I am delighted to have an opportunity to make a presentation to the committee. Copies of our submission document have been circulated to members. I propose to deviate from it in the interests of time and in order to highlight some particular points.
It is important that members understand the function of Science Foundation Ireland, SFI, which is a relatively new organisation. This is our first time to appear before the committee. SFI was established in 2003 as a separate legal entity under the Industrial Development (Science Foundation Ireland) Act 2003. We are under the umbrella of Forfás, as are Enterprise Ireland and the Industrial Development Authority, IDA. Those other agencies do excellent work, but SFI was established because analysis showed it was needed to fill a gap in the system. According to the Industrial Development (Science Foundation Ireland) Act 2003, SFI was established to "promote, develop and assist the carrying out of oriented basic research in strategic areas of scientific endeavour that concerns the future development and competitiveness of industry in the State". That was the part that was missing in the overall composition of activities.
It is significant that SFI is under the aegis of the Department of Enterprise, Trade and Employment. Therefore, we are not to be judged simply as an educational or academic organisation. Ultimately, our actions must fit into the economic impacts set. It is notable that Mr. Ryan of Enterprise Ireland referred repeatedly to research and development in his opening statement. That is where we mesh with that organisation and the IDA. It also means our activities are constrained and focused on activities which are of strategic importance to the State. Our overall objective is to build world class skilled human capital in the areas of scientific research assigned to us. As referred to by the Comptroller and Auditor General, these include biotechnology, information and communications technology and, more recently, sustainable energy and energy efficient technology. This meshes with the industrial activities fostered by Enterprise Ireland and the IDA.
The establishment of SFI was a leap in the dark because it was an entirely new initiative. The Government's framework document on sustainable economic renewal, Building Ireland's Smart Economy, published in December 2008, stated: "Science Foundation Ireland will continue to build Ireland's world class research capacity in strategic areas allied to the needs of industry". That puts it succinctly. In our own strategy document which is referred to in the formal submission the overall emphasis is on linkages between scientific excellence and economic impact. One must have the former in order to have economic impact in high technology areas. In presenting ourselves we often say we support research with consequences and research for Ireland's future. We are in agreement with statements and documents from many quarters in being strongly of the view that Ireland's future must be as a smart economy and, therefore, based on the quality of people in the system.
We work in close collaboration with our colleagues in Enterprise Ireland and the IDA. This is highlighted in the Team Ireland section of the document. With Enterprise Ireland, the technology referred to is an important component and a bridge between what happens in the higher education institutes and industrial output. At a practical level, we meet frequently with Enterprise Ireland at executive level, usually every six weeks. There are plans to engage Enterprise Ireland in targeting support for a major component of our activities, namely, the centres for science, engineering and technology, CSETs. The researchers we support, apart from being academically very strong, a sine qua non, also work with industry at a very high level. Our census shows that in 2008 they were working with 359 companies, some 100 of which were in the Enterprise Ireland area.
It is significant that the expenditure on research and development by the companies concerned is growing dramatically. Since SFI was established, this expenditure has increased from some €800 million to €1.6 billion. There are several implications of this increase. First, it implies more jobs are being created and more services purchased, but it also indicates that skilled personnel are coming into the system. As this spend by industry grows, so too does the need for the activities of SFI. Our scientists were directly related to 36% of the new agreements entered into by the IDA in the last year. Moreover, the IDA's figures for 2008 indicate that more than 40% of its new agreements were in the research and development area. All of this underlines the absolute importance of the SFI component in keeping manpower skills growing and attracting companies to the State. Multiple examples of this can be identified.
Although ours is a recently established organisation and there was some uncertainty about how to handle us, we have been reviewed extensively. For example, the first five years of our operation were reviewed in the Brook report which came to a very favourable conclusion. We were also favourably reviewed in the Indecon report, with a particular emphasis on value for money. Both reports pointed out that it was early days and that we had to be allowed time to develop our role. The examples I have given point to us being very relevant to what is happening in Ireland.
Ours is a small organisation on one level. Some 5% of our expenditure relates to pay and non-pay elements. In other words, the vast majority of funding we receive from the Exchequer goes back into the system. Some 3% goes towards salaries, which is about as lean as one can get. We are deliberately keeping our numbers low, with an employment cap of 54 which we just about reached recently. We are managed, as are all the other organisations, by a board which includes external members, an audit committee and internal auditor. We have placed significant emphasis on good governance at every step. As a result, we have received a clean bill of health from all quarters. We are guided in our activities by an international peer review which is an essential component to ensure the right decisions are made. That is meshed with strategic analysis with colleagues from the agencies to which I referred.
The primary focus of this meeting is our activities in 2007. In that year grants to research bodies amounted to €156.6 million, comprising 570 new grants of varying sizes. One of the characteristics of our work has been the growth in the number of applications and, therefore, the number of researchers we can support, some at a very modest level and others more substantially. In 2007 we initiated what we call strategic research clusters, 12 of which were launched in that year, with another five added since. These research clusters, based in the universities and institutes of technology, are deliberately designed to be close to industries' needs. There is a requirement that participating industries must, after a time, contribute up to 25% of the cost. This was not a requirement on day one because of the complexity of putting together these organisations. Surprisingly, however, most had industries tied to them from the beginning. The list is a who's who of all the companies one would require. From the beginning the 12 strategic research clusters were working with 43 companies. The advantage to Ireland of this linking cannot be underestimated. It consolidates the engagement of companies in the State and means they are more likely to stay there.
The year 2007 saw us continuing our principal investigator programme which seeks to attract and retain top class researchers in order that we have the necessary skill base in the areas of relevance. The CSET programme was launched in 2003-04. A new centre was established in 2007 in the area of localisation, which is to do with instant software translation. It is based in DCU.
As for SFI's activities in 2007, the figures I provided to members previously refer to the number of companies with which we are dealing and there is a lag time regarding investment in this area. This is the reason the investments are multi-annual and that has been happening.
Given the introduction, I will refer to the comments by the Comptroller and Auditor General with reference to our awards management system, AMS, on which we will have further discussion. It probably is worth noting a few points in this regard on which I will be happy to expand. First, the decision to draw attention to this issue was taken by us. In 2006, SFI procured an internal audit-driven external auditor's report, which was then provided to the Comptroller and Auditor General, because we were not satisfied with what was happening. We knew this was not working in the manner we had anticipated. When I was appointed in mid-2007, it came as a surprise to me that this had happened, as well as the manner in which it happened. Consequently, I have been obliged to catch up on its history because all the principals have already moved on. That said, there are reasons that explain but do not excuse what has happened. I will explain in the sense that this took place in 2003. It was a new organisation that was doing a new sort of business in Ireland. It was a business that was transacted in the electronic medium at an early stage for many. At the time, I was a scientist who was making applications and the manner in which people applied for funds worldwide was clunky and uncomfortable. The manner in which people submitted papers for publication was highly unsure. However, this had to be done because it is widely accepted that there had to be a move from paper and tracing papers. One must think about what the Ryanair or Aer Lingus sites would have been like in 2003, as one would have found many deficiencies. In this case, they were identified at a very early stage. Moreover, the addition of new activities, as happened in SFI, including the research frontiers programme that was transferred from Enterprise Ireland, required an entirely new configuration.
This goes some way towards explaining the inadequacy of the scoping at the outset. As the organisation had not scoped itself, it could not anticipate its needs. Few people were involved, there was no experience in the area and there was a strong dependence, which seemed reliable at the time, on the experience of the US National Science Foundation, NSF, because my predecessor came from there. However, what perhaps was overlooked was that the NSF had an massive budget to work on this area and had approximately 20 people working on it constantly, which was not the case here. These are explanations but not excuses. It is something from which we have learned much. On foot of a great deal of engagement in the management of the process, we have moved towards putting in place correct procurement and infinitely greater scoping to be in a position to replace in due course the system we had in place.
I wish to make a second point because numbers can deviate slightly. Only one of the three components whose use were originally anticipated is still in use and it has provided the service for the entry phase for thousands of applications since then, up to and including the present. However, it is not that one third of the cost occurred in that area. Two thirds of the cost fell on that particular component and the other two, which were not activated for good reasons, constituted smaller but significant costs. I will conclude in respect of this issue and will allow members to develop their own questions in this regard.
I should make one or two points. The first is that although the sums that Ireland is spending on research and development by the SFI, Enterprise Ireland and the others are large mathematically, by international comparisons when relativised to GDP, we still are on a growth phase. We are still just about at the EU average and are approximately 50% below the OECD average, which pertains to the countries with which we wish to be in competition. Consequently, the investment to date in SFI is not excessive by world standards. It needs to grow, which is the overall plan underlying the strategy for science, technology and innovation, and one would hope this can be delivered upon in due course.
SFI is managed in an efficient and cost-effective manner. We are delivering the primary purpose for which we were established and this has been reviewed by others, that is, world class research capability with transfer to industry. We are having an immediate impact on industry in Ireland, which is a little surprising because there could have been some hanging around before we could deliver something, whereby there would be a rolling five year promise that it was coming. In fact, given the examples indicated earlier, this is happening now, which paves the way for Ireland's future in the smart economy or whatever other derivations may arise. This is showing through with all the emphasis in the industries on research and development. I thank members for their attention and I am open to questions.
