We are considering the Dublin City Enterprise Board annual financial statements 1995, 1996, and 1997; Fingal County Enterprise Board annual financial statements 1994, 1995, 1996 and 1997; South Dublin County Enterprise Board annual financial statements 1994, 1995, 1996 and 1997 and the Dún Laoghaire-Rathdown County Enterprise Board annual financial statements 1995, 1996, 1997 and 1998. I welcome Mr. Gerard Macken, the chief executive officer of the Dublin City Enterprise Board. Perhaps he will introduce those accompanying him.
Dún Laoghaire-Rathdown County Enterprise Board.
Mr. G. Macken (Chief Executive Officer) Dublin City Enterprise Board; Mr. P. Douglas (Acting Chief Executive Officer) Fingal County Enterprise Board; Mr. L. O'Byrne (Chief Executive Officer) South Dublin County Enterprise Board and Mr. M. Johnson (Chief Executive Officer) Dún Laoghaire-Rathdown County Enterprise Board, called and examined.
Mr. Macken
I am accompanied by my assistant, Ms Vanessa Carey.
From Fingal County Enterprise Board, I welcome Mr. Paul Douglas, Acting chief executive officer. From South Dublin County Enterprise Board, I welcome Mr. Loman O'Byrne.
Mr. O’Byrne
I am accompanied by my assistant chief executive, Mr. Sean McDonald, who also acts as company accountant.
I welcome Mr. Michael Johnson, chief executive officer of Dún Laoghaire-Rathdown County Enterprise Board. The Department of Enterprise, Trade and Employment is represented by Mr. Sean Murray, principal officer for small business and local enterprise. All witnesses should be made aware that they do not enjoy absolute privilege and should be appraised of the provisions of section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, which grants certain rights to persons who are identified in the course of the committees proceedings. I will ask the Comptroller and Auditor General to introduce these reports. We will take each one briefly, seriatim, and then have general questions.
Mr. Purcell
The committee is resuming its examination of the accounts of a selection of county enterprise boards and today we are dealing with enterprise boards from the general greater Dublin area and their activities since their incorporation as companies limited by guarantee in late 1994 and early 1995. Prior to that, the committee will be aware that the boards had been operating since they were set up around 1993 as committees with the general aim of fostering and supporting small scale, locally based business activity.
As I mentioned at last week's meeting, the accounts for the boards are compiled to a standard format which facilitates comparative analysis and provide information in a way which clearly indicates the nature and scale of their financial activities. The emphasis of the audit in the early years was to ensure that proper procedures were put in place and some tightening up has been done. As a result, I am satisfied the boards have, generally speaking, a corporate governance framework appropriate to their size. While matters have been drawn to the attention of boards over the years, as a result of the audits, by way of management letters, there were no issues which in my opinion merited a public accountability. From that point of view, Chairman, we are talking about clear audit reports on all the boards before you today.
We are dealing with reports for the years 1994 to 1997, except in the case of Dún Laoghaire-Rathdown for which we have 1998. I take it the other accounts are in the process of being completed.
Mr. Purcell
Perhaps I can clarify that for you, Chairman. As you say, in the case of Dún Laoghaire-Rathdown, the 1998 accounts are before the committee. In the case of Dublin City Enterprise Board, the 1998 accounts were certified by me on 17 April this year. In the case of South Dublin County Enterprise Board, the 1998 accounts were signed on 3 April of this year. In the case of Fingal County Enterprise Board, there was a problem there. The chief executive died, unfortunately, and that has caused some problems in getting things finalised. That is the position in regard to the boards. The audits are up to date in all cases except in the case of Fingal where there is a sound, if unfortunate, reason for that.
Mr. Douglas, I presume that is being attended to to bring you up to date.
Mr. Douglas
It has, yes.
When will we get the 1999 reports? That will be some time down the road.
Mr. Purcell
It should be in in the second half of the year. We are bringing forward our programme of audits and we are getting on top of them. The audits for the county enterprise boards did suffer last year in the timetabling. I expect the vast bulk of them would have their audit reports by the end of the year 2000.
Mr. Macken, tell us what the enterprise board does. Tell us, by way of an introduction, what you do and what successes you have had.
Mr. Macken
What we do basically is the support and assistance of small micro-business in the city. As you know, this is an area that had not been supported in the past and, over the past number of years, had been recognised as a very important engine of the economy and for local development. It is the area we work with. We support and assist small business and we fill that identified gap. Our work would range from fostering the enterprise culture in city schools right through to management development programmes targeted at owner-managers of small businesses.
As you are aware, during that period, the city has witnessed enormous change in terms of economic development, increases in population, especially in the inner city, a reduction in unemployment and an improvement in overall prosperity and confidence. However, the board noticed that this has to be balanced against a backdrop of large pockets of social disadvantage which, unfortunately, still continue to exist in this city. We have had to grapple with that dichotomy of the growth and disadvantage and we did this through various means, through working closely and in co-operation with other local development and State agencies, Dublin Corporation, colleges and the voluntary sector to ensure the effective use of scarce resources in a city as large as Dublin, and through our project selection based on thorough investigation and recognition of identified growth in emerging sectors.
If you will allow me, I will briefly give an outline of our successes to date. We have approved approximately £4.8 million in grants for the period from the beginning of the inception of the boards to the end of 1999 for 523 individual projects. In that period we created 920 full-time jobs at a cost of between £3,500 and £4,000 per job. The percentage of new start ups has increased from 60% to 85% of our total. Follow-up surveys indicate a very low business failure rate of between 4% and 5%. Based on our research identifying the dearth of affordable enterprise space in this city, the board has invested more than £1 million in various enterprise centres throughout the city. The number of long-term unemployed promoters has increased from 25% to 38% of total grantees. The number of female promoters has increased from 28% to 40% over the period.
Between 25 and 30 secondary schools within the city, totalling 1,215 students annually, are involved in young enterprise programmes organised by the board. Since 1996 approximately 120 individual businesses have been receiving mentoring and business advice on an ongoing basis per year. Since 1996 approximately 150 individual businesses are engaged in specific management development programmes each year. The board currently receives in excess of 3,000 inquiries per year.
That is a summary. As we move forward, our focus will be on the continued development of our existing client base, moving away from grant aid towards various forms of refundable aid, supporting our clients and adopting and taking advantage of the opportunities created by information technology, especially e-commerce, through networks with other agencies, assist our client businesses to grow and develop export markets, to continue to develop and provide enterprise space and also to continue to encourage women to choose enterprise as a life option. In essence, that is what we are doing.
Do you have incubator units? What type of premises do you have or do you make available?
Mr. Macken
As you can imagine, in the city at the moment, the cost of capital investment enterprise space is enormous. What we are doing is that we are working with various agencies - Enterprise Ireland, ourselves, Dublin Corporation, voluntary bodies - to provide space. One of our flagship projects, of which you may be aware, is the new Guinness enterprise centre where we have linked in with Guinness plc which provided £1 million in cash and an old vat house at the back of the brewery. At present, new clients are moving into that. That is a massive operation. Ourselves, Dublin Corporation, Enterprise Ireland and the business innovation centre have come together to provide the finance for developing that facility. It will be similar to other facilities involved with the integrated area action plans in the city and also with some of the European programmes, such as URBAN.
Guinness has provided this free of charge?
Mr. Macken
Yes, a free building worth £1 million and £1 million in cash.
As well?
Mr. Macken
Yes, through the intervention of our chairman.
Who is an ex-Guinness man like myself.
Mr. Macken
Yes.
What space is available?
Mr. Macken
Almost 70,000 square feet on three floors is available. We have 65 units of various sizes and we are focusing on the emerging sectors, especially information technology.
Is that ready yet?
Mr. Macken
People are moving in this week.
What has it cost?
Mr. Macken
In the region of £4 million.
How is that funded?
Mr. Macken
Again, the capital expenditure was met through the various agencies and, very generously, an exceptional grant of £500,000 was provided by the Department of Enterprise, Trade and Employment to the city enterprise board over two years, that is £250,000 each year.
There are 65 units. What sizes are they?
Mr. Macken
They vary from between 1,200 square feet down to 450 square feet.
Twelve hundred square feet?
Mr. Macken
Yes.
Are there centralised services such as security, secretarial, phones?
Mr. Macken
All of that. There is a central administration on the ground floor and we are developing security as we go along. We also engaged the local community to provide downstream services and units are also provided for the local community.
If a young entrepreneur has an idea and locates there but is not up to speed and cannot provide receptionists or cleaners, how do you improvise?
Mr. Macken
The common area facilities would be secretarial, reception areas, back up and photocopiers. There are also meeting rooms and board rooms which can be hired as they are required. The occupants can meet their clients in a professional corporate atmosphere within the centre.
What about catering facilities?
Mr. Macken
There is a canteen. Again, it will be franchised out to a local entrepreneur to develop canteen facilities. As I say, we will eventually have up to about 300 people in the building when it is fully occupied.
Working?
Mr. Macken
Yes. We will develop catering and other facilities as required as we move forward.
Are there other similar projects emerging for other parts of the city?
Mr. Macken
There are quite a few in the pipeline, Chairman. Under the integrated area action plans, there is a facility plan for Corporation Street-Foley Street. We are looking at a development in St. Anne's Park along with Dublin Corporation.
That is in Raheny, is it?
Mr. Macken
It is, yes. It is the old stables in the park. We are looking at an arts and crafts centre. There is a very beautiful building. There is also a facility out in Coolock in the Coolock development centre. We are looking at a facility there. For the south-east inner city, there are other pipeline projects, but they are not at a developed stage.
Are there identified buildings?
Mr. Macken
There are, yes.
Where is the building in Corporation Street-Foley Street?
Mr. Macken
It is derelict at the moment. It is a vacant site but it is being developed, and there will be a dance centre there, an enterprise space and retail.
A dance centre?
Mr. Macken
Yes, for the performing arts. There will be 1,000 square feet for dance and performing arts.
What kind of dance - ballroom dancing, ballet?
Mr. Macken
Mainly modern contemporary dance and ballet and whatever else is required.
Irish dancing?
Mr. Macken
There would be that, yes.
Part of our job is to examine value for money. Does Mr. Macken think, given the current state of the economy, that there is a necessity for county enterprise boards?
Mr. Macken
Yes, I do. I think there is a great need for enterprise boards. Going back to when they were set up, all the documentation at the time - the task force on small business, the Culliton report - said we lacked this enterprise culture and that there was still a lack of finance for the small start up. That still continues to this day. Banks are more bullish now but people still need that little bit of finance to carry them over the first 18 months in particular, especially people who come from a disadvantaged background and who have managed to get the confidence back in themselves and empower themselves through training and various efforts. They need a certain amount of seed capital to start off. We are finding that even with the so-called Celtic tiger we are getting more and more inquiries and more people setting up in business - people coming back from outside the State and others leaving paid employment to set up businesses. They require support, as this is a very lonely process and any form of support, direct or indirect, is of great benefit to the start-up business. There is a continued need there.
The climate has changed dramatically since they were established. Do we need a separate bureaucracy and a separate structure to provide the service you feel is still needed by a small enterprise?
Mr. Macken
I do. They normally consist of between three and five people and are locally based, small organisations We have our finger on the pulse of what is going on locally. Even in the city, where one imagines there is a lot of growth, there are sectors such as film, television and multimedia which many young people are going into. They may be very technically proficient, but they also need sound advice and guidance on the business side of things. We are doing a lot to support and assist those businesses rather than allowing them to go forward and make mistakes; we save them a lot of time and money through timely intervention, particularly at an early stage.
Is there any yardstick on the point you made about disadvantaged communities starting their own businesses? What proportion of businesses are set up in such communities in comparison with those who might set up a small enterprise in any event?
Mr. Macken
I did make the point that almost 40% of our clients that we grant aid are from the long-term unemployed. Many of them would be referred to us by the seven partnerships in the city. Many people find themselves in the position that they may have worked in what I term the grey economy or may find themselves unemployed through no fault of their own. They find that once they have done a start your own business and worked with a mentor they are able to run a business that employs them and perhaps one other person. As I say, almost 40% of our clients are from that base and the board is making a conscious policy decision to help these people, as they need help the most, though they must have the ability to run and manage a business themselves.
I was amazed at the percentage given for failure rate - 5%. That must be a great deal smaller than the average.
Mr. Macken
It is important to acknowledge that in the city we get a large number of applications and that they are screened thoroughly. I suppose we take the best of the ones that need support and we provide ongoing support, mentoring and advice. When I say failure rate, some have passed on, some have gone back into work or changed direction and left the city. We are very pleased with the low attrition rate.
Dún Laoghaire is the only one which has given us a list of projects supported and a cross-section of the types of services and businesses involved. It must be a very difficult decision to make in terms of displacement. If one looks at the Dún Laoghaire range, and I am sure Mr. Macken's is not so different, there is evidence of roof repairs to hairdressers and Chinese medicine shops. It must be difficult to decide which to support and which will put another organisation down the road out of business or whatever.
Mr. Macken
This is something we have grappled with from day one. Our chairman produced a very good paper on this and other issues. There is what we call obvious displacement - in our case, restaurants, pubs and retail, particularly in the city. When one opens another one closes down the road. We have avoided that area. We take each application on its merits, as we do not want to play God with the applications. They are enthusiastic and put a lot of work into their applications and we must deal with people sensitively and give them a fair hearing. We would outline our policy and they might then come back to us and say their business is slightly different and that they have identified a niche market. Our policy relates to the impact of an enterprise board supporting that particular project - what effect does that have locally on the ground? If there is no major knock-on effect that eases our fears in terms of displacement. What happens in Dublin may be different from the west of Ireland, but we look at the local impact. We deal with projects on their own merits and make decisions accordingly on individual cases. It has not been a major problem for us.
Is accommodation a problem?
Mr. Macken
It is a major problem. We conducted a kind of mini-Bacon report two years ago on the shortage of space. Every enterprise space was 95 to 99% occupied and it is a major barrier to entry. The city is obviously a good place to locate a business, but if one cannot find somewhere to set up one's premises one has a problem. One does not want people operating from their homes - that might not be conducive to good planning and so on - so we see this as a major barrier to business development as we move forward.
I did not know about the Guinness initiative until now - I should declare an interest, having a connection with Guinness. It is a tremendous example. Are there any other firms in the city that might follow the Guinness example with unused warehouses and so on?
Mr. Macken
Property has become very expensive compared to a few years ago and we have brought to the attention of the Docklands Authority that there might be something in that area in public ownership which might be used for this type of activity. We supported the Dublin Institute of Technology, through the Project Development Centre, which acquired the old IDA centre in East Wall to develop it as an enterprise space. Keeping those types of facility in public ownership should be pursued as a policy.
Are there any projects in the portfolio which were especially successful in their own terms?
Mr. Macken
Does the Deputy mean well-known projects?
No, just projects that have done well and which are manifestly viable and which have a long-term existence.
Mr. Macken
Sure. We have a couple of projects such as that of a husband and wife which we supported at the end of 1996. It related to a software product for medical consultants and that project has been growing and developing. It was recently an award winner at one of our enterprise competitions and we recently got approval to develop equity product and preference shares. We put an equity investment into a business of £20,000 and recently it secured £250,000 under the BES scheme. It now has 15 people employed and has bought premises in Park West - which we encourage as it is within the city. It has an office opening in Belfast and is opening agencies in the UK and Europe and its business is growing exponentially at this stage.
Another well known one is the person who takes chewing gum off the street - Gum Busters. He came to us for a feasibility study in 1995. People thought he was mad to develop this machine using superheated steam to take chewing gum off the street. We supported him with employment grants after a feasibility study and he now has a major manufacturing plant in Santry exporting to 16 different countries around the world and which employs 35 people.
How many people?
Mr. Macken
It is between 25 and 30 and there is also outsourcing. One sees the machines on the streets of Killarney, Galway and Dungarvan, where I was recently for a meeting.
In terms of the crossover between your organisation and Forbairt, is there a point at which it becomes difficult to see where Forbairt takes over or is Forbairt interested in this micro-enterprise area at all?
Mr. Macken
Many people ask this question. At an executive level we have an excellent relationship with Enterprise Ireland, which serves on both our evaluation committee and our board.
I meant Enterprise Ireland.
Mr. Macken
It is Enterprise Ireland now.
It will have a new name next year.
Mr. Macken
Our attitude when someone comes in looking for assistance is always to ask what is best for that individual. With Enterprise Ireland the demarcation is the size - they deal with ten employees plus. Some organisations could have nine employees, but I encourage them towards whoever can offer the best range of services. If applicants are to expand so as to fall within Enterprise Ireland's statutory remit regarding international trade or service or manufacturing for export, we encourage them to work with that body as it has greater resources, but it is not a problem.
Does your organisation send clients?
Mr. Macken
We would refer some clients, yes. Some of our clients who grow and develop and who have a particular need for technical support, for example, export potential or product development are identified and selected by us for referral to Enterprise Ireland. It would also refer clients to us. People still ring the IDA asking for small business support, not knowing that the IDA only deals with foreign direct investment. They are referred to us and there is no problem.
You explained to the Chairman the kind of services on display in, for example, the Guinness development - back-up in terms of photocopying, security, cleaning and so on. What about mentoring? Do some of your clients need advice on how to proceed from here to there and so on? What is available to them in that regard?
Mr. Macken
We have a comprehensive mentoring service at the board going from what we call pre-enterprise - from the inception of an idea through to an existing business that may be hitting a glass wall and wants to develop further. I have a team of between 20 and 25 mentors who work for me on an hourly basis and provide that expertise to clients based on their needs.
And these are people you take in and pay at the market rate?
Mr. Macken
We have a standard rate at which we pay them. It is not as high as the normal consultancy rates. They are small business advisers many of whom have their own businesses.
The payment is made by the enterprise board and not the client.
Mr. Macken
Yes. If a client applies to us for enterprise support and advice, we vet that application and meet the client and assess their needs. We assign a business adviser to them and give them between 20 and 30 hours contact time, depending on the needs.
In terms of the move towards refundable aid, as you refer to it, what have you in mind there?
Mr. Macken
We are developing the whole range of products. At the moment we are mainly involved with using the equity scheme - the preference shares - which people find very attractive. That can go up to £50,000. The attractive part is that it has a two year moratorium so there are no repayments for the first two years. The business needs that two years to set up and to move forward before they start bringing in cash. They then pay us back over five years at 5% simple interest. It is on a reducing balance.
So you are saying that if Deputy Durkan and I were in this position we could get up to £50,000 injected in equity in the form of preference shares?
Mr. Macken
You could, yes.
Not repayable for two years.
Mr. Macken
It also has a codicil attached that in the certain eventuality or in the event of different things happening we have an option to convert our preference shares into ordinary equity. So, if you are being bought out by Microsoft next week and we found out about it - you are obliged to tell us as shareholders - we could exercise our option to convert our £50,000 into 10% of your business and, hopefully, we will get £100,000 or £150,000 back into the enterprise board.
Has that ever happened?
Mr. Macken
Not yet.
Hope springs eternal.
It has in the case of Enterprise Ireland in a few cases.
Mr. Macken
In fairness, Fingal enterprise board rolled out the basic template initially. We are also looking at refundable grants.
I am not at all hostile to the concept but this committee has to ask questions. Of the 920 jobs created and so on, with your hand on your heart how many can you say would not have been created were ii not for the existence of the city enterprise board?
Mr. Macken
Obviously, with my hand on my heart I would not think that amount of jobs would have been created, nor would I think that amount of jobs would continue to be sustained. We take credit for the lion's share of those jobs. We have these people's PRSI numbers, we are in regular contact with them, we survey them and we keep in touch with them. I could stand over 920 jobs.
The figure is 920 jobs in Dublin city.
Mr. Macken
It is from inception to the end of 1999.
And that is over what sort of period?
Mr. Macken
Five years really because the boards really only got going in 1994.
I have asked parliamentary questions in the past but what is the average cost per job for your board? Does it average across all boards?
Mr. Macken
There is quite a similar figure. The figure we have for our own situation is between £3,500 and £4,000. It varies.
Hoes does that compare with, let us say, the famous IDA jobs which taxpayers subsidise?
Mr. Macken
It compares very favourably.
Is it £8,000 or £10,000? I cannot remember.
Mr. Macken
There was a figure of £14,000 for IDA jobs in the past. I think it is between £10,000 and £12,000 for Enterprise Ireland.
So it is quite efficient in that sense. Forty per cent of your clients come from disadvantaged backgrounds or the ranks of the long-term unemployed. Deputy Rabbitte asked about this - what re-focussing do you believe needs to occur given that your creation as boards is in a period of high unemployment relative to the rest of Europe? What do you believe needs to be changed in order to transform your operation now that we are in an economic and social landscape of, practically speaking, full employment?
Mr. Macken
As we move forward that figure will definitely reduce. It should but, as you know, there is a tendency towards a concentration of unemployment in particular areas. We spent so long trying to solve the problem and now that it is solved it is unknown territory for us. I do not see any fallback in the amount of people who want to set up a business. That seems to be growing all the time and it is being fed by a lot of younger people setting up in business from college and a lot of people returning from overseas. A lot of people are also leaving reasonably well paid employment to set up their own business. This is a good thing because they will have to be replaced by someone else in their own jobs. It is also good for the local economy.
As the economy grows you get more.
Mr. Macken
We have not seen any obvious fallback in the number of inquiries from people coming to us. It is interesting and it is something we will have to look at as time goes on.
You would expect that when jobs are scarce people would be taking the initiative to try and employ themselves whereas there is a momentum with confidence that people——
Mr. Macken
It is a difficult thing to measure because it is down to the individual. Some people are driven. For some reason they could be in paid employment and their families may be that bit more advanced and, for whatever reason, they have this burning ambition to set up their own business. We are seeing an awful lot of that.
In the broader context, it may seem as if it comes from elsewhere but, as a constituency TD I have run into the phenomenon and it is rather rare. It is not terribly common but it is one that I would be concerned about from a micro point of view for people who are setting up a business. Let us say you decide to leave the enterprise board tomorrow and stop your nice secure salary. While you are setting up that business in a pre-trading situation, perhaps you have a van and you are trying to do distribution, and you are trying to build up a customer base but you are not actually getting any revenue in, there seems to be a mismatch in the social welfare code in that you cannot draw down increments from the social welfare system while you are in a pre-trading system as a start-up entrepreneur. This is hugely problematic for individuals caught in this position. Have you discovered anything in relation to that?
Mr. Macken
Are we talking about someone who is unemployed at the moment, or technically unemployed - long-term unemployed?
Yes. No, someone who is actually in employment and leaves that employment to set up. In that situation you allow for it in the sense that there is two year period in terms of these preference shares. However, let us take the simple situation where someone either has a job or is laid off or whatever else. Let us keep it quite simple - they have a job, they leave their job because they have an enterprising idea, they have secured grant assistance of some shape or form from your organisation, and I am talking about the interim period before they actually start getting income in. If an entrepreneur sets up a business tomorrow it does not just take off with paying customers immediately. In Ireland we have a very bad record, with three month credit arrangements, whereas it is one month up the North. People may show the kind of enterprising zeal to which we often exhort them but they find themselves in a position where they cannot draw down social welfare.
Mr. Macken
The day of the guy having a business plan on the back of a cigarette box is long gone. We guide and advise people. We do not tell them what to do. A person would be very foolish to leave a good, well paid job unless they had done a lot of homework - they had prepared their business plan, their market research and that there was a viable business out there. Invariably these people coming from a work situation are aware of that so we would encourage them to do a feasibility study or to do the business plan before they leave the job - do it in their spare time. If they are long-term unemployed one of the great schemes is the area-based or back-to-work allowance.
I am aware of that.
There is a back-to-work allowance but——
Mr. Macken
Yes, but you could apply for a feasibility study.
You are mixing up my purpose. There appears to be an anomaly where that does not cover the person who comes out of employment - perhaps, a person has a secure job but is looking at the company he or she is working for and it is not going well or whatever else and approaches you to try to set up a business. If a person with a secure job decides tomorrow that the company is not doing well, they might knock on your door and you might tell them they have a fabulous business plan——
Mr. Macken
Under the Finance Act, 1995, we got authorisation under the seed capital fund to allow people who leave paid employment to set up in internationally traded services or manufacturing and who have a feasibility study certified by the enterprise board, claim back income tax from the best five of the previous seven years, up to £125,000. Many of our clients are availing of that new provision, which is really good.
But in terms of the domestic market, if you take my example of a person in full-time employment who sees potential to drive a van to make a delivery round——
Mr. Macken
In that situation——
——they are not covered.
Mr. Macken
It may be an anomaly which should be examined, but there are very few such cases. In general people will carry out a feasibility study. A person in paid employment who is planning to set up a business might have a few bob set aside. They can apply for funding for a feasibility study and draw down up to £5,000 from their local enterprise board. They will then be ready to face the market.
That does not cover paying the bills of the entrepreneur. I think Mr. Macken is missing the point.
I think the point being made by Deputy Lenihan is that there is no safety net or income stream for the set up period for those who give up jobs and take a risk to create jobs. There is a gap in that context.
Mr. Macken
There is a gap.
Does the Department of Enterprise, Trade and Employment think it should examine that gap?
Mr. Murray
Not necessarily. People in the risk business must take risks. As Mr. Macken pointed out, the setting up of a business entails much detailed planning and people are aware that there will be an income shortfall. Deputy Rabbitte and others mentioned that we are in a period of full employment and that we must be careful that assisting an enterprise is not done at the expense of somebody else. The advantages which arise from the seed capital scheme are very considerable.
What is said about this being a period of full employment is correct, and we must guard against complacency. Say, for example, the bottom fell out of the computer market and Intel closed, God forbid, there would be a need to very quickly create many jobs. Locally generated and led jobs have a base and commitment at home. The Japanese miracle was based on this type of enterprise which began on back streets. Mitsubishi began in small places in the back streets of Kyoto, etc. Is there a view that any of the enterprises we are discussing will become large organisations in due course?
Mr. Macken
Yes, I think this will happen with a number of them. Ireland is a small market base and many of them are growing and must move outside the country. We have a very good reputation abroad and people want to do business with us. Many are moving forward and we are referring clients on to Enterprise Ireland. Diversification is important - it is better for a community to have many small businesses than for it to be dependant on one or two large employers. Small businesses are very flexible and are being run more efficiently by well educated people who have undergone much training to improve their ability. They are looking down the line and are not just riding on the back of the Celtic tiger.
One of the things which has greatly annoyed me over the years has been the lack of support by Irish industry for community endeavours compared to elsewhere. For example, in the North there are many more foundations to support community initiatives than here and in the US there are many more supportive private foundations. I am pleased to note the Guinness initiative. Is part of your role the encouragement of more support by private industry in helping the communities in which they operate?
Mr. Macken
Our focus is on small enterprise and one of our strengths is that we have kept our eye on the small enterprise ball. It is easy to get pulled in different directions in terms of local development. Everything must be integrated in terms of education and community development. Much of the problem stems from the fact that people do not ask the private sector for support. The banks have been more than generous to us in assisting in running seminars or producing publications. We are involved in PLATO, a management development programme, under which large parent companies provide senior executives who freely give of their time to assist small businesses. It is a case of asking and making a case.
I cannot speak about community support. Obviously there is a vested interest for banks in terms of business support, as new or small businesses are potential future clients.
My experience as a Deputy for almost 30 years is that those who make up the corporate sector are very poor citizens and are not very charitable or interested in social development, although that is a generalisation and there are exceptions. I would like some research to be done in this regard to see, for example, the role the Dublin Chamber of Commerce would see in aiding and abetting this sort of initiative. Is support received from the Dublin Chamber of Commerce?
Mr. Macken
Yes. I am on a sub-committee of the chamber concerned with enterprise and employment which has a schools initiative, crime busters and various other activities. People are increasingly examining this area. We are very fortunate to have Guinness in our area, which has been so generous to the community throughout the ages. Groups such as Enterprise Trust, which funds local initiatives, are very involved in this area through IBEC. I think more can be done.
How would we go about studying this? This is a time of great prosperity and great success for the business sector and I wonder what the sector is putting back into the community or whether it sees itself as having a role in supporting endeavours such as your own. How could we compare what is happening here with what is happening in Manchester, Marseilles or such places?
Mr. Macken
I do not really know. Local authorities, particularly Dublin Corporation, are taking more of a lead role in this area and they have more clout to engage the private sector because of their size, and I can see moves in that direction.
Regarding Dublin City Enterprise Board, Fingal has done an analysis of successful applications based on gender which is both interesting and frightening. What is the Dublin City Enterprise Board doing to promote women in enterprise? The board has had 2,000 inquiries and holds networking evenings. What is being done in a positive way to promote women and how many successful applicants have there been?
Mr. Macken
As I said at the outset we are very proud of the fact that almost 40% of the people we grant aid are female entrepreneurs, which is significant. We link with the women in business network. There are two schools of thought. Many young, progressive women do not want to be treated any differently - they want to be treated fairly and for their application to be taken on its merits. We try to be gender neutral in how we deal with business, and it is important that we are conscious of this. We find an increasing number of women at our training programmes and information evenings. Nearly 80% of children involved in the schools programme are girls. We are conscious of participation by women and are constantly trying to encourage it. Also, much of our focus is on services and an increasing number of women are entering service businesses.
We plan to run specific and targeted management training for women. Women are predominantly involved in the craft sector. I am beginning to feel women do not want to be treated differently from men.
Once an application is made it must stand up, be it from a man or a woman. The point is to provide encouragement. The problem is with the number of applications. Of the 2,000 inquiries——
Mr. Macken
Three thousand.
How many of the 3,000 applications are from women and what is being done to encourage women to make applications?
Mr. Macken
Between 40% and 50% of inquiries are from women - it has almost pushed towards 50%. I talk to groups of the women's network and the women in business group of the chamber of commerce. We organise exchange visits and have links with ORTIS, a women in business group in Belfast. Rather than being sexist, we try to have no barriers but rather to provide positive encouragement. We encourage positively.
Is there a reason you have not done a gender application breakdown as in the case of Fingal?
Mr. Macken
We have done so in our statistics. It is reflected in the grants between 40% and 50%.
That is very impressive. In relation to the number of applications, you have almost a 50% success rate in terms of funding. You funded 129 of 237 applications in 1997. Is the ratio the same among all enterprise boards throughout the country?
Mr. Macken
No, in the initial stages all the boards had the same allocation of money. This was changed in 1996 to reflect the size of the population in the various areas. All the applications formally made went through evaluation by the boards. Many people who applied were directed in different directions but were not evaluated. Slightly less than half were successful. Many of them would have applied for huge amounts of money. It is a balancing act to divide resources as equitably as possible, bearing in mind the board's policy.
Does the figure of 237 represent the screened applications?
Mr. Macken
Yes.
On female participation, women have particular pressures such as child minding. Are there any concessions in this regard?
Mr. Macken
In the past we have been supportive of the whole child care sector. This is a major issue and we are trying to work with other agencies in this regard. Most enterprise and training centres provide creèche facilities.
Enterprise centres have crèches?
Mr. Macken
Some of them do. Many of them are used for training.
We will move on to the Fingal County Enterprise Board. Mr. Douglas, the acting chief executive officer, will give us a quick run down of the board's operations.
Mr. Douglas
We drew up our first action plan in 1997. At the time Fingal was a fairly new county. It is a county of 174 square miles, consisting of almost 200,000 residents. The main areas we identified where specific support should be provided were in work space development, provision of high quality business advice to start-ups, development of an enterprise awareness programme for schools, specific skills training for SME managers and staff and for people planning to set up SMEs, showcasing local business through trade fairs and exhibitions, delivery of management development programmes with an emphasis on the particular needs of small businesses, provision of a flexible mentoring system, running seminars on topics of current interest to SME. We run seminars on current topics. Last year topics included the euro, Y2K, e-commerce and so on. Networking and co-operation among small businesses should be facilitated. There should be provision of advice clinics and one to one support from board staff, specific support for women in business and co-operation with organisations supporting the long-term unemployed.
Under the heading of general enterprise awareness, we run regular business opportunity seminars to make people aware of the opportunities available and how to go about generating ideas and so on. We run a schools enterprise programme which has approximately 12 to 15 schools participating each year. We have also run a teacher's support programme to help teachers in the school in administering the schools enterprise programmes and make them aware of what is involved in setting up a business and putting together a business plan. We run ideas generation workshops for many diverse groups, including a number of groups from FÁS of women returning to the workplace to help them how to find and evaluate an idea and get to the stage of starting up. We run pre-submission workshops, including business planning workshops, to show people how to put together a sensible and effective business plan.
We have run two major trade exhibitions called Enterprise Experience in 1997 and 1998. Approximately 18,000 came through the doors. The exhibitions showcased local industry and agricultural produce and so on because we are an area with a high percentage of agricultural land. We have also developed a website, plus an Internet business park which is basically a directory site for the area. It is a portal which means if you want to find businesses in Fingal which have a website, you go to this site and you can look up the various different categories to see how many accountants or manufacturers of a particular product are in the area. We also set up a website for crafts called "Gifts from Fingal" to showcase local produce and encourage local businesses to use local produce where possible in the event that they might be making presentations to staff or visitors. We have run various advice clinics.
The enterprise awareness part of our activities cost £110,000 in 1998. That included 1,200 plus estimated one to one meetings with clients. There were 18,000 visitors to the Enterprise Experience workshops and over 500 participants in workshops.
The next measure related to enterprise support. This focused on supporting businesses at pre and post start-up stage. The support starts and pre start-up mentoring continues afterwards with a post start-up mentoring programme. Our mentors are private business consultants. We have a panel of 12, each of whom is an expert in a particular area. It is very much a voluntary effort in that the client works with us in deciding who the mentor will be, what support they will give and so on. During these mentoring initiatives we highlight training needs and then develop programmes to meet these needs. We develop specific skills training programmes for people planning to set up a business. These are selective programmes comprising 12 or 13 modules in different subjects. The individual can choose which module to attend. It is very flexible and in tune with what people need rather than prescriptive.
With the long-term unemployed in mind and those who might have difficulty setting up a business, we bought into the NEST programme. This programme takes place over nine months, three months of which are pre start-up and six months are post start-up. It is focused on getting the individual to a point where they can safely carry the business through. There is a very high risk in setting up a business for people who may not have been involved in the workplace for some time. These people may not have the necessary contacts, financial resources and so on. We set up satellite offices in a number of centres such as Balbriggan and Baldoyle. We have taken stands at various exhibitions such as Showcase and so on.
We bought into the women's network which has been successfully run by Kildare Enterprise Board and a number of other enterprise boards. We have been involved with sponsoring Tradenet which is a North-South co-operation project on the Internet. This is designed to encourage networking and identify opportunities for joint supply and so on.
I presume between the North and South of Ireland rather than the north and south of Dublin?
Mr. Douglas
That is correct. The cost of activities under enterprise support was approximately £290,000 up to 1998. Some 158 clients received mentoring and 350 clients attended seminars and training events. That is an approximate figure and we did not always keep tabs on people attending seminars in the early days. There are currently 70 participants in the women's network.
Another measure is management training and development. These are more formal training programmes which must be more than 200 hours in duration. We have developed two management development programmes in co-operation with Dublin city. These were certified by Portabello College and the participants receive a formal qualification. Linked to this there is a European computer driving licence module. We are conscious that it is necessary to bring people to a stage where they are comfortable working with technology and aware of the possibilities for e-commerce and the Internet as well as the potential pitfalls.
We ran a management development programme for craftworkers which focused on producing quality product and developing quality management systems. In many instances craftworkers are not running their businesses effectively. Many have a turnover of, perhaps, £10,000 per annum. We identified the sector as one in which there was the potential to generate substantial business if one acquired the necessary promotional, management and business acumen skills.
With Dublin City Enterprise Board we have bought into the PLATO programme, which we view as a very important initiative as it links small business to growth. To join the programme a company has to be of a particular size. Some of the start-up businesses with which we are involved are beginning to reach the stage where they can buy into it. Between ourselves and Dublin City Enterprise Board there are 100 companies taking part in the programme. There are 12 parent companies. The cost of the management development programme was approximately £148,000. A total of 118 companies participated.
On financial support by way of grant aid and preference shares, to the end of 1998 grants totalling £1.8 million were made available, with which 412 jobs were created at an average cost of approximately £4,500 per job. A total of 216 projects were grant aided. The participation rate can be broken down as follows: 63% male and 37% female. The female participation rate varied from a figure of approximately 27% in the early stages to 40% at a later stage. We have bought into the women's network to encourage a greater number of women to view enterprise as a viable option. We are aware, however, that there is a cultural barrier which will take time to break down.
The best way to encourage people to participate in enterprise is to demonstrate success. We have, therefore, been trying to show that people can make a go of it. Realistically, our success rate is probably about 90%. We have produced statistics which show a failure rate of 6% to 8%. I suspect, however, that the figure is higher as there are a number of businesses which are dead in the water but which have not formally thrown in the towel. The actual figure is somewhere around 10%.
It is extraordinarily low.
Mr. Douglas
It is.
Are there any enterprises of which you are wary in the making of proposals?
Mr. Douglas
We have always been conscious of displacement as it affects local areas. In judging projects, therefore, we always look at the business environment in Fingal. I am very conscious that there are many applications coming through from e-commerce businesses, particularly those developing websites. It is an easy business to get into. It does not cost much. Everybody sees it as a goldmine. We are, therefore, aware——
Website gifts, especially from Fingal, should be regarded warily. Would it help Mr. Flood if he knew about it?
Two cases came to light in which the conditions attached to grants were not complied with subsequent to payment. What were the conditions?
Mr. Douglas
There were three cases, one of which, in the first year of the board, involved pure fraud in which the individual concerned obtained a grant of £10,000 to purchase equipment for a particular type of business - I cannot name names - and then absconded. It turned out that the name of the business was false and the address rented. The investigation department of the council sought to trace the individual concerned but without success. One of the two remaining cases involved a very successful craft business, which a large company offered to buy. Its offer was accepted. As the individual concerned was not continuing in business we sought repayment of the grant made available. In the interim, however, the deal fell through and the buy-out did not proceed. The individual concerned continues to operate very successfully in Fingal.
There were two cases, one of which involved a sum of £10,000 and the other, £33,000.
Mr. Douglas
The second case to which I referred.
The operator concerned is still in business and operating successfully.
Mr. Douglas
Yes.
The conditions have subsequently been complied with.
Mr. Douglas
Yes. The matter was not closed. He could have repaid the grant at that stage.
There is a reference - 94/26 - to a £50,000 grant. It is understood that the assets which were grant aided were damaged, that the company involved received an amount from its insurance company and that the county enterprise board had been in dispute with the company.
Mr. Douglas
Again, I cannot name names but the case involved a structure which we part financed and which was damaged in a storm during which the roof literally blew off. It took the individual concerned a long time to rebuild. We were concerned because money had been recovered from an insurance company and not put back into the business. That has now been done.
How many jobs have been created since the board was established in Fingal?
Mr. Douglas
Four hundred and twelve.
At an average cost of £4,500?
Mr. Douglas
Yes.
Because of economies of scale, it is slightly above the Dublin City Enterprise Board cost.
Mr. Douglas
Yes.
I will come back you later as I want to talk to you about your financial control and audit systems but I wish to move on to Mr. O'Byrne from South Dublin County Enterprise Board. Mr. O'Byrne, would you like to give us a quick run-down on your operations?
Mr. O’Byrne
South Dublin County Enterprise Board shares the history and broad framework of activities common to all county enterprise boards. This has been explored by several of my colleagues. I will, therefore, confine my remarks to the distinguishing features of the county of South Dublin and South Dublin County Enterprise Board.
Before you proceed, South Dublin is the name of the county but very often one sees references, especially in the property pages, to south Dublin as including Dún Laoghaire-Rathdown. This is very confusing. What are the boundaries of the county of South Dublin?
Mr. O’Byrne
It is a constant problem between ourselves and Dún Laoghaire-Rathdown. We are trying to establish a separate identity for the economy of South Dublin at a time when most of its residents do not know that they live in the county. We sometimes have to ask applicants to refer to the name on their wheelie bin to determine——
They do not know they live in the county?
Mr. O’Byrne
Precisely. They think that anything south of the city centre must be south Dublin, whereas in fact the county geographically lies in south-west Dublin.
The Irish Times, in particular, contributes to that confusion because its property pages always refer to "south Dublin", when it means the gold coast of Dún Laoghaire and so on, rather than what is in fact South Dublin.
Mr. O’Byrne
The heart of the county is Tallaght and Clondalkin. However, the north-eastern boundary is parts of Rathfarnham and Templeogue, over to Walkinstown, Palmerstown, including Ballymount, and Lucan. There are also four rural villages - Brittas, Saggart, Newcastle and Rathcoole. All of that surrounds Tallaght and Clondalkin.
It is south-west Dublin, geographically.
Mr. O’Byrne
Essentially, yes.
There is a very large industrial area in its midst.
Mr. O’Byrne
There is a very high percentage of distribution companies, in particular, based on the excellent access to our national road network. The county was formed in 1994 and is, therefore, younger than the county enterprise board. It had a population of 218,000 in 1996, of whom about 30% live in Tallaght, 20% in Clondalkin and only 5% in the rural parts of the county. It is, essentially, an urban county.
With the exception of our very high proportion of young people under the age of 25, the statistics describing South Dublin are close to national averages. However, this normality masks huge divergences between the established areas, such as Rathfarnham and Templeogue, and the very disadvantaged areas, such as west Tallaght and north Clondalkin. A total of 34% of our population live in areas which were classified in the Gamma studies as being severely disadvantaged. To my knowledge, this is higher than any other local authority area in the country.
A further characteristic of South Dublin is a very strong and diverse range of local development organisations. This fact is probably linked to the disadvantage I talked about earlier. Many of these organisations predate the county enterprise board and some of them are larger than it, both in terms of staff and budget. In this environment, our board has always followed a strategy of joint action with our partners in the community. We have tended to support existing programmes and competencies, where they meet our shared objective, in preference to direct delivery of programmes. This has been particularly true during a period when it was expected that the county enterprise board would conclude at the end of 1999, with the expiry of the last operational programme. There was no point in building up internal competences, in preference to supporting existing competences which were going to outlast the board.
Our budget is usually the second biggest of the county enterprise boards in the country, second only to Dublin city, although at times our grant budget has been third behind Mayo. In our grant aid programme we have strongly favoured employment grants over other forms of assistance. This is because our applicants are largely from the service sector, whether personal or business services, and their capital needs are generally small.
The proportion of manufacturing projects applying to us is well below the average for county enterprise boards. I believe that has a strong correlation with the factor which my colleague talked about, the scarcity of suitable work space. It is far easier to accommodate a service business than a manufacturing business. On the other hand, just over 50% of the projects approved in the current year to date are so-called new economy businesses, with a heavy emphasis on IT.
Serviced building land with industrial zoning in South Dublin is virtually non-existent. Consequently, almost none of our clients can ever aspire to owning their own premises. In fact, we are daily losing projects to other areas for lack of work space. Further, we have start-up projects struggling on in inappropriate premises, with projects being run from bedrooms and so on.
To address this, the board has to date approved £440,000 for enterprise space projects, creating 84 new incubation units. Most of these centres were built with contributions from all the local development companies. We can usually put together a local funding package of around £1 million to £1.5 million from local resources among the local development companies, including a typical contribution of £80,000 to £100,000 from the county enterprise board. Enterprise Ireland also participates and, typically, the private sector.
This is relevant to a question that was asked of Gerry Macken. In our area, we have had very generous contributions from Roadstone and the Gallagher group in the building of these enterprise centres. Most recently, Roadstone contributed £200,000 to the construction of the Brookfield enterprise centre and Gallagher group played a similar role in the construction of the Ballbrook enterprise centre, both in Tallaght. We have further plans to access funding from some recently privatised former State companies, which are at a very early stage yet, for future projects.
We have also experimented with a rent subsidy programme, which I think is unique among county enterprise boards, to assist projects to move on from commercially rented enterprise space. Due to the scarcity of expansion space, they are reluctant to free up these incubation spaces. We try to assist them to do that, thereby assisting both the enterprise that gets the grant and moves on and also the enterprise that moves into that vacated space. There has not been a huge take up of that and we have plans to promote it in a more focused manner directly at occupants of incubation units.
To date, we have assisted 494 projects. We have approved £4.2 million in grants and we have paid out £3.4 million of grant aid. As of last November, a net additional 884 jobs had been created by our client enterprises and were still in existence as of that date. These are not jobs that existed for a time and then disappeared, but were in existence as of our annual employment survey last November. They are sustained, to that extent. This gives a net actual grant paid per job created figure of £3,600. That is in contrast to the figure used in the value for money audit, which was closer to £4,800, if I recall correctly. That was calculated on the basis of a particular period and grants approved against jobs approved. I am using a more direct measure of grants actually paid against jobs actually created.
Of the 494 projects assisted, 29.4% were promoted by women exclusively and a further 3.5% involved women in mixed promoter groups. Some 29.6% of our clients were unemployed prior to starting their businesses. Some 432 of the 494 projects, representing 87.5%, continue to trade as of today.
In summary, the county enterprise board in South Dublin has identified unique local circumstances and has responded with a well thought out and ultimately successful strategy, within the framework of the operational programme and to the great benefit of the emerging local economy.
Very good. I cannot find South Dublin's website. I have got those of Dún Laoghaire and Fingal but Dublin city and South Dublin have eluded me.
Mr. O’Byrne
It is www.sdenterprise.com.
What is Dublin city's?
Mr. O’Byrne
It is www.dceb.ie. I was looking at it last night.
How would somebody looking for you know to look up that obscure nomenclature?
Mr. O’Byrne
My problem is not as difficult as that of my colleagues in Dún Laoghaire-Rathdown county enterprise board dot com, which very sensibly shortened its name for that reason. I wanted to have "enterprise" in the title. The two additional words of "South Dublin" would be too long, so we shortened it to "sd". Search engine registration is a constant problem, of course. There are books written about the subject. Our website is still under development. However, we see it becoming in the next five years the primary means of information delivery and a very important means of interaction with our clients, alongside face to face interaction.
We are all IT geniuses on this side of the table and we were not able to find you. How is the ordinary, common or garden citizen going to find you?
Mr. O’Byrne
If they pass our shop front soon out of office hours they will see a very large sign saying we are open 24 hours on www.sdenterprise.com.
What is the failure rate in South Dublin?
Mr. O’Byrne
I have a twin edged attitude to failure rates. From the point of view of the effectiveness of public investment, in purely financial terms, one would want a low failure rate.
A variety of studies over many years have shown that failure rates in start up businesses are high. Rates of up to 90% are quoted over a five year period - quite commonly. Undoubtedly, in the economy we have today, lower rates are being achieved quite regularly. The statistics for county enterprise boards in general are lower again. The rate commonly agreed is about 10%. However, it is only from a purely financial point of view that low failure rates can be considered good. On the other hand, very low failure rates could be taken as an indication that the CEBs were not in the risk business or were failing to fulfil their mandate to foster innovation and avoid deadweight and displacement. The attitude of my board is that we expect every client to succeed but we expect to have a significant proportion of failures indicating a healthy degree of innovation and risk taking.
The question of what represents failure also needs to be examined closely. For instance, most of those who cease to trade have no difficulty whatsoever in finding alternative employment, if that is what they want. Many of them go on to found an extra business, a second business, whether it is eligible for our support or not. With an average grant payment per job created of £3,600, it only takes 18 weeks of social welfare payments at a notional average of £200 per week to recoup the grant paid. A further four weeks would recoup the entire administrative overhead. That takes no account of corporation taxes, VAT, local authority rates, etc., which would be generated nor of the upstream or downstream multiplier effect. A failure after 22 weeks is not a failure in terms of Ireland Inc.
It strikes me as almost toogood to be true. The failure rate seems solow and the obvious benefit seems so good that I do not know why we have not been in this business much longer and more extensively than we are.
Mr. O’Byrne
I agree with that and I think the important thing is that we continue in this business. Although the economy is extremely good at present, we have to maintain the infrastructure which constantly renews our economy.
And spread our risk. Will you tell me about your accommodation problems in South Dublin? Are they as acute as in the city?
Mr. O’Byrne
Yes. There is no prospect of our client, unlike a typical client of a rural board, building a factory. We do not have problems of clients running out of their expiry date because they are waiting for planning permission. It does not arise expect in a few cases where people have some spare land around their houses. As you can imagine in a largely urban county, that does not arise very often.
People are left with a choice of recently developed industrial space from the private sector, which is generally 2,000 square feet or thereabouts sometimes in tax designated areas. Because the developers tend to try to recoup the tax benefits for themselves, the cost of that space is extraordinarily high. On the other hand, there is a small amount of publicly provided incubation space.
We did a study for our 1996-9 action plan which looked at this factor. We found that we had at that time 175 units available in the county - incubation units. Since then we have added, I believe, 18 in Brookfield and we have a further 40 or thereabouts under construction. We need about 300 units in South Dublin to support the rate of business start up we have, and I am only talking about the types of businesses which really must start in a factory type space and cannot be started in a bedroom or a garage. We are left with a deficit of in or around 75 units from the public sector.
I explained earlier that a coalition of local funders will usually get together and look for additional funding which we have been very successful in achieving under the community enterprise space grants recently distributed by Enterprise Ireland to projects within the county. Each achieved £1 million of additional funding - one in Bawnogue near Clondalkin and the other in Killinarden in Tallaght. However, when the tenders for those projects came in, we found that we had an additional £3 million to find in the county between the two projects, so there is now huge problem again with funding for those two projects.
We are going to have to look for new models to allow the private sector to play a much more important part in the provision of incubation space with a local development, an economic development, ambit rather than from a purely commercial property developer's view point. Perhaps we will need to look at build and lease back ideas using publicly owned land and getting developers to build and lease the units back to public sector organisations such as Get Tallaght Working, Action Clondalkin or, indeed, ourselves, to manage and use as incubation space.
Do you have compulsory purchase powers?
Mr. O’Byrne
None whatsoever.
Could you get the local authority to exercise their powers on your behalf?
Mr. O’Byrne
Frankly, Mr. Chairman, the thought had never occurred to me. It is an interesting idea. There is a substantial land bank available within the South Dublin County Council area. All the enterprise centres we have built so far in our local coalition have been built on local authority owned land which they submit to the project or make available. That has been our line so far and it is not exhausted yet.
That is fairly comprehensive. I should say I have been a member of this board. What about your relations with the Department? How do you perceive them?
Mr. O’Byrne
I would characterise them as being very good.
What does that mean?
Mr. O’Byrne
In general, our ideas are listened to and, within the context of the resources available to the Department, we get a reasonable share of those resources consistent with the projects we put forward.
Why do you think there is the implicit bias to which you refer in the case of Mayo, for example? Is it the availability of accommodation, for example, which drives the additional take up of grants or is it other factors which we will not probe in detail?
Mr. O’Byrne
Mayo is a large county and at the time to which I referred, the year in which I noticed it had slightly more grant aid capacity than we had, there was a very specific formula in place for making this distribution of grant giving capacity among boards. It rested on the population of the county, the degree of unemployment that was present there, the capacity for creating enterprise and the quality of the enterprise plan produced. Using that formula, the result that came out was that while South Dublin County Enterprise Board had a larger budget overall, the grant giving capacity in Mayo was marginally higher.
Are you saying, in terms of your relations with the Department, that the criteria in place in regard to how much an area like yours or the city would get compared to other county enterprise board areas are, by and large fair, enough?
Mr. O’Byrne
I do not have a problem with it. We have been fortunate over the years in having a very good balance between the numbers of quality projects coming forward for assistance - I am talking here about financial supports - and the amount of money available to assist them. Our approval rate has constantly hovered around 50% of projects or applications presented to the board. We have been able to maintain grant giving capacity throughout the year because a good project is just as likely to come in December as in January. We are very pleased with the level to which we can assist our enterprises, so there has not been a problem in that regard.
There is, of course, an overall scarcity of resources and the resources available within the new operational programme are not likely to be greater than in the outgoing operational programme. We are constantly coming up with new ideas for non-financial supports which we would like funded.
If the idea is as good as we have heard from you all, and allowing for the fact that, no disrespect, we would expect you to say that, there is nevertheless a certain objective validation for what you say, and if we have that rate of success and a unique failure rate of 10% or lower, why should it be confined within the rubric of the operation programme? Why should the seed capital not be there from whatever source, for example, straightforward Exchequer grant aid if necessary?
Mr. O’Byrne
The Exchequer has consistently, through Supplementary Estimates, supplemented the funding that was designed into the programme itself. The actual funding has been in excess of that design over the period of the programme. I stand to be corrected on this, but I believe that an additional amount of £36 million has been put in over the period. That has been entirely from Exchequer funding with no EU element.
County enterprise boards, including my own, have been successful in accessing funding from other areas. In my own case we received funding under the small business operational programme, before it ended at the end of last year, to make a concerted effort to produce a high quality first stop shop facility for business information and referral, particularly leaning on the possibilities that are afforded us now through information technology. That was outside of the OPLURD programme.
Other county enterprise boards are involved in INTERREG, for instance, and the Border counties, in particular, are involved in funds connected with the North-South process. This trend would need to be accelerated in the future and with the prospect of static or declining Exchequer and EU resources, we must maximise what we can get through refundable or recycling forms of aid on the one hand while extending the range of resources we access on the other.
We are looking at your accounts going back to 1995. You have a small staff.
Mr. O’Byrne
Three members of staff, paid for through the operational programme.
Does that mean you have other staff?
Mr. O’Byrne
Yes. I have, for instance, an enterprise development officer, grant aided entirely by FÁS, who does perhaps 60% of her work for the board and within that 60% manages our mentor programme. Approximately 40% of her responsibilities are concerned with the Dublin west and Kildare area of FÁS. In addition, I have a FÁS staff member who is allocated to carry out a dual role, as an enterprise facilitation officer within FÁS and who also looks after our after care programme. Finally, two staff members staff our reception area. They have been on the jobs initiative. That is coming to an end and we are already having to subsidise them.
Given such a small staff and looking at the accounts for 1995 and 1996, how do you know if jobs aided in 1995 and 1996 are still extant? What validation takes place four or five years later?
Mr. O’Byrne
The methodology we employ was set out this year for us by the Department, so it is standard across all county enterprise boards. It asks us to survey all clients asking them what their head count was in November 1999 and November 1998. By subtracting one from the other we were able to calculate jobs growth during the year.
We sent out a survey to all clients, back to the beginning, except for those we know to have ceased trading and gone out of business and excluding the capital grants to enterprise centres. We do not count jobs against enterprise centre grants. Where the surveys were not returned by post we followed them up by telephone. Through the good offices of our FÁS staff member there is also a very extensive programme of after care visits, many of which are unannounced, and we are constantly getting updates on numbers employed and so on in our projects from that source.
Is there any safeguard against the situation where, say, somebody got a £20,000 grant from you in 1995 and replies to your circular to the effect that all is well, thanks you for your help and indicates that it will not be needed in the future? There may be no reality behind such a reply. What do you do then?
Mr. O’Byrne
Some of our 1993 clients wondered why we were contacting them when they had not received, nor had requested, further assistance in the interim. The programme for after care visits, some of which are unannounced, are undertaken by our FÁS staff officer. I give credit to FÁS and thank it for its generosity in this regard. It is an excellent form of local co-operation. His visits, and the prospect of his visits, which are known, would be a deterrent to that. We also enjoy a very co-operative relationship with out clients. While we do not rely on that to protect ourselves from being duped, it is fair to say that in all cases our relationship with our clients is excellent and is one of open sharing of information.
What is the figure in terms of net extant jobs for your board since its creation?
Mr. O’Byrne
It is 884.
Do any stand out from that?
Mr. O’Byrne
I would point to two, one of which has tremendous potential for the future. It is called European Access Providers and is involved in providing broad band access to the Internet through radio connections without a hard wire loop between the exchange and the user. It is a form of mobile phone network for the Internet and is already going great guns in terms of accessing finance. I am told it currently employs 40.
Another example - more an old economy business - is a mechanical and process engineering firm, founded by a group of partners who had skills in that area. They have been very successful in supplying pipework in pre-assembled packages to the many new manufacturing plants that are being built. They employ 25.
What is your biggest grant?
Mr. O’Byrne
I would have to exclude here the grants which exceeded £50,000 with ministerial permission during the Deputy's time as Minister of State.
Were there many of them?
Mr. O’Byrne
They were generally connected with enterprise space. There was one of £100,000 and two of £80,000. Other than that we have given on three or four occasions the maximum grant of £50,000.
I take it you have no doubt about the value of this structure and the need for it to be nurtured in the future.
Mr. O’Byrne
It would be rash in the area I represent to suggest that the full employment project is complete. Even if it was there are subsidiary objectives relating to the competitiveness of our companies going into a global market. We need to constantly assist them and encourage them to upgrade their competitiveness.
I referred earlier to the need for an economy to constantly renew itself because there will be business failures and we must have the structure in place which can encourage people to take up an entrepreneurial career. There is also the question of quality of employment. We now have a national minimum wage, but it does not appear to be sufficient to encourage employees into some industries where the work is unattractive.
What is necessary now is to have employment on the basis of competitiveness. My board shares this view because we discussed it at our last meeting. Through innovation, that competitiveness will arise which will allow them to provide sustainable high quality employment based on high skills and knowledge. That is where we need to head now. The new draft operational programme certainly gives us that direction and my board has applauded that.
Presumably Mr. O'Byrne's colleagues may be affected by the job initiative scheme also. There is still some uncertainty hanging over the future of the job initiative scheme and recent attempts to resolve it are unclear and seem to have been conducted on an ad hoc basis. It would be a serious matter if people fronting the office for Mr. O’Byrne, for example, found themselves unemployed as a result of the revamping of the scheme, irrespective of the nature of it, which does not envisage their retention. How will Mr. O’Byrne deal with that?
Mr. O’Byrne
I am aware that locally there is an application for a new jobs initiative in Tallaght. I was invited to join the previous group of applicants to form a syndicate meeting the minimum employment numbers and I decided not to do so. There has been a certain turnover in those jobs and the idea is that those people would progress through this work experience into other jobs, but it has not happened particularly quickly. I am concerned that regarding the people, the quality of whom is excellent, who are with us now and who have built up skills; we must call a spade a spade and find out whether or not they have a real job. I decided not to pursue further jobs initiative funding on the basis that we will only keep these jobs if they are real jobs. I would expect to be able to maintain at least one of them with current funding and I hope to maintain the other job based on other funding which we are attempting to access.
My constituency colleague has asked most of the questions I wished to ask. I congratulate Mr. O'Byrne on his presentation. We have known each other for some time.
I am intrigued by his reference to people establishing businesses in bedrooms. He presented a rather chaotic picture where an absence of incubator units or accommodation results in entrepreneur men and women trying to establish businesses from a bedroom in their homes. On the same theme, what is his view on actually encouraging that phenomenon? This is about high quality knowledge-based jobs and, from the point of view of traffic and other matters, it is in our interests to encourage working from the home, be it entrepreneurial start-up work or work associated with enterprises which might be located elsewhere.
He stated that many business for which he has a preference are services driven due to the make-up of the South Dublin County Council area. Many such businesses can be run from home because of the developments in technology, the world wide web, the Internet, etc. I understand the underlying problem he is experiencing regarding incubator units and the needs of certain types of businesses, such as the pipe work pre-assembling process engineering company to which he referred, which obviously cannot be based in a bedroom or home, but surely it must be preferable to opt in the future for the high-tech businesses to which I referred? I do not wish to diminish the importance of old industries such as the pipe work company but given that the make-up of the locality lends itself to services and given the shortage of land zoned for industrial purposes and offices, the emphasis must be on these knowledge-based services driven companies. What is Mr. O'Byrne doing in that regard?
Mr. O’Byrne
The problem with incubation space largely relates to companies which cannot be operated from home such as manufacturing enterprises but there is also a problem and a need in the services area which we can expect will make up an ever increasing part of our remit, particularly given the prospect of the boards taking a special role regarding e-commerce. I do not see any problem in terms of a business being operated from home. Recently I had a conversation with the county architect for south Dublin and he raised the interesting concept of local authority houses now being designed with this in mind, that is, with Internet connections and home businesses in mind. If that should come to pass, then the county enterprise board would be interested in that sort of development.
However, there will always be drawbacks. There will be presentations and meetings where the image of a business run from home will be a barrier to the enterprise concerned. It is hard to land that big contract while the two of you are sitting on the end of your divan bed in the spare bedroom. One needs to present a professional image.
Our plans in this regard, which are being formed at present and, therefore, this is the first time it has been mentioned outside the confines of my board, would be to promote the development of a technology centre which would include a range of desks or cubicles which could be rented on a very short-term basis, either for a week or possibly even a day or a half-day. Certainly these would include PC training and presentation and conference rooms which could be rented on an hourly basis, as could the related secretarial services. In terms of ensuring a stable base of tenants for such an enterprise, we would also need a range of self-contained furnished offices to be rented on a more permanent basis and own door units to be rented on perhaps a three year licence.
This is an idea I am pursuing for which I am seeking support because we have assisted in the development of generalised enterprise centres in the various villages of south Dublin, including the urban villages, and it is now time to move to a more sector based enterprise centre concept using the benefits of clustering among similar companies. There are a number of examples of this already. There is a light engineering cluster of which I am aware in Kingscourt, County Cavan. Within my county, there is the Growcorps development which focuses on new economy and IT businesses in the Citywest industrial estate and more are emerging as the days go by. I would see also the need, for instance, for specialised food production units which are especially scarce and especially expensive for promoters to build.
Working from home has great potential for disadvantaged groups and women, who traditionally have been discriminated against and denied participation in the higher levels of business and also in the start-up area. Are there specific programmes emerging to encourage working from home of which Mr. O'Byrne is aware?
Mr. O’Byrne
I would have to bow to the greater experience and effort made in this regard among more rural boards where new technology is a specific answer to a specific problem of remote locations. In an urban county council area, such as that of south Dublin, that is less of an issue. It does arise in the contexts suggested by the Deputy, that is, in the contexts of people with disabilities and women trying to balance family responsibilities. The technology centre of which I spoke would be intended to be a support for people who primarily conducted their business at home but occasionally needed the support of a centre of this nature.
That sounds promising and I wish Mr. O'Byrne well in that venture. I am intrigued by the low rate of failure, which is a double-edged sword. Clearly it is great for the boards to pat themselves on the back and state that theirs has been a wonderful success story with low failure rates, but would I be right in suggesting that they are essentially picking winners from all the applications? It is hard to quantify the number of companies which set up without the help of the boards and run successfully. What is the best way to evaluate this?
By Mr. O'Byrne's admission, it is a double edged sword and a low failure rate could mean two things, first, that the county enterprise board is doing a tremendous job evaluating projects and is a great success or, second, it comprises a conservative group of bankers who examine the entrepreneur's bank balance and ask if he or she is pledging the deed of his or her home and grant he or she a loan so that he or she can go ahead and develop. What is Mr. O'Byrne's view?
Mr. O’Byrne
My view is that——
Where is the weakness in this? Is there enough of it? If, as the Chairman has said, it is a successful model why is not able to pay for itself rather than be funded by the Exchequer?
Mr. O’Byrne
I will come back to that question.
As an enterprise board, it should aspire to operating without Exchequer support.
Mr. O’Byrne
First, we have to assess each and every case. As I said earlier we would not assist——
I do not want Mr. O'Byrne to feel that I am discriminatory. I have also made the case regarding Enterprise Ireland. I do not understand why it is in State ownership if it attracts entrepreneurs.
Mr. O’Byrne
We would not assist a project which we expect to fail because primarily we are users of public funds and that carries a very heavy responsibility both for accountability, in which we are involved here today, and for prudent use of those funds. That would militate against us ever having what could be considered or even suggest to be considered a high failure rate. I would never suggest that we would take a punt with public funds. It is out of the question.
On the other hand, I believe there is something which distinguishes us from the commercial finance sector. We have had discussions with banks on regular occasions and been involved in projects with them - not just our country enterprise board but others - and it is clear that they put a lot of emphasis on a positive evaluation by a county enterprise board. They often will rely on that as spreading their own risk and confirming their own judgment about a project and it, therefore, acts to lever significant private sector funds in terms of loans and other facilities. We are often the first to take a risk.
With regard to my own failure rate, I prefer to put things positively. My success rate is 87.5% but that implies a 12.5% failure rate. I feel that is about right or should perhaps move slightly lower because it does indicate that we sometimes get it wrong. We are on the edge and we are assisting projects which without our initial assistance at least would not be assisted elsewhere.
With regard to the banks and the board's positive evaluations, how would the board characterise itself going forward? I posed this question earlier to Mr. Macken. I do not know whether I received a complete answer but that is not his fault as he cannot give the answer to everything. Will these structures become self-financing? The same argument has been made in regard to Enterprise Ireland. It has a significant investment portfolio in highly successful companies, apart from shares, going forward. Is there is a linkage to the real economy because essentially the level of State subsidies which the board receives means that it is part of the social economy?
Mr. O'Byrne and others would say that the board is part of the commercial sector and would like to be in it. The only way to belong to that sector is for the board to be in it rather than being grant assisted. Does Mr. O'Byrne envisage a time when that will happen if the economy maintains its current growth? Is that something to which he aspires?
Mr. O’Byrne
I see us moving towards first being able to recycle funds. That is a tremendous move in that direction so that every pound is used several times before it is eventually exhausted but I do not ever see a day when we could sustain ourselves fully without public intervention because I believe that our role is there to foster risky enterprises, not always because they are socially desirable or just to give a poor fellow a break but because of the innovation involved and the need for some recognised body at a local level even to express faith in a project in order to get it going where is it especially risky.
The county enterprise boards have always done things which are strategic in nature and do not have an immediate pay off. Some things that we do such as the use of equity instruments, for instance, may have a commercial pay off down the road but if we were to confine ourselves only to measures which could earn a commercial pay back sufficient to sustain the boards then we would have lost our strategic role in the local economy. That would, therefore, be a final abandonment of the mission we were set up to serve.
Does the county enterprise board belong to the local authority or central Government?
Mr. O’Byrne
We are at a junction, which is being explored and defined currently. We are in the process of local government reform guided by the task force on the integration of local development and local government. Clearly, that has been our background and many of my colleagues are former local authority staff, although that is not generally true of the Dublin area. Many county enterprise boards are still housed in county council offices and still use county council administrative systems. That is our background and the task force process is strengthening that connection and making it even more accountable. It always has been because we have always had public representatives on our boards, uniquely among local development initiatives. It has always been the case but now that everybody is reaching that plane, the county enterprise boards are going to a higher plane.
At the same time we are negotiating with Enterprise Ireland a very clear and comprehensive statement about the relationship between our organisation on one side and Enterprise Ireland on the other. I heard Dan Flinter refer to it at the committee last week. Tony Jones who was sitting beside him is the man who is leading the project from their side and it is to be discussed at a meeting tomorrow at which all four will be present. We hope to be able to push it forward at that stage. The new draft operational programme clearly identifies us as a feeder service for Enterprise Ireland and that has a resonance within the county enterprise boards which have always recognised their role in industrial policy as well as in local development policy.
We will pause there and move on to Dún Laoghaire-Rathdown County Enterprise Board. Before that, Mr. O'Byrne did you say that there is a task force on the integration of local government and local initiatives?
Mr. O’Byrne
The task force on the integration of local government and local development.
I would be very interested to hear more about that because this committee has been concerned for some time at the multiplication of bodies. It gets confusing in terms of who to deal with and we will come back to this when we have heard from the representatives of the Dún Laoghaire-Rathdown County Enterprise Board.
Mr. O’Byrne
My colleague from the Department, Seán Murray, is a member of that task force.
We will come to that. I ask Mr. Michael Johnson from Dún Laoghaire-Rathdown County Enterprise Board to give us a brief introduction to the work it is doing.
Mr. Johnson
I thank you, Chairman, for the opportunity. I will make my remarks as brief as possible and will only highlight those unique characteristics that are interesting from our board's experience. First, it is important to understand that this is part of a series of initiatives which are interlinked at local development level, reform of local government level and industrial and economic development. That context is important. What enterprise boards uniquely bring to the party is that they are very close to their customers and have a unique perspective on the landscape and territory that they service. Another key perspective that they bring is their ability to respond quickly and flexibly to local needs which have been identified. Those characteristics are common to most enterprise boards.
In the case of Dún Laoghaire-Rathdown there can be many misconceptions about my territory, your own remarks about our gold coast being a part of that. We enjoy some of the more exclusive neighbourhoods in this country but we equally have more than 20 pockets of disadvantage which are as good or as bad as it gets by way of urban blight in areas such as Shankill, Sallynoggin, Nutgrove Avenue, Holylands, old Dún Laoghaire and a number of other areas. Unlike the other territories discussed here this morning where there seems to be a higher level of concentrated disadvantage, we have pockets of disadvantage interspersed with extremely wealthy areas. Sometimes that makes the job more difficult to tackle. We have suffered from that perception that Dún Laoghaire-Rathdown is a fairly snug county. I wish to take the opportunity to balance that to some extent.
If you continue in this vein, you will reduce property prices.
Mr. Johnson
That might be helpful in the current situation. We have performed broadly in the same line of business as our colleagues. We would like to think that as an enterprise board, among our peer group we have performed excellently. If one looks at any of the statistical tables, either published in the review of local development initiatives undertaken by the Comptroller and Auditor General or the other published data, one will see that the Dún Laoghaire-Rathdown Enterprise Board is in the top six of performers against a wide range of indices. If the committee has a particular interest in those statistics, I can send them the information later.
On a more anecdotal level, I would like to concentrate on a few things we have achieved in our area. We have achieved, uniquely, a panel of over 100 voluntary business mentors. This has been capitalising on the raw materials of people we have in Dún Laoghaire-Rathdown. If there is such a thing as a managerial and business class in this country, many of them live in our territory. We have been able to mobilise that and put it back to work in a totally voluntary capacity, to act as a support and aide to the development of small business. This is unique in the experiences of enterprise boards. This is only possible because of a range of circumstances, much of which relate to the fact that we have such a dominant level of these people in our area.
Another issue I wish to highlight is that for the year of 1999, continuing into 2000, I believe we have become the first enterprise board in Ireland where females constitute the majority of new business. In 1999, 54% of all new customers who received financial support from our board were women entrepreneurs. Another 18% were co-owners with male partners in some structure. That has continued this year. This is due to the work we have undertaken, going as far back as 1995 when we did some well-based scientific research on the needs of women entrepreneurs and the factors mitigating against them. Since that time, in some cases in conjunction with other enterprise boards and more recently on our own steam, we have developed a range of initiatives which recognise and respond to the particular needs of women at one level and integrates them into the mainstream of the services which we supply and support. It has been clearly outlined to us by those women entrepreneurs that they have particular barriers and issues which they need to be dealt with, but they do not wish to be totally compartmentalised in that sense. There is a balance of approach between those two factors. We are chastened by their performance in that regard.
Another area on which we have concentrated a great deal of time and effort, as distinct from financial resources, is the educational sector. We have developed programmes or become partners in programmes which ensure every sector of the educational framework in the county has inputs by way of entrepreneurial cultural development. As the Chairman is probably aware, a number of reviews over the years have identified gaps in our educational system which are not very supportive to developing this entrepreneurial culture which is critical to our ongoing well-being. We have developed programmes at primary, second and third level to try bridge the gaps in the educational sector in an innovative way. We have linked with the business community and in many cases have brought entrepreneurs into the classroom as part of that process as role models which some of the students will hopefully aspire to. That is fundamental in putting in place the strategic pillars which will underpin economic development in the future.
In the context of our future role, which has been alluded to, obviously the Ireland of today is not the one in which we started in 1993. Certainly, the whole next phase of the enterprise board's life has been classified as the stage of building on its capability. That is absolutely valid and we must now take stock. We are in a unique position where we can be somewhat picky about what we want to do in the future, coming from a nearly full employment base. Obviously we wish to make investments now which will underpin the strategies in the next ten to 15 years. Equally, it would be wrong to dismiss the local service sector which has never had any potential for internationalisation or export capability. The local service providers, across a wide range of areas, will be a vital element in providing the infrastructure which will maintain inward investment projects and offer other supports to indigenous businesses engaged in international and export orientation. We must not lose sight of this. We need excellent businesses in whatever sectors those businesses operate.
I would like to highlight something else on which we concentrated, that is, the area of commercial child care. Since our inception as a board, we have made a very conscious decision to develop and promote the provision of high quality, professional and well-managed child care facilities in the commercial sector. Some of our most successful projects, although they would not be household names, are in this sector. We have child care facilities looking after customers, up to 150 children in some cases, meeting and exceeding best international practice and employing up to 25 to 50 people which is not insignificant in the context of local employment. We are pleased with the range of investment we have made in the commercial child care sector and we see that as an ongoing part of our activity which has an added social value dimension.
Our experience has been excellent. The next five years will be very different. We see ourselves moving away from the grant mentality entirely. It would be our strategy as a board, as distinct from whatever tablets we would be handed, to concentrate to the maximum extent possible on refundable tools in the financial area. We should be seeking to take the risks the other mainstream financiers will not take. Inherent in that is failure and we should not be afraid to confront that. Hopefully, the committee will find this helpful but our experience of failure is somewhat different from others. If one goes back to our customers in 1994 and 1995, 67% of those are still trading successfully, a year hence, 75%, a year hence again, 80% and a year hence again 90%, ending up at 100%.
Will you relate those percentages to particular years?
Mr. Johnson
If we go back five years with our customer base, effectively we have a 37% failure rate.
That was 1995.
Mr. Johnson
Yes. If we come forward a year, that improves to a factor of 75%. In 1997, it is at 80%.
Success rate.
Mr. Johnson
Yes, they are still trading.
And the figure for 1999 is 90%
Mr. Johnson
The figure for 1998 is 88% and the figure for 1999 is currently 100%.
That is all recent.
Is that on a yearly basis or is it cumulative? You are aggregating it.
Mr. Johnson
No, I am not aggregating it, I am looking back year on year so it gives a perspective. It can be misleading to give the average figure.
If one looks at the 100% success rate in 1999 in a year or two, there may be some failures.
Mr. Johnson
Absolutely.
Failure is less likely the more recent the year.
Mr. Johnson
It also gives some comfort. One can determine when is the riskiest period and when the interventions are most needed.
You were not as brief as I expected. I am going to interrupt you.
Mr. Johnson
I will finish at that, Chairman.
In the high level of female participation, is there any discernible difference between the types of enterprises women establish and those men establish? Is there a noticeable difference?
Mr. Johnson
Very much so. It is dominated by service sector activities and areas which have an acceptability in many cases from a lifestyle perspective to the woman entrepreneur and it fits in with their particular lifestyle choices.
Give us some examples.
Mr. Johnson
Child care would be an example in its own right. Obviously, most of the child care businesses are owned by women and that is not unusual. Many of those people have started businesses themselves at a time when they had their own children. Part of agenda was that it offered an opportunity for taking care of them as well as others while earning reward. The crafts sector would be a particular area where women are using traditional craft-type skills in the arts and cultural sector to develop initiatives.
What type of crafts?
Mr. Johnson
Pottery would be one; special parchment-type printing would be another. It would involve people coming out of many of the colleges of art and design. It would be those types of skills. We are seeing a wide range but we are still not seeing much penetration of women into the traditional male areas of manufacturing et al.
What numbers of jobs have you created?
Mr. Johnson
As of the end of December 1999, we would have supported directly and completely audited the creation of 660 new jobs.
How many of them are still extant?
Mr. Johnson
That is the number that is extant at this point in time.
Let us do a little sum. The 660 and 880 jobs makes 1,500.
Mr. Douglas
We have 412.
That makes 1,900. What about Dublin city?
Mr. Macken
It is 920.
That is 2,500 jobs, and they obviously also have downstream effects. That is interesting. The average cost is around £4,000 per job.
Mr. Macken
In our case it is £3,200.
It is £3,500 to £4,000. One must ask if there is some trick in this. This is very cheap compared to figures we hear for jobs both here and in Scotland and Wales from IDA Ireland and its equivalents. Should we close IDA Ireland and get you people to do the job?
Are accommodation issues a major problems in Dún Laoghaire-Rathdown?
Mr. Johnson
I suppose everyone says this but I consider our problem to be the most critical of the four Dublin counties. Again, you will be broadly familiar with the type of territory and the density of its development. Given the nature of some of the residential areas, there is a particular sensitivity to anything that smacks of industrialisation. We have only one community/public enterprise centre facility in the county. That was the conversion of the old fire station in Dún Laoghaire to a facility of some 3,000 square feet, which is extremely modest by any stretch of the imagination. We have fronted a proposition, which is under consideration by the special Enterprise Ireland programme, for a major 30,000 square foot development in Nutgrove. Other than that, we have been totally unable to identify suitable land that could be made available.
What about in the industrial estates, such as Sandyford industrial estate, which is in your area? There are places. There are places in and around Dundrum.
Mr. Johnson
All these facilities are in private ownership and, with the cost of land at present, the acquisition of a site to develop what is usually accepted as the minimum level of a viable enterprise centre, namely, 30,000 square feet, is impossible.
Are there not any disused schools or hospitals?
Mr. Johnson
We commissioned a complete survey of possible sites or acquisitions, many of which were in the ownership of other agencies, organs of the State or the private sector. We could not prise any of these sites from the current owners.
What exactly are you proposing for Nutgrove?
Mr. Johnson
It is a major enterprise centre development similar to ones which have been successful in south Dublin, Tallaght and Clondalkin. This arose from the closure of the Avonmore facility, the old Dublin Dairies-Premier Dairies plant in Whitehall Road in Rathfarnham. That had a devastating economic effect on the local economy around Nutgrove Avenue. Out of that, we picked up on a project to try to develop something which would pick up the pieces. A number of people are involved in that as a public-private partnership and the funding application is in.
I was amused to hear you say that Nutgrove was one of these pockets of deprivation. My children could not afford to buy a house there. I live beside it. Is that the rate of deprivation in Dún Laoghaire-Rathdown?
Mr. Johnson
Up behind Nutgrove shopping centre in what was known traditionally as Holylands there is a massive local authority housing scheme, and the prevailing rates of unemployment and disadvantage are shocking.
I know property prices in Nutgrove are something else. That does not matter.
I wish to ask a few general questions of all four witnesses. I wish to ask each one of you quickly about your financial control and audit situation. How do you in Dublin city ensure that you are efficient in spending your money, that there are proper controls and checks and balances, that there is a check against fraud, and so on?
Mr. Macken
As you are aware, an accounting procedure policy was adopted a number of years ago and we follow that. We also have a computer-based internal accounting package which is used for normal controls. We have an accounts executive in the office. We have our own independent accountant who prepares the books for the Comptroller and Auditor General. We follow the normal procedures. Having worked in a local authority, I am aware that, in terms of tendering, invoicing and grants, we should follow the procedures outlined in the document covering procedures and our accounting policies in terms of checking grant aided assets, the people we fund, and so on. Those are the procedures we have.
Obviously you are too small to have your own internal auditor. Tell me more about your audit procedures and the checks. Presumably there are systematic checks but are there also spot checks?
Mr. Macken
Yes, there are spot checks. It is in terms of clients we have supported through grant aid.
And your internal funding arrangements?
Mr. Macken
As you are aware, we operate on a cash basis. We draw down money each quarter from the Department based on our cash flow for the previous quarter. We work within the allocations approved to us in terms of approval capacity and approval for the different measures and their supports. We adhere and stick to those. In the issuing of cheques, they are authorised by me and signed by me or my assistant and a board member up to a certain level.
There are no blank cheques signed in advance?
Mr. Macken
None whatsoever.
What interest do you take in the financial controls? What reports do you receive and how frequently?
Mr. Macken
I take a great interest in it because I authorise all the payments. The drawing up of the cheque is done by me in conjunction with my colleague and a board member. We would review our cash flow. As I say again, the way it operates is very much a cash system. On a quarterly basis, we review where we are in terms of budget for the year.
You have a budget profile for the year prepared in advance and you check against budget?
Mr. Macken
That is right, yes, when we know exactly what our figures are, but we would have indicative figures. We would have a rough idea of what we would have for the year in terms of administration.
However, an actual budget profile is set out detailing subhead by subhead what you will spend the money on and the likely amount and you check against that. How often would that be?
Mr. Macken
It would be every quarter and even between each quarter. Sometimes, we request a certain amount of money and we may not get it all. In that case, we might have to review it three quarters of the way through the quarter and request more cash or whatever. We constantly keep a control on it.
What steps do you take if you are going ahead of budget?
Mr. Macken
We normally would not be ahead of budget. We are in the fortunate situation in terms of administration that we use Dublin Corporation's payroll system, so we are usually a quarter behind on administration. We would make up the deficit in the final quarter. We are obliged to clear out our accounts by the year end. That is how we operate. We spend according to budget, but there would be cycles in the year regarding programmes like management development. Those follow a period similar to a university term; we do not normally have management training programmes in the middle of summer, so one finds there is more spent at the beginning of the year and then towards the end of the year. Mentoring and other activities are pretty steady throughout the year.
Is it the same in Fingal?
Mr. Douglas
Very similar. We appointed an internal audit committee recently for our own board and it carried out an audit recently and intend to carry out audits on a six-monthly basis.
An internal audit committee might be something the other bodies could consider. In Dublin south?
Mr. O’Byrne
Yes. We also adopt a budget for the year within the allocation given us and we are fortunate to have a qualified accountant and company secretary in the person of Mr. McDonald on my staff. He gives me monthly budget reports. We have a computerised account system on the network and I can review it at any time. We adhere fully to the accounting manual produced in conjunction with the Comptroller and Auditor General and modified from time to time by the Department. We deliver cheques - we never post them - and do so on unannounced visits.
And in Dún Laoghaire?
Mr. Johnson
The same procedures. We have an internal auditor and I am on-line; I have constant access to our management accountant.
There is a vote in the Dáil so other members have left. The Comptroller and Auditor General, as has been mentioned, has done a value for money report on local development initiatives which the committee will look at later in the year. Something the committee has expressed concern about is the multiplicity of bodies - it is very confusing to have task forces, enterprise boards and other bodies, so we will come back to that.
I would like the organisations present to give us a list of companies that have been helpful and that have contributed - Guinness, Gallagher's and Roadstone have been mentioned. We would like to thank those bodies here as we have no other way to do so and also to encourage other businesses to do likewise. We may have an opportunity to do so in the autumn, perhaps in the first week in October. We will also ask some chambers of commerce about how active they are in supporting these kinds of initiatives. I thank all representatives and the accounts are noted. We are only catching up as these bodies are newly arrived under our umbrella. Next year we will see how you have progressed in a more rigorous way and you will not get away so lightly.
The witnesses withdrew.
Next week the committee will deal with the National University of Ireland; Financial Statements, St. Patrick's College, Drumcondra, 1994 to 1998; St. Angela's College of Education for Home Economics, 1995 to 1998, and the Church of Ireland College of Education, 1994 to 1998, and any other business.
The committee adjourned at 12.33 p.m. until 10 a.m. on 15 June 2000.