The State lost more than €2.27m following an investment in a cross border high speed broadband project.

A report by the Comptroller and Auditor General and the Northern Ireland Audit Office found serious weaknesses in the management and oversight of the Bytel project by two government departments.

It said that the Department of Communications, Energy and Natural Resources and the Department of Trade and Investment in Northern Ireland disagreed about the responsibilities each had in relation to the project.

It also said that their communications about it were carried out on an ad-hoc basis.

It also found that when a director of Bytel made allegations to the Department of Enterprise about false accounting practices and withdrawal of funds the internal investigation carried out by the department found that no further action was necessary.

However, it said this investigation was not independent, sufficiently rigorous and its finding were not supported by adequate evidence or supporting documentation.

When the Department of Communications was made aware of the allegations by the Department of Enterprise it did not attend a meeting about the issue.

Two years later when a whistle blower made further allegations about the project there was a delay in over a year of the Department of Enterprise reporting an irregularity to the EU, who had been originally involved in funding the project.

It also found that €4.2m of the €4.3m paid in grants to Bytel should not have been paid as it was ineligible expenditure.

The two departments also lost €3.79m in EU funding when the project was withdrawn from a particular program.

It also found the first grant paid to the project paid for equipment not used in the project while the last grant claim contained no back-up or verification evidence.