"The evidence, both public and private, painted a compelling picture of jobs on the public purse according to factional loyalties, and widespread misuse of public resources for political purposes," he said.
"We criticise a legislative framework that provides few, if any, consequences for abusing public resources and that allows such conduct to continue unchecked," IBAC commissioner Robert Redlich said.
"The difficulties in proof and the state of the law are such that we cannot recommend prosecution."
The anti-corruption watchdog said the investigation also did not uncover examples of "traditional" corruption, with decision-making said to fall within the zone of "grey" corruption that benefited MPs' associates, but did not amount to criminal conduct.
However it warned the corruption could have a "deeply damaging" effect on public confidence in democracy and its institutions.