Inspectors said the quality of the authority's child protection service was inconsistent, ranging from very poor to excellent.
The high level of staff turnover was cited as one of the main reasons.
Of 214 social worker positions, 86 were unfilled at the end of last month.
The council is increasing its area child protection committee's budget from 52,500 to 243,000 and reviewing all 539 cases on its child protection register.
John Harris, Hertfordshire's director of children, schools and families, described the report as "tough" and admitted there was "no quick fix for long-term problems like recruitment".
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