AN HM Inspectorate of Constabulary report said the failure to record crime properly was "indefensible".
More than 800,000 – or one in five – of all reported crimes went unrecorded each year, it estimated reports the BBC.
Home Secretary Theresa May described the findings as "utterly unacceptable", but police representatives said the situation had improved since the study.
The inspection, which looked at more than 8,000 reports of crime across all 43 police forces in England and Wales between November 2012 and October 2013, discovered 37 cases of rape that were not recorded as a crime.
Even when crimes were recorded correctly, many were subsequently removed or cancelled from the system as "no-crimes" because they were deemed not to have taken place, it said.
The report found that in more than a fifth of 3,700 cases, offenders were given out-of-court disposals such as a caution or a penalty notice when they should have been charged and sent to court or given a heavier penalty.
"The position in the case of rape and other sexual offences is a matter of especially serious concern," said Chief Inspector of Constabulary Tom Winsor.
"It is particularly important that in cases as serious as rape, these shortcomings are put right as a matter of the greatest urgency. In some forces, action is already being taken in this respect."
The Essex Police and Crime Commissioner, Nick Alston said;
"I am pleased with the findings of the HMIC report into crime data integrity which show that, of the 43 forces across England and Wales, Essex Police has the sixth best figure for recording crime accurately, with 91.67 per cent, more than nine out of ten crimes, recorded correctly.
Tom Winsor, Her Majesty’s Chief Inspector of Constabulary, said: "The first duty of the police is to protect the public and reduce crime. A national crime-recording rate of 81 per cent is inexcusably poor. Failure properly to record crime is indefensible. This is not about numbers and dry statistics; it’s about victims and the protection of the public.”
I agree. Since becoming Police and Crime Commissioner for Essex, I have given evidence to the Public Administration Select Committee’s hard hitting investigation of recorded crime.
"I have also taken extensive steps to explore the recording of crime in Essex and satisfy myself that the police processes are ethical and robust. The integrity of the Essex Police process for recording crime is significantly higher than the national average, and I expect it to stay there and hopefully improve still further.
HMIC is also rightly concerned about the accurate recording of serious crimes such as rape. The inspection of Essex Police revealed that in the 27 cases of crimes reported directly from the victim (including sexual offences), all 27 were correctly recorded in our county.
In Essex, we will continue to focus on reducing crime with the confidence that the crime figures are broadly reliable. At the tactical and operational level, an accurate record of the types of crime committed and where they are occurring helps to shape the way in which police resources are deployed. At the individual level, if a crime is not correctly recorded there is a risk that the victims of that crime are not getting the service and support they deserve.
I welcome the HMIC’s report confirming the strong performance of Essex Police in recording crime ethically and accurately.