In December 1997, South Australia's alternative care system was radically restructured along ‘funder-purchaser-provider’ lines. A recent progress report into the workings of the new system (Barber, Cooper and Delfabbro, 1999) identified high levels of frustration and dissatisfaction throughout the sector. This article argues that the current problems in alternative care are a legacy of policy decisions by successive state governments, some of which date back many years. The most important of these are the nationwide demise of residential care, the unhelpful role of the state under the ‘funder-purchaser-provider’ model, and the decision to outsource the entire foster care service through competitive tender. The article concludes that the state's policy preference for distancing itself from service delivery is incompatible with the community's growing reluctance to volunteer.