The HSE breached tendering rules by extending a controversial arrangement for an outside executive to fill a senior management position on a contract basis in the Limerick group of hospitals, the organisation's internal audit unit has found.

The Irish Times reported last May that the group of hospitals had paid a contracted senior manager €258,000 over a 13-month period since last year. Subsequently, in July, members of the Impact trade union at the group of hospitals began industrial action in protest at the salary scale paid to the executive. The union had argued that the amount being paid was twice the correct rate.

Impact said that under the work to rule, staff were refusing to acknowledge instructions from the manager, provide data to him, co-operate with changes directed by his office, or agree to relocate, redeploy or change assignments. The union said yesterday the industrial action was continuing.

During the summer, chairman of the Dáil Public Accounts Committee John McGuinness raised concerns that a company known as Starline Management Consulting Ltd was paid €258,000 to fill the position of chief operations officer/deputy chief executive officer at the hospital group.

The HSE told the PAC in a letter this week that its director general Tony O'Brien had instructed its internal audit unit to review the issues raised. The HSE said the extension of the contract by management "resulted in non-compliance with policy thresholds for formal tendering and EU tendering".