The National Audit Office says at least 500 holidaymakers missed their departure dates, following problems with a new computer system, which left the agency unable to issue passports on time.

Umbrellas for people waiting in the rain cost £16,000, according to the NAO.

The BBC's Jane Peel: "The fiasco cost the passport agency its good reputation"

Total compensation currently amounts to £161,000 but is likely to rise further. A futher £6m was spent on staff overtime.

The problem arose, says the NAO, because management failed to check a new Siemens computer system properly before it was introduced, and failed to make proper contingency plans.

Holidaymakers had to queue for hours for passports

David Davis MP, chair of the Commons Public Accounts Committee, said: "The total inability of the Passport Agency this summer to cope with the demands of its clients was a complete fiasco."

The disclosure comes days after the Home Office admitted passport fees could go up from the current £21 to pay for the £12.6m cost of emergency measures.

The Passport Agency lost its Charter Mark - awarded for excellence in public service - earlier this year as a result of the shambles.

'Run on the cheap'

The Public and Commercial Services Union, which represents staff at the agency, welcomed the report "as a total vindication of our members' hard word work over the summer".

Frank Campbell, its national officer, said the document acknowledged "that management should have acted earlier when we called for more, permanent, staff to be recruited".

He added: "The report recognises that the agency has been run on the cheap.

"If we are ever to provide the public with the quality service they deserve and guarantee to turn round passport applications within the 10-day target, then the agency must be properly resourced."

'Badly damaged'

Passport Agency head Bernard Herdan, Siemens UK managing director Gary Pusey, and Home Office permanent secretary David Ormand - have been summoned to appear before the Public Affairs Committee next Wednesday.

Mr Herdan said the report had identified "important lessons for the future".

"The Passport Agency is actively engaged in learning these lessons," he said.

Home Office Minister Barbara Roche said public confidence in the agency had been "badly damaged" by this summer's problems.

"We are well aware that strong and sustained evidence of improvement will be required to rebuild it," she said.

Shadow Home Secretary Ann Widdecombe said the public had "taken the rap" for Home Secretary Jack Straw's "failure to avert a crisis in the agency".

"Common sense should have told him that to change the law on child passports at the same time as introducing a new computer system into the agency was storing up trouble for the future," she added.