Executive summary
	The focus of our audit
	Over the last decade more and more use has been made of the media to inform the community of government services and programs.
	Today, government agencies have sophisticated communication plans that use television, radio and print media as well as mail outs, letter box drops, the internet and telephone call centres to increase awareness in their target audience.
	In 2006‑07, the NSW Government spent $111.7 million on government advertising. Twenty-seven per cent of this expenditure was on routine advertising for job vacancies and tenders (referred to as non‑campaign), and 73 per cent was spent on specific advertising campaigns.
	Governments may legitimately use public funds for education or information campaigns to explain government policies, programs or services. Yet there is much controversy and debate around government advertising and its ability to promote the incumbent government and influence voter behaviour.
	We previously examined government advertising in 1995 and made a number of recommendations for government to improve guidance to agencies and strengthen the approval process.
	In this audit we wanted to find out: § what has been spent on government advertising § whether the current guidelines for government campaign advertising are sufficient to prevent the use of public funds for party political purposes.
	We did not seek to form an opinion on whether any past campaigns contained party political content. Rather, we tested the current review and approval process to see if it was adequate to prevent advertisements containing party political content.
	Audit opinion
	Since our performance audit in 1995 the government has improved guidance for agencies and introduced a more robust framework for approving advertising campaigns. Greater rigour has been introduced into the process by requiring campaigns to be peer reviewed and approved by Cabinet.
	This new approach aims to improve the effectiveness and value for money of government advertising.
	We have seen an increase in the amount spent on placing advertisements in the media leading up to the March 2007 state election. Although this may be justified, it contributes to the perception that government advertising may be promoting the incumbent government.
	We found that the current guidelines are not adequate to prevent the use of public funds for party political purposes.
	There are two reasons for this. Firstly, there are no general principles to ensure campaigns do not contain material that serves party political interests. Secondly, there are no criteria to help agencies judge whether a campaign could be seen to promote the incumbent government.
	The Department of Commerce has drafted guidelines that, if adopted, would go some way towards helping agencies avoid the appearance that advertising campaigns may serve party political interests. These guidelines should be updated in line with recommendations in this report and released to agencies as soon as possible.
	We also found it difficult to obtain information on the total amount spent on advertising campaigns. This is because there is no central record of the total expenditure, only the cost of placing advertisements in the media.
	Greater transparency around what is spent would support more accurate and informed debate.
	Key audit findings
How much is spent on government advertising?	In 2006‑07, government agencies spent $111.7 million on advertising media placement, an increase of 21 per cent from 2005‑06. This comprised $30.2 million on non‑campaign and $81.5 million on campaign advertising.
	There is no central record of the total amount spent on advertising across government that includes the costs of research, development, production and placement. The total amount spent is not reported and although agencies evaluate the impact of some campaigns, there is no consistent reporting on their effectiveness.
	In 2002, the government introduced practices to reduce the total amount spent on government advertising. As a result, expenditure decreased by $19.7 million or 19 per cent between 2001‑02 and 2003‑04. However, total expenditure has increased by 32 per cent since then. The Department of Commerce reports that some of this increase may be due to a rise in media placement rates.
	Expenditure on non‑campaign advertising continued to decline up until 2005‑06, but has since increased by 48 per cent. Campaign advertising has steadily increased since 2003‑04 by nearly 37 per cent.
Do government guidelines help prevent advertising for party political purposes?	Since our performance audit in 1995 the government has improved guidance for agencies and introduced a more robust process for approving expenditure on campaign advertising.
	However, the current guidelines are not adequate to prevent the use of public funds for party political purposes. The Department of Commerce has drafted new guidelines for government advertising which go some way to address these issues.
	We also found that the review and approval process could be further strengthened. For example, there were variations in the amount and type of documents forwarded to Cabinet and the way in which the outcomes of peer review have been reported. This may mean that Cabinet does not know whether agencies have considered issues raised by peer review.
	We also have concerns about the number of campaigns approved by the Minister for Commerce under delegation rather than approved by Cabinet. Since the delegation took effect in December 2005, 69 per cent of campaigns were approved out of session. This undermines the premise that campaign advertising is important enough to warrant Cabinet oversight.
	Recommendations
Improve transparency	We recommend that the Department of Commerce: § publish a whole‑of‑government report on government advertising each year that includes: (page 20) □ total expenditure on campaign advertising □ total expenditure on non‑campaign advertising □ a list of campaigns over $50,000 by agency, the total cost of each, and an indicator of those that have been peer reviewed □ case studies of the impact of a sample of campaigns. § post on its website each month a list of the campaigns approved by Cabinet or under delegation by the Minister for Commerce, and the proposed cost of each (page 20) § recommend in the government advertising guidelines that agencies post on their website information on campaigns including the total cost, justification, audience and campaign objectives (page 20).
Issue guidelines	We recommend that the Department of Commerce: § publish by December 2007 the government advertising guidelines it has drafted, incorporating the recommendations in this report (page 24) § include in the government advertising guidelines more detailed criteria for judging whether material may inappropriately serve party political interests, such as those in Appendix 3 (page 30) § advise agencies to consider including an audit of campaigns for compliance with the government advertising guidelines in their internal audit programs (page 30) § maintain the two month pre‑election quarantine period (page 30).
Improve the review and approval process	We recommend that the Department of Commerce: § ensure that all required campaign documents are forwarded to Cabinet (page 26) § require agencies to document in their final submission to Cabinet how they have considered all matters rated two or three (refer Exhibit 10) in the peer review report (page 27) § introduce a formal feedback mechanism to ensure that peer reviewers are aware of how agencies review and respond to issues raised in the peer review report (page 27) § amend the peer review report to require peer review teams to document any issues or concerns regarding compliance with the government advertising guidelines, including party political matters (page 30).
	We recommend that the Department of Premier and Cabinet, in conjunction with the Department of Commerce, better define the criteria used to determine which campaigns may be approved under delegation by the Minister for Commerce (page 27).
Ensure all campaign documents are available for Cabinet	We recommend that the Department of Premier and Cabinet ensure that a full set of campaign papers including the agency’s original submission and peer review report are available during the relevant meeting of Cabinet (page 26).

Response from the Department of Premier and Cabinet

Thank you for providing a copy of the final report of the Performance Audit into Government Advertising for the Department’s comment.

I welcome your finding that the Government’s initiatives since the 1995 performance audit have introduced a more robust framework for approving advertising campaigns.  The Government’s requirements for peer review and Cabinet approval have introduced greater rigour into the process and I agree with your assessment that these initiatives have improved the effectiveness and value for money of government advertising.

Your review has also provided a useful opportunity to demonstrate the effectiveness of government advertising campaigns, such as the recent “dangers of smoking” campaigns which doubled the number of calls to the Quitline (your Exhibit 8). 

I also welcome your acknowledgment of the efficiencies achieved through the Government’s adoption of centralised media placement procurement practices. I note that a consequence of using centralised arrangements is that the Department of Commerce is now able to calculate total expenditure on media placement and that this information has been placed in the public domain regularly over the last few years under the Freedom of Information Act.

I also appreciate your support for the amendments the Department of Commerce has developed to date in its work on revised guidelines for government advertising.  The Government will consider your suggestions for additional amendments before finalising the revised guidelines, which it intends to do as soon as possible.

I reject, however, your suggestion that the existing processes are not sufficient to prevent party political content in advertisements and I note that your report contains no evidence that any NSW Government advertising campaign has contained any party political content.

Agency chief executive officers are accountable for the expenditure of public funds. They must be satisfied that expenditure is for a legitimate function of the Government and that public funds are not used for the purpose of advancing the election prospects of a political party in Government.  These requirements apply to all expenditure and not just to expenditure on government advertising.

Two of your recommendations directly concern the Department of Premier and Cabinet. As a result of discussions between our respective officers during the course of the audit, the Department has already proceeded to implement one of your recommendations by ensuring that a full set of campaign documents is available during the relevant Cabinet meeting.

In relation to the approval of campaigns by the Minister for Commerce under delegation, I note that the existing process ensures that Cabinet has the opportunity to require any particular matters to be dealt with only by Cabinet and that any approvals given out of session are reported back to Cabinet at the earliest opportunity. I will, however, liaise with the Department of Commerce to consider whether the exercise of the delegation should be further refined.

I have also noted your recommendations on transparency and the publication of information on total expenditure on government advertising. While I agree that the Department of Commerce could publish on its website the information it holds on government advertising expenditure, this information will not include all advertising costs.

The Department of Commerce has details of all expenditure on media placement and some estimates of research, development and production costs for some advertising campaigns. It does not, however, have details of actual costs for research, development and production costs, and nor does it have estimates for these costs for some advertising campaigns.

I am concerned that attempting to gather this information will impose a significant cost. I would be pleased to meet with you to discuss what information could be published to improve transparency without unreasonably diverting resources from front-line service delivery.

It may also be possible for the Department of Commerce to publish on its website a list of advertising campaigns approved and their proposed costs (if the Department has costs information). This should not, however, be done in any way which could undermine the Government’s ability to get best value for money in its media placement.

As you know, advertising is only one means by which the Government pursues its objectives, whether they be improved public health, encouraging water-saving strategies in homes or encouraging participation in public consultation processes. Agencies consider advertising as only one of a range of measures available to pursue the relevant Government objectives. For example, decisions on allocating resources to the “dangers of smoking” advertising campaigns must consider the effectiveness of such a campaign compared to the effectiveness of other anti-smoking measures, such as restrictions on tobacco advertising and restricting smoking in public places.

Singling out the total amount spent on government advertising from the amounts spent on other measures is unlikely, therefore, to assist in the decision-making of Government or in evaluating the effectiveness of government expenditure. It is for these reasons that the Government does not collate centrally total expenditure on government advertising. That said, the Government is always willing to consider additional measures to improve its processes and their transparency, provided such measures will not divert resources from front-line service delivery.

Thank you for the opportunity to comment on your report.

(signed)

Robyn Kruk

Director General

Dated:  17 August 2007

Response from the Department of Commerce

I refer to the Performance Audit Report on Government Advertising forwarded by the Acting Auditor General on 20th July 2007. I have noted the contents of the report and was particularly pleased to see that the report recognised the procedural measures already in place to ensure the efficient and appropriate utilisation of public funds on government advertising.

Your very positive comments in relation to the campaign advertising Peer Review process support Commerce’s goal to provide Government with high quality advice on advertising proposals and to ensure the decision to undertake advertising has been made following a robust assessment process. The documents currently submitted to the Standing Committee include essential details of each campaign and are comprehensive enough for the Standing Committee to consider each campaign proposal. The report’s recommendation that the Standing Committee have access to the complete set of documentation has been implemented.

I would however like to comment on some of the recommendations, particularly as they relate to the responsibilities of the Department of Commerce (Commerce).

The principal roles of Commerce are to oversee the approval process for advertising campaigns requested by government agencies, which have a budget of $50,000 or more, and to manage the placement of all government advertisements through the government’s media contracts for campaign and non-campaign advertising.

Although the activities of Commerce have a whole of government focus, the initial decision to include advertising as part of a communications strategy and the allocation of the funds required to achieve the government’s and agency communication objectives, is one for approval by individual government agency Chief Executive Officers. This is the same as for any other activity carried out by the agency to meet its overall responsibilities and obligations to the community and the Government. In the case of advertising, the campaign will not proceed until further approved by the Cabinet Standing Committee on the Budget (Standing Committee).

Campaign advertising expenditure details held by Commerce only relate to the cost of placing advertisements in the media through the government’s media contracts. All other costs associated with an advertising campaign, i.e. production, research and related publicity material, is information the initiating agency retains as part of their management of total project costs. This information is not held by Commerce.

Your recommendation that details of approved advertising campaigns be made available by Commerce online and that each agency also post comprehensive information on its campaigns on its website will be considered. Commercial confidentiality and value for money considerations will determine the appropriate timing of publication.

The Minister for Commerce’s authority to approve selected campaigns “Out of Session” was delegated by the Standing Committee.  In the period 22 December 2005 to 30 June 2007, 34 of the 58 approved by the Minister were repeats of successful campaigns, previously approved by the Standing Committee. Of the other campaigns, 14 were simply routine announcements, like legislative changes, or very low cost. The other 10 required time critical approval to meet the advertising strategy timelines (e.g. Melanoma Prevention in early summer) or were submitted during the Christmas/New year periods when the Standing Committee did not meet.  All of the Out of Session approvals are submitted to the Standing Committee at the next available meeting.

This procedure has significantly reduced the amount of material to be reviewed by the Standing Committee and with the early ministerial approval, has generally allowed the purchase of media placement at a lower cost due to timely booking.  Additionally, the papers submitted to each Standing Committee meeting always include a schedule of future campaigns proposed by agencies. This advanced notification provides Standing Committee members with the opportunity to request that full details of any individual campaign be submitted to the Standing Committee for its consideration. I will, however, liaise with the Department of Premier and Cabinet to determine whether the exercise of the delegation should be further refined.

I was also pleased to note your acknowledgement that the revised draft Government Advertising Guidelines already go a long way to assist agencies to determine whether or not some government advertising could be perceived as an inappropriate use of public funds. The additional information you suggest be included in the Guidelines will be considered prior to the finalisation of the new Guidelines document. As you know, it was decided to delay the issue of the Guidelines to allow the inclusion of appropriate audit report recommendations.  The revised Guidelines will be submitted to the Standing Committee as soon as possible.

I believe the Performance Audit of Government advertising has provided a worthwhile opportunity to demonstrate the strength of the current campaign advertising approval procedures and bring further clarity to the requirements placed on government agencies when deciding to undertake an advertising campaign.

Finally, I would like to commend your audit review staff for the courteous manner in which they conducted the review.

(signed)

Alan Marsh

Acting Director General

Dated:  17 August 2007