The health committee has been told that funding allocated for extra staff in hospice and palliative care in 2006 and 2007 disappeared.
The Irish Hospice Foundation chief executive Eugene Murray said that as a result only half of the 130 new positions approved for funding in those two years had been appointed.
Irish Cancer Society Chief Executive John McCormack said it was a failure of Government to live up to its own commitments and was simply not acceptable.
The HSE said the funds were used to balance overruns in other key services.
The HSE's Hugh Kane said there had been deficits in some existing sectors during 2006 and 2007 and a decision had to be made on core services that were sometimes at the cost of developing new services.
He confirmed that the funds allocated for palliative care had been withdrawn to fund other services.
The Irish Association for Palliative Care, Dr Dominic O Brannagain, said he could not accept the HSE's explanation and it was a cruel irony that the voluntary organisations were doing things properly and gathering the evidence and then being punished because other people were not doing their jobs properly.
He also pointed to evidence showing that palliative care was cost effective and that currently there was no specialist palliative care unit that was overbudget.
The funding had been approved for a range of posts including consultants and social workers.
The three associations have written to the Minister for Health asking her to instruct the HSE to apply the promised funds for 2006, 2007 and 2008 for the purpose for which they were intended.
The committee also heard that hospice care varied considerably from region to region.
