Special Report 66 – Advertising and Promotion in FÁS     Summary

 

 


 

Summary of Findings

This report follows up on matters arising out of a previous report on procurement and related matters in FÁS.[1]; It primarily deals with the management of advertising and promotional activities.; A further report will be issued in the coming months which will, inter alia, examine the arrangements for internal control and governance that pertained in FÁS.

Over the period 2002 to 2008, FÁS spent over €48 million on advertising, promotion and related activities including jobs fairs and activities to promote science. 

Within FÁS, its Corporate Affairs section had primary responsibility for this expenditure.  That section carried out two main types of activity – running certain campaigns centrally and promoting the services of other units within FÁS.  It had overall responsibility for jobs fairs and the promotion of science through a Science Challenge programme. 

Overall Examination Findings

Advertising which accounted for almost half of the overall promotion expenditure by FÁS is the largest in the non-commercial State sector.  The examination found that

§                Advertising and promotional activities lacked strategic direction insofar as a marketing and communications strategy had not been developed by FÁS despite longstanding commitments to do so.

§                There was a substantial and prolonged breakdown in budgetary control in the area of promotional expenditure in the period under review with expenditure exceeding budgets by 38%.  This lack of control was particularly evident in the area of general advertising where expenditure exceeded budgets by 66% over the seven-year period.

§                Much of the advertising was ineffective in increasing an awareness of the services provided by FÁS.   

§                There was nugatory expenditure of €622,000 as a result of a series of transactions for which there was no evidence of goods or services having been provided.

§                There was also considerable non-effective expenditure including over €600,000 spent on producing TV advertisements that were not broadcast and payment of €9,200 for a car that was not delivered.

§                The rates FÁS paid for advertising were reasonably in line with industry norms.

Internal financial control was insufficient to ensure that all commitments were recorded and captured, and that procurement was conducted in accordance with public service norms and within expenditure authorisation limits.  In particular, the examination found that

§                Commitment controls did not function when agents were used to effect transactions.  Procurement of certain goods and services by Corporate Affairs through contracted agencies meant that the Finance section only became aware of certain commitments when invoices were presented for payment. 

§                FÁS was exposed to probity risks through a failure to meet public sector procurement requirements.  Exposures arose from the purchase from contracted agencies of goods and services that were not contemplated within the scope of their contracts and the potential consequences of FÁS playing a role in the selection of third parties by the agencies to provide services.

§                Expenditure authorisation limits were circumvented through the splitting of payment claims into a series of invoices.

§                There was a lack of clear accounting trails in regard to proceeds from the sale of exhibition space. 

Conclusions and Recommendations

The findings of this examination would suggest the need for adjustments to systems, procedures and practices employed by FÁS.  These arise in the following areas:

Strategy

A fundamental step for an organisation with a significant level of advertising or promotional expenditure should be the development of an appropriate marketing strategy.  This should take account of the business needs of the organisation and inform the development of annual business plans.  Promotional activity should be clearly focused and only undertaken in response to identified business needs and within specified and agreed budgetary limits. 

Evaluation

Each major promotional activity should have preset objectives and a review of their achievement should follow.  In order to determine the effectiveness of promotional activities there should be periodic external review of their outcomes. 

Commitment control

A requirement to record all commitments combined with more timely highlighting of anticipated budgetary overruns would lead to speedier management responses and help to prevent the types of over-expenditure that occurred in FÁS.  Commitments need to be controlled better through

§                earlier logging in instances where they are entered into by third parties on behalf of FÁS and

§                monitoring the cumulative expenditure and outstanding commitments against associated budgets and reporting of all emerging variances.  

Budget management

In the area of advertising, there needs to be a move from passive monitoring to active budget management.  While the Executive Board approved budgets and received regular monthly reports about financial performance, this did not lead to effective budgetary control over advertising and promotional expenditure.  Because overspends on advertising were compensated by underspends in other areas sufficient attention was not given to individual variances.  In order to allow for meaningful control, feedback about financial performance should include clear explanations of variances from budgeted expenditure distinguishing between

§                variances on demand-led programmes and

§                variances on general advertising and other general expenditure. 

Significant Bbudget variances should be formally ratified.

Purchasing/commissioning split

A weakness in the arrangements for advertising and promotional activities was that Corporate Affairs could incur expenditure and charge it to the budgets of other divisions.  A clearer division needs to be established between units who commission advertising and the responsibility of Corporate Affairs to manage it.  In addition, where innovative programmes are developed within Corporate Affairs responsibility for these initiatives should be assigned to line divisions at the earliest opportunity in order to maintain an appropriate separation of functions. 

Subject matter experts

A factor contributing to certain nugatory expenditure identified in the report was the preparedness of a manager, when approving payments, to accept, apparently without question, the view of a subject matter expert who initiated the transactions.  This type of risk should be addressed by all units in their risk management reviews and be specifically considered by management prior to signing the Statement of Internal Financial Control.  

Procurement

Many of the procurement breaches identified related to jobs and careers fairs.  Early planning of exhibitions would go a long way to assist FÁS in meeting its obligations in the area of public procurement and its own internal approval requirements.  It would also facilitate the timely authorisation of expenditure at the appropriate level.   

Use of agents in procurement

The operation of contracts with agents should be monitored to ensure that they are not used as a mechanism to avoid procurement controls and rules and in particular that

§                goods and services that are authorised to be procured by the agent are clearly and narrowly defined in line with the agent’s authority as defined in the contract

§                once an agent is in place, valuable resources are not wasted in directly managing services that the agent is already contracted to provide. 

Payment control

The Finance section should have a stronger role as gatekeeper in order to ensure, insofar as possible, that expenditure authorisation procedures have been properly complied with.  Its role should extend beyond a mere processing of invoices for payment that have been, on the face of it, authorised in other divisions in accordance with internal procedures.  In particular, commitment authorisation and methods of subverting authorisation limits such as invoice splitting should be the subject of checking.  

Reconciliation of income

In conducting exhibitions there should be a clear accounting trail between the income chargeable for each exhibition stand and that received from exhibitors.

Gross accounting

In the reporting of the outcome of jobs fairs, FÁS reported their cost net of revenue from the sale of exhibition space.  Transparent gross accounting would facilitate monitoring of both income and expenditure for these events.



[1]     Chapter 2, Special Report 10: General Matters arising on Audits – Non-Commercial State Sponsored Bodies, Health Sector Bodies, Vocational Education Committees, Comptroller and Auditor General, 2008.