Equipment for a cross-border high-speed broadband project was bought for €1.3 million using public funds when the true value was €30,000, Northern Ireland’s auditor said.

The "virtually obsolete" Nortel racks were never used and Northern Ireland's Enterprise Department lost €2 million after the EU withdrew, according to an audit office report.

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 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 was given for equipment that was never used in the project, the audit office said.

The racks were bought by Bytel, a Belfast IT company, for €1.3 million from a “related” company. The audit report added: “Evidence suggests that this equipment cost €30,000. 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. However, Europe withdrew because of irregular expenditure and Northern Ireland's Department of Enterprise, Trade and Investment lost €2 million of EU funding and the Republic's Department of Communications, Energy and Natural Resources lost €1.8 million, the audit office report said.

PA