IRELAND 25 February 2017
Press Release – Special Report:
Management of a Cross-Border Initiative : the Bytel Project
Mr Seamus McCarthy, Comptroller and Auditor General and Mr Kieran Donnelly, Comptroller and Auditor General in Northern Ireland, have completed special reports on the management of a cross-border broadband initiative (the Bytel project).
The reports are the result of a co-ordinated examination between the Office of the Comptroller and Auditor General and the Northern Ireland Audit Office. This is the first time this approach has been used.
The reports have been presented to Dáil Éireann and to the Northern Ireland Assembly today, 3 March.
The Bytel Project
The Bytel project was undertaken to provide high-speed broadband connectivity linking Belfast, Craigavon, Armagh, Dundalk and Dublin. It was intended that the project would be funded under Intereg III, with around three-quarters of the funding to be provided by the EU and the balance through co-financing provided by the member states.
The Special European Union Programmes Body (SEUPB) has responsibility for managing cross-border European Union structural funds programmes in the border region of Ireland and Northern Ireland, including Interreg. SEUPB appointed the Department of Communications, Energy and Natural Resources (DCENR) in Ireland and the Department of Enterprise, Trade and Investment (DETI) in Northern Ireland, as joint implementing agents for the measure under which Bytel was to be funded.
Loss of EU funding
Grants totalling €4.3 million were paid to Bytel in 2004 and 2005. Subsequent reviews found that just 3% of the expenditure claimed was eligible under Interreg rules. The project was withdrawn from the Interreg programme, resulting in a loss of €3.79 million of EU funding - €2.03 million paid by DETI and €1.76 million paid by DCENR.
Project assessment and appraisal
The Bytel proposal narrowly passed the threshold required for funding of projects. There were a number of shortcomings in the project appraisal including weaknesses in the definition of what was to be delivered by Bytel, a lack of clarity over the source and ownership of the assets required to deliver the project and little evidence to support project costs.
Failure to re-appraise project
Aurora Telecom was initially proposed as a project partner, but it withdrew from the project two months after the two Departments had issued their letter of offer of funding. Nine months later, Bytel entered into an agreement with another company which provided access to its existing infrastructure in Northern Ireland. This fundamentally changed the nature of the project and the effect of the agreement was also to reduce the estimated project costs by 39%. Despite the changes, no review of the project or re-calculation of the offer of grant support was carried out.
Checking and authorising of grant claims
Service level agreements between SEUPB and the joint implementing agents, required that grant claims should be verified by both implementing agents and approved by them as eligible expenditure.
Between 2004 and 2005, four grants totalling €4.3 million were paid. There were pressures on the implementing agents to pay grants within tight deadlines due to annual EU spending targets and
- the first grant payment included €1.3 million in respect of equipment that was not subsequently used for the project.
- the final claim – for €2.07 million – contained no back-up or verification evidence.
Handling of allegations about the Bytel project
Whistleblowers made allegations about the project in 2006 and 2008. However,
- an internal investigation by DETI into the 2006 allegations failed to identify problems with the project and
- there were significant delays in properly addressing the 2008 allegations.
Roles of joint implementing agents
Both Departments had equal responsibility for administering the programme under the terms of the service level agreements that each had with SEUPB but DCENR took the view that DETI was the lead implementing agent. DETI disagree.
DCENR did not seek documentation from DETI to support claims of project expenditure when grant payments were being made.
Communications between DCENR and DETI, as joint implementing agents, were carried out on an ad hoc basis. This was inappropriate for an important inter-regional infrastructural project which was in receipt of grants of €4.3 million and for a sub-measure with an €8 million overall spend.
SEUPB is one of six cross-border bodies set up as part of the Good Friday agreement.
The NI C&AG’s report is appended to the report.
Enquiries about the report should be directed to John Riordan at (01) 603 1027 or at email@example.com.