinois on the benefits of therapeutic care, which in one case saw the number of children in residential care fall from 370 to zero.
"There are good arguments to say that models that don't include residential care are likely to give kids a better chance at life" Mr Hazzard said.
The new services will be put out to tender, with a focus on evidence-based, therapeutic care.
