A Northern Ireland funding body has defended its procedures after it was ordered to recover £26,500 of EU money from an ex-prisoners group linked to the PUP following an anti-fraud probe.
The investigation was launched by the EU's anti-fraud office after it was discovered peace money had been given to a group which used a building where guns were found.
The former Northern Ireland Voluntary Trust (NIVT) had distributed the money to former loyalist prisoners in Co Antrim.
However, weapons, including a powerful machine gun, were found by police in the offices of the north Antrim branch of Ex-Prisoners' Interpretative Centre (EPIC) in Ballymoney in May 2000.
The haul also included a rifle, booby-trap device, stun gun, three replica weapons, a large quantity of ammunition, military-style clothing and baseball bats.
The ex-prisoners' group said it had vacated the offices prior to the arms find but its funding was frozen immediately afterwards.
Stringent new monitoring procedures have since been introduced for the distribution of all future EU peace money.
The investigation into the incident has since found there were serious weaknesses in the voluntary trust's monitoring of the funding to the group.
It said: "On the balance of probability, the EPIC offices were used by and linked to the Progressive Unionist Party in contravention of the terms and conditions under which the grant was made."
It recommended that the grant be returned.
However, PUP leader David Ervine said it was unlikely the money would be retrieved. His party had also been tenants of the building but had left before the weapons find.
"Who would you get the money from? It was an autonomous group of people, a small nucleus of people who had set up an ex-prisoners group. They are now defunct," he said.
"The £26,000 was to pay wages and rent and there was no suggestion as far as I can tell from this report that there was any inappropriation of money.
"The money was used for the purpose which it was supposed to be used, which was to pay wages and to pay rent so I don't know what they want the money back for."
Last night (Friday) a spokeswoman for the Community Foundation for Northern Ireland (CFNI) – formerly NIVT – stressed that the report found "no evidence to suggest that EU funds were used to purchase arms or other terrorist equipment found on the premises".
"This funding represents only 0.01 per cent of EU Peace I funding managed by the CFNI," she said.
"While it is hard to delineate between political and non-political activity, the CFNI will implement the recommendations regarding monitoring of expenditure by funded bodies.
"Prior to the issue of this report CFNI revisited and revised their monitoring systems. Under the current Peace II funding more stringent monitoring systems are in place."
Last night SDLP North Antrim assembly member Sean Farren called for the CFNI to work to retrieve the money.
"Money given in good faith has to be properly controlled and scrutinised to ensure that it is spent on the objectives presented by a project," he said.
"Abuse of funding cannot be tolerated and every effort must now be made to recover the money that has been used in this way."
