Joint Committee on Social Protection, Community and Rural Development and the Islands debate -
Wednesday, 4 Oct 2023

Grants and Bridging Finance for Community Groups: Discussion

An Cathaoirleach

Good morning. Members participating in the meeting remotely are required to do so from within the precincts of Leinster House only. I remind all those in attendance to make sure that their mobile phones are switched off or on silent mode.

I welcome the witnesses. I wish to point out that they are protected by absolute privilege in respect of the presentations they make to the committee. This means they have an absolute defence against any defamation action for anything they say at this meeting. However, they are expected not to abuse this privilege and it is my duty as Cathaoirleach to ensure this privilege is not abused. Therefore, if their statements are potentially defamatory in respect of an identifiable person or entity, witnesses will be directed to discontinue their remarks. It is imperative they comply with any such direction. Witnesses are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against any person or entity by name or in such a way as to make him or her identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against any person or entity outside the Houses or an official either by name or in such a way as to make him or her identifiable.

The committee will consider the effect of financing for voluntary and community organisations, as well as State grant aid support and the need for such organisations to acquire bridging finance. Some of these grant schemes come directly under the remit of the Department of Rural and Community Development, which includes the islands, while other funding programmes have a direct impact on the long-term viability of many of these communities. Members of this committee have direct experience of the challenges faced in securing local matching funding and bridging finance for grant programmes, such as the sports capital grant scheme, the LEADER rural development programme, the Sustainable Energy Authority of Ireland grants, the outdoor recreation scheme and the just transition fund, to name but a few.

The committee wishes to explore innovative ways to bridge this challenge and has sought presentations from two organisations working in this area. The first is the Western Development Commission, which has identified the need for such support and has developed a financing model with the local LEADER companies, although this is only one aspect of the challenge faced by local communities. The second is Philanthropy Ireland, the umbrella organisation for philanthropy in Ireland. Philanthropy has historically not been well developed as a sector in this country. However, the Minister of State, Deputy Joe O'Brien, is determined to change this with the publication earlier this year of the draft national policy on philanthropy. This draft plan and the experience of the witnesses present today, along with the first-hand understanding of the challenges that each member of this committee knows, provides us with an opportunity to feed into the Minister of State, Deputy O'Brien's plan to help to address these challenges head-on.

From the Western Development Commission, I welcome Mr. Allan Mulrooney, chief executive office, and Ms Gillian Buckley, investment manager. From Philanthropy Ireland, I welcome Ms Éilis Murray, chief executive officer, Ms Hazel Hennessy, communications manager, and Mr. Dónal Traynor, chief executive officer of Community Finance Ireland.

I ask Mr. Mulrooney to make his opening statement.

Mr. Allan Mulrooney

I appreciate the opportunity to address the committee on behalf of the Western Development Commission, WDC. I am the chief executive of the commission and I started in the role on 1 September, so I am quite new to the role. I am here to provide a concise overview of the organisation's role in fostering economic and social development across the west of Ireland. Established in 1997, the WDC is a statutory body operating under the Department of Rural and Community Development. Our mandate encompasses counties Donegal, Sligo, Leitrim, Roscommon, Mayo, Galway and Clare. At its core, our mission aligns with the national development plan's pursuit of balanced growth and the objectives outlined in the Government’s Our Rural Future policy.

I will provide a brief overview of the WDC's multifaceted efforts because it is important that we outline these as we move forward into our bridging and loan opportunities. Our dedicated communication team actively promotes the western region through initiatives such as Westernjobs.ie and our television programme "Moving West" on TG4. Collaborative efforts with stakeholders and agencies have garnered millions of euros in PR value in recent years, emphasising the region's work-life balance and career opportunities.

Under our EU team, we have leveraged EU funding and the team has spearheaded sectoral growth strategies, securing €42 million over the past decade for the western region. We excel in designing, implementing and managing EU programmes across various sectors, from the creative economy to renewable energy.

Our policy team conducts in-depth research into long-term trends, challenges and solutions affecting our region. Drawing from diverse data sources, we inform policymakers on crucial matters like broadband, employment, energy and transportation. Notably, our recent national remote work survey influenced the Government's remote work strategy.

As part of the Atlantic economic corridor initiative, we have launched ConnectedHubs.ie, which is now a national project that has become very important to the Government's Our Rural Future strategy. This network of over 300 hubs has revitalised communities, offering diverse services and workplace options to individuals, start-ups and corporates, with plans to expand to 400 hubs by the end of 2024, if not before.

There is also the western investment fund which I intend to focus on during my statement. Managed by the WDC, the WIF, as it is called, marked its 20th year of investment in 2021. Comprising several sub-funds, the WIF includes the strategic investment fund, the business investment fund, the community loan fund and the western region audiovisual production, WRAP, fund and micro-loan fund dedicated to the creative industries.

The western investment fund initiated investments in 2001, receiving €31.75 million in Exchequer funding between 2001 and 2010. Importantly, since then it has been operating independently as an evergreen fund, reinvesting all earnings into western region enterprises. In the context of non-commercial semi-State agencies, the WIF stands out for its financial return and now exceeds by three times the initial €31.75 million allocation. At present, the fund's value stands at just over €90 million.

The investment fund operates commercially, providing risk capital through equity investments and loans to businesses and social and community organisations. It follows the market economy investor principle, co-investing alongside private sector investors without state aid elements. Commercial interest rates apply to its SME lending activities, which is very important to note. It provides lending to community enterprises and projects at a 5% interest rate by way of term loans and bridging finance against LEADER grants. The WDC may take security in certain lending scenarios but it never looks for personal guarantees for any of its lending activity. This approach aligns with the investment fund's objective of promoting social and economic growth while maintaining sound fiscal practices.

The business investment fund is the largest of several WIF sub-funds, having invested €65.7 million in 144 SMEs across the region by way of equity investment and loan finance. The community loan fund, which funds community enterprises and projects, and the strategic investment fund, which funds social enterprises and initiatives, have to date supported 144 projects with a total of €20.3 million of funding. Investment in the creative industries, which is a new focus for the organisation, accounts for just over €3.2 million across 57 projects. Overall, the WIF is a multisectoral fund, funding both high-tech and traditional businesses, the creative sector and community and social enterprises.

The WDC, through its multifaceted efforts, plays a pivotal role in enhancing the western region's economic and social vitality. We have consistently demonstrated our commitment to fostering growth and sustainability, both in terms of financial returns and socioeconomic impact. I and my colleague, Gillian Buckley, our investment manager, are available to address any questions in regard to the fund or any other part of our work.

An Cathaoirleach

Thank you. I call Ms Murray, the chief executive officer of Philanthropy Ireland, to make her opening statement.

Ms Eilis Murray

I wish the Chairman and members a good morning and thank them for the invitation to attend. I am joined by Ms Hennessy, who is communications lead with Philanthropy Ireland, and Mr. Traynor, CEO of Community Finance Ireland, which is a member organisation of Philanthropy Ireland. Formally established in 2004, Philanthropy Ireland is the independent organisation providing a collective voice for philanthropy in Ireland. Our purpose is to advance knowledge, understanding and practice of philanthropy for social benefit. We do this by engaging in three key pillars of activity, namely, promotion of the concept and value of philanthropy, policy input to support the development of an enabling environment for philanthropy and practice building capability in support of best practice in grant making. Philanthropy Ireland’s over 50 members provide grants and investment funding to a broad spectrum of over 5,000 causes and initiatives in Ireland and overseas. In doing so, they make a significant contribution to Irish and global society.

Quite simply, philanthropy is private giving for public benefit. It is a form of giving, usually in the form of grants or donations of money, that seeks to be planned, thoughtful and intentional in approach, taking account of those delivering social change and the communities they serve. It is generally done by families, individuals, companies, or a combination of all via private, corporate and community foundations, family trusts and philanthropic intermediary organisations. It is collaborative in nature and works in partnership with stakeholders, including communities, the Government, or both.

There is no single measure that captures the scale and scope of philanthropy in Ireland. We know almost €80 million was disbursed by philanthropic institutions in 2020, an increase of over 20% on the 2019 figure. However, as much individual philanthropy in Ireland is done privately it is fair to assume this is an underestimation. Social services, education and research, health, and environment are causes receiving most funding. The publication in June of a draft national policy for philanthropy by the Minister of State, Deputy Joe O’Brien, is a significant and very welcome development. We congratulate the Minister of State and his departmental team on taking this step. We understand submissions are under consideration by the Department to inform a final draft for adoption by Government before year end. Why is this important? Philanthropy is underdeveloped in Ireland. Ireland lags significantly by comparison with other countries when it comes to the number of active grant-making trusts, which is estimated at 30 times lower than the European average. For example, community projects in the UK have access to 8,000 grant-making trusts, whereas we have fewer than 100 active grant-making trusts. Giving by way of legacies and bequests in Ireland, which is another source of philanthropic giving, is modest. 2023 research by Community Foundation Ireland identifies legacies and bequests are increasing by up to 17% per annum, albeit from a low base. With an estimated intergenerational wealth exchange of €9 billion annually, the same research identifies that benefits from legacies for communities could double to over €300 million with increased awareness and incentives. We know, therefore, that there is capacity to grow philanthropy and through this to benefit more communities. Policy provides a framework for action for philanthropists, beneficiaries, and the Government to work more collaboratively and effectively and put in place an environment to encourage planned giving.

As a form of independent funding, philanthropy can support innovation, test models of intervention and take risks. For example, the DCU Exoskeleton Programme aims to provide individuals with access to cutting edge Ekso Bionics technology to address mobility issues. Equally, philanthropy can support initiatives in communities that might not otherwise receive attention. A particular example is MyMind. Mental health is a key issue. MyMind is a unique movement for community-based mental health services. It works towards giving every person in Ireland equal access to mental health support early, affordably directly and without stigma or delay.

It is important to note that philanthropy is not seen as a replacement for public service provision, nor should it diminish existing Government funding levels. It seeks to complement and align with other sources of finance available to communities. This includes bridging finance services, which are mostly used by community organisations to unlock the retrospective nature of many statutory grants such as those from the sports capital programme, LEADER programme and the Sustainable Energy Association of Ireland, to name but a few. Such loans have proved vital for many community projects to get started. In many cases bridging loans follow grants to organisations that may have no sustainable income streams. With this in mind, and thanks to the WDC and Community Finance Ireland, volunteer-led groups no longer need to pay arrangement fees to access bridging finance across the State. While bridging finance is deemed a necessary tool to allow voluntary bodies access many grant supports, there are ways in which this process can be improved. These include standardising the mandating of all State grants directly to the lender where a bridging facility is required by a voluntary-led group and ensure all State-funded grant programmes, where appropriate, clearly highlight the fact the support is retrospective in nature.

While there is a real opportunity to advance philanthropy in Ireland for public benefit, it will not just happen without a policy framework. To successfully engage people in philanthropy we need to raise awareness, create understanding and proactively stimulate engagement. To achieve this, we invite the committee to assist by supporting the adoption of the national philanthropy policy by the Government, thereby acknowledging the role of philanthropy in support of civil society and local communities and providing an enabling environment, supporting our proposal for a White Paper to review fiscal measures that could support the growth of philanthropy. Recent independent research commissioned by Philanthropy Ireland indicates 66% of those aged 55 and over agree that the tax system should include incentives for individuals who give to charity, with 18% saying they do not know. A White Paper can identify the right fiscal measures to stimulate greater and more sustained giving in Ireland. Again, I thank the committee for this engagement. My colleagues and I would be happy to answer any questions members may have.

An Cathaoirleach

I thank Ms Murray. The Leas-Chathaoirleach, Deputy Ó Cathasaigh, will begin the questions.

Deputy Marc Ó Cathasaigh

I thank the witnesses for the their presentations. I openly admit that I am not an expert in this area in any way, shape or form, so I found the presentations really interesting and informative. The thing that stands out from a Deputy's work is that expertise in funding applications. The sports capital programme is a great example. A number of clubs will come in and they just have not filled out the form properly or they have left ten or 15 marks behind them that they could easily have got through. This also applies to the EU funding level, where things seem so distant and labyrinthine.

The first question is for both groups and then I have a few more specific questions. On the business of supporting grant applications for a community group that walks through the doors of the organisations present, what does that look like in terms of the accessibility? The most successful community groups tend to have somebody behind them who is very good at filling out grant applications, but there are a lot of community groups out there that do not have that level of expertise and for them that whole process seems very daunting and intimidating. From that first decision by a community group to come to the organisations present for their expertise in applying for grants, what does that process look like?

Ms Eilis Murray

I am happy to take that. If a community group is putting in an application to many of our own organisations, the first thing they have are very clear criteria for what that fund is available for. That is very readily available to any of the community organisations to go through specific criteria around what would constitute a successful application. The second thing is that nearly all our organisations do briefing sessions in advance that a community group can come along to, where there is an open consultation system whereby the funder will clearly lay out what it is it will be looking for in the application, what the process is and how long it will take for the applicant to get feedback. As the Deputy said, for a lot of community groups this is unknown territory, so they need to be very well supported in the process and that is one thing philanthropic organisations do. From experience, they believe it is absolutely essential. When they put the application in or when they are drafting it, most of the organisations are online at the end of a telephone to support them in completing them.

Very clear and engaged processes are involved. They stay with the communities and the communities have the opportunity to interact with the organisations because it is a difficulty. Any of our organisations want to see success and, equally, that it does not waste the time of the community organisation. There is huge respect for that. However, from recently being part of a selection process for applications, of the 55 applications, only ten projects were selected, which is where the need for philanthropy lies. For us, that means 45 projects still need the funding sought and will perhaps have to go elsewhere or not proceed. It is an example of how many applications come in and shows that, for every application that is funded, there are many that are not. That is a clear signal of the need for greater philanthropic support in the Irish community space.

Ms Gillian Buckley

From our perspective, we do bridging loans against the LEADER grants. We work very closely with LEADER companies and try to minimise the process for the grant applicant as much as possible. We have a very straightforward form - give your name, address and how much you are looking for. We rely on LEADER's evaluation of the project and that it has a grant letter of offer. We try to minimise the work for the applicant; we would like to press that point. They are volunteers who put in a huge amount of time and effort. We need to make it as easy as possible for them to access funding to allow development in their local communities. That is one thing we do and we work with the LEADER companies to try to streamline that as much as possible.

We also do term loans to the community groups. That is a bit more sophisticated than having to take on a grant because the organisation is now taking on a debt, which must be repaid. We need a business plan from the groups but it is appropriate to the scale of the project. If an organisation is doing new AstroTurf in the local community, it is likely to pay us back through fundraising efforts over the next five to ten years. We just need to have a track record of that. We try to keep the process as simple as possible but because it is State money, there are still hurdles. We need tax clearance certificates, state aid statements and insurance. We try to minimise the work but it is a challenge. There are many other supports. If a project is going ahead, it will have obtained a feasibility study grant to help it through that process. We try to streamline the process, and the more we can do that, the better it is for everybody.

Deputy Marc Ó Cathasaigh

It is really about helping people to put their best foot forward. The work is often there and it is just about making sure they hit all the scoring parameters in whatever is it, the X, Y and Z.

I enjoyed the line about philanthropy being able to take risks because it is true. Something that prevents people further down the socioeconomic distribution from being able to access capital is that they do not feel they can take the risk in the same way. That line really jumped out at me. The draft national policy on philanthropy is important. I know the Minister of State, Deputy Joe O'Brien, has been active in that area for many years. That level of experience shows in the initiatives he puts forward.

It would be remiss of me not to mention the Tomar Trust. Ms Murray said there are only 100 grant-making trusts. Tomar Trust is very active in my area. An awful lot of projects simply would not have happened without that derisking, support and money to step in to enable people to take something on.

I have a specific question for Philanthropy Ireland. Ms Murray mentioned tax treatment, which is important. Will she give some examples of best practice from other countries as regards how to entice this money out to play, as it were? She spoke about it in terms of intergenerational wealth exchange. We are trying to make wealth work within the community rather than leaving it to one side to accrue interest or whatever else. Will Ms Murray point out best practice examples of tax treatment in other jurisdictions?

On the flipside, in terms of ideological safeguards, it is right and appropriate that somebody making a philanthropic donation will probably have something in particular they want to support. How do we safeguard in that regard? There are all sorts of ideologies, motivating views and opinions but I would like to see safeguards around transparency in particular. If I am allowed, I may come back with a separate question for the Western Development Commission.

Ms Eilis Murray

In terms of tax treatment and looking at other jurisdictions, there is no one-size-fits-all. That is because every country is different in terms of focus and where it is in stages of development, etc. The reason we are looking for the White Paper is to see if we can decide what is appropriate for Ireland. Within that, one would look internationally and see what is happening elsewhere. An example, to take one that is not a European jurisdiction, is New Zealand. We do not look at America because it is a very particular model and we do not tend to make comparisons with it. New Zealand, in terms of country size, population, etc., has a tax incentive that goes directly to the individual, at a rate of 33.3%, for example. We are not necessarily going to say that is the way we should do it but it is a model that could be looked at. With the Covid crisis, Belgium recently had an incentive that goes back to the donor. It can be written off against tax. Belgium increased that to 40% during Covid on particular donations in order to attract funding. Due to its success it has been retained. Coming back to a White Paper, it could look at all of these other measures elsewhere and focus on what is appropriate for the Irish context.

On the second point about ideology and issues around that, it is an emotive issue for many. We need to think carefully about it. The wealth building in Ireland is new, it is not something we are used to. In many other countries, it has been inherited for a long number of years. We are coming from a low base. It is a good opportunity for us to look at what we need in this area. We agree that transparency and protection are vitally important. If one looks at our current organisations, our membership has a charity structure. It comes under the regulation as it stands. Transparency is vital because it builds trust, faith and confidence. We agree that, ideologically, we need to look at that as well. We can address it if we consider all issues around it and how something could be structured. We believe a White Paper could address that.

Safeguarding is essential. It is not about a replacement; it is about supporting what is there. Philanthropy should be supporting. If there were a shift in the tax, it could also stimulate a behavioural change in how we give. If we look at other incentive measures such as the plastic bag tax, it is about changing behaviour. Part of the ambition around it is to shift behaviour so that those who want to give automatically think about it, and-or those close to them, such as their advisers, can raise the conversation and ask if it is something they would consider. It provides that shift in behavioural change.

Deputy Marc Ó Cathasaigh

I like the idea that philanthropy can take risks or the organisations put themselves in that position to be able to derisk community borrowing. What about the percentage of non-performing loans? My sense is that a lot of communities may lack the capacity or confidence to take on debt in this way but once they do, and they are supported in doing that, their capacity to repay is very good.

I am, however, basing that off anecdote. Can Mr. Mulrooney give me the facts?

Mr. Allan Mulrooney

It is something we speak about a lot and brought to our board in a recent conversation. The Deputy is correct that, anecdotally, we might think communities would not be in a position to repay, but we have found over the years, with the risk the organisation has taken through communities, that almost none gets to the stage where it does not repay. The goodwill is there, and once the community gets over the challenge of the paperwork and the-----

Deputy Marc Ó Cathasaigh

I might make an assumption as well. Even when they get into payment difficulties, the engagement with the community groups as lenders is probably very good.

Ms Gillian Buckley

Just three of the 144 loans are non-performing, which is phenomenal. People do not want to let things fail on their watch. They will move heaven and earth. As the Deputy said, we try to be flexible and work with the project if it does get into difficulty. During Covid, for example, we automatically gave a six-month payment holiday and extended that where it was required. We give payment pauses, extend loans and top them up. We try to work with the projects. They see us as a benign lender and we want to see ourselves in that. We understand the sector and we understand how important we are to our region. The vitality that community groups bring to rural Ireland, and to urban centres as well, is phenomenal. Anything we can do to help them we will do. As I often joke, when we give the money, we kind of half hold on to it, but that allows the projects to be more sustainable because it moves them on to another level. We talked about social enterprise. A lot of these community projects could move with that model, become real forces within their community groups and generate more employment on that sustainable model. Taking on a small degree of debt from the likes of us or Community Finance Ireland is the stepping stone into the next phase of their development.

Deputy Paul Donnelly

I thank both groups for their presentations, which were very interesting. Deputy Ó Cathasaigh asked a number of the questions I had wanted to ask. In regard to taking risks, I attended Charities Institute Ireland's presentation last weekend and thought it was very interesting to hear the organisation’s views on risk-taking in funding, whether from the community itself and the public at large or from philanthropic organisations or groups of individuals, and how the balance is spent. We heard about the experiences of a number of organisations, especially in the US, given the presentation was based largely on the American experience. One year, they might raise $500 million or a couple of hundred million dollars and then the following year, because of issues with spending on, say, advertising, administration, CEO costs or whatever it might be, public trust in that body falls through the floor. Sometimes, philanthropic organisations can give charities, community groups and voluntary groups that bit of space to be a risk-taker in some of the steps they want to take, and that can be important.

Deputy Ó Cathasaigh made an important point about the power balance between the funding and the work that is done, as well as who is given the money and for what reason. When we talk about tax incentives or tax breaks for people who are giving substantial sums, we have to be really careful. The Charities Regulator has a very important part to play in ensuring that taxpayers' money, which is what it is and which is, in effect, given back by the philanthropic organisation to the people, or at least spent on them, will be used in the correct way and properly regulated. The witnesses might comment on that.

One organisation I have always found really interesting is Benefacts, which the witnesses referred to in their documents in the context of statistics and data on the community and voluntary sector and how important it is to know the number of people who work in the sector and the level of money that is raised within the sector. All those very important data show the value, not least in the Twenty-six Counties, of community and voluntary organisations. In fact, a lot of both physical and mental health organisations and disability organisations just would not exist without philanthropic funding or the supports from community funding. I have asked this question a number of times of the Department and I am still not exactly clear on it. It relates to the funding that was given to Benefacts. The Department is bringing the expertise in house but I have not seen that level of transparency coming from the Government in regard to data and openness. The witnesses might speak to that.

On bridging loans, I am involved in a community group that is also a charity, and pretty much all our funding comes from either the local authority or the HSE. One of the key developments we have built up over recent years is a separate fund that will allow us, if we have any issues or if the company needs to be wound up, to survive for three months. Is that a separate issue to that of bridging loans? Do they apply to organisations that are perhaps waiting on funding from a State organisation and do not have money to pay the wages, or are the witnesses talking about new projects, community or voluntary groups or charities that are looking to set up something new?

Ms Eilis Murray

On the point about proper regulation, we would 100% concur that regulation is vital. The philanthropy sector even called for the establishment of the Charities Regulator. Regulation and oversight are absolutely vital. All our member organisations undergo a thorough due diligence process, not just with the projects but even for themselves, by watching how they are doing their own work and transparency is a vital feature. For any of our members, we can certainly send the committee some links to their websites where they show their impact reports and annually outline in detail every grant they have given, for what purpose, to whom and so on. In summary, we fully agree regulation is vital, as is transparency, because that builds trust. If trust is evident, we can do so much more.

The data issue is another one on which we would agree. In the draft policy that is in place, data figures significantly because without an adequate, solid evidence base, that creates a difficulty with being able to talk confidently and at the most thorough level with the sector. Certainly, the data element is something on which we would call for focus with the implementation of the policy. We again say that needs to be resourced and supported along the way.

This speaks to the Deputy's point about the number of organisations that would not be supported were it not for philanthropy. We agree 100%. The regulation, the data and everything else feed back into creating an environment where more giving can be done, with a greater level of philanthropy that supports those organisations, as has been outlined, that are dedicated to their cause. The Deputy knows this himself from working in the area where he works. Projects that have been supported by philanthropy would never have got off the ground if that had not been in evidence.

Ms Gillian Buckley

Bridging has a number of facets. It allows the organisation to draw down the grant. Usually, grants are paid retrospectively, so without the bridging they cannot access the grants. That is a fundamental issue for a lot of projects because they do not have the money, and it also adds a cost and a layer of duplication to the process.

One thing that could be considered is whether we could do more front-loading of grants and then put the checks and balances in for second and subsequent claims so that the organisations do not need bridging finance. At the moment, bridging helps them unlock a great number of grant projects. On the term loan, many projects, particularly those of smaller organisations and smaller communities, may not have the nest egg the Deputy is talking about. If they do, they should not be using it. They should keep it as a nest egg, as the Deputy wisely said, so that if there is a speed bump they will have some resources. Rather than depleting it, they could borrow on the back of it. It is easier to borrow if you have a little bit of money in the background to augment the operations of the organisation. Our view is that the amount of bridging finance projects have to draw down should be minimised. They should take loans from the likes of ourselves or Community Finance Ireland instead of depleting their own nest eggs because that would accelerate the development of the project.

Deputy Paul Donnelly

I have just one quick question. On the bridging loans, obviously somebody has to take responsibility for that loan. I have not come across these loans before so I would like to know whether the organisation, which may be a company limited by guarantee, CLG, takes the fiscal responsibility in case of a default. I believe Ms Buckley said there had been only three defaults. Is it the community organisation or an individual that takes on this role and these responsibilities? Who takes responsibility if there is a default? If something goes catastrophically wrong, who takes the hit?

Ms Gillian Buckley

In those case of those projects, the Western Development Commission took the hit. We have a policy not to ask for personal guarantees from individuals, whether in the case of community groups or SMEs. We do our lending in good faith and on the understanding that the project has the ability to repay and will do everything it can to do so. We work with the projects but if things go wrong through no one's fault we take the hit.

Mr. Dónal Traynor

There is a similar history in Community Finance Ireland in the Republic. We have unique status in that we operate on an all-island basis. Since we started lending in the Republic, we have put €47 million on the ground. We have lost €47,000 worth of capital in those 15 years. On who takes the hit, we go into these deals with our eyes wide open and look at them on the basis of repayment capacity first and foremost, without the need for personal guarantees. At least 50% of the lending we do is totally unsecured. Some 25% is secured in nature but there is no real commercially realisable asset behind it. After that, the other 25% would have some tangible security behind it. Ultimately, we go in with our eyes wide open and, generally speaking, as Ms Buckley has alluded to, we lend to organisations and communities on the basis of what they need to have rather than what they would like to have. These are communities that need infrastructure in place and they move heaven and earth to ensure the loan finance is repaid and their good name remains intact.

Deputy Éamon Ó Cuív

I will ask the simple question first. The witnesses' organisations give bridging loans to all of these organisations. I am curious. The LEADER programme covers virtually all of rural Ireland, including large towns such as Castlebar, Ballina, Sligo and so on. How much demand do the witnesses see from the deprived urban areas as opposed to from rural areas? Is there disproportionate demand from the lesser populated rural areas where there seems to be great capacity to collect money, organise and get things done? I am just curious as to whether the witnesses have noted any pattern as to how demand is distributed.

On philanthropy, if people want to give their money away, that is fine. It is their choice and their money. They can do what they want. When the State gets involved, depending on how great the State's involvement is, you may be effectively allowing the philanthropist to determine where taxpayers' money goes. When philanthropists boast that they gave €1 million, it should be noted that they actually gave €1 million less all the tax they saved, which depends on the rate of tax kickback. There is therefore a real challenge and issue here, as has been said, unless the State compensates those groups that are unlikely to attract philanthropic funds.

I got lost in Ms Buckley's answer to the previous question because I was coming down the stairs. One place I am always curious about is the United States of America, where philanthropists give very serious amounts of money to support places and so on. However, I have never got to the basis of the tax kickback and found out whether it is given at the marginal rate of personal income tax or some other rate. Do the witnesses have any information on that because it was always the place for it? The boom time here seems to be disappearing daily, such times do not seem to last, but when the previous boom time came, there was great talk about the possibility of philanthropy. I do not like depending too much on it because, when the economy is good, it is easy to get the money but, when it is bad, it is not so easy. Do the witnesses know what the tax relief in America is?

I take it that the money is given back to the taxpayer. I quite like the idea here whereby, if you give more than €250 to a charity, the charity can claim the tax relief so the people donating cannot claim they gave more money than they really gave because they got a tax break on it. I like that particular approach. To the big philanthropists, that might not be so attractive but there is an attraction to it. It is like the scheme we had for dormant accounts. If a body in, for example, the disability sector collected €500,000, whether by bucket collections, from a philanthropist or in some other way, the Government backed it directly with another €500,000. We backed it directly; it was not given to the donors. That could have been collected in small amounts, €20, €30 or €40 at a time, or one person could have just dunked in all of the money.

Do philanthropists tend to go to the more attractive projects? It could be something they have a personal interest in. For example, a philanthropist may have a close connection to somebody with a severe disability and give money to a disability organisation. You also often see philanthropists giving money to universities and so on but they get kudos for that. Do they shy away from the less glamorous organisations, such as charities dealing with ex-prisoners or recovering drug addicts? Does the State have to compensate the charities that are less likely to attract philanthropy? If not, the people at the bottom might lose out.

I do not believe we should allow the private sector to dictate where taxpayers' money goes beyond a certain point. I see the point on leverage but I have a conflict in my own mind about this. It should not be allowed beyond a certain level. That is why I am curious as to whether the witnesses have studied the US model and what the actual amount given by philanthropists is when the tax breaks are considered.

Ms Gillian Buckley

We only provide bridging loans to LEADER companies. In our region, that is everywhere except Galway city. We do term loans across all community and social enterprises across the entire region. There are also aspects, particularly the business investment fund and the western region audiovisual producer’s fund, that are available throughout the region. The bridging finance is only given against LEADER grants, however.

Deputy Éamon Ó Cuív

What I am saying is that you can get a LEADER grant anywhere in Ballina-----

Ms Gillian Buckley

Yes.

Deputy Éamon Ó Cuív

-----or in Castlebar or any of these areas.

Ms Gillian Buckley

You can also get it in Sligo. Only Galway city-----

Deputy Éamon Ó Cuív

Ballina and Sligo were in the revitalising areas through planning, investment and development, RAPID, scheme.

Does the commission find that it gives bridging loans in more rural areas because they have the capacity to get their projects together to get the money or grants and that the more deprived urban areas in all the schemes lag behind?

Ms Gillian Buckley

We can get bridging against LEADER programmes so that would be the case. In our experience rural communities can coalesce much more easily than larger urban centres which do not have the community infrastructure. They have people on the ground but more formal intervention is needed for more deprived areas to access those kind of facilities. They do not have the community leadership that exists in rural communities where people know each other better anyway. Yes, that is what we have found.

Deputy Éamon Ó Cuív

Does Ms Buckley agree that human capital tends to be better in rural communities?

Ms Gillian Buckley

That is our experience, yes.

Ms Eilis Murray

My colleague, Mr. Traynor, will comment on that point before I address the other questions posed by Deputy Ó Cuív.

Mr. Dónal Traynor

We are very much in a demand-led business. We will never say "no" and are always looking for ways to say "yes" to organisations regardless of whether they are urban or rural. As I said earlier, we have the benefit that we are able to operate across both jurisdictions - both urban and rural - and work with grants such as sports capital, Social Entrepreneurs Ireland, SEI, Fisheries Local Action Group, FLAG and, indeed, philanthropists like Tomar Trust, Rethink Ireland, etc. We have a lot of experience in that area.

I get what the Deputy has said. One can see from the geographic spread of our loan finance over the past 20 years that the vast majority of it will have been in rural areas, and smaller urban concentration spots like the Ballinas of this world. Let us consider Dublin and one might ask how well aware people are that social finance exists. Then, considering human capital, one asks what level of resources do they have on the ground so that they would have the capacity to submit applications to various grant funders, and then one can look at the transient nature of the communities themselves. I might be in a rural football club in County Cavan, and have grown up with those lads since they were three and four years of age so I almost know what they are going to say to me in the dressing room, but if people are playing for a different type of sports club in a very urban area one might never have seen a person before and that person may not come into the club next week. That is the basis on which grant applications are going to be based. It is about awareness, human capacity and the repayment capacity linked to their buying into the ambition of that particular organisation. If a person has not been there long enough then their ambition might wane.

Ms Eilis Murray

On the question about the marginal tax rate in the US, I do not have that information to hand and will get back to the Deputy on that. I suppose one of the reasons is we have a belief that the US system of philanthropy is quite unique to that country. It is a different model and the US has a different social system, etc. All that comes back to why we are saying that for the Irish model we need to look at what is appropriate for our system and that is what is important for the White Paper.

The Deputy asked about anything above €250 going back to the cause to which the donor has donated. Yes, the incentive works well for a large number of organisations and they get a lot back from that. In 2018, we conducted research on the system which showed that a very low number of community organisations and not-for-profits availed of the incentive. There is a number of them and there is a lot in it to actually avail of the incentive. The process is straightforward once organisations get involved. Nonetheless, almost 70% of organisations had not availed of the incentive in 2018 and that is a big gap. Equally, at the time the incentive was introduced and the change was taking place, it was intended that alongside that there would be another tax change for designated vehicles that was capped at €1 million. That did not happen and created a gap of stimulating the larger amounts and bringing those other amounts into the space. These are all things that we need to discuss. I would question why there is a €250 limit for the incentive. New Zealand is the only other country in the world that has a limit on how much can be claimed and it is $5 in New Zealand dollars. Let us say I can give €200, according to my means, and Ms Hennessy can give €250, why does the cause that she is donating to get a tax break while my cause does not? Many questions about the scheme need to be answered.

I agree 100% with the Deputy that we should not become dependent on philanthropy. If we consider the amount of funding that is going into the space, regarding the amount into the not-for-profit sector and civil society, philanthropy accounts for way less than 10% of the overall funding so we are not close to even reaching an influential mark. I am not saying that that may not occur but this is why regulation, transparency, etc. are incredibly important.

The Deputy asked whether funding goes to attractive organisations or other places. We have loads of examples of philanthropy really dealing with the harder to go to places. The St. Stephen's Green Trust, for example, is an ardent supporter of prisoners, Travellers, etc. There are lots of examples. It spans so many areas of support. One of the things organisations do, certainly ours does, is to try to base their decision on evidence and see where there is a need. Yes, for anybody who is giving, and we all give in different ways, there is an emotive part of that. It is what you know or it is something that has been asked of you and that is a huge thing. Many donors will say they were never asked. If a person has had a life experience or has a particular interest then that is likely to be the first port of call but any donation will be based on evidence of a particular need. Many of our members carry out a lot of research on where gaps exist and what areas do not receive funding, and then assess whether they can attract funding to those spaces.

Deputy Éamon Ó Cuív

I know the St. Stephen's Green Trust very well as I have a connection with it.

Senator Paddy Burke

I commend the work done by the Western Development Commission of which I am a great admirer.

Over the past ten years a lot of small builders or developers have found it difficult to get funding. Has the Western Development Commission funded any small developers or builders? Has it funded housing contracts or projects of that nature?

I think it was the case that the level of matching funds or deposit necessary to get funds from the Western Development Commission was very high and put many people off applying for or seeking approval for loans from the commission.

Mr. Allan Mulrooney

On the first question, it would be very challenging for the Western Development Commission, considering the Act that we are bound by, to support a builder or a developer. We are bound by the need for a business plan and have a separate entity to support the company from a private sector perspective on the other side.

On the challenge that some early stage start-ups sometimes find with seeking money from the Western Development Commission, and it is certainly what I have heard up and down the region, that challenge comes back to the Act. We are bound by the Act so we do not necessarily focus on early stage start-ups that are in need of grant support. We are looking at companies that are scaling and looking to grow and, equally, have a private investor on the other side ready to help them to grow and scale from there.

Ms Gillian Buckley

On building, we have only done that for social housing, which tends to get very high-level grants. We would have helped to fund the daycare centre aspect. Again, we have deployed funding in the non-for-profit community sector and we did that in the first decade of our operation but not recently. I am not sure about matched funding. For community lending we are the matched funding. So organisations will have gotten the grant and a community group or not-for-profit organisation will need to provide matched funding.

They come to us to borrow it so they can draw down the grant. With the business case for SMEs, it is completely different because we operate under a state-aid regime, so there are very particular rules around that. We have a lot more flexibility around community lending. We are the match-funding in those cases.

Deputy Donnchadh Ó Laoghaire

First, apologies for being late. I was participating in a Topical Issue debate. I do not have many questions. I do think the availability of bridging loans is crucial. Making more companies aware of it is something that could be done. I will plug my own community association, of which I am a member. It got a lot of support from Clann Credo - the Presentation Sisters set that up - for delivering local football pitches for our community which is one of the communities that Deputy Ó Cuív mentioned, that was a RAPID area in Cork city. Clann Credo is an excellent organisation.

On the philanthropy side, I must mention the Tomar Trust and Tom Cavanagh who passed away last year. He had a huge impact on so many things, particularly in Cork but also right across the State and, indeed, beyond. He was a very generous man who left a huge legacy.

Philanthropy Ireland’s opening statement referred to the much greater proportion of giving trusts that exist in Britain. I think it is right that the United States has a very different model. Even the fact that it is a different economic model to some extent has an impact and I am not sure that I would trade that, to be honest. Greater levels of inequality might aid philanthropy but I do not know if it does much for the people on the ground. But there is no doubt that philanthropy has a role. I suppose Britain might be a better comparison. Why does Philanthropy Ireland think there is a greater level of trusts in Britain than here?

In its opening statement, the Western Development Commission demonstrated how it has been able to support a lot of communities to benefit from EU funding. As a State, which is a slightly different thing, we do not always perform particularly well at drawing down European funding such as how we did not draw a lot from the Covid recovery fund. That is more related to Departments and whether they seek funding rather than the community organisations which are usually different streams of EU funding. When there are discussions in community organisations when people are scrambling, sometimes people ask “Is there any bit of money from Europe we could get?” There may or may not be, depending on the circumstances but people do not have a great sense of the kinds of things they can get European money for and how they can do that. Maybe with the work the Western Development Commission is doing in the west means that is more advanced, but can more be done to make communities aware of the opportunities that exist or to make it easier to avail of some of the various streams of EU funding? I imagine some might be quite onerous in the paperwork or whatever but there may be greater potential than is being realised.

Ms Eilis Murray

It is wonderful to hear that acknowledgment of philanthropy. Clann Credo and Tomar are both excellent models and are both members of Philanthropy Ireland.

On the difference with the UK, first there is a greater level of inherited wealth going back a long number of years. That has come down through many years from industrialists, corporations, families etc. would have set up trusts and foundations to provide for that grant-making. Therefore, historically, it is the wealth that has been in the country but they are also far more practised in it and have a longer history of it. The Deputy pointed to the examples of philanthropy he knows of. We look to the evidence of what we know and that creates momentum for further change and development.

Another thing that has impacted this and evidence is beginning to emerge of the impact, namely, the support in the UK to grow legacies and bequests. There is the age-old idea that “you cannot take it with you”. People want to give enough to their family that they will be looked after and taken care of but then it is about the balance. The UK has a more attractive system to attract legacies and bequests into charities, not-for-profits and even the establishment of people’s own funds. Those make a difference to what is happening there.

Mr. Allan Mulrooney

The Western Development Commission has grown expertise in drawing down EU funding. The Deputy used the word “onerous”. It can be quite challenging. With some of the paperwork, it can take quite a long time to understand how it is done. Unlike many of the applications we have in Ireland, whether it is grant aid or support, it is rarely one application and one is through the process. Most of the EU grants and projects with which we work have an application and then there is a consistent level of paperwork needed to draw down the funds over different stages. We have built up such expertise internally and we are working with community groups on the ground to try and help them to understand how they can do that.

On whether they always know what is available and when, they certainly do not but those EU supports come down in different stages and they are released in different stages so we are working with lots of community groups. More often than not, they need a lead partner. We have become a lead partner on a number of those across the region in the past couple of years. They vary depending on the type of project. It could be anything from the blue circular economy to niche tourism. When it comes to a community group trying to draw down funding, aligning that to what they are trying to do can often be the challenge. We can find projects that align with our current strategy or with a different organisation or a county council. If they are looking at the green economy, there could be EU funding coming down the tracks that they can apply for and we can find a way for it to fit with their own strategy.

Ms Gillian Buckley

It is a bit broader than just community groups. Social enterprise is an area in which we have done quite a bit of work. Through that, they have been able to access funding. It is what we call a strategic project. We tend to do them vertically. There is the BIA accelerator centre in Athenry around food, there is Creative Enterprise West, CREW, in Galway which is around creative industries and Future Mobility Campus Ireland, based in Shannon, is looking at smart technologies. Those are social enterprises. It is quite a new model in our region. They are able to lever out community funding, with our expertise. They will disburse into the more traditional community groups we are talking about but we need to have the social enterprise model in the country as well. People need to have jobs and live in communities. A huge part of our other fund, the business investment fund, has been to provide equity capital to high-tech start-ups. In the last four to five years, they have been able to leverage €85 million. Fourteen of our companies have leveraged €85 million. Almost all our entire fund is valued from European funding. We seed funded them and they, in turn, were able to access that very significant grant money from Europe. Again, that disburses into communities through job creation.

Deputy Donnchadh Ó Laoghaire

Our witnesses might not be able to answer this because it is not their job but I am conscious that they have developed this expertise. Is there a similar body or someone else with that expertise who can assist areas outside that covered by the Western Development Commission? I am not looking for an eastern development commission; the Western Development Commission exists for a good reason and if you prioritise everything you prioritise nothing. I am conscious, however, that while anyone outside that area can contact the European Commission’s office and so on, it will not offer that ongoing support or match it with projects like the Western Development Commission can. Is there a way of creating greater awareness? Who could offer support? Could the Department itself offer greater support to communities? Our guests have a remit, I understand that, and maybe they cannot answer this.

Mr. Allan Mulrooney

That is a very good question. A number of county councils in our region have started to become more active in this space. Donegal and Clare have become very good at applying for European funding and drawing it down but they have taken that upon themselves and we are working with them across a lot of projects. I believe outside our region it is the same. There are county councils and other bodies that have started to see the focus and the opportunities within it. I stand to be corrected, but I do not believe there is another body that has the expertise across the country, which means there is a gap, if that is the case.

Deputy Donnchadh Ó Laoghaire

Perhaps the local authorities could fill that gap.

Mr. Dónal Traynor

On that point, this is something I have been harping on about for the last five or six years. I recall, when I joined this sector about 25 years ago, going into parochial halls at eight and nine o'clock at night and being entered into LEADER-facilitated community audits. They were like a wish list or the Santa letter for all the parents in the parish to set out what they would want to have in their parish if money was no object. That process has been done away with because the LEADER staff simply do not have the resources or budget to carry out those audits. The best projects we financed over the last two decades on the island resulted from those local community audits because they were what the people themselves knew they needed.

I will tie this into the Deputy's question on everybody always looking for European Union grants. Everybody wants to get their hands on free money. As Mr. Mulrooney alluded to earlier, it is fantastic if that aligns with the actual needs of the local parish. I always think of a scene in "Killinaskully" where the boys are up at the bar and Dan is saying he is going to get a grant. The two boys tell him that is great and ask him what he is getting the grant for. Dan is not fully sure what he is getting it for. His only purpose is to get the grant and ensure the Bally boys do not get it because if they did, they would be looking down their noses at the Killinaskully boys. There is a territorial competition where people have to get their hands on the money for any reason whatsoever.

We must be very wary of two things. One is external agencies coming in and suggesting they have buckets of cash and all people have to do is put in an application to get their hands on it. I wary of that approach because it normally involves getting bridging finance and also the matching term loan finance. The organisation probably does not want or need to take on the project. For this reason, when we talk about community loans we set a litmus test in which we ask whether, if the project goes down the tubes during a financial recession or Covid and we have to shake buckets at the crossroads, people will put their money in the buckets. They will only do that if the project is really needed and it came from the people themselves deciding it was what they required.

The other thing we must be wary of is people with a mid-life legacy crisis. This is where people get out of bed some morning and wonder who will remember them if they vanish from the face of the earth. They then decide they have to build a big white elephant in their name or their family's name that nobody really wants.

It all comes back to the need for these community audits that were all over the place 25 or 30 years ago. We need to do those again and start from scratch.

An Cathaoirleach

I thank Mr. Traynor. On his last point, the whole idea behind the urban and rural regeneration funds was that communities would come forward with ideas rather than the Government providing another set of standard lighting or standard public seating in every village in the country and deciding that no matter what part of the country you are in, the streetscape would be exactly the same because that is what the grant is for. The whole idea behind those funds is to break that cycle so communities would identify what their needs are and, if it is a good project, the funding would match that. Maybe we need to take the traditional model in LEADER and amalgamate it with what has been happening with the urban and rural regeneration funds. The committee could recommend doing this as a pilot project in a number of rural communities and urban disadvantaged communities to give them a leg up and meet their needs.

On the philanthropy side there is a lot of merit in the possibility of developing a White Paper. Deputy Ó Cuív and Philanthropy Ireland have articulated very well the reasons for having a White Paper in this area. Have the witnesses had any engagement with the Government on this issue and have they received any feedback on it? The committee could make a recommendation to have a White Paper developed.

The purpose of, or spur for, this meeting was the meeting that Senator Murphy and I had with the Western Development Commission last March. There is bridging finance available for LEADER projects, which, if we are honest, are low-risk projects because detailed assessments are done through the LEADER programme. The difficulty is the lost opportunities that arise when other organisations do not get funding from LEADER. My question is for Ms Buckley and Mr. Traynor. What is their experience of the lost opportunities where grant aid has been provided from the State but the capacity to get bridging finance or matching finance is absent? One case that comes to mind is the perverse scheme we have called the just transition fund. This is where we provided grant aid to communities that had haemorrhaged jobs because of the shutdown of Bord na Móna and asked them to go and fundraise for the replacement jobs. It was the most perverse scheme ever devised in this country. We highlighted this at meetings of the midlands regional transition team. The just transition commissioner himself wore a path to the Department saying that this was amoral, yet nothing happened in relation to it.

Ms Buckley will know of some community groups that have very good innovative projects and will create employment and replace the lost jobs but they have been asked to put their hands into their pockets. After losing employment and wage packets, these communities have been asked to try to fundraise to provide replacement jobs. It is bizarre. Deputy Barry Cowen has articulated this as well. A number of communities across the midlands have got substantial grant aid but do not have the capacity to provide the matching funding and there is no mechanism for them to do so. What is the witnesses' experience of cases where funding has been allocated but cannot be drawn down because bridging finance or a matching local community contribution have been lacking?

The purpose of this meeting is also to ask how we can change this. Philanthropy Ireland has put forward a couple of suggestions for standardising the mandates, which would be helpful, and that it is made clear in State-funded projects that the funding is retrospective. That would not deal with the issue, however. The State wants these programmes to go ahead. It is committed to ensuring there is a just transition, communities have sports facilities, community centres around the country are retrofitted, and so on. The communities, however, cannot untap that without having another nest egg of funding. Many of them just do not have one. As Deputy Ó Cuív said, the communities that need the funding most are probably those that have been designated as deprived urban communities and do not have the human capital or capacity to provide that additional funding. We are actually compounding the disadvantage because they cannot get matching funding. How do we unlock that? Are staged payments part of the answer? Are there other innovative mechanisms that would allow that to be untapped that and would ensure the maximum drawdown of the grants?

We all deal with officials in the Departments, be it the Department of sport or any other Department, who are hugely frustrated with the lack of drawdown of funding. They are now trying to design the application process to ensure, insofar as possible, that matching funding is already in place. Again, that is a self-selecting process in that the communities that probably need those facilities most are the ones that will never get them because they do not have funding in place already. How do we address this challenge?

This committee wants to make a constructive set of recommendations, not just to the Minister, Deputy Humphreys, who is very willing to engage on this issue, but also to other Government Departments, to ensure the maximum level of drawdown and that the purpose of the grant scheme is fulfilled in delivering on those projects.

I will pick up on Deputy Ó Laoghaire's final point.

It is correct that the Western Development Commission has built up a body of expertise, particularly with regard to EU funding and supporting local authorities within its catchment area. It is not possible to go beyond that. Is there a role here for the regional assemblies or for the different regions, whether the Border region or other different regions around the country, including the southern region, to help local authorities or allow them to pool together to leverage some EU funding? Is there an opportunity for the Western Development Commission to share its understanding and knowledge of this with those organisations? Is this maybe a recommendation that should come from this committee to spur that type of engagement on?

Finally, we have had this meeting today because of the meeting we had last March with the community around Tulsk and Rathcroghan, which secured €495,000 to develop a marked walkway around Rathcroghan. It has done tremendous work in getting the 11 local landowners together to agree to public access to a series of monuments that have been there for the last 5,000 years. It is the ancient capital of Connacht, which has not been publicly accessible until now. The community is meeting more than halfway in getting access and agreement, yet it is coming up against a brick wall in getting the bridging finance to get this project over the line. It seems perverse again that the community has done the heavy lifting on this and has been rewarded with substantial grant aid from the State because it sees the merits of this, but because all the work has to be done before the funding can be drawn down, the project does not go ahead. We all lose out as a result. Maybe Ms Buckley, Mr. Traynor and whoever wants to come in after that can speak.

Ms Gillian Buckley

The Cathaoirleach makes hugely valid points. I endorse many of his insights. The easier we can make it for community groups, the better for everybody. They put their shoulder to the wheel on a voluntary time basis in many cases. Many of the projects do not have large access to capital. We, Clann Credo and Community Finance Ireland have helped bridge the gap, to use the pun. It is not enough in many cases. There would be ideas about front-loading the grants rather than having them be retrospective, but staging them so that one can still have insurance compliance. We know the rural regeneration fund front-loads 30% of the grant so that cash flows to the project and then it can make a claim and the next tranche will come. That is one way of doing it.

Speeding up the process of the grant claim is another aspect. We are always conscious that these are volunteers who may not have the skill set and expertise. What can we do to make it as easy and streamlined as possible? It is taxpayers' money so there has to be a level of compliance and everything have to be above board. Can we make it easier? Certainly, staged front-loading and more staged payments would allow cashflow. Matched finance is an element. Matched finance from the likes of us and Community Finance Ireland can be drawn down upfront and used almost to cashflow the business as well. The matched finance would be a term loan but it also helps cashflow to business. That, combined with maybe front-loading a portion of the grant, would take the burden and accelerate the drawdown.

One reason that we went into the bridging finance with the LEADER grants originally was that we knew the drawdown in our region was much lower and we had lost out on LEADER money as a result. We felt we had a very small fund in the Western Development Commission and thought that was a very good use of our expertise and funding. I agree with the Cathaoirleach that it is very low risk. As Mr. Traynor would echo, community groups have been phenomenal to work with. I have great admiration for every member of every community group, be it a sporting club, crèche or social housing. They do phenomenal work. The more we can do as a State to assist them, the better for everybody and our citizens.

Mr. Dónal Traynor

Apologies if I repeat some things that Ms Buckley said. Awareness is key here. That is awareness among the community groups that social finance exists for that purpose and that social finance is what it is. Recent research that we carried out with DCU across the public suggests that when 50% of respondents heard the phrase "social finance", they thought it referred to grants. That in turn means that an element of investor readiness needs to be delivered across the State for these community-based organisations, which, as Ms Buckley already alluded to, are led by volunteers with 150 other priorities in their lives, as opposed to just this particular organisation and the grant that it is achieving.

When we have organisations that are being set up for charitable purposes, the last thing they ever think they will get involved in is debt. Often, we come across rules and constitutions that do not include the authority to borrow and this becomes a last-minute scramble to amend their constitution and get trustees to agree that they now have the authority to borrow. Where there are not companies limited by guarantee, there is the issue of the liability that some trustees may take on board. This is not something that either of us would like to find ourselves in, but for fraud and negligence purposes, we need to consider that.

It is linked to what I said to Deputy Ó Laoghaire earlier about community audits. These organisations need to know where they are going and what their strategic plan or the community's plan and ambition going forward is. Some thought needs to be given by the grant design teams about where finance, whether it is bridging or term loan finance, fits in. I know I and Community Finance Ireland in the Republic have never been consulted about how these grant funding programmes should be set up. It has happened in Northern Ireland. We have worked with the Department for Communities in disbursing £21 million worth of grant supports to the community and voluntary sector over the Covid period. That was a co-design process so people understand exactly where we are coming from as investors. We do not like to go in at 100% debt finance. We think it is a very prudent approach. If the community does not have skin in the game, we are on a hiding to nothing.

When we come back to the existing human capital on the ground, not necessarily just the organisations themselves but the local LEADER companies and local authorities, maybe we have to skill up there and put in extra resources whereby staff members from those entities are available to hand-hold. They need to be properly selected so they have the capacity to hand-hold these organisations and bring them through that process. We are a little different from the Western Development Commission in that organisations have the grants sorted before they come to us. We are not there to hold their hands through a grant application process. We will do so through a debt finance process but they normally come with the grants. It was raised earlier that we have an issue with the timeframe of grants being opened and closed. LEADER and SEI, are continuously open and everything is fine. Sports capital to the average sports club, however, comes out of nowhere at the last minute. Clubs have a couple of weeks to gather a committee, come up with a plan of application, put in an application, and talk to us so that they can go back to the sports capital section in the Department and say they have spoken to a finance provider and say that, in principle, they can get access to bridging finance or term loan finance, and then we wait. We could be waiting for six or seven months. This perhaps comes down to a lack of resources in the sports capital team too for it to complete its assessments. Six or seven months later is a long time in this business. Costs escalate. One comes back to the same organisation that said yes, in principle, six or seven months ago, but the whole game has changed and we have to go through the due diligence process a second time, which takes the resources from us and the community into consideration.

On the work that we do, I am not speaking for the Western Development Commission but I am sure it comes across the same thing as us. Probably about 70% of the advocacy, signposting and due diligence work that we do with community-based organisations comes to nothing. Only about 30% of them end up drawing the loan finance. We are not grant-funded so our whole staffing team is covered by the interest income that we get from the circa 30% of loans that actually draw down. We now have to think about what we can do for the other 70% and how we can make sure that it is worthwhile that they engage with us in the first instance.

An Cathaoirleach

The committee would be interested in any further suggestions the witnesses may have along the lines of those offered by Ms Buckley and Mr. Traynor. We feel there is an opportunity to help to streamline this, even in respect of co-design with the Departments, sports capital and the time lag, so we can make practical recommendations here that can be examined. The committee wants to facilitate that but the witnesses are the ones at the coalface and know what can make a real difference. This is not an area that any committee has considered up to now but we are prepared to produce a report and make recommendations. The witnesses are the ones who have the meat to put on the bones, so to speak. If they have any additional supporting evidence or suggestions, could they please feed them to the secretariat to the committee over the coming weeks?

I am now going to ask Ms Murray to contribute. With regard to philanthropy, could she state whether there is an opportunity for a pilot in the area of community finance? Taking up the point that Deputy Ó Cuív has made, that philanthropy could, in theory, be pulling money away from where the State wants it to go, is there an opportunity to use philanthropy, even through a pilot, to support social finance, endorsing where the State wants to put the money? Is that a possibility or a recommendation that could be made by this committee?

Ms Eilis Murray

I absolutely believe there is an opportunity to consider everything, or all the models. We do not want philanthropy to work exclusively with government, but at the same time we want alignment with government. The programmes of the Atlantic Philanthropies and Genio all worked alongside the Government to pull together to achieve a specific objective. The answer to the Cathaoirleach's question is that there is an opportunity. It is wonderful that he is looking for further comments after this session. He mentioned co-designing with Departments. In this regard, one of the things we know from philanthropy is that it works well when it co-designs with projects. Several of our organisations would invest in supporting a project in identifying and mapping, and in determining the need in the first instance or what a good application could look like, or both. The aim is to take organisations through the process so there is no fall-down at the final hurdle. The co-design concept is discussed a lot in the context of trust-based philanthropy, whereby the projects themselves have an input into what the design might look like.

Mr. Traynor might refer to the projects being considered for philanthropic support for a fund. There is an opportunity to work together, which is certainly an ambition of ours.

To answer the question on the White Paper and whether it has gone to any other Departments, one aim of ours was to see the draft national policy. Seeing it published was such a welcome development, as was knowing it is now coming to a conclusion of sorts, the next stage being implementation. We suggested the White Paper in our budget submission. It is certainly our intention to take it further because we believe it is a way of collectively considering how the sector can be stimulated. It is not necessarily just about tax incentives, because co-funding could happen. I often point to the investment the Government made in supporting the establishment of Community Foundation Ireland back in 2000. A sum of €1 million was invested. That fund is now almost €60 million, and it is dispersing in excess of €25 million annually. Therefore, there are other ways and mechanisms. Yes, we will now be pushing forward to seek support for the White Paper, and we would very much welcome the committee's support on that.

An Cathaoirleach

If Ms Murray wants to provide the committee with more detail on that, she should please do so.

Ms Eilis Murray

I thank the Cathaoirleach.

Mr. Allan Mulrooney

Awareness was mentioned a couple of times. It is really important, certainly for us. Across the region, we have a memorandum of understanding in place with Roscommon LEADER, for example, and we have seen what we are lending and supporting in Roscommon increase exponentially. That is probably the best way of putting it. We are now trying to ascertain how we can expand in this regard across all the new LEADER companies. However, the question remains as to whether we are doing enough, because those concerned are still coming up against the same issue. The idea of trialling a project across several counties is very interesting, certainly regarding regional transition and looking particularly at the north west, where the grants are not being drawn down at the same level as in other parts. It is a question of whether there is an opportunity to mitigate the risk by taking several counties and determining after a year or two whether there have been defaults or issues after front-loading the grants. That could certainly be worth looking at as well.

An Cathaoirleach

I thank our guests for their presentations this morning. As a committee, we are quite willing to get further information from them. I thank them for their engagement with the committee this morning.

I now propose that we go into private session to consider other business. Is that agreed? Agreed.

The joint committee went into private session at 11.06 a.m. and adjourned at 11.28 a.m. until 9.30 a.m. on 11 October 2023.