Authorities in Rochdale showed a "total lack of urgency" to address the sexual exploitation of boys at a council-run school who were regarded as "authors of their own abuse", a report has found.
Pupils at now-closed Knowl View residential school were also sexually exploited in the town centre, the bus station and at public toilets across the road from the borough council's offices over a 20-year period.
The Independent Inquiry into Child Sexual Abuse (IICSA) panel also found a "valuable opportunity" was missed to prosecute the town's former Liberal MP, Cyril Smith, during his lifetime in the late 1990s and that ex-council leader Richard Farnell lied during his evidence last October.
Publishing its report on Thursday, IICSA concluded that from 1989 onwards the police, Rochdale Council's social services and education departments, as well as staff at Knowl View, knew youngsters were being subjected to sexual exploitation for money in public toilets.
The panel found:
It ruled there was no "deliberate cover-up" by the authorities involved but said instead there was a "careless and wholly inadequate response".
The panel said the police did not turn a blind eye as records suggested they did not obtain sufficient evidence to prosecute, although they did not provide "any satisfactory answer" as to why no-one appeared to have been charged with abusing Knowl View boys in the town centre despite some disclosures from the boys and police knowing the names of some men.
IICSA also looked into the involvement of the late politician Smith at Cambridge House boys' hostel in Rochdale and found a "valuable opportunity" to prosecute him in 1999 was lost.
Smith, a prominent councillor before he represented the town in Parliament from 1972 to 1992, acted as a governor for several Rochdale schools, including Knowl View.
Before he died aged 82 in 2010 he was the subject of sex abuse accusations and investigations but never faced trial and received a knighthood in 1988.
A Lancashire Police investigation into the 29-stone MP concluded in 1970 - the year he first ran for public office - that he was hiding behind a "veneer of respectability" and had used his "unique position" to target eight boys at Cambridge House during the 1960s.
The boys said Smith, the hostel's honorary secretary, spanked their bare bottoms and carried out intrusive medical examinations despite not being qualified to do so.
But the then director of public prosecutions (DPP), Sir Norman Skelhorn, chose not to charge him.
From 1997 onwards, Greater Manchester Police investigated allegations of physical and sexual abuse in residential homes, with the Lancashire Police file concerning Smith and a further witness statement submitted to the Crown Prosecution Service in 1998.
Two additional statements were submitted in 1999.
The IICSA panel said the CPS branch crown prosecutor advised Smith should not be charged despite coming to the view there was a "realistic prospect of conviction".
The panel said:
IICSA also addressed the evidence given last year by Mr Farnell, the leader of Rochdale Council between 1986 and 1992.
The inquiry heard that a paedophile had been admitted to Knowl View in September 1990, where he had sexually abused at least one boy but Mr Farnell insisted the information was not passed on to him.
Mr Farnell said he was also unaware of a 1991 report submitted by a health authority worker which detailed claims that boys at Knowl View as young as eight were being sexually targeted by men from as far afield as Sheffield.
The panel concluded Mr Farnell lied to the inquiry and that it "defies belief" he was unaware of the events involving Knowl View.