Finance Minister Bill English said it aimed to identify which families were the most vulnerable, what help they received and whether that made enough difference.
"It is a bit more intense than we thought - that cycle of dependency is tighter, it is a smaller group of people I think in a longer term, which highlights for instance that a lot of these families will need sustained, intelligent support.
"We are making a lot of progress with this compared to five or six years ago - flying pretty much blind to now getting much more of a picture of what really happens. It shows that some of these kids are likely to be getting multiple services, these families, some might not be getting much at all."
The work has frustrated Labour, who say the exercise crudely simplifies what are complex, real-life situations.
"The social workers who are in this space already know how to identify the families that need help," Labour's spokeswoman for children Jacinda Ardern said. "Our problem is that we are not properly resourced to deal with it."
Mapping high-risk children - and looking to their future
Treasury officials identified three risk factors - having a parent or caregiver who has served a custodial sentence, being known to CYF, and being supported by a benefit as a child for more than 75 per cent of the time.
The more than 1.09 million children aged 0-17 as of June 2012 were then assessed to see if they had none, one, two or all three risk factors, by territory.
Data was anonymised.
To then find out what could happen to children, Treasury used MSD's database, including benefit, CYF, Corrections and education information.
Outcomes before the age of 21 for a cohort of 62,418 children born in 1990/91 were examined, according to which of the three factors they had before the age of 13.
Just over 77 per cent of the group who had all three risk factors in their childhood did not achieve NCEA level 2.
That dropped to 68 per cent for the group with two risk factors, 53 per cent for those with one, and 30 per cent for the majority of the cohort that had none of the factors.
Thirty-eight per cent of the three factors group had served a custodial or community sentence before the age of 21, compared to only 3.6 per cent of the group who had none of the identified risk factors while growing up. Those poor life events meant a bigger bill for the government.
Predicted future costs by age 36 were around five times higher for those with all three risk factors - $321,600 compared to $65,500 for the overall cohort.
What happens next?
After the 2015 Budget's $25 benefit boost, Mr English ruled out more across-the-board benefit hikes but signalled spending on at-risk youth would be a feature of future Budgets.
He told the Herald the next step for the Treasury analysis was to find out what services families were accessing.
"Then we could adapt the service, or improve it. But at the moment, even for our most challenging families we know we spend a lot of money, we know there are services available in their area, but we don't know what services they actually get."
The Treasury research comes as a Productivity Commission report, released yesterday, found the 10,000 "highest-cost clients of the social services system" each cost at least $500,000 in lifetime services.
It proposed handing control of services for those people either to a new national "Better Lives" agency or to expanded "district health and social boards" (DHSBs), which would buy services from mostly non-government "navigators" to coordinate help for needy clients in their regions.
A review of Child, Youth and Family, due to be released this month, is expected to recommend similar changes to bring agencies together when people report concerns about children at risk.
CYF was last month the subject of a damning report by Children's Commissioner Dr Russell Wills, which found not enough support provided to those looking after 5133 children in state care. Mr English said Dr Wills' report underlined the need for change, but that could not be rushed.
"We are in a pretty intensive discussion with both the public agencies and the non-government sector ... and some NGOs are a bit too enthusiastic about it, and some are still unsure."
Concerns full picture will be missed
More cost-benefit analysis to allocate funding has worried unions, including the Public Service Association, which has said the "lottery" of contestable funding causes too much uncertainty.
Labour's social development spokeswoman Carmel Sepuloni said social sector leaders she met this week said officials were fixated on risk factors.
"Who is looking at resilience factors? It is a very negative approach towards people who are effectively a resource but are seen as a burden by this Government."
Ngaroma (Mala) Grant, project manager of Rotorua-based Te Arawa Whanau Ora, said the investment approach appeared to be a good idea, but care was needed to ensure that hard-to-measure but beneficial outcomes were not ignored.
"There's always going to be more to the stories and potential in the families. Let's receive [Treasury's] information for what it is, but it's not the full picture."
Treasury released the information on its research to the Herald under the Official Information Act, and published a report on its website this week.
It acknowledged limitations, including imperfect population data, the potential for misclassification, and results possibly reflecting administration processes.
Estimated outcomes and costs were indicative only, and not forecasts. MSD has used the same information for related but separate work to develop a new predictive modelling tool that attempts to identify those at risk of abuse before the age of 2.
Needy family wary of plan to use 'navigators' to help
A West Auckland family who have dealt with nine social agencies in the past year are wary about a proposed new agency to help them "navigate" a way through the social services system.
The Productivity Commission yesterday proposed creating either a new "Better Lives" national agency or funding district health boards to buy social services as well as healthcare for the country's 10,000 neediest people, who cost taxpayers at least $500,000 each during their lifetimes.
It said those agencies should pay new commissioning agencies which in turn would hire "navigators" to help each needy client to plan a way out of their problems and get help from schools, doctors, addiction services, budgeters and others.
But Kelston couple Paul Amani and Jenny Daniell-Wiig, who were among 100 families who told their stories to Auckland City Mission researchers last year, said they often knew more than the officials they dealt with.
The couple, who have three children aged 8, 6 and 10 months, have had insecure lives. Ms Daniell-Wiig, 33, was addicted to P in her early 20s but came "clean" at rehab where she met Mr Amani.
Since then both have been in and out of work. Mr Amani, 42, is now on a jobseeker support benefit and desperately looking for work.
They pay $430 rent for a three-bedroomed house which they have to leave by Sunday because it is for sale. Work and Income has said they may qualify for one of 12 new state houses across the road.
Ms Daniell-Wiig felt a "navigator" might help.
"My biggest concern is, is it going to be a sticky plaster situation and not actually be able to address the full underlying issues?"
Radical proposals
• Set up "Better Lives" agency or expanded health boards to fund "navigators" to work with 10,000 neediest families.
• Give clients direct control of budgets for home-based aged care, respite, family services and addiction rehabilitation.
• Fully fund services that deliver stated goals or commitments.
• Make state agencies compete for contracts with other providers on a neutral basis.
On the web: productivity.govt.nz.
To read the report in full go to tinyurl.com/ChildrenAtRisknzh
