Bernard Allen, who chairs the Public Accounts Committee, said the department needed a strong boardroom presence to ensure the INS adhered to the code of practice for state bodies.
He said the impending boardroom revamp, which this week saw two directors appointed, was a chance to scrutinise its affairs.
Mr Smith’s department confirmed he would decide in the next month whether to replace or reappoint four out of the five remaining members of the board.
It would not say if chairwoman Chryss O’Reilly’s position was in jeopardy.
Earlier, Mr Allen’s committee ordered the secretary general of the department, Tom Moran, to send it all recent correspondence between agriculture officials and Ms O’Reilly, after he confirmed that the department had recently sought assurances from her that the INS was being run properly.
During the PAC meeting, Mr Moran was subjected to scathing criticism for his oversight of the INS.
He said in past eight months, Ms O’Reilly had twice given assurances that the INS met governance standards. This first happened when its ex-chief executive John Clarke’s expenses were detailed. And again in February when an independent report found the fallout from bullying by Mr Clarke affected the INS’s business.
This week, it was also revealed that €600,000 was spent defending staff bullying claims, Mr Clarke had a €800,000 travel bill over eight years, and there were €719,000 in untendered deals between the INS and key personnel.
Mr Allen said his committee was alarmed by the revelations and wanted the department to investigate.
He said he was “appalled” when Mr Moran said he did not want to intervene in the operation of a commercial semi-state company.
Mr Moran refused to say if the department or the minister accepted the INS’s assurances. He said the minister and Ms O’Reilly met in recent months. Mr Moran said it was not for him to judge whether a subsequent INS report was satisfactory.
“I have to accept that the chair and the board [reported] in good faith,” he said.
Fine Gael TD Jim O’Keeffe said the department appeared to turn a “blind eye” to serious issues.
He said the board could not report on itself when there were questions about its directors involvement in untendered business deals.
Separately, the Oireachtas Agriculture Committee has requested the INS appear before it to explain itself.