The setting up of the Equality and Human Rights Commission was “patently flawed” and cost taxpayers almost £39 million, a Commons report said today.

The government’s equalities watchdog was formed in 2007 from three equality bodies but has been in turmoil for the last year over accusations of ‘unnaceptable’ spending.

In the summer, four commissioners, including Stonewall chief executive Ben Summerskill, resigned. Some criticised chairman Trevor Phillips’ leadership skills. The National Audit Office also refused to approve its accounts.

Today’s parliamentary report said that setting up the body cost taxpayers a surprising £39 million and that it had made mistakes when rehiring seven members of staff from the three dismantled equality bodies.

The report said that seven staff members were given severance pay but were then rehired as consultants at a cost of £338,708.

Five of those staff were given their pay-offs and continued working for the organisation without a break, it said. Their jobs were not advertised and they were not asked to pay back any money.

The report said that the EHRC had been in a “great hurry” to be ready for its starting date and had found itself with staff shortages.

One of the seven who left the now-defunct Commission for Racial Equality was found to have been paid £15,000 three months after he left the EHRC, a payment which has not been explained.

The government’s public accounts committee chairman, Edward Leigh, wrote in the report: “”The process by which this new body had been established, at a total cost to the taxpayer of nearly £39m, was patently flawed.

“Symptomatic of this was that, before its launch, the commission had no control over which staff left the former commissions through an early exit scheme, costing some £11m, leading to a large loss of staff with valuable skills.”

The EHRC was accused of failing to follow the correct channels for rehiring staff and had not obtained approval from the Treasury.

It was also criticised for spending for spending more than £9 million on new computers and the report questioned why it had not used equipment left over from the three defunct groups.

An EHRC spokesman told the BBC: “In their reports, both the National Audit Office and the public accounts committee acknowledge the extreme pressures that commission was under to open its doors on October 1st 2007.

“Under these circumstances, the commission made mistakes – for example not making an adequate case for re-engaging several former members of staff.

“We have accepted these criticisms from the PAC [public accounts committee] and – as the NAO has recognised – we are taking steps to improve our financial and performance reporting, and strengthen our governance arrangements and other control systems.”