Those using such services develop good key and basic skills, work well with adults, and enjoy what they do, says a new report.
Innovative projects have targeted vulnerable groups and there is good support for school councils. But overall, young people do not make good progress because of poor planning and scarce funds.
Leadership and management is ineffective, and struggles to remain focused on learning outcomes for young people, says Estyn. When managers did consult young people, they failed to match provision to need.
Denbighshire young people's partnership said it had gone through an "unstable period".
A spokesperson said: "The partnership consists of willing stakeholders committed to working together to ensure positive outcomes for young people.
It will implement the post-inspection action plan being drawn up in response to Estyn's recommendations."