Gerard Hanna had been the bishop of Wagga for 14 years, a servant of God who led a diocese of 66,000 Catholics in 31 parishes.

But here, in the refurbished sports stadium at Henschke Primary School, Bishop Hanna was set to step down sooner than expected, citing "continuous ill health" as the reason for his early retirement.

It was about two weeks before he was due to give evidence at the Royal Commission into Institutional Responses to Child Sexual Abuse.

As the tributes flowed, few in the room would have known that this church leader was harbouring a secret.

Decades earlier, while working as the administrator of a parish in Tamworth East, Hanna had been embroiled in a cover-up involving John Joseph Farrell – the notorious paedophile now serving a maximum 29-year jail term for a decade-long reign of abuse against children. At least two of those victims ended up taking their own lives.

Hanna accepted the priest into his parish after he was kicked out of another, used church money to help pay for his legal defence, and turned a blind eye to what Farrell was: a dangerous predator.

And now, after his retirement from Wagga, the bishop has re-emerged in the diocese of Armidale, occasionally taking mass in the small NSW town of Guyra. As one outraged priest told Fairfax Media: "What kind of message does that send?"

In the wake of the Royal Commission's landmark inquiry, Hanna's story is emblematic of an all-too-familiar tale: the failure of religious leaders to sufficiently respond to allegations of child sexual abuse within their ranks.

But some say that if the church is serious about genuine reform, cases like this also raise valid questions. Should bishops complicit in cover-ups be held to account for their past actions? How deeply does the Church feel responsible for the catastrophic mistakes of its past? And how will Australian religious leaders respond to the commission's findings more broadly, via solid steps to ensure that children are protected?

The NSW town of Moree on the banks of the Mehi River, about 600 kilometres north of Sydney, is a quaint little haven with a dark history.

In the 1980s, it was the kind of place parents wouldn't think twice about leaving their child in the care of the clergy – and this was exactly what Farrell relied on to exploit his power as the local assistant priest.

Eventually, though, sexual allegations against Farrell began to surface, and by 1984 he was stood down, placed on "sick leave", and then relocated by the then bishop of Armidale, HJ Kennedy, to another parish in Tamworth East, run by Hanna.

The church's management of Farrell became the subject of a Catholic-commissioned inquiry led by Antony Whitlam, QC, in 2012, which revealed that numerous religious leaders over successive years had mishandled the abuse allegations.  What wasn't clear until the Royal Commission – and what has since angered some of the church's critics and priests – was the extent to which Hanna was involved.

Under questioning, Hanna told the commission that the now-deceased bishop Kennedy had warned him that Farrell was "a big risk" and would need to be placed on a restricted ministry, which meant, in theory, he was not supposed to mix with children during mass, in schools, or at youth groups. When Hanna asked why, Kennedy was frank.

"The bishop said, 'Oh, you know, Gerry, it's that usual thing, he was messing around with altar boys'," Hanna said, later explaining to the inquiry: "It wasn't unknown, your Honour, that there were priests who used altar boys - that they were paedophiles, in fact."

And when Farrell was arrested and charged in August 1987 for the alleged abuse of former altar boy Damian Jurd, it was Hanna who authorised the use of church funds to help pay for one of Sydney's fiercest silks, Chester Porter, to fight the case.

According to a witness at the committal hearing, Porter made "mincemeat" of Jurd in the witness stand, with the magistrate later deciding there wasn't enough evidence to warrant a trial. Farrell went on to reoffend, while Jurd's life went into free-fall. At the age of 28, he killed himself. The impact on his family still lingers.

"That court case was the beginning of the end – it really destroyed him," Damian's brother, Peter, told Fairfax Media. "What Farrell did is one side of the coin, but ultimately the church should be equally responsible for what happened because of the way they hid it. Bishops are usually the first layer of the cover-up."

Asked if he regrets the way he handled Farrell, Hanna says lessons have been learnt. Back then, the clergy's response was "all about the reputation of the church" and ensuring that the priest "had the chance to defend himself".

"It took a crisis to look long and hard at our systems and what we should do," the 76-year-old said this week.

But Hanna insists his knowledge of Farrell's offending "was limited" when he took him in – sure, he knew the priest had been "messing around" with altar boys, and yes, he'd been told to keep Farrell away from children, but "I was never given a rundown of the precise nature of his activities", he said.

"It was all very vague. I think there was a history of being too familiar with altar boys … Did it always imply sexual interference? I don't think so," he says. "It wasn't, in those days, as clear as it would be now."

The broader question is what next for the Catholic church? The Royal commission's findings were scathing, not only of priests who preyed on children, but of the diocesan bishops who shuffled them around and were never challenged thanks to "the culture of deferential obedience" that existed for decades.

In response to the commission's final report, Melbourne Archbishop Denis Hart, president of the Australian Catholic Bishops Council, said the church had been "working diligently to learn from the terrible mistakes that were made" and that all bishops – "individually and collectively" – were considering the commission's recommendations seriously.

Proposals include a national review of governance structures, new mandatory standards, a national redress scheme and measures to ensure Bishops draw upon broad-ranging advice in their decision making. It is not clear which recommendations will be fully implemented.

Nor is it clear whether bishops will be held to account for their past failings, although a current court case against Archbishop of Adelaide Philip Wilson – accused of covering up clergy abuse in the 1970s – could end up being a landmark test case.

Whether there's a crackdown from the Vatican is yet to be seen. Pope Francis signalled a shift after meeting victims of abuse in 2014, condemning religious leaders whose "sins of omission" covered up paedophiles and vowing that bishops who failed to protect minors "will be held accountable".

Since then, a proposal for a tribunal to prosecute bishops who covered up for abusive priests has been scrapped. Instead, the Vatican will simply clarify legal procedures to remove them if the Vatican finds they were negligent – a move that critics have branded as window dressing.

Francis Sullivan, chief executive of the Truth, Justice, and Healing Council, said that while the Pope had made it clear bishops ought to be held to a higher standard, "no one knows exactly what that process will look like, or what the implications will be".

The Royal Commission's findings would therefore be a good place to start, he said, beginning with an implementation body to work through the commission's recommendations.

"The first thing bishops and religious leaders need to put in place is a substantial implementation body to demonstrate to the community that they take these recommendations seriously – and that it won't be business-as-usual.

"The proof will be in the eating."