The report, which examines the sale of Nama's Northern Ireland portfolio, was carried out by the Irish Parliament's Public Accounts Committee (PAC)
Mr Cushnahan, a Belfast businessman, was on the board from 2010 until 2013.
He was a financial adviser to seven different Nama debtors, an interest he disclosed at the time as required.
However, the PAC said the he should have been removed from the board when those interests were disclosed.
That goes further than an earlier report by the Irish Auditor General.
It said Nama should "have formally considered" whether Mr Cushnahan's involvement in discussion of its Northern Ireland strategy was consistent with his involvement as a financial adviser to debtors.
Nama, an Irish state agency, was established in 2009 to take control of billions of euros of bad property loans which were damaging the Irish banks.
It sold its entire Northern Ireland portfolio to Cerberus, a US investment fund, for Â£1.24bn in 2014.
The PAC has concluded that the sales process, which lead to a loss of Â£162m, was "seriously deficient" and Nama had been unable to show it got value for money for the state.
It said that key elements of the sale were influenced by one of the bidders, US fund Pimco.
The report also finds it was not "procedurally appropriate" for the Irish Minister for Finance, Michael Noonan, to meet with Cerberus, as it could have given the perception of preferential treatment.
This conclusion was disputed by committee members from Mr Noonan's Fine Gael party.
Mr Cushnahan has consistently denied any wrongdoing in relation to the deal.
The failure to remove Frank Cushnahan from Nama's Northern Ireland advisory board was "a failure of corporate governance", a report has concluded.