The inspectorate said that following the last full inspection of children's services in Derbyshire in 2013, a large-scale restructure "led to a substantial reduction in leadership and managerial roles at all levels".
"Combined with a prolonged period of considerable instability across the workforce, this led to a significant deterioration in the quality of services for children," the inspection report states.
While the front door for child protection services were found to provide a "timely and effective" response when children are at risk of harm, inspectors said it takes too long to progress a minority of referrals when it is less clear about whether social care support is needed, meaning that a small number of children wait too long for their needs to be met.
Although the issues are now being addressed by the local authority, Ofsted said more progress needs to be made, rating the service as "requires improvement" overall.
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At the time of the previous positive inspection in 2013, Derbyshire County Council was already implementing a substantial cost-cutting programme across the department. In 2010, the children's services budget stood at £131m. By 2016 it had dropped to £90m, with the council announcing plans in June that year to reduce it yet further, to £68m by 2019.
In January 2015, Ian Thomas, who had been director of children's services (DCS) in Derbyshire since August 2011, left to take over at Rotherham in the wake of the town's child sexual exploitation scandal.
He was replaced on an interim basis by Ian Johnson, prior to the appointment of current director of children's services Jane Parfrement in February 2016.
"After her appointment in 2016, the DCS acted to identify priorities for improvement and increase capacity in the service," the inspection report states.
"Senior managers have successfully secured the support of two successive and different political administrations, following local elections in 2017.
"This led to some early investment and more recently significant financial reinvestment in the service, and substantial increase in leadership and management capacity. This has enabled the creation of a stable, permanent leadership team that demonstrates determination to deliver improvements in services for children."
Inspectors said that the senior leadership team now has a sound understanding of the strengths and weaknesses of the service and has worked purposefully to tackle shortfalls. As a result, some services are much improved, however, the quality of support and help across services was found to be inconsistent.
"There remain areas for improvement, particularly in the support offered to care leavers and some children in need," the report states.
A previous "focused" visit to check on provision in February 2018 found that although no children were found to be unsafe, the quality of child protection work was "too inconsistent".
A Derbyshire County Council spokesperson said: "Ofsted highlighted many strengths across our children's services in their report as well as some areas for improvement.
"These are not a surprise as one of our strengths, and one which was acknowledged by the inspectors, is that as a result of constant monitoring we had already recognised and started work on many of the areas highlighted for development while also having plans in place for further work.
"While Ofsted highlighted there had been a decline in services in the years following our last inspection in 2013, they also recognised we've made significant improvements over the last three years under the strong leadership acknowledged by Ofsted and are achieving well in many areas, but we're not complacent and know there is still work to do.
"Ofsted found we are ambitious for our service, care about what we do and are focused on long-term, sustainable development and improvements and - as their report clearly sets out - are going in the right direction on a positive trajectory to continue helping the children and families we support every day across Derbyshire to lead safe and happy lives."