Although Teeling was made a Lieutenant in the army of the newly-founded Irish Free State, his behaviour and escalating alcoholism became a cause for concern. He had become an embarrassment to the army, but his record of service during the War of Independence made it awkward to publicly discredit him or discharge him. The commander-in-chief of the National Army complained that Teeling had been "publicly misconducting" himself and "bringing serious discredit on us". In October 1922 he accidentally shot a sergeant major dead in Gormanstown camp, Co. Meath. The subsequent investigation cleared him of any malice in the incident. Plans were made to give him a sum of money in order to encourage him to emigrate to Australia. On 19 March 1923 the Department of Finance made out a cheque to Teeling for the sum of £250. The money was apparently to be drawn down from funds authorised by the Free State cabinet for use by the Secret Service.