THE MISSISSIPPI LEGISLATURE

The Joint Committee on

Performance Evaluation and Expenditure Review

Report # 504

State Entities’ FY 2006 Advertising Expenditures

Executive Summary

Introduction

In July 2006, at the request of the chair of the Joint Legislative Budget Committee, the Legislative Budget Office (LBO) staff surveyed state entities to determine the total amount expended on advertising services during FY 2006. LBO staff presented survey results to the Joint Legislative Budget Committee during September 2006 as part of that Committee’s annual budget hearings.

Following receipt of the survey results, a member of the Joint Legislative Budget Committee requested that the PEER Committee review the efficiency of state entities’ use of advertising services. Specifically, the requesting legislator had concerns regarding whether advertising dollars spent by state entities were for well-defined purposes or outcomes and were placed with the appropriate vendors to achieve maximum results.

In conducting this review, PEER sought to determine:

• what laws and/or regulations govern state entities’ procurement of advertising services;
• whether state entities use a formal process to determine need for advertising services;
• methods state entities use to procure advertising services; and,
• methods state entities use to evaluate the effectiveness of advertising services received.

Method

The Legislative Budget Office’s Survey

LBO’s survey determined that state entities expended $14,345,385 on advertising services during FY 2006. State entities reported advertising expenditures in the following categories and for the following total amounts:

• Legal notice advertising--This is advertising required by law and usually placed in newspapers (e.g., requests for proposals, notices of meetings). State entities reported a total of $504,097 for this category (4% of all FY 2006 expenditures for advertising).
• Recruitment advertising--This is “help wanted” or other types of advertising to fill employment positions. State entities reported a total of $2,347,594 for this category (16% of all FY 2006 expenditures for advertising).
• Program advertising--This is advertising used to promote the mission of the entity. State entities reported a total of $11,493,694 for this category (80% of all FY 2006 expenditures for advertising).

PEER’s Use of the Survey Results

To address the concerns of the requesting legislator, PEER used LBO survey data as the foundation for this review. Because program advertising services accounted for a significant majority of all funds expended by state entities on advertising during FY 2006, PEER chose to focus on program expenditures.

PEER analyzed LBO’s survey information for program advertising expenditures to identify those advertising agencies or vendors that had received the highest amount of cumulative payments during FY 2006 for advertising services rendered. In LBO’s survey, state entities reported using sixty-two different advertising agencies or vendors to provide program advertising services, with the following seven vendors receiving cumulative payments in excess of $100,000:

• Frontier Strategies: $2,865,983;
• GodwinGroup: $1,301,092;
• Covello Group: $311,303;
• The Ramey Agency: $774,303;
• TeleSouth Communications: $1,210,874;
• Commnet Marketing: $220,494; and,
• CFO Publishing Corporation: $128,907.

PEER reviewed FY 2006 accounting data in the Statewide Automated Accounting System and identified nineteen state agencies that had made payments to one or more of the seven advertising vendors. PEER sent inquiry letters to the nineteen state agencies requesting information as to each agency’s process for determining the need for advertising services, policies and procedures regarding procurement of advertising services, processes used to procure advertising services, and methods for evaluating the effectiveness of advertising services received.

Because universities and community colleges have no centralized accounting system to identify those institutions that had used the services of the seven advertising vendors listed above, PEER sent inquiry letters to all of the state’s universities and community colleges requesting the same information as requested from state agencies.

PEER also requested the same information from the private, university-affiliated organizations and foundations. Although PEER challenges their assertion, eleven of the twenty-one organizations questioned PEER’s authority to provide oversight of their organizations. Three organizations reported advertising expenditures for FY 2006, but did not respond to questions regarding needs assessment, procurement methods, or evaluation of effectiveness.

Conclusions

Because of the lack of uniform procedures for the assessment of need and selection and evaluation of contractors, the state has few assurances that entities have utilized their best efforts at selecting advertising vendors.

Key elements of an effective contracting process involve a process to assess whether a need for a service actually exists, a competitive process to identify and select vendors who can provide the needed service, and an evaluation of a vendor’s performance. In reviewing state entities’ practices in light of these key elements, PEER found the following weaknesses:

• State entities are subject to few controls on their use of advertising vendors. The only state agency contracts that must be approved by the Personal Service Contract Review Board are those that exceed $100,000. Universities’ contracts are not subject to PSCRB’s review and only those contracts exceeding $250,000 must be reviewed by the IHL Board. Community and junior colleges’ contracts are governed by the procurement policies of each individual institution.
• No state laws or regulations require entities to assess whether need exists prior to contracting for advertising services. As a result, few entities utilize fully documented needs assessments with stated goals and objectives.
• State agencies are not required to utilize a competitive selection process until contracts for professional services (such as advertising) exceed $100,000. For contracts for less than those amounts, agencies must utilize their own due diligence to procure services in the most efficient and effective manner.
• No state laws or regulations require entities to identify criteria by which a vendor’s performance should be evaluated after rendering the requested services. As a result, state entities typically rely primarily on informal measures of effectiveness.

Recommendations

1. The Legislature should amend MISS. CODE ANN. Section 25-9-120 (1972) to require that the Personal Service Contract Review Board adopt rules and regulations governing the procurement of advertising and marketing support services by all agencies employing state service employees. Such rules and regulations should apply to contracts for such services without regard for the dollar value of the contracts.
   
   Further, the amendment should require that all such contracts be approved by the Personal Service Contract Review Board prior to any agency making a payment for services under any such contract. Specifically, the board’s rules should address the following:
   
   
   • the development of goals and desired results for the campaign or marketing services;
   • the development of a needs assessment outlining the methods by which the agency determined the need for the service. (Such should also establish that the goals could not be accomplished through the use of public service announcements.);
   • competitive selection for services; and,
   • evaluation criteria to determine whether the services met the goals established by the agency.
   
   
   For purposes of this amendment, advertising should not include legal notices published in newspapers or recruitment notices to fill job vacancies.
2. The Board of Trustees of Institutions of Higher Learning and the individual boards of trustees of the community and junior colleges should review their policies and procedures to determine whether they address the requirements for procuring advertising services described in Recommendation 1 of this report. If such requirements are not currently in policy, the boards should adopt such requirements to ensure efficient and accountable expenditure of funds for advertising services.
3. The Board of Trustees of Institutions of Higher Learning should review its policy whereby service contracts in excess of $250,000 must be approved by the board to determine whether the dollar limit should be lowered (possibly to $100,000) to ensure more oversight of such procurements.

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