Presenting the results of its year-long Kilbrandon Now inquiry, which heard from experts across the youth justice field, NCH said the system was "under strain" because most cases referred to hearings were on care and protection grounds.
It recommended greater police involvement, the extension of schemes that allow communities to have a say in measures to address young people's criminal behaviour, and a transfer of resources away from custody and secure care to preventative and rehabilitative programmes.
Maggie Mellon, head of policy for NCH Scotland, said the system could be a world leader if it were resourced properly.
An independent research, monitoring and performance review system should be built into the hearings process and fees for the members of children's panels could be introduced, the charity suggested.
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