The number of children in council care in England has risen by 12%, with overall costs calculated at £3.4bn.
The latest numbers show there were 68,110 children in care on 31 March 2013, including 42,228 who had suffered abuse or neglect.
This figure has risen by 12% or 7,210 in four years, according to the Audit Commission.
Councils in England spent £3.4bn in 2012/13 caring for these vulnerable young people, who represent 0.6% of all under 18-year-olds in England.
Councils' costs rose by 4% nationally, but regional variations ranged from a 15% rise in the north east to a 7% reduction in London. Spending on foster care totalled £1.5bn in 2012/13.
An Audit Commission study into council foster care costs and the impact the growing numbers of these children is having on council spending found that 21 councils spent under £40,000 per child in 2012/13, while 32 councils spent more than £60,000 per child.
The total amount spent on services for these children rose by 69% or £1.4bn in real terms between 2000/01 and 2012/13. It was noted that in 2012/13, it accounted for 64% of all the care provided.
Councils' use of foster care increased by a fifth between 2008/09 and 2012/13, with more than two-thirds of this extra care provided by foster care agencies from the private and voluntary sectors.
The cost of agency foster care fell by 15% during this period but can be more expensive than council-provided care.
The Audit Commission chairman, Jeremy Newman, said: "It is beyond question that councils must place children in settings that meet their individual needs and that provide cost effective, high quality care.
"With pressure to improve outcomes and reduce costs, all councils are faced with the challenge of getting the optimum value from the £137 on average spent per day, which equates to £50,000 a year, looking after each child in their care. To meet the complex needs of this group, spending can be more than five times the financial cost of bringing up a child where there is no requirement for council support.
"We encourage all councils to review their spending and in particular urge higher spending councils to understand the reasons for this and to consider whether they can secure more cost-effective placements without compromising on the quality of care."
Factors such as how easy it is to recruit local foster carers, the availability of suitable local placements when they are needed, the balance between the council's use of its own and agency foster care services and the nature of local foster care services may all affect how much councils spend, according to the commission's analysis.
Newman suggested that councils should use their collective purchasing power to get maximum value for the £1.5bn they spend on foster care.
Helen Berresford, of the 4Children charity which is working towards an integrated approach to children's services, pointed out there "is a high financial cost to councils (£3.4bn) of caring for these vulnerable young people – there is an even greater social and economic cost to not giving these young people the support they need".
The "bleak reality facing some of England's most vulnerable young people" is that children in care are more likely to have mental health problems than their peers, more likely to end up homeless and are also more likely to be excluded from school than other children.
She said: "We need a system of early and intensive support which sets sights high for struggling families and helps reduce the risk of children falling into care.
"Expanding the role of children's centres to become community hubs, integrating support services, could deliver the support needed to tackle the underlying causes of crisis for vulnerable families.
"This could be co-ordinated through children's centres, expanded to become community hubs, integrating support services to tackle the many underlying causes of crisis for the most vulnerable families."
He said: "Rather than competing with each other, potentially driving up prices, councils should consider whether collaborating with neighbouring councils can secure the services they need, at a price they can better afford."
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