The scope of the investigation by the Oireachtas Public Accounts Committee into the indemnity deal between the State and 18 religious orders is to be widened significantly.
The powerful committee has now decided to demand sight of all confidential papers held by all Government Departments, including the Taoiseach's office, on the deal reached in June 2002.
The decision was taken during a private meeting after civil servants from the Department of Finance and Education and Science appeared before the PAC on Thursday.
The chairman of the PAC, the Fine Gael TD for Sligo-Leitrim, Mr John Perry, said: "We are seeking all the papers on the deal from every office, including the Taoiseach and the Attorney General."
A two-week deadline will be offered to all State bodies. "Once we have studied them, we may decide to call new witnesses before us," he told The Irish Times.
Under its statutory powers, the PAC has the right to investigate all spending by State bodies, but not to question the policy decisions behind that spending.
Mr Perry said: "Nobody is disagreeing that the State is fully liable for what happened in institutions run by the religious.
"But the big mistake seems to have been that the then minister for education, Dr Woods, underestimated the contribution needed from the religious institutions. Our concern is for the taxpayer. Nobody can quantify the ability of the religious congregations to pay. That was never quantified."
State lawyers were not invited to a number of key meetings when Dr Woods agreed the €128 million contribution in cash and lands from the congregations.
Mr Perry said: "The risk for the taxpayer quadrupled. The indemnity got wider and wider. "The level of negotiation between the State and the congregations seems to have been very poor.
"The real negotiators seem to have been on the church's side," he said, adding that the State had been required already to indemnify the congregations in court actions and could face many more such cases.
It has also emerged that the Minister for Education, Mr Dempsey, briefed two of the six Fianna Fáil PAC members, Mr Sean Fleming and Mr Sean Ardagh, on the background and detail of the agreement before Thursday's meeting.
Rejecting suggestions that he had acted in a partisan fashion, Mr Fleming said he had requested the briefing publicly at Tuesday night's parliamentary party meeting. "I have an obligation to be as well briefed as possible before attending PAC meetings. I spent one whole night going through the Comptroller and Auditor General's report. As a TD I felt that there is a duty on all members to gather information from all possible sources of information."
Senior Fianna Fáil figures are understood to have been worried that the PAC meeting would add fuel to the dispute between Dr Woods and the Minister for Justice, Mr McDowell.
The Department of Education last night said it was standard procedure to brief TDs on all sides of the Dáil if they requested a briefing.