It says CYF should "partner more effectively and extensively" with iwi and other non-state agencies to provide early support for needy families, with statutory intervention only for the most vulnerable children with needs their families can't meet.
Once a child is taken into care, it recommends making all relevant state agencies responsible for meeting the child's needs, including schools, housing providers and the health system as well as CYF.
The report says children in care are moved an average of seven or eight times, and recommends placing them in a permanent foster family "far more quickly".
It is scathing about CYF's nine youth residences, calling them "cold, sterile facilities" which often cause more harm than good. It proposes community-based alternatives "such as specialist one-to-one caregivers with intensive wrap-around services".
Social Development Minister Anne Tolley has acknowledged in a Cabinet paper, also released yesterday, that the recommendations "will require some significant additional investment and reprioritisation".
The paper said CYF was forecasting deficits of $11 million in this financial year and up to $38 million next year. Ms Rebstock's final report in December will provide costings for the new initiatives.
Trouble for kids 'raised in poverty'
Eighteen per cent of Kiwi children now aged 8 to 10 had concerns about them reported to Child, Youth and Family in their first five years, the Rebstock report shows.
Otago University associate professor Nicola Atwool said the figures reflected high numbers of children "raised in poverty".
"It's not that poverty is the sole explanation, but poverty is a significant stressor," she said. "It means that you increase the risk of things like family violence and substance abuse."
Thirty-seven per cent of the children reported to CYF before age 5 had a parent who had a criminal conviction in the five years before the child's birth, compared with 7 per cent of other children. As well, 88 per cent of all children reported to CYF before age 5 had at least one parent who had been on a benefit, compared with 30 per cent of other children.
The report shows that Maori children made up 57 per cent of children reported to the agency in their first five years, compared with only 29 per cent of children born in the three years 2005 to 2007 overall.
More than one in every three (35 per cent) of Maori children born in those years were reported to CYF before reaching school age, compared with one in nine (11 per cent) of non-Maori children.
Professor Atwool said there was a generational link. More than a quarter (26 per cent) of Maori children born in those three years, compared with only 6 per cent of non-Maori children, had at least one parent who was a CYF client in their own childhood.