The Public Interest Advocacy Centre (PIAC) says vulnerable children are being left in juvenile detention centres because the New South Wales Department of Community Services (DOCS) is unable to provide care for them.
The PIAC submission to the Wood Inquiry into Child Protection Services says children who have not been found guilty of crimes are remaining in custody.
PIAC chief executive Robin Banks says it is happening even when the court has directed the DOCS to care for the child.
"It's our view that there's a serious failure by DOCS to provide the necessary support to a number of young people, which means that they end up remaining in juvenile justice, in detention," she said.
"It seems to be particularly young people with quite high support needs and that's a very serious concern."
The inquiry has received over 300 submissions, and will continue its series of regional public forums in the north coast town of Ballina next week.
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