Part 5: Enterprise Network Grants
- Introduction
- Cabinet and additional NZTE criteria for the award of Enterprise Network Grants
- The application process
- Monitoring of Enterprise Network Grants
Introduction
5.1
Enterprise Network Grants (EN grants) are one type of funding available through
the Enterprise Development Fund.11
5.2
EN grants assist groups or networks of businesses to gain additional business
skills, through increased business opportunities and obtaining external expertise in
developing network-based business projects.
5.3
Export Networks formerly existed as part of Trade New Zealand’s operational
activities. When the merger with Industry New Zealand formed NZTE, Export
Network activity continued largely unchanged because of the requirement to
honour forward commitments made under Trade New Zealand’s Export Network
programme.
5.4
Export Networks were renamed Enterprise Networks to recognise the changes
associated with coming under the Enterprise Development Fund.
5.5
In the 2003-04 year, NZTE had $4.133 million available to distribute as EN grants.
Figure 10 below sets out a summary of applications approved for funding.
Figure 10
Approved applications for Enterprise Network Grants in 2003-04
| |
Approved | Cancelled | Total ($) | |
|---|---|---|---|---|
| Approved | Paid | |||
| All applications | 107 | 1 | 2,339,859 | 1,022,078 |
| Applications we examined | 53 | 1 | 1,603,088 | 817,076 |
5.6
The approved applications ranged in value from $2,500 to $100,000, with an average
grant of $21,667.
5.7
NZTE had some difficulty meeting our request for data on approved, cancelled or
declined grants, as the data was held in the computer systems of various
administrators. Eventually, NZTE was able to provide us with information about
applications that had been approved, and it was able to provide information about one grant
that had been cancelled. This Part discusses applications that were approved, as the
cancelled grant raised no particular concerns.
5.8
NZTE had difficulty telling us how much of each grant had been paid. We were told that
this was because each team was responsible for tracking its own progress; there was no
consolidated financial system that tracked the progress of EN grants payments.
5.9
NZTE was also unable to provide us with data that stated how many participants
were involved in each network. This has implications for the risk profiling of
EN grant applicants and the ability of NZTE to focus its monitoring efforts
accordingly.
| Recommendation 14 |
|---|
| We recommend that NZTE develop comprehensive data collection systems to ensure that it can accurately ascertain at all times: how much funding of Enterprise Network Grants has been approved, how much has been paid, and who are the participants involved in an Enterprise Network. |
Cabinet and additional NZTE criteria for the award of Enterprise Network Grants
5.10
Criteria set by Cabinet for EN grants require applicants to:
- include 3 or more New Zealand organisations co-operating strategically to increase their combined earnings;
- not have any co-ownership of businesses;
- demonstrate that the network has the capacity and capability, including financial support, to undertake the activity successfully; and
- not have more than 25% of its members as public entities or educational institutions – unless it is an education network.
5.11
In addition, Enterprise Network members must:
- be registered in New Zealand for tax purposes;
- retain their own identity within the network and normally carry their share of any costs;
- be operating in a commercial environment; and
- be financially viable.
5.12
NZTE has stipulated an additional criterion – each business must have no more than
100 full-time equivalent employees and/or annual turnover of no more than $50
million. Where a business is near the limits of this criterion, the proposal must
specifically discuss how funding the business will have a significant “spill-over”
benefit to the network as a whole.
5.13
Enterprise Networks can apply for assistance and grants of up to $20,000 for each
business for each year.12 This can be for up to 50% of approved costs on a
reimbursement basis.
What can Enterprise Network Grants be used for?
5.14
EN grants provide assistance to networks of businesses to:
- undertake international market development activities related to investigating a new market and/or participation at a trade fair;
- access international experts through offshore or inbound missions;
- engage business expertise on well-defined projects or concepts that lead toward enhanced capability, profitability and international competitiveness;
- engage the services of a business mentor up to a maximum NZTE contribution of $3,000 for each year for each business; and
- undertake advanced management or technology-based training up to a maximum of $3,000 for each business for each year.
What can Enterprise Network Grants not be used for?
5.15
Costs that are not eligible for funding include:
- the businesses’ contribution to the proposed costs must be met by the businesses themselves rather than by another business-assistance agency;
- costs incurred before NZTE has given “in principle” support to the network;
- domestic travel and meeting costs within New Zealand;
- the cost of meals, entertainment, phone calls, gifts and other incidental expenses, as these costs are all included in daily rate provisions;
- individual business marketing materials;
- the purchase of NZTE services;
- costs relating to normal business operating expenses, non-developmental costs of the project, business establishment and the purchase of assets;
- costs incurred internally by the organisation, such as salaries, wages, fees, personal expenditure, in-kind expenses or donations;
- work being undertaken by any of the applicant’s employees or immediate family, or the employees or immediate family of any subsidiary, associate or parent company;
- costs of anyone with a financial interest in the project or activity such as shareholders;
- cost of New Zealand permits or consents and licence, renewal or registration fees;
- costs relating to website design and implementation;
- costs associated with making an application under another government assistance programme; and
- costs relating to establishing the project as a commercial venture.
Were the Cabinet and additional NZTE criteria met?
5.16
It was difficult to assess whether the Cabinet and additional NZTE criteria were
met, as the evidence and supporting documentation for making such assessments was
poor. For example, the application summary requires Client Managers to state
whether there is any co-ownership within the network. In most instances, the
Client Manager had simply ticked the appropriate box but there was no supporting
evidence on file. Such practice was similar for most of the criteria.
| Recommendation 15 |
|---|
| We recommend that NZTE ensure that all Enterprise Network Grant files contain the required supporting evidence for all statements made in the application summary. |
5.17
Similarly, although the assessment sheet requires Client Managers to score individual
companies and the network for its financial and organisational stability, there was
often very little discussion in the plan and proposal of the members involved in the
network. In some instances, the names of network members were only listed in
the proposal, and there was no discussion of the governance and accountability
arrangements for the companies involved in the network.
| Recommendation 16 |
|---|
| We recommend that NZTE ensure that there is appropriate discussion of all network members in the plan and proposal, to ensure that all risks associated with particular companies are identified. This should be included as part of any risk assessment of Enterprise Network Grants awarded. |
| Recommendation 17 |
|---|
| We recommend that all Cabinet criteria for Enterprise Network Grants be explicitly addressed in applications and be supported by comprehensive documentation. Decision-makers must be satisfied that all criteria are fully addressed. |
5.18
From 5 January 2004, one of the NZTE criteria is that members of an Enterprise
Network must have no more than 100 full-time equivalent employees and/or annual
turnover of no more than $50 million. This criterion was not addressed in any of the
applications for funding under the scheme.
5.19
In some of the networks, one or more of the network members explicitly did not meet
this criterion. NZTE told us that smaller companies were able to gain advantage from
the presence in the network of the larger companies.
5.20
We did not see a single proposal where this criterion was identified or noted. We would
expect such criteria to be explicitly addressed, with the reasons for variation from
the criteria to be clearly addressed in any proposal that was submitted for approval.
| Recommendation 18 |
|---|
| We recommend that, if NZTE decides to develop Enterprise Network Grant criteria additional to the Cabinet criteria, and an application does not comply with the additional criteria, the reasons for non-compliance be clearly stated, so that the decision-makers are aware of the proposed variation from the criteria. |
The application process
5.21
Companies interested in forming an Enterprise Network must contact an NZTE
Client Manager before submitting an application. There is a standard proposal
template that Client Managers provide to the companies involved in the network.
These documents are not available on the NZTE website. The proposal must include:
- a clear outline of Enterprise Network objectives and activities;
- a detailed plan of Enterprise Network activities including costs;
- anticipated benefits from participating in the Enterprise Network and predicted increases in revenue;
- information about the businesses/individuals making the application; • the total revenue and number of full-time equivalent employees of the Enterprise Network members;
- any other funding (received or pending) for the Enterprise Network; and
- any other NZTE or government funding applied for or received.
5.22
Client Managers submit the proposal and an application summary to a Team Director
for peer review. Once it has been established that the criteria for an EN grant have
been met, the proposal is assessed against the following:
- robustness of the plan;
- financial and organisational stability and the appropriateness of available resources including the stability and maturing of Enterprise Network members;
- ability of the network to undertake the planned work;
- potential for growth within the network and its members;
- level of need for government assistance and funding as a catalyst for growth; and
- level of services or the value to add to existing activities or innovation offered by the network.
5.23
Figure 11 below sets out the approval process for EN grants.
Figure 11
Approval process for Enterprise Network Grants
5.24
After an application is approved, the applicant has 20 working days to accept or
decline the offer of a grant under the Enterprise Network scheme. When submitting
claims, applicants must provide:
- a copy of airline boarding passes to initiate the payment of daily rates and travel costs; and
- original invoices or receipts.
Guidelines
5.25
NZTE has developed an internal Enterprise Network Fact Sheet for Client Managers.
This fact sheet sets out the criteria for EN grants, eligible and ineligible costs,
application assessment processes, how claims are approved, and client reporting and
confidentiality requirements.
5.26
At the time of our audit, NZTE had developed a “work in progress” process manual.
This manual sets out how Client Managers should manage the application process.
As part of its Business Mapping Project, NZTE is in the process of significantly
revising its EN grants documentation.
Documentation
5.27
To apply for Enterprise Network funding, applicants must complete a standard form,
which includes providing information about the network participants, objectives of the
network, and activities the network proposes to undertake with the funding.
5.28
The information provided in the proposals that were submitted for approval was
variable. In some of the proposals, there was little information about the companies
involved in the network or the activities they intended to undertake. Proposals
regularly did not include quotes for the cost of the purchase of services under the
grant.
| Recommendation 19 |
|---|
| We recommend that NZTE develop clear guidelines for Client Managers as to what information should be included in an Enterprise Network Grant proposal before an application can be submitted into the assessment process. |
5.29
We found variable standards of documentation in individual files. Generally, the
standard of documentation improved from those applications that were submitted in
July 2003 through to those applications submitted in March 2004. NZTE updated the
guidelines for Enterprise Networks in October 2003.
5.30
However, even taking into account the improvements over time, the overall standard
of documentation on the files was inadequate. Credit checks, returned and signed
copies of the offer of funding, receipts for work completed, and boarding passes for
completed travel were missing from the files in many cases.
| Recommendation 20 |
|---|
| We recommend that NZTE develop clear guidance for Client Managers as to what material should be held on each Enterprise Network Grant file, and check files periodically for completeness. |
NZTE’s approach to risk for Enterprise Network Grants
5.31
The application summary and assessment sheet required credit checks to be
completed if individual company funding was expected to be greater than $5,000.
Further, from 1 February 2004, Client Managers were also expected to collect the
latest financial statements for all Enterprise Network members.
5.32
Client Managers assessed the track record of the company or management teams,
the financial and organisational stability of the individual companies and the network
as a whole, and the ability of the individual, business, or network to implement the
project or activity. Such assessments were incorporated into the decision-making
documents, but there was no specific risk analysis of companies.
5.33
The amount of funding received by a network participant can vary greatly,
depending upon the number of participants in the network. NZTE had not developed
comprehensive criteria for assessing the risk profile of grant recipients, taking account
of the amount of funding individual participants received.
| Recommendation 21 |
|---|
| We recommend that NZTE develop comprehensive guidance for assessing the risk profile of participants in an Enterprise Network, and the network as a whole. |
Were NZTE’s assessment procedures satisfactory?
5.34
NZTE’s assessment procedures could be improved. Client Managers were required to
fill in, for all Enterprise Network applications, an application summary that included
an assessment sheet. This assessment sheet rated the application against a series of
categories to determine a score out of 100.
5.35
The Client Manager’s assessment sheet was then peer reviewed by the Team Director.
However, as the files held only the final application that was sent for approval, we saw
no documented evidence of such reviews occurring, or applications being amended
because of such reviews.
| Recommendation 22 |
|---|
| We recommend that NZTE ensure that all Enterprise Network Grant applications are peer reviewed, and that peer review comments are included on the grant file. |
5.36
In general, the guidelines had been consistently applied. All applications received a
score of at least 70/100 in the assessment sheet as required. However, as NZTE was
unable to provide us with any applications that had been declined, we were unable
to ascertain how approved applications compared to declined applications.
5.37
For 2 of the approved grants, the applicant had received a rating of 0/10 for the level
of need for government assistance. Zero indicates that the proposed activity is likely
to proceed without support and 10 indicates that the proposed activity needs direct
support to proceed.
| Recommendation 23 |
|---|
| We recommend that NZTE set required scores for each Enterprise Network Grant criterion, to ensure that an applicant who receives a low score for one criterion such that, in effect, the criterion is not met, is not eligible for an Enterprise Network Grant. |
5.38
The appropriate delegated authority had approved all grants we examined.
Monitoring of Enterprise Network Grants
5.39
For some grants, particularly those where NZTE had a high level of involvement
in organising the Enterprise Network, there was evidence of constant interaction
between Client Managers and grant recipients. For other grants, there was no
evidence on file that the Client Managers monitored the Enterprise Network’s
progress.
| Recommendation 24 |
|---|
| We recommend that NZTE ensure that all significant conversations or meetings with Enterprise Network Grant recipients throughout the life cycle of the grant are recorded. |
5.40
Appropriate payment controls had not been exercised over EN grants. Claims for
payment were checked and approved by the Client Manager responsible for the
network, and approved claims were sent to NZTE’s finance team in Wellington for
payment. However, we noted that the supply of receipts and boarding passes by
grant recipients was inconsistent. The level of oversight depended on the individual
Client Manager.
| Recommendation 25 |
|---|
| We recommend that NZTE ensure that appropriate payment controls are observed in relation to Enterprise Network Grants, to ensure that all claims sent to Wellington for payment contain the requisite information. |
5.41
Successful Enterprise Network applicants were required to send in a completion
report form within 30 days of the completion of the activity. This report required
applicants to note the benefits received from the funding, rate the experience they
had of Enterprise Network funding, and suggest how NZTE could improve its
service to Enterprise Network clients. NZTE may withhold 20% of the grant until the
completion report form has been received.
5.42
We were concerned to note that the level and quality of post-activity reporting was
variable. For grants approved after 1 October 2003 and paid, 12 of the 14 grants
had some kind of post-activity report on file. However, these reports ranged from
one network that had 17 participants and 17 completion reports on file, through to
one member of a network writing a one-page letter identifying some of the successes
of the activity.
| Recommendation 26 |
|---|
| We recommend that NZTE consistently apply the requirement that all members of a network provide a completion report, and that 20% of the Enterprise Network Grant be withheld until the completion report has been received. |
11: Enterprise Development Grants are the other type of funding available through the Enterprise Development Fund. Enterprise Development Grants are discussed in Part 4 of the report.
12: The maximum a single business can claim from the combined Enterprise Development Fund is $20,000 for each financial year.
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