James Bulger's killer Jon Venables was properly supervised and he alone was responsible for his further offence of collecting child pornography, Justice Secretary Kenneth Clarke said today.
But a review of his supervision found "a number of potential opportunities that might have opened up had circumstances been different and that might have made the further offences less likely", Mr Clarke said.
He added that "learning points for the future management of this and any similar cases" had been identified.
Mr Clarke said: "Sir David has concluded that Jon Venables was properly supervised at an appropriate level with suitable frequency of contact, having regard to particular circumstances in this case.
"Sir David also concluded that Venables alone is responsible for his further offence and it could not have been prevented or predicted by any reasonable supervision.
"The review identifies a number of potential opportunities that might have opened up had circumstances been different and that might have made the further offences less likely, although Sir David is clear that this is a matter of judgment.
"He has identified learning points for the future management of this and any similar cases. Those learning points will be taken forward in the future."
Mr Clarke added: "I would like to thank Sir David Omand for carrying out this comprehensive review into the supervision of Jon Venables since his release from prison in 2001.
"The report was commissioned due to the high profile nature of the case and sets out a number of recommendations, all of which I accept."
Probation officers were cleared of any major errors in the supervision of Venables, 27, who was jailed for two years in July after he was caught with sick images of youngsters on his computer.
But the report found he could have been given more therapy and more help to enhance his employment prospects after being released from jail with a new identity.
Harry Fletcher, assistant general secretary of the probation union Napo, said: "Supervision of Jon Venables was extremely difficult because of his notoriety and the need for tight security."
The review found only 24-hour surveillance could have stopped Venables.
"The only way that his drinking, his trips to Liverpool and his accumulation of child pornography could have been prevented would have been through 24-hour surveillance, which would have been extremely expensive and implausible," Mr Fletcher said.
"There are a number of criticisms that are made with the benefit of hindsight.
"For example, he could have received more therapy and more could have been done to enhance his employment prospects.
"But the same criticism could be made of all people on probation's books and there's no guarantee that additional therapy would have been helpful.
"He was in full-time work and attempts were made to try to enhance his prospects.
"But because of the sensitive nature of the case, supervision was always going to be difficult."
It was in February this year that Venables was arrested and recalled over child pornography allegations.
Evidence later emerged that he had an "extensive history of searching for and downloading indecent images of children using the internet".
James's mother, Denise Fergus, condemned the two-year sentence as "simply not enough".
Mrs Fergus and her spokesman said they were "surprised and concerned" that Venables had not been recalled for breaching his licence.
Venables told officers he had enjoyed the images of abuse and said he was "breaking the last taboo".
He even adopted an online alter ego as a married mother offering to sell her eight-year-old daughter to a paedophile.
Venables and his friend Thompson were just 10 when they killed James in Bootle, Merseyside, and became national figures of hate.
They were jailed for life in 1993 and given new identities when they were released on licence in 2001.
Extensive measures were taken to protect the pair from vigilantes and help them lead a normal life but after several years Venables descended into a spiral of cocaine and mephedrone addiction and drunken violence.
In February this year, Venables contacted his probation officer, fearing that his true identity had been discovered.
The officer arrived at his address and told him to collect his belongings, and he was found trying to delete files from his computer and to remove his hard drive with a tin opener.
Venables was taken to a police station with the machine and it was later examined by officers.
Eight of the 57 child abuse images found were at level four, the second most serious level - featuring sexual activity involving children, the court heard.
Two were at level three, three were at level two, and 44 at level one, the Old Bailey was told.
The court heard that, in September 2008, Venables was arrested on suspicion of affray after a drunken brawl and was given a formal warning by the probation service for breaching the good behaviour terms of his licence.
Later the same year he was cautioned for possession of cocaine after he was found with a small amount of the class A drug, said to be for personal use.
The judge Mr Justice Bean said that, as Venables was still on licence for the "horrific" murder of James, he would not be automatically released on serving half his two-year term, and when he was let out would be up to the parole board to decide.
He was also put on the sex offenders register for 10 years and banned from working with children for life.
In a statement released after he was sentenced, the killer said he thought of the murder he carried out every day and was "genuinely ashamed" for his latest crimes.
In his report, Sir David said information was available that showed Venables was "in a low paid job with no prospects, living a stressful assumed life under a new identity with no ambitions and little or no prospect of satisfactory intimate relationships".
But the focus was on controlling his behaviour and keeping his identity secret rather than the effect the circumstances were having on his emotional state, Sir David said.
"If he had been prepared to co-operate then more could have been done too at an earlier stage to try to get him into a job with better prospects and rekindle his original optimism about a career.
"The Home Office could, for example, have approached national employers (such as British Telecom or BAE Systems) at a senior level to see if a local position as an apprentice technician could have been found."
The report also found the need to create a new identity for Venables "had not been properly anticipated" and "there was some catching up to do".
"The end result was that he did not have the ideal 'clean start'," he said.
Sir David said no suitable individual was identified after 2004 to establish a long-term mentoring agreement "that might have helped him cope better with the strains of living under his changed identity".
His offences in 2008 were considered by the then-Justice Secretary Jack Straw and there was no case for his recall to custody, Sir David said.
He added that Venables "concealed from his offender managers that he had broken the conditions of his licence by visiting Merseyside and lied to them when asked about his movements".
"His offender managers should not be criticised for failing to detect this deception," he said.
But, overall, he was "effectively and properly supervised at an appropriate level and frequency of contact" with proper risk assessments.
Sir David also found managers were justified in deciding that there was no obligation to disclose Venables' criminal record to prospective employers "given his perceived low level of risk" but "ministers were entitled to know of the policy being followed by their officials".
With the benefit of hindsight, it would have been better "if greater efforts had been made to try to get him to accept some form of therapeutic counselling with a trusted professional who could know his true identity", he said.
"Had he co-operated (which of course he might not have) that might well have reduced the risk of his continuing descent into the use of extreme pornography, although there can be no certainty of that."
Sir David added: "Further clinical assessment of Jon Venables will be needed to gauge in what ways his progressive use of internet sites and pornography, latterly with extreme paedophile images, related to his deteriorating emotional state in relation to his sense of identity and self-worth."