Council chiefs and children's services bosses said they were "disappointed" after Sunderland's provision continued to be rated inadequate in the latest Ofsted report.
Inspectors made a series of critical findings following their latest visit to Wearside.
Leaders of the local authority and Together for Children pointed to the fact inspectors had acknowledged three out of five areas inspected had improved and that "solid improvements have been made for children in care, children with a plan for adoption and care leavers" - but admitted more work still needed to be done.
Deborah Jenkins, Chair of Together for Children, the company which has run children's services on behalf of the City Council since April 2017, said: "Transformation of this scale and from such a low base takes time and while we are disappointed at the overall judgement, we are encouraged that in three out of the five inspection areas Ofsted have acknowledged the improvements that have been made.
"Everyone at Together for Children remains steadfastly committed to working tirelessly to quickly address the remaining areas that have been identified by Ofsted as still falling short of where they need to be.”
Council leader, Coun Graeme Miller, said: "We always knew it would take time to turn things around, so this is not unexpected in view of the incredibly challenging Ofsted inspection in 2015. While we're disappointed with the overall rating, what is reassuring/heartening is that areas like adoption and services for care leavers have improved and that Ofsted have noted 'solid improvements' being made.
"In the last 15 months we have had a major transformation in the way children’s services is managed and run, with Together for Children now delivering children's services on behalf of the council. This has made significant strides in some areas but we completely accept a much greater pace of improvement is needed in others. This is something we are looking to address.
"We want the very best for our children and young people in Sunderland and we will settle for nothing less than that."
After the damning 2015 report, the Government appointed Nick Whitfield Commissioner for Children’s Services in Sunderland to oversee safeguarding improvements in the city.
Discussing the new report, he said: "In 2015 Sunderland accepted that there was systemic failure in services and that a new start was needed. The council has worked really hard in a time of rising demand and a tough financial climate to invest in improvement.
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"The recent inspection finds that in many areas there is improvement whilst more remains to be done. This pattern has happened elsewhere, and I am confident that the company and council have put in place plans to ensure that improvement is continued.”"
Coun Louise Farthing, Portfolio Holder for Children, Learning and Skills, said: "The council has been working very hard to improve children’s services from a very low base, against a background of unprecedented demand since 2015. We know there is still a lot to do but we are pleased to see significant progress in adoption and the experience of care leavers.
"Nothing is more important to us than protecting vulnerable children so we will be redoubling our efforts to address those areas where is still more work to be done."
Jill Colbert, Sunderland’s newly appointed Chief Executive of Together for Children and Director of Children’s Services, started in her post this week,
She said: "While much remains to be done, Together for Children has made significant improvements in the year that the company has been operational as evidenced in this Ofsted report. The report gives clear guidelines as to where improvements need to be made and work is already underway to address this, build on our evident progress, and create a service that fully meets the needs of the children and families in Sunderland."
Nadhim Zahawi, Parliamentary Under-Secretary of State for Children and Families, tweeted: "Progress highlighted in @Sunderlanduk children’s services Ofsted report, though will be disappointing for staff who have worked hard. I look forward to welcoming new Chief Exec Jill Colbert to continue driving improvement."