Priests suspected of child sex abuse over more than three decades were not robustly challenged or properly managed, the watchdog's report into the Derry diocese said.
Problems were often handled by moving them to postings elsewhere where abusive behaviour continued, the 24-page document said.
There was a delay in referring sex abuse allegations against priests in Derry to the authorities by those advising the bishop.
The report said: "Priests about whom there were clear concerns were not robustly challenged or adequately managed and problems were often handled by moving them to postings elsewhere.
"There is evidence that abusive behaviour continued to be exhibited by priests who were moved on in this manner."
Allegations have been made against 23 priests.
The report also highlighted issues of concern raised by two parish representatives.
These surrounded the "apparent cynicism" of one of the priests and his lack of support for safeguarding.
The second alarm was raised by a representative concerned that the curate in her parish had unsupervised contact with an altar server, without any suggestion of impropriety.
Other matters raised included:
* It was not clear from the files that sufficient emphasis was placed on prompt referral to the police and social services by those legally advising the bishop, contributing to a delay in referring cases to the authorities, but it could not be blamed for all such delays;
* An advisory panel did not provide useful advice to Bishop Hegarty consistently;
* Case recording was poor and unstructured, making it extremely challenging and time-consuming to read case files;
* Resort to canonical disciplinary procedures was the exception rather than the rule;
* Risk assessments of priests against whom allegations or reports of concerns had been received were not conducted or commissioned, and where psychological or psychiatric assessments were ordered there was evidence that the recommendations were not acted upon;
* No consistent, coherent and effective case management strategies were put in place in the diocese.
The Review of Safeguarding Practice in the Diocese of Derry by the National Board for Safeguarding Children in the Catholic Church praised the bishop's attitude of openness and said past mistakes were readily acknowledged.
It recorded 23 priests against whom allegations had been made since 1975, seven of whom are still alive and four who are left in the priesthood.
A total of 31 allegations were reported to police in the north and south by the diocese, which straddles the border.
There were 33 allegations referred to social services but no priests were convicted of an offence.
Another three who face allegations are still in the ministry or are retired.
The report made eight recommendations, including that the bishop must ensure that following removal from public ministry, the restrictions imposed along with supervision and management arrangements should be set down in writing.
Reviewers noted significant improvement in the management of allegations since the last review of practice in 2009.
It said there remained the need for action, within canonical processes, for at least one priest currently out of ministry.
Social services and police in Derry spoke warmly of their relations with the person designated for safeguarding by the diocese and the new approach was much more child-focused and empathic to those who had been harmed by priests.