The Government has sanctioned €4 million in short-term financing to keep the Digital Hub Development Agency afloat.

The Cabinet approved the new funds after reviewing a KPMG report it commissioned into the activities of the agency, which manages the Digital Hub project. The hub houses a cluster of digital media and technology firms in the Liberties in Dublin.

The agency ran out of funds earlier this year following its failure to negotiate a deal with the private developer Manor Park Homes to develop the project.

Records released under the Freedom of Information Act show the Digital Hub Development Agency this year sought sanction to increase its overdraft to €3.6 million from €2 million.

The agency said it needed the cash to maintain its operations until a decision was taken to develop the Digital Hub. The records show the Department of Communications recommended approving a €500,000 increase to its overdraft facility to allow the agency to continue to operate.

The Department of Finance was also approached to approve the extension to the overdraft.

But, after reviewing a report by KPMG that investigated all the agency's commercial and non-commercial activities, the Cabinet finally sanctioned up to €4 million to keep the agency afloat.

The extra cash will be used to clear the agency's overdraft of €2.5 million and meet running costs until the end of 2005.

E-mail correspondence between officials at the Department of Communications and officials at the agency show there have been sharp exchanges and rising tension between the parties over the lengthy delay to deciding on how to develop the Digital Hub.

Under the original plan in 2000, the Government planned for the agency to contract a private developer to develop a nine-acre portion of land in the Liberties for use by companies.

However, in March 2005, a competition to appoint a developer was terminated when negotiations with preferred bidder Manor Park Homes collapsed.

One e-mail sent in December 2004 by officials at the Department to the agency says: "(We) are astonished at the fact that the date for finalisation of the project has been pushed back to the end of March... it is now 27 months since initial submissions on the development competition were received". Philip Flynn, chief executive of the agency, replied: "I am astonished at the reaction and tone in the e-mails below."

Some of the Digital Hub projects have started and more than 40 companies are located in the Liberties. But a seven-acre portion of land at the site remains undeveloped.

The Government recently set up a committee chaired by the Minister for Communications Noel Dempsey to oversee the project. This will now involve the sale of land to developers.