Value for Money Examination  31; Local Development Initiatives   Summary

This value for money report is concerned with the operation during the period 1994- 1999 of local development initiatives provided through County Enterprise Boards (CEBs), Area-Based Partnership Companies (Partnerships) and LEADER groups.

CEBs were established in every county for the purpose of promoting local enterprise and economic development. There are 35 CEBs which operate under agreements with the Department of Enterprise, Trade and Employment.

The purpose of partnerships is to combat unemployment and exclusion. There are 38 partnerships operating in areas designated as disadvantaged and a further 33 local development groups in eon-disadvantaged areas. These operate under an intermediary company which reports to the Department of Tourism, Sport and Recreation.

The LEADER groups were established under an EU Initiative to promote rural development by supporting local development groups. There are 34 LEADER operating agreements with the Department of Agriculture and Food.

From 1994 to 1998 public funding totalling ?208 million was provided to these bodies, of which ?127 million was provided by the EU Commission and ?81 million by the Exchequer. CEBs and partnerships are funded under the Operational Programme for Local, Urban and Rural Development 1994-1999 (OPLURD). The LEADER groups are funded under the LEADER Operational Programme 1994-1999.

The value for money examination looked at specific issues relating to the administrative and operational efficiency of the three types of bodies, the arrangements for co-ordination between the bodies and approaches to evaluation of their impact

Administrative Efficiency

The diversity of activities and different stages of development of the bodies limit the extent to which cross comparisons of administrative efficiency can be made.

Administration expenditure by all the bodies totalled ?28.9 million in the period 1995 to 1997. During this period the overall percentage of administration costs to total  expenditure declined substantially from 28% to 22% principally because many of the bodies moved from a set up phase to being fully operational. Administration expenditure as a percentage of total expenditure also varied between individual bodies due to differences in the nature of the activities undertaken. For example, the level of administrative costs would be influenced by the extent to which individual bodies issue grant support or offer non-financial assistance. In general, Partnerships have higher administration costs relative to the other bodies for this reason.

The bodies are characterised by substantial voluntary inputs at board and sub-committee levels. This is in keeping with harnessing local knowledge and expertise to achieve common objectives. Key staff were invariably highly qualified and resourceful.

The development of management information systems has not been satisfactory in that there is no automatic sharing of data among local development bodies and the scope for effectiveness analysis is limited. Throughout the period covered by the examination, information systems which include performance measures and indicators to monitor efficiency and effectiveness have been under development and progress is being made in addressing the deficiencies.

Co-ordination of Activities

The flexible approach to the implementation of local development policy results in considerable duplication of the enterprise services provided by the three types of bodies with respect to objectives, clients and activities. To a lesser extent there is duplication of activities concerned with countering serious economic and social disadvantage because partnerships target specific client groups - the long-term  unemployed and the socially excluded. In nine cases partnerships and LEADER groups share a common management board.

Co-operation among the bodies and with other organisations (State, local aovernment, community and voluntary sector and business) at local level to achieve agreed objectives contributes to the unique innovative role of the Local Development initiatives.

Subsidy shopping' can occur, whereby clients can maximise the public funding they receive by applying for grants from different bodies to support different elements of their projects. This inevitably leads to duplication in administration. Formal interdepartmental agreements should be concluded to define the limits between the objectives, clients and activities of the three bodies and similar agreements should be concluded at local level. These agreements might look for ways of minimising the administration of multiple applications for funding in a project.

A cohesive approach to the integration of local government and local development was set out in 1998 by an interdepartmental Task Force. Implementation of this report is underway

Operational Efficiency

The main activity and output targets are being met but the absence of baseline performance data means that it is not known how demanding the original targets were. Arising from work by the external evaluators to the Operational Programmes many of the targets have been raised by the Monitoring Committees which oversee  the implementation of the Programmes.

While elements of expenditure (Partnerships and LEADER groups) were somewhat behind target at the end of 1998, it is expectedl by the Departments that spending targets will be met by the end of the Operational Programmes.

Studies indicate that the level of deadweight (the extent to which enterprises supported under the Operational Programmes would be established without grants) may be in the range 40% to 50%. Displacement (the extent to which supported enterprises divert sales and employment opportunities from other Irish enterprises) may be in the range 200/0 to 40%. From early 1998, CEBs and partnerships have been empowered to assist enterprise projects by means of refundable aid and equity. Use of these forms of aid should be expanded quickly in preference to non-repayable grants as they can help to reduce deadweight and displacement and, in addition, are a more economical use of public funds.

Some instances of displacement provide social benefits which may outweigh the costs involved. There is a need for more clarity regarding the circumstances in which displacement may be permitted.

Assessment of impact

The development of systems to assess the impact of Local Development initiatives is not easy because of the diversity of objectives? the lack of measurability of some impacts, the absence of disaggregated data models relevant to local areas and the need for careful interpretation of results.

Quantitative Assessment

Quantitative assessment of the impact of Local Development bodies can be carried out by examining changes in variables such as long-term unemployment and enterprise formation. Studies to date of these variables have yielded inconclusive results.

A report on the impact of OPLURD on long-term unemployment shows that from 1991 to 1996 unemployment in Partnership areas fell by roughly the same percentage as in non, Partnership areas.

Analysis of national Live Rechister data for the period 1994-1998 indicates a signiticant fall in the level of long-term unemployment which is a particular focus of partnerships but the reduction may have more to do with the impact of strong economic growth than with the effect of Local Development initiatives.

A review of the number of manufacturing startups from 1987-1996 shows that the rapid economic growth from 1993 and the onset of the Local Development initiatives did not result in an increased rate of manufacturing startups.

Integration of enterprise support and performance data across the Local Development initiatives would be required in order to establish the underlying reasons for these trends.

Qualitative Assessment

Detailed Census of population data (1991 and 1996) is available regarding indicators of disadvantage in Partnership areas. While there are limitations involved in interpreting the data, further analysis should facilitate assessment of the impact of the activities of partnerships.

The extent of material specifically covering the evaluation of impact is very limited. Partnerships have carried out several case studies to explore the impact of their activities and to promote best practice. Case studies are underway also in many LEADER groups. However, there is a clear need for more data collection and the development of social policy models to provide a better insight into the impact of Local Development activities.