Inspectors found that a youth offending service in Reading "neglected and overlooked" the needs of some vulnerable children.
The HM Inspectorate of Probation (HMIP) rated the service as "inadequate," which is the lowest possible rating.
This is only the second time any service has been given this rating since July 2020.
Chief Inspector of Probation Martin Jones said: "Sadly, too little attention has been given to youth justice work in Reading since our last inspection.
"We identified numerous shortcomings in service delivery - the needs of this vulnerable and complex cohort of children have been neglected and overlooked by the partnership."
HMIP's report found that while half of the youth justice caseload in Reading involved drugs, there was "minimal intervention to support these needs".
Despite this, Mr Jones believes there are "green shoots of hope" developing in the borough.
He said a recently appointed manager is already making positive changes.
The service said it was "disappointed" by HMIP's findings.
However, it stated that it has already started to make changes following feedback in the autumn.
Michael O’Connor, chair of Reading Youth Justice Service's management board, said: "We are all clearly disappointed with the inspection findings but we have taken a strategic and pragmatic approach to address all the recommendations made in the report.
"While the grading is a blow to staff across all agencies in the partnership, we will use it to drive us forward positively and demonstrate that what we are doing is improving outcomes for young people who find themselves caught up in the criminal justice system."
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