Jeremy Dowling, a lay preacher, school teacher and church employee, abused young boys in the 1970s and was jailed in 2015.
A review by the Diocese of Truro said several bishops were told about the abuse and did not act.
It found there was a "probable misunderstanding" by church leaders over a decision by the authorities not to prosecute Dowling in the 1970s.
Dowling became a member of general synod in 1977 and was communications officer for the Diocese of Truro from 2003 to 2009.
The school in Cornwall where Dowling carried out the abuse is not identified in the report.
But in September 1972 an unnamed canon, who was chairman of the board of governors, wrote to Bishop of Truro Maurice Key to inform him Dowling had admitted some sexual offences against boys and offered to resign.
In reply, the bishop said: "It is terribly said that his should have happened, not only because it is a tragedy for Jeremy Dowling, but it can be a real blow for the school and the Church.
"The devil is certainly a master at attacking where he can do most harm."
The following December the director of public prosecutions decided not to prosecute Dowling.
The diocese review noted "the level of corroborative evidence to bring a successful prosecution of sexual abuse against a child was extremely high" but said the Church had "its own responsibilities to judge such behaviour".
The review said successive bishops knew about the allegations against Dowling but did not launch any investigation or take any action.
Dr Andy Thompson, who wrote the review, said: "I was disappointed by what I found, but not surprised.
"Sadly, we have heard numerous examples of people in positions of power and influence behaving in a different way in the 1970s when it came to dealing with serious allegations.
"Certainly, it is a way that is entirely unacceptable by today's standards.
"They saw the decision by the DPP not to proceed with a prosecution as meaning that they didn't need to do anything, but my strong point is that they did have a responsibility to investigate.
"Because they didn't take it any further it enabled Jeremy Dowling to reach a position where he made up his own rules, and his position within the church lent him credibility and authority."
The Rt Revd Dr Chris Goldsmith, Bishop of St Germans, apologised to anyone who had suffered because of past failings.
"It was important for us to look into what happened in this situation and consider whether we as an organisation made mistakes at that time, and whether we can learn new ways in which to make the church safer for all," he said.
"My apology on behalf of the diocese to anybody who has suffered as a result of past failings is abject, sincere and heartfelt.
"It was with a sense of disappointment, sorrow and shame that we read of a failure to act and make any independent investigation of Jeremy Dowling after the initial allegations were made.
"Thankfully, there have been changes in society and attitudes as a whole, changes to the law, and many changes to the structures, culture, procedures and policies of the church, and the Diocese of Truro is no exception."
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