To: All Investment Division Staff

Cc: Chief Executive

Head of Appraisal

David Carson Department of Economic Development Business Liaison Unit

August 2001

PROCEDURES MANUAL FOR PRIVATE AND PUBLIC SECTOR DEVELOPMENT UNDER THE TOURISM DEVELOPMENT SCHEME

This manual has been designed with the aim of achieving a systematic and consistent approach to the processing of TDS applications, and to assist staff concerned to demonstrate best practice as required by Government in the performance of their duties. It is the responsibility of all staff to become totally familiar with its contents, and to apply its principles at all times.

This version of the manual supersedes earlier versions and for the first time is available on desk-top computers. Staff must not amend the manual on their own machines or mail it to other organisations or individuals.

The manual is written as if all cases were private sector projects. Where the guidance differs for public sector or community sector cases the relevant information is included in a shaded box adjacent to the original guidance.

MANUAL OF PROCEDURES

FOR

SELECTION, APPRAISAL, APPROVAL AND MONITORING

OF PRIVATE AND PUBLIC SECTOR PROJECTS

UNDER THE

TOURISM DEVELOPMENT SCHEME

CONTENTS

CHAPTER SUBJECT PAGE

NO(S)

I BACKGROUND TO THE MANUAL 1-2

II OBJECTIVES OF THE SCHEME 1-2

III PROJECT ELIGIBILITY 1-2

IV KEY TDS CRITERIA 1-8

V FORMS OF ASSISTANCE 1-10

VI APPLICATIONS 1-4

VII FINANCIAL APPRAISAL PROCESS 1-4

VIII SUBMISSION TO INVESTMENT

COMMITTEE/PDU 1-2

IX LETTER OF OFFER 1-3

X ACCOUNTING PROCEDURES 1-3

XI MONITORING PROCEDURES 1-3

ANNEX

1 STANDARDS OF FINANCIAL PLANNING,

CONTROL AND ACCOUNTABILITY IN THE

NORTHERN IRELAND PUBLIC SECTOR 1-2

2 TOURIST INDUSTRY (FINANCIAL

ASSISTANCE) SCHEME 1992 AND

EXPLANATORY NOTE.

3 DEPARTMENT GUIDELINES ON OPERATION

OF TDS

4 FIRST SPECIAL REPORT FROM THE

COMMITTEE OF PUBLIC ACCOUNTS, DATED

23 NOVEMBER 1987.

5 ASSISTANCE FOR NON-VIABLE PROJECTS

6 PROJECT COSTS UNDER TDS.

7 GUIDANCE ON AREAS AND ITEMS NOT

REGARDED AS ELIGIBLE FOR FINANCIAL

ASSISTANCE.

8 MANAGEMENT RESOURCES REQUIRED

FROM APPLICANTS.

9 FINANCIAL INFORMATION AND CONTROLS

REQUIRED FROM APPLICANTS.

10 ECONOMIC APPRAISAL

11 GENERAL DUTIES AND RESPONSIBILITIES

OF A NON-EXECUTIVE DIRECTOR.

12 POTENTIAL ISSUES TO BE ADDRESSED

WHEN DETERMINING THE LEGAL RIGHTS

ATTACHING TO PREFERENCE SHARES.

13 BROAD DEFINITIONS FOR THE TOURISM

DEVELOPMENT SCHEME AND INITIAL

APPLICATION FORM.

14 STANDARD LETTER REQUESTING

BUSINESS PLAN.

15 ROLE OF THE PDU AND DELEGATED

LIMITS.

16 PROJECT ASSESSMENT COMMITTEE.

17 ILLUSTRATION OF BUSINESS PLAN

FORMAT FOR TDS SUBMISSION.

18 CHECKLIST OF INFORMATION REQUIRED

FOR MARKETING APPRAISAL.

19 CHECKLIST OF ISSUES FOR COMMENT BY

QUALITY ASSURANCE.

20 PROJECT REPORT FORMAT FOR INVESTMENT

COMMITTEE/DELEGATED PDU SUBMISSION.

21 STANDARD FORMAT FOR RECORDING FINAL

RATIFICATION BY INVESTMENT COMMITTEE

AND DELEGATED PDU

22 CASES REQUIRING SUBMISSION TO THE

DEPARTMENT.

23 MIS UPDATE FORM.

24 CLAIMING AND PAYMENT PROCEDURES.

25 NOTES FOR THE GUIDANCE OF CLAIMANTS.

26 LETTER OF OFFER MEETING PRO-FORMA.

27 INFORMATION REQUIRED FOR FINANCIAL

MONITORING.

28 PAYMENT AUTHORISATION FORM.

29 PROCESS FLOWCHART

30 MINOR AMENDMENTS TO LETTERS OF OFFER

PRO FORMA.

31 COVENANTS

32 USE OF CONSULTANTS

33 INITIAL SUBMISSIONS TO THE PROJECT

DEVELOPMENT UNIT PRO FORMA

34 LETTER OF OFFER SIGNING OFF SHEET

This manual sets out the procedures to be followed by the Northern Ireland tourist Board in the selection, appraisal, approval and monitoring of all private, public and voluntary sector projects seeking financial assistance under the Tourism Development Scheme legislated under the Tourism (Northern Ireland) Order 1992. It is the responsibility of the Board of the Northern Ireland Tourist Board to ensure that these guidelines are followed. Where any significant policy decisions are taken which would be contrary to the procedures set out in this manual, the approval of the Department of Economic Development must be obtained in advance of such a decision. It is important that the highest possible standards of financial planning, control and accountability be observed in the Northern Ireland public sector, and to emphasise the importance of this point, a copy of the Department of Finance and Personnel letter of 29 June 1995 to Accounting Officers is attached as Annex 1.

March 2000

Introduction

CHAPTER I BACKGROUND TO THE MANUAL

1. Introduction

The introduction of the Tourism Development Scheme presents the tourist industry in Northern Ireland with the opportunity to develop accommodation and amenity projects with the direct incentive which selective financial assistance offers. The administration of the Tourism Development Scheme is the responsibility of the Northern Ireland Tourist Board in accordance with Guidelines prepared by the Department of Economic Development. By its nature, selective financial assistance presents two particular issues which are not relevant to standard capital grant programmes i.e.:

(i) with limited financial resources, the process of selection is likely to result in projects being declined for assistance and, therefore, development priorities need to be agreed and published;

(ii) the financial assistance may take the form of repayable monies such as preference share capital or secured loan stock and, therefore, the approach to determining financial packages must be subject to the custom and practice of corporate finance in the private sector.

This Manual documents how the Northern Ireland Tourist Board will administer the Tourism Development Scheme in terms of project selection, appraisal, approval and monitoring. As such, these issues will be fully addressed to avoid any charge of inadequate administration of a selective financial assistance scheme.

Initially drafted as a manual for handling private sector projects only, this update now addresses the handling of voluntary sector and public sector projects as well.

1.2 Purpose

The purpose of the Manual is to ensure that:

(i) each project considered for assistance under the Tourism Development Scheme is subject to the same process of selection, appraisal, approval and monitoring appropriate to and within its category and,

(ii) best practice as directed from time to time by the Department of Economic Development is followed in performing financial and related appraisals on every project.

1.3 Content

The Manual is designed to facilitate easy reference in the process of selection, appraisal, approval and monitoring. Consequently, the Chapters of the Manual follow that chronological order recognising that there is some degree of overlap (e.g. Chapters IV and V are relevant to the selection and the appraisal processes). Following Chapters I and II, the remaining Chapters can be categorised as follows:

Chapters III to VI selection

Chapters VII appraisal

Chapters VIII to IX approval

Chapters X to XI monitoring

All relevant personnel are expected to have read and understood the implications of the entire Manual even though their present duties may relate to only one area within the overall process.

1.4 Glossary

The main abbreviations used within this Manual are:

(i) Department of Enterprise Trade and Investment “the Department”

(ii) Investment Committee: “IC”

(iii) Northern Ireland Tourist Board: “the Board”

(v) Project Development Unit: “PDU”

(iv) Project Assessment Committee: “PAC”

(vi) Tourism Development Scheme: “TDS”

(vii) Quality Assurance: “QA”

(ix) Administration Support Unit “ASU”

1.5 Circulation

This Manual is for the exclusive use of the Board’s personnel acting with the authority of the Department. The Manual may not be copied or reproduced in any form for any party without the prior consent of the Department.

Chapter I

CHAPTER II OBJECTIVES OF THE SCHEME

Background

2.1 The origins of the TDS lie within the Statement of Government Tourism Policy issued as “A View to the Future” in 1989 following a major policy review. Financial assistance toward tourism development would be based on a highly selective approach similar to that applying to support for the manufacturing and tradable service sectors.

2.2 TDS was introduced initially in 1990 under the then existing legislation which confined support to accommodation projects only. From April 1992 the legislative basis became Part III of the Tourism (Northern Ireland) Order 1992 which also conferred on the Board the power to provide financial assistance within the terms of a Scheme made by the Department with the approval of the Department of Finance and Personnel.

2.3 The formal Scheme, designated the Tourist Industry (Financial Assistance) Scheme 1992 and Explanatory Note are reproduced as Annex 2. The Board has retained the title “Tourism Development Scheme” as the operational title.

Aim

2.4 The aim of the TDS is to assist the development and improvement of tourist accommodation and amenities available to visitors to and within Northern Ireland, to improve the industry’s competitive position and to increase its economic contribution.

Objectives

2.5 In pursuit of the delivery of that aim, the following principal objectives will apply:

(i) accommodation, attraction and amenity projects in both the public and private sectors will be considered for support;

(ii) the TDS scheme is selective and it is at the Board’s discretion as to whether any project should be offered financial assistance (and in terms of the type of assistance offered). Any such assistance should be limited to the minimum amount needed to enable the project to proceed;

(iii) there will be a strong focus on the quality of management, marketing and operation of the project, as well as on physical quality;

(iv) account will be taken of the likely job creation impact, together with other economic indicators such as displacement and targeting social need.

(v) the consideration of any project will include a risk evaluation, arrangements for monitoring and a post project evaluation.

2.6 The operation of the TDS is delegated to the Board in accordance with the Guidelines and Directions from the Department – reproduced as Annex 3. Any application being dealt with by the Board has, therefore, to have regard to the terms of the TDS, the Explanatory Notes relating thereto, and the Guidelines.

2.7 It is important that in considering financial assistance towards private sector projects, lessons be learned from past experience. In that context, the Treasury guidance to Government Departments on assisting private sector ventures is relevant, and a copy of the first special report from the Committee of Public Accounts dated 23 March 1987 is attached as Annex 4.

2.8 In particular, it is imperative that there should be at least £1 of private sector investment for each £1 of assistance from public funds. In determining the level of grant, it is therefore necessary to ensure that, in aggregate, grants from all sources do not exceed 50% of project costs. For this purpose grants from the EU and IFI must be added to any assistance from Government Departments, public bodies and NITB. Grant assistance from Lottery Funds is to be treated as private finance in a project.

2.9 There is a requirement under EU Regional Guidelines to reduce the maximum level of financial assistance offered to public sector proposals from 75% to 40%. This was considered by the Board in November 1999 when it was concluded that the proposed change should be phased in on the basis of a sliding scale over the period January 2000 – December 2003, as follows:

Jan ’00 : 50%

’01 : 45%

’02 : 40%

’03 : 40%

Given the need to ensure that available funds are utilised as fully as possible it was considered appropriate to retain the flexibility of a higher rate of assistance over the period provided that a clear message is conveyed that the intention is to promote less dependency on grant aid and that the appropriate argument is developed in support of any case deemed to merit a more favourable rate.

Chapter II

CHAPTER III PROJECT ELIGIBILITY

Introduction

3.1 There is no automatic entitlement to financial assistance under the TDS. It is at the discretion of the Board (subject to the approval of the Department in certain cases) to provide financial assistance to any project which, in the opinion of the Board, will increase tourism activity to and within Northern Ireland and the revenue derived therefrom.

Eligible Activities

3.2 A wide range of tourist facilities may be considered for financial assistance. These include various types of accommodation, activity holiday facilities, cultural and heritage attractions and the provision of tourist information and services.

Development Priorities

3.3 The Board’s priorities for TDS are assessed and reviewed from time to time, and are set out in the following documents:-

(i) Corporate Plan

The Board’s Corporate Plan sets out the priorities for a three year period.

(ii) Strategic Plan

The Board’s Strategic Development Plan sets out the broad policy and strategic direction the Board has determined for the tourist industry.

All projects should be tested against the stated aims, objectives and priorities of these documents; (in addition to any annual statement of priority in connection with development projects).

Project Costs Under TDS

3.4 Annex 6 details costs which under TDS should be included in determining a project’s overall funding requirement. There are a number of broad principles which can be applied to any project and may need to be communicated to promoters at an early stage. These are set out in the paragraphs below.

3.5 TDS is intended to be a flexible approach to assisting developers. The actual costs of undertaking a project such as professional fees, statutory approvals, initial operating deficits, and pre-opening human resource and marketing costs, as well as site purchase, will all be taken into consideration when determining the appropriate level of support. This does not mean that they will all be regarded as eligible costs, as defined by TDS, for the purposes of assistance.

3.6 Financial assistance is not directed towards particular capital expenditure but rather towards the funding of the total project cost. However, there are areas and items which are specifically not eligible – Examples of these are given in Annex 7.

3.7 In addition, assistance will not be forthcoming other than in very exceptional circumstances where construction work has clearly commenced. Notwithstanding this exclusion, the Board may seek the Department’s consent to provide prior approval in cases where certain expenditure in advance of consideration and offer of TDS assistance is unavoidable. Such consent must be obtained in writing from the Department before any commitment to the applicant is made.

3.8 It is a pre-requisite of any offer of assistance under TDS that the applicant is the owner of, and has clear title to the site on which development is planned. It follows therefore that assistance will not be offered in the circumstances where the applicant is one of a number of potential purchasers of a site to be developed.