Child Youth and Family is to investigate claims by a Dunedin principal that students are living in dangerous and dysfunctional homes.
Heidi Hayward of Dunedin North Immediate wrote to three government ministers, urging them to help vulnerable children.
She said she had 49 at-risk pupils at her school, but under the funding system each of them receives just $92 of support a year.
Minister of Social Development Anne Tolley said she had told Child Youth and Family to look into the matter immediately.
She said the recent Budget provided an extra $347 million to transform the care system.
Mrs Tolley said from next year the new Ministry for Vulnerable Children, or Oranga Tamariki, will work with families earlier, and there will be more financial support for foster carers.
Education Minister Hekia Parata said next year $12.3 million will be spent specifically targeting children in long term, benefit-dependant households.