Ombudsman Emily O'Reilly has warned public servants that cost-cutting is no excuse for poor services.
Launching her last annual report before taking up a new role in Europe, Ms O'Reilly said austerity could not be blamed for inequality and denial of rights.
Ms O'Reilly said public services had been abolished on two occasions in the year after she had highlighted problems with them.
The surprise scrapping of the mobility allowance and motorised transport grant underlined "moral dilemmas" facing watchdogs during times of austerity, she said.
"If they highlight illegality and inequitable treatment of citizens, they risk public services taking the easy option and abolishing the entire scheme, grant etc for everyone," Ms O'Reilly said.
"Twice in the last year I have faced this dilemma, and on both occasions my worst fears were proven correct."
The ombudsman dealt with 3,412 complaints last year, the largest number relating to the Department of Social Protection.
Just under a third were against local authorities and a fifth were about the Health Services Executive (HSE).
Ms O'Reilly said her biggest difficulties during 10 years in the role were with health chiefs.
The Department of Health and the HSE would "run to the lawyers" any time money or reputation was at stake, she said.
"There is a culture which means that whenever trouble looms you reach for the nearest lawyer and you get advice that will shore up whatever line you want to take," she said.
"Because the law is never pure... whatever side a barrister is hired for, you can give an opinion to suit whatever."
Ms O'Reilly said her office had not been able to break through the legal barriers with the Department of Health, and urged a proper relationship between the sides where they would be able to talk "like grown ups".
Ms O'Reilly leaves the post tomorrow for her new role as European Ombudsman in Strasbourg.
Her successor would be appointed next week, she said.