Four million euro of Irish Aid funds to Uganda has been misappropriated in a "a very sophisticated, well-thought-out fraud involving a high degree of collusion at a senior level", according to an audit report.

The Irish Independent reports that none of the money was ever used to assist the war-torn region because funds was siphoned off by senior officials. According to the Department of Foreign Affairs interim report, the officials had a knowledge of the controls, including passwords, and were diverting  a total of €11.6m, including the €4m in Irish Aid, into two bank accounts under the control of the Office of the Prime Minister (OPM).

The €4m was tracked from Irish Aid to a designated holding account on July 22, 2011, when it should have been immediately transferred to a consolidated account. Instead, the money remained in the holding account for five months.

According to the report, the money, along with aid from Sweden and Denmark, was then "fraudulently" transferred to a dormant account in the Bank of Uganda, controlled by the OPM. The funds were then withdrawn from this "crisis management account" under a number of guises.

The Irish Independent reports that the key people involved in the fraud have been identified with some being arrested and others suspended pending police inquiries.

The report recommends that the Government recovers the €4m and halts aid payments to the country until follow-up audits in Uganda are completed, which could take as late as 2013 to complete.

"I think the systems control could have been stronger," said Tanaiste Eamon Gilmore, who stressed that the missing funds would be repaid but was unsure of when it would be returned. It would be "in weeks, months – that process is being handled by our ambassador in Kampala," he said.