The review was one of the first 10 of a series that will eventually deal with every social services department in England and Wales.
It found that nearly 200 children who needed help or protection did not have a social worker and were not receiving services.
Eight of the council's 10 homes for old people were substandard and more than 100 elderly people were waiting for assessment or services. Children's homes were not inspected as regularly as they should be.
Alan Lewis, Sefton's acting assistant director for old people and hospitals, said: 'We have already taken steps to improve some of the areas of criticism. We had to save£900,000 last year and it was unavoidable that there would be a strain.
'However, this year we are recruiting to the council's inspection unit. We have taken on 10 staff very recently and seven more positions have already been freed up after a staffing freeze in children's services.'
The review results came in the same week that Help the Aged and Age Concern agreed to apply for a judicial review of the Merseyside council's failure to comply with a Court of Appeal ruling over payments by pensioners to cover the cost of their residential care.