LONDON The UK Health Security Agency was set up with financial controls that were so weak parliament cannot establish whether it used funds in the way intended, a critical report by lawmakers said on Wednesday.

The UKHSA, which was established in 2021 during the COVID-19 pandemic to take over responsibility for public health and health protection, responded to the criticism by saying it had now improved its governance.

Parliament's Public Accounts Committee said that 3.3 billion pounds ($4.20 billion) of inventory for the country's COVID-19 test and trace system could not be properly accounted for after it was transferred to the UKHSA.

"It is completely staggering... that an organisation envisaged as a foundation stone of our collective security was established with a leadership hamstrung by a lack of formal governance," committee chair Meg Hillier said.

The UKHSA's chief acknowledged that there had initially been issues from the "unprecedented circumstances" in which it was founded, saying it had taken its accounts and financial controls "very seriously" but there had been "inherited significant pre-existing accounts challenges without full governance autonomy."

UKHSA took over from Public Health England as the government looked to combine several public health functions - including those linked to the pandemic response - into one organisation.

"We have already instituted strong governance arrangements in a hugely complex organisation at the earliest opportunity within the controls available to us," UKHSA Chief Executive Jenny Harries said in a statement.

"This progress means our organisation is now substantially different in terms of stability, governance and financial controls."

She added that the body was working with government to "ensure the robustness of our accounts is recognised both now and for the future" and that it was fulfilling its remit despite inherited financial challenges.

($1 = 0.7859 pounds)

(Reporting by Alistair Smout; editing by William James)