In a verdict that puts the authority among the least successful of 25 councils inspected so far, the inspectors found five aspects to be good and six fair.
Among indicators judged fair was leadership and management. There were too many initiatives which were not monitored properly by an organisation that was too complex, the report stated.
Graeme Young, the director of education, has been off ill for some weeks and a council spokesman refused to comment on his future.
The inspectors praised Dr Young's management style for improving relationships with schools. But the report said that, despite his commitment and dedication, and that of his senior management, their overall effectiveness was limited.
David Alexander, leader of the SNP-Independent council, acknowledged the report showed there was room for improvement and promised to "act on its findings".
While none of the authority's overall operations was found to be unsatisfactory, that was the description of the performance of Falkirk secondaries in Higher and Advanced Higher exams. Results were consistently below national averages and the achievements of similar authorities, and failed to build on better progress at the 5-14 stages.
Tom Coleman, convener of Falkirk's education and leisure committee, said improving upper secondary school results "will remain our number one priority for the future".
As with previous inspections, the views of headteachers proved crucial in determining HMI's conclusions. In a damning passage, the report noted:
"Overall, nearly a third of heads of establishment did not agree that policies were backed up by clear procedures for putting them into action, and this included all but one of the secondary headteachers."
The report adds: "School staff were also sometimes unclear about the relative importance which the authority attached to different policies and whether their status was that of giving advice or firm guidance.
"The time-scale for the introduction of policies was also often not clear to schools, particularly as the authority lacked a systematic overall procedure for monitoring the extent of policy implementation in schools."
The report said the authority had a good range of policies but it had to do more to improve their impact. A main challenge for officials was to use the information they gained from monitoring the performance of schools to bring about improvements.
Inspectors attributed the blame for these failures partly to "complex organisational structures which had resulted in overlapping, and in some cases unclear, areas of responsibility".
The report stated: "This had led to some difficulties in communication and insufficiently clear direction for certain initiatives and policy developments. Recent changes in deployment meant that not all staff were fully familiar with their roles, and in some cases further training and staff development was needed."
These problems were less inhibiting where structures were simpler, as in educational provision where the leadership had been more effective in improving the quality of the service.
The report stated: "Headteachers and other staff considered the team as a whole as committed and supportive, but not always providing decisive leadership or making clear what was expected of schools.
"The director, convener and depute convener carried out an extensive programme of school visits. However, staff in schools, other than headteachers, sometimes saw (them) as remote."
Mary Pitcaithley, Falkirk Council's chief executive, said "significant steps" would be taken to ensure HMI's recommendations were implemented.
Work had already started on areas rated as fair, such as monitoring and improving school performance.