The State spending watchdog has found public funds committed to Galway's Art House Cinema increased by €2.1 million from the initial expected outlay of €6.3m.
The Comptroller and Auditor General also found the State bore the financial risks which crystallised when the project ran into difficulties.
It says there was no overall oversight arrangement in place for the project at the outset despite the involvement of a variety of public agencies.
It has recommended Government departments should review their approach to projects which are being grant aided, in particular where the key project risks are carried by the State.
It also says where projects do not progress as expected or serious shortcomings are identified with the project sponsor, early action needs to be taken.
This includes formal reviews of the project viability, in line with the Department of Public Expenditure and Reform's Public Spending Code requirements.
