FÁS DIRECTOR-general Rody Molloy rejected a senior Fás executive's evidence to an internal company inquiry that Mr Molloy had ordered him to spend €100,000 on advertising with a Dublin local newspaper.
The decision to spend the money with the Lucan and Blanchardstown Gazette in 2005/2006 was questioned earlier this year by the Comptroller and Auditor General (CAG).
In his report, the then State spending watchdog John Purcell said the Gazette contract was one of a number of decisions "which did not appear to be conducive to the attainment of value for money".
The newspaper is part of the Gazette Group Newspapers, which has eight titles serving the capital. The Irish Times bought a 45 per cent share in the company in 2007, and subsequently a controlling interest.
Two pages from the auditors' 68-page report have been released to Fine Gael Dublin West TD Leo Varadkar following requests under the Freedom of Information Act.
In these pages, the auditors record that Fás executive Greg Craig handled the placing of all of the State agency's €9 million worth of advertising even though its advertising company, AFA O'Meara, continued to be paid fees for this work.
Mr Craig was questioned about the spend with the Lucan and Blanchardstown Gazette which was "unusual in that it was not a national paper", although Fás did advertise with other non-national media.
"Greg Craig told Internal Audit that he had been requested to place business with this group by the director-general of Fás .
"At a subsequent meeting with Internal Audit, the Director General denied that he had ever requested or directed Greg Craig to place business with the Gazette Group," the auditors reported.
In his report, the CAG said Fás and its advertising agency AFA O'Meara "engaged in transactions which did not appear to be conducive to the attainment of value for money".
These included a €250,000 contract in 2002 to organise its Opportunities 2002 tradeshow "which was at least twice as much as was paid previously, or since".
Fás had to pay €27,400 more than it should for a 2005 public tradeshow because it signed an incentive-based, rather than a fixed-cost, contract after the event was over.
Fás's internal auditors reported that between 25 per cent and 30 per cent of its total advertising budget went on outdoor media - far above the 10 per cent industry average.
In the Dáil yesterday, Fine Gael leader Enda Kenny, who did not identify Mr Craig by name, questioned his decision to place all advertising himself, even though the advertising agency got paid anyway: "It is like keeping a dog and barking oneself."
He noted the "straight-forward conflict of evidence" between Mr Molloy and Mr Craig.
"Their evidence was directly contradictory. The official said the director general told him to place this advertisement.
"This is an example of sloppy management of the public's money," he told Taoiseach Brian Cowen.
Meanwhile, the Garda Fraud Squad has confirmed that it is investigating an allegation made by Fás that it was defrauded by a number of its contractors in relation to separate matters.
A spokeswoman for the Garda last night said it would be "inappropriate to make any further comment" until the probe was completed.
Asked to take questions by The Irish Times yesterday, Fás declined, and instead issued a brief statement saying that, while carrying out its statutory functions, its internal audit uncovered matters of concern.
These were notified to the CAG, it said, adding this demonstrated the robustness of Fás's internal audit function.
"Fás also notified gardaí who are investigating the actions of a number of contractors. As the gardaí investigation is continuing, Fás is unable to make any further comment."