The Department of Health has warned that overspending by the HSE could reach €400 million by the end of the year, unless remedial action is taken.
In briefing material prepared by officials for its new ministers of State, the department said that the recent indications were that savings of the order of €100 million on funding originally earmarked for capital projects would be required by the HSE as part of the solution to the current spending overruns.
The department said that at the end of May the HSE had exceeded its budget for the period by €185 million on the non-capital side and that the management of the emerging revenue overspend in the HSE was one of the most pressing priorities for its finance unit at this time.
However, the HSE said that it was still forecasting that it would break even financially by the end of this year.
The Department of Health said the HSE had indicated that the two areas where it was experiencing pressure were the national hospitals office and demand-led schemes.
It also said the Department of Finance had indicated that it would be briefing Minister Brian Cowen on the current financial position of the HSE and that it wished to be kept fully informed of future developments.
In a statement, the HSE said it did not provide such a specific figure of its projected overrun for the year to the Department of Health.
"It is our understanding that it is most likely a projection derived from a simple extrapolation of our vote return figure provided to the Department of Health and Children to the end of May 2007," it stated.
The HSE said that in the period since May, it had undertaken a number of additional cost-control measures across the Republic to address the budget overrun.
"Senior managers have been formally requested to ensure these measures are implemented. These measures include an extended value-for-money programme.
"The HSE continues to prioritise frontline services and is continuing to meet its commitments as outlined in the 2007 Service Plan. It expects to have delivered in full on the Service Plan by the year end.
"The HSE continues to keep the financial position under review but would stress that we are projecting a break-even position for the full year 2007," it stated.
The Department of Health also said in the briefing material that it was now clear the HSE's approved capital programme for the year - which had a budget of €487 million excluding spending on information technology - "will not require the full 2007 capital allocation".
The department said: "The capital figures are showing an underspend of €82 million. One of the main causes of underspending to date is that there is a preponderance of smaller scale projects [ under €5 million] than in previous years."
The HSE was at the centre of major controversy several weeks ago after it emerged that it failed to spend €97.7 million in capital funding last year that had been allocated to it by the Government for new developments and facilities.