Over £1.3 million has been paid out in "bounties" which brought a small number of building workers into the industry's pension scheme between 1998 and 2000.
Amounts of £350 were paid out on each of 3,816 cases reported to the Construction Industry Monitoring Agency of employers failing to pay pension contributions on behalf of employees.
But only 276, or 7.2 per cent, were carried through to a successful conclusion.
The scheme has been condemned as expensive and ineffective in a confidential report, a copy of which has been seen by The Irish Times and which was prepared for the agency by KPMG consultants.
The Dublin Alliance of General Construction Operatives has been campaigning for the past two years to reform the system despite resistance from the construction unions, which are the main beneficiaries of the "bounty" system.
Yesterday alliance chairman Mr Paul Hansard said: "The report has vindicated our stand." He found it particularly disappointing that after so much expenditure only 61 per cent of eligible construction workers were in the scheme.
"If the unions are serious about putting things right, they should donate the money they have received to a benevolent fund for the families of building workers forced to retire, through no fault of their own, without a pension."
The chairman of ICTU's construction group, Mr Timmy White, said the unions now accept changes are needed. "The report gives us an excellent opportunity to restructure the scheme. It won't be a `bounty' system in any shape or form but will be fair, transparent and operated by full-time investigators."
The KPMG report shows that only 10 per cent of cases taken were brought to a successful conclusion in 1998 and six per cent in 1999 and 2000. It concludes that "performance indicators/measures point to lack of effectiveness at this level" and adds: "Sanctions at the disposal of investigators for concluding cases are rarely used."
The main sanction is referral to the Labour Court. But while well over 1,000 investigations took place each year, the number referred to the court never exceeded 10.
The report sees the system of paying bounties on the basis of initial identification of the failure of a company to register employees as a flaw.
It also describes the investigative process as cumbersome. It says the "administrative core currently does not have any role in setting targets or formally measuring and reporting on performance; does not co-ordinate the activities of investigators, e.g. in relation to target clients or geographical spread" and "does not have any role in the recruitment or selection of investigators carrying out work on behalf of the agency."