Professional boundaries "became blurred" at Scotland Yard as the force made "imprudent decisions" and showed "poor judgment" in hiring a former News of the World boss as a PR consultant, the police watchdog has said.
The Independent Police Complaints Commission ruled out corruption allegations in the decision to give Neil Wallis a £1,000-a-day job with the Metropolitan Police.
The investigation also dismissed claims of misconduct surrounding former assistant commissioner John Yates' alleged involvement in securing a job at the force for Mr Wallis' daughter.
But the two investigations showed "senior people appear to have been oblivious to the perception of conflict" amid the phone hacking scandal, Deborah Glass, the watchdog's deputy chairwoman, said.
Senior figures at the force were to blame for failing to carry out a vetting check on Mr Wallis "prior to, or during, his employment" for communications advice between October 2009 and September 2010, the report said.
Mr Wallis was arrested and bailed last year as part of the force's investigation into phone-hacking.
Ms Glass expressed concern over the resignation last month of former Metropolitan Police communications chief Dick Fedorcio, who was told he had a case to answer over the procurement of the contract., adding: "The IPCC cannot prevent a member of police staff leaving before facing misconduct proceedings. But I can and do observe that such a practice can be hugely damaging to public confidence."
Mr Yates, who quit the force during the peak of the scandal last summer, showed "poor judgment" in forwarding Amy Wallis' CV to Scotland Yard's head of HR. The action had "the foreseeable consequence that human resources staff believed that they were obliged to find a post", the report said.
Ms Glass said: "In neither case did we find evidence of corruption, but in both cases we found that policies were breached, and in the case of the former Director of Public Affairs, Dick Fedorcio, that there was a case to answer in relation to misconduct. Our investigations were limited in scope to the issues over which we have responsibility. However, the findings should be considered in context."
A Scotland Yard statement said the force accepted the IPCC's findings. It said: "The report recommends that we review our practices in relation to senior staff who refer friends and relatives to our human resources department for appointment, attachment and holiday employment. The MPS has been the subject of much external scrutiny in recent months and the review recommended by the IPCC will form part of our wider response in taking forward the emerging issues and advice such as that from Elizabeth Filkin and the Leveson Inquiry."