By this time he had become the company's chief with a salary of around £800. On the opening of the canal in 1803 he became an engineer under the Directors-General of Inland Navigation, whilst still receiving a reduced salary from the Grand Canal company until 1810. In 1805, he was sent on a six-week fact finding tour of engineering works in England and Wales, reporting on canals, bridges, docks and railroads. On his resignation in 1810 the Board recorded that Killaly had 'conducted himself with the most unwearied assiduity and the most perfect and unimpeached integrity' during his service to the company.
Together with John Brownrigg, he inspected the state of the River Shannon Navigation and made a comprehensive report to the Directors with a number of proposals for action on the upper part. He supervised the construction of lateral canals at Athlone and Meelick. He also advised on the Corrib, Lagan, Newry and Suir navigations. He surveyed an extension to the Royal Canal to Lough Allen but by this time the Royal Canal Co was in financial trouble and was declared bankrupt in 1813, leaving the Directors-General to complete the line to the Shannon. Killaly resurveyed the route from the summit west of Mullingar to a new entry into the Shannon using the Camlin River. This was let as a single contract and completed substantially on time and within budget in 1817, including a major aqueduct across the River Inny. In 1814 he surveyed the line of a canal to connect Lough Erne with Lough Neagh. The plan was approved and the Ulster Canal Co was eventually formed in 1825 to undertake construction, though he was instructed to resurvey it to cut costs.
In 1823, he was asked to re-examine his plans for an extension of the Grand Canal to Ballinasloe in County Galway and offered to act as Directing Engineer on condition that his son, Hamilton be appointed as superintending engineer. He used his experience of driving through bogs by driving a drainage channel along the centerline of the canal with similar and interconnecting drains at 25 and 60m on each side with transverse drains. In this way a uniform settlement was achieved over a wide area, avoiding the need for high embankments.
Between 1820 and 1826, Killaly was seconded by the government to deal with some 88 miles of road improvements to provide employment in Clare, parts of Limerick, Galway, Mayo and Roscommon, including numerous bridges. At times he was responsible for more than 9,000 workers in these famine relief schemes. Reporting in 1822, Killaly said "the great destruction of morals and waste of public property which have taken place in the county of Clare from this cause (jobbing) is beyond my power to calculate" and in 1830 he expressed the hope that the presentment system would be eradicated.
On his death in 1832 a large memorial was erected by his widow in St. Patrick's Cathedral, Dublin.