Broadband project bought equipment for almost £1m... it was valued at just £21k, says NI auditor
Equipment for a cross-border high-speed broadband project was bought for nearly £1m - when its true worth was just over £21,000, Northern Ireland's auditor said.
The "virtually obsolete" racks made by Nortel were never used and Northern Ireland's Enterprise Department lost two million euro (£1.45 million) after the EU withdrew, according to the review.
The company behind the ambitious plan, Bytel, aimed to provide faster internet connections to homes in Belfast, Craigavon, Armagh, Dundalk and Dublin.
Comptroller and auditor general Kieran Donnelly, who investigated the matter, said: "Bytel shows what can go wrong when projects like this are not handled properly.
"I have serious concerns over how it was managed and the legitimacy of the grant payments made. The response to whistleblowers fell well short of the standard required and a robust investigation took too long to complete."
Although ineligible for funding, 1.3 million euro (£940,000) was given for equipment that was never used in the project, the review said.
The racks were bought by Bytel, a Belfast IT company, for 1.3 million euro from a "related" company, the audit office said.
The report added: "Evidence suggests that this equipment cost 30,000 euro (£21,000).The racks were never used for the project."
It said a whistleblower's concerns, which alerted Stormont's Enterprise Department to the true cost in 2008, were not brought to the attention of European funders until 2011. The project, approved in 2004, was to be funded by the EU.
In the end Europe withdrew because of irregular expenditure. The Department of Enterprise, Trade and Investment (DETI) lost two million euro (£1.4m) of EU funding and the Republic's Department of Communications, Energy and Natural Resources lost 1.8 million euro (£1.3 million), the audit office report said. Bytel was paid grants worth 4.3 million euro (£3.12 million).
Its total actual costs were just under four million euro (£2.9 million), the audit office said.
The auditor said the project narrowly passed the assessment for entry to the programme. A key element in its favour was a proposed partnership with Aurora Telecom. The document said: "The strength of this relationship was not probed adequately."
Aurora withdrew shortly after funding had been granted and the project changed significantly, which the audit office said should have led to a recalculation of the grant, but this did not happen and it was overpaid."
The report found: "The actual costs of delivering the project were significantly lower than those set out in the original proposal... DETI began legal proceedings in November 2010 to recover 4.3 million euro grant paid. These proceedings are ongoing."