THE state's biggest foster care agency is being investigated by the NSW Ombudsman's office over concerns it failed to properly check the backgrounds of its carers.

The NSW Children's Guardian has made an early start to its five-yearly review of the agency because of concerns about the quality of service after a restructure.

Life Without Barriers, which is responsible for more than 1000 children and receives about $140 million a year in state contracts, mostly for foster care, has had phenomenal growth in the past decade to become a national provider of social services.

But critics believe the growth in foster care is due to a recruitment model that is good for business expansion but not necessarily good for children, an allegation strongly rejected by LWB, a non-profit agency.

''The threshold of quality for carers is very different from other agencies','' a former manager said. ''You can't remove kids [from their families] and put them in a situation that is no better.''

In one case a foster carer's new partner is being assessed as a carer even though he has had his own four children removed from his care by Community Services, and has acted violently, documents show. LWB has asked the man to go to anger management classes and drug and alcohol counselling.

The deputy ombudsman, Steve Kinmond, in response to questions, said his office was looking ''in some detail'' at whether LWB had undertaken probity checks on all its NSW carers before it placed children with them.

Internal documents seen by the Herald reveal that in October, 14 per cent of the 573 foster carers in the Sydney area did not have the legally mandated Working With Children Check, which includes a check of relevant criminal records. As well, 63 per cent did not have the more extensive Criminal Record Check, as required by LWB policy. The agency went into overdrive to try to correct the situation.

LWB outsources much recruitment of foster carers in NSW to about 30 contractors with no special qualifications. The contractors are paid $350 to assess potential carers. For providing 24-hour support, they are paid a continuing fee of between $150 and $200 a week per child placed with carers.

The system provides a financial incentive for contractors to support their carers. But it also provides an incentive to minimise problems.

''There's a financial incentive to keep the child with the carer even if the carer is not up to the plate,'' a former manager said.

The contractors, known by the term Supporter of Carers, or SOC, can earn up to $300,000 a year, according to invoices, and some SOCs use subcontractors.

A spokeswoman for LWB said the agency used ''a very vigorous process'' of recruitment, with SOCs conducting five interviews with a potential carer, as well as assembling documents from referees and GPs. The agency also did extra criminal record checks, which were not required by law.

Though SOCS are supposed to take on no more than 20 carers, the Herald has sighted invoices for a SOC with 37 carers whose husband also has 12 and a subcontractor six.

In addition some SOCs have employed as subcontractors the carers they are supposed to monitor.

LWB prides itself on finding carers for difficult-to-place children. It is able to reach into diverse, overlooked communities to recruit. It was accredited for five years in 2007 by the NSW Children's Guardian as meeting standards, and is working towards re-accreditation in 2012.

Former and current staff have told the Herald that last year there was a backlog of 180 outstanding allegations about carers, some two years old and serious, which had to be quickly cleared. Many foster carers lived in tough Housing Department areas and ''are raking in thousands tax-free'', a staff member said. There was a financial incentive to break up sibling groups as the second and subsequent siblings were paid at a lower rate compared with unrelated groups of children.

''There are heaps of cases where siblings are split,'' she said.

An LWB spokeswoman said more than 97 per cent of LWB's children had only one or two placements in a year, compared with a 47.5 per cent rate for the whole sector.

''We are proud that we have half the kids in care in the non-government sector, kids with really high needs in stable placements.''