Working for Families Communications Strategy
2 September 2004
Hon Murray McCully
MP for East Coast Bays
Parliament Buildings
WELLINGTON
Dear Mr McCully
WORKING FOR FAMILIES COMMUNICATIONS STRATEGY
1. Further to our letter of 3 June 2004, we have now completed our work in relation to the concerns you raised with us about the size and cost of the communications strategy for the Working for Families package announced in the 2004 Budget.
2. In forming our views on this matter, we have considered:
- the need for the communications strategy;
- the process of costing the communications strategy;
- the development of the joint communications strategy; and
- whether the budgeted costs for the communications strategy are reasonable.
3. We have not sought to compare the cost of this communications strategy with other government-funded public information campaigns. In our view, making like-for-like comparisons is difficult having regard for differing communication needs, ongoing developments over time in communications strategies and methods, and the resulting costs. We have instead focused on and examined the communication needs of this particular communications strategy and the reasonableness of the associated costs.
4. The purpose of this letter is to communicate our findings in each of these areas, and our overall conclusions. Our findings are based on discussions with the responsible staff from the Ministry of Social Development (the MSD), the Inland Revenue Department (the IRD) and the Treasury and a review of the relevant documentation provided to us.
Introduction
5. The Working for Families Communications Strategy (the Communications Strategy) is a joint strategy of the MSD and the IRD, and was approved by Cabinet on 26 April 2004. Mass media advertising is a major feature of the Communications Strategy.
6. Budget 2004 included $21.15 million (GST inclusive) for the Communications Strategy, allocated to the three financial years from 2004-05 to 2006-07 inclusive.
7. The budget for the Communications Strategy was a separately identified and approved element within the Working for Families Budget 2004 package.
8. The Communications Strategy budget is divided between two Votes and three financial years as follows:
| Financial Year | Vote Social Development (GST incl.) | Vote Revenue (GST incl.) | Total (GST incl.) |
|---|---|---|---|
| 2004-05 | $7.65 million | $3.94 million | $11.59 million |
| 2005-06 | $2.81 million | $3.38 million | $6.19 million |
| 2006-07 | $2.25 million | $1.12 million | $3.37 million |
| Total | $12.71 million | $8.44 million | $21.15 million |
9. The $21.15 million for the Communications Strategy includes the costs of research, creative development, production, media placement and monitoring for mass media advertising, as well as the costs of the MSD’s direct marketing campaign to its existing clients. The MSD direct marketing campaign includes the cost of amendments to brochures and forms, and of letters to explain the Working for Families changes. The IRD will use its annual renewal letter to advise existing family assistance clients about the changes that affect them. This letter is paid for from elsewhere within the IRD budget and is not included in the Communications Strategy budget.
10. The inclusion of $21.15 million for the Communications Strategy within the approved Working for Families Budget 2004 package does not, of itself, provide sufficient authority for the MSD or the IRD to incur that level of expenditure.
11. In accordance with the requirements of Cabinet Office Circular CO99(7) Financial Delegations and Delegation Limits for Responsible Ministers and Departmental Chief Executives, further approvals will be required from the responsible Ministers before any advertising expenditure of more than $100,000 is actually incurred. Further, although the Budget 2004 Estimates of Appropriations includes estimated amounts for the financial years to 2007-08 inclusive, the Appropriation (2004/05 Estimates) Act 2004 provides legal authority to spend only for the appropriations identified for 2004-05. The estimated amounts for future years will be subject to Parliamentary approval in future years’ Appropriation Bills.
12. We note that, to date, the only expenditure committed from the approved Communications Strategy budget has been for initial publicity of the package at the time of the Budget and for subsequent communications with MSD clients which are to commence in early September 2004. The MSD and the IRD are preparing to issue a joint Request for Proposal to select an advertising agency to plan and execute the mass media advertising component of the Communications Strategy.
13. It should also be noted that, before the matter of the total cost of the Communications Strategy was raised with us, the MSD had briefed our Office in general terms about the proposed communications campaign, and had asked us to review specific elements (as and when they were developed) to ensure that they are consistent with the requirements of the Cabinet Guidelines for Government Advertising (the Guidelines). To this end, we have reviewed the initial publicity material and the proposed September 2004 communications, and provided an opinion that the material complies with the requirements of the Guidelines. It is our understanding that the MSD and the IRD will continue to seek our advice on compliance with the Guidelines for the future elements of the Communications Strategy.
The need for the Communications Strategy
14. In our view, it is appropriate for there to be a communications strategy to ensure that people are aware of their entitlements under the Working for Families package, consistent with the statement in the Guidelines that:
Governments may legitimately use public funds for advertising and publicity to explain their policies, and to inform the public of government services available to them and of their rights and responsibilities.
15. This is particularly the case when people will not receive a benefit to which they are entitled, unless they make a formal application. The Working for Families package is made up of a number of major changes that are expected to cost up to $1.8 billion over the first three years and affect up to 300,000 families – including current beneficiaries and significant numbers of people who do not currently receive benefits (and will not do so unless they apply). The MSD and the IRD pointed out to us that the communications strategy budget, while substantial, represents only 1.2% of the cost of the Working for Families package itself over the first three years.
16. The objectives of the Communications Strategy are to:
- build awareness and understanding of the Working for Families changes among stakeholders, clients, and the wider community;
- ensure stakeholders and clients receive accurate and timely information and consistent messages about Working for Families;
- ensure those who will benefit from Working for Families receive all the assistance they are entitled to.
17. Consistent with these objectives, the Communications Strategy recommends “a high profile public awareness campaign targeting all New Zealanders … supported by a direct marketing campaign to existing and new clients”.
18. We understand that the decision was made to target “all New Zealanders” because people’s circumstances change, and it was considered important to inform people generally of the assistance to which they may become entitled should their circumstances change in the future.
19. Nevertheless, we have been told that the MSD and the IRD are continuing to revise and tailor the detail of the Communications Strategy as part of their ongoing assessment of the communication needs for the Working for Families package. As the detail – in particular, the mass media advertising campaign, which is at the early stage of requesting proposals from advertising agencies – has yet to be finalised, the actual cost of the Communications Strategy is not yet certain.
20. As discussed above, we will continue to monitor the progress of specific elements to ensure that the Communications Strategy meets the requirement of the Guidelines that:
Government advertising should be undertaken only where there is an identified and justifiable information need by the intended recipients.
Process of costing the Communications Strategy
The Budget 2004 bid: Our expectations
21. We expected that there would be a detailed and robust analysis to support the Budget bid for a $21.15 million Communications Strategy. Such an analysis would include the nature of the Working for Families package changes, the numbers and demographics of people affected by the changes, the most appropriate means of communicating with these people and other identified target audiences, and the comparative costs of appropriate communication options.
Our findings
22. The process for determining the estimated cost of the Communications Strategy was affected by the timeframes and confidentiality imposed by the Budget 2004 process.
23. We were told that there was very little time between the agreement of the major government policy decisions and the close-off dates for Budget bids. This meant there was limited time to agree on and cost the Communications Strategy for the Working for Families package. In addition, Budget 2004 confidentiality requirements meant that only a limited amount of information about the package was shared with the advertising agency that was engaged to provide estimated costs relating to a mass media advertising campaign.
The initial costing process
24. Initially, the MSD and the IRD acted separately to estimate the costs of mass media advertising of the Working for Families package changes relating to their own department and relevant Vote.
25. The IRD’s original cost estimates for mass media advertising were sourced from an advertising agency in August 2003. The advertising agency was not briefed about the nature of the Working for Families package changes to be promoted, or the target audiences. The estimated costs for a one-year advertising campaign of $3.94 million (including GST) formed the basis of the 2004-05 budget in Vote Revenue. The IRD told us that the budgets for the subsequent two years were based on the estimated costs for the first year, but there is no detailed analysis of cost by specific promotional activity within the total budgeted amount.
26. The MSD consulted separately with the same advertising agency in January/February 2004 to obtain estimated costings for its part of the Communications Strategy. Because of the Budget 2004 confidentiality requirements mentioned above, the advertising agency was given only a high level (i.e. relatively unspecific) briefing as to the nature of the changes proposed in the Working for Families package. The briefing covered the types of changes that would occur during the rollout period of the package, the need to target beneficiaries and low to middle income working families, and that the changes and communication about the changes would be delivered through both the MSD and the IRD.
27. Because of the “high level” nature of the briefing, the advertising agency’s costings could only be indicative and approximate. The cost estimates given to the MSD for the promotion of the package of changes totalled $19.1 million (including GST) over four calendar years.
Costing of the joint Communications Strategy
28. In February 2004, the MSD and the IRD agreed to recommend a joint Communications Strategy to Ministers. In early March, the communications teams of the MSD and the IRD jointly reviewed the costings provided by the advertising agency. The MSD told us that this resulted in the removal of some elements that were considered unnecessary or that could be managed internally by the MSD, and the removal of television advertisement production costs after the first year, as it was decided that a generic television advertisement could be produced in the first year and repeated throughout the three years (with updated messages as necessary).
29. As a result of this review, a budget of $12.7 million (including GST) was derived for the part of the Communications Strategy that the MSD will lead. This budget is broken down into the time periods when expenditure is expected to be incurred, but there is no detailed breakdown of the cost by specific promotional activities and no reconciliation of the budget costs to the original detailed cost estimates provided by the advertising agency.
30. We were told that the joint budget review exercise also considered the IRD’s proposed budgets for the parts of the Communications Strategy that it would lead. This did not result in any change to the amount of $3.94 million for 2004-05, which was based on the figures received from the advertising agency in August 2003.
31. We note that the costings provided to the MSD by the advertising agency in February 2004 appear to have been for an advertising campaign that would cover both IRD- and MSD-led changes in entitlements. Despite the review of costings discussed above, we note that the combined MSD and IRD budgets total $21.15 million, which is in excess of the advertising agency’s indicative costing of $19.1 million. From our discussions with the MSD, we understand that this difference is primarily because of the costs of the MSD’s direct marketing campaign, involving direct communication (generally by letter) to its clients about the package. These costs were included within the Communications Strategy budget, but had not been included in the costings provided by the advertising agency.
The Treasury’s review of the Budget 2004 bid
32. The Government budget process requires the Treasury to review Budget bids and advise the Minister of Finance accordingly. We therefore asked the Treasury to comment on the process it adopted in reviewing the proposed expenditure before it went to Cabinet.
33. The Treasury stressed to us the context in which its review of the Communications Strategy budget took place. In particular, the Working for Families package represented substantial and complex expenditure over several financial years. The policy parameters were still being developed and refined in the months leading up to the Budget and, at this time, the Communications Strategy was still at a relatively early stage of development, with only limited detailed information available. Moreover, the Treasury said, the Budget deadlines limited the time available for further development and testing of costings.
34. It appears that the degree of scrutiny by the Treasury of the Communications Strategy budget was affected by the above factors. The Treasury’s scrutiny focussed on:
- the larger elements of the package that involved ongoing spending, and identified areas of risk or concern; and
- ensuring that appropriate governance structures (for example, a joint Chief Executives’ sponsorship group) were in place around the delivery of the package as a whole – including the Communications Strategy.
35. The risks associated with the Communications Strategy were considered small relative to the possible fiscal implications of the policy around the Working for Families package and its implementation (refer paragraph 15).
36. Nevertheless the final papers to the Ministers recommending the package (including the Communications Strategy budget) were joint papers from the MSD, the IRD, and the Treasury.
Our conclusions
37. We accept that much of the information that existed about the Budget package was the subject of ongoing policy development. Moreover, there was a need to observe confidentiality requirements of Budget 2004 in regard to that information. Accordingly, both the MSD and the IRD took a cautious approach in sharing information with the advertising agency.
38. However, in our view, it should have been possible for the MSD and the IRD to have provided the advertising agency with information about the numbers of people likely to be affected by the Working for Families package changes, and the nature and size of the target audience, without necessarily disclosing specific information about the package. This could have enabled the advertising agency to make a more informed assessment of the communication needs and the likely costs, and resulted in more precise costings to form the basis for the budget bid to Ministers and the subsequent parliamentary appropriation.
39. The MSD and the IRD stressed that the inclusion of the $21.15 million in Budget 2004 does not of itself provide sufficient authority to incur that level of expenditure, as the actual costs of the Communications Strategy will not be known until after an advertising agency has been selected to run the campaign, and further research and analysis has been undertaken. The final costs will be subject to Ministerial approval and sign-off.
40. However, our primary concern is with the robustness of the process of costing a significantly-sized Budget bid. The approval of the bid led directly to the parliamentary appropriation of $11.59 million for the first year’s funding, in the Appropriation (2004/05 Estimates) Act 2004. The effect of the Act is to authorise the Executive to incur the expenditure.
41. Overall, we would have expected a more robust process to be used, and for more detailed information to be available to support a Budget bid for $21.15 million. The level of scrutiny by the Treasury of the Communications Strategy budget was less than we would expect for new expenditure of this magnitude.
Development of the joint Communications Strategy
Our expectations
42. We expected to find a co-ordinated approach, with evidence of the two departments working together to develop a joint Communications Strategy for the Working for Families package, and combining the use of resources wherever possible to achieve the most effective and efficient use of taxpayer resources.
Our findings
43. In February 2004, the MSD and the IRD decided to have a joint Communications Strategy. They worked together on the Strategy from then until the date of the Budget announcement. Nevertheless, each department during that period took quite different and separate approaches to planning the communications activities they intended to lead under the Strategy. In particular, this is demonstrated by:
- the planned separate production of television advertising campaigns; and
- the separate and differing approaches to the nature and scale of the specific mass media advertising campaigns to promote the changes led by each department.
Planned separate production of television advertising campaigns
44. The Communications Strategy recommends a “high visibility Working for Families public awareness campaign” being “developed and delivered jointly by MSD and Inland Revenue”. The strategy proposes that the centrepiece of the public awareness campaign is a series of “story-telling advertorials illustrating the types of assistance families can apply for” using television and other mass media.
45. As noted above, the MSD told us that in reviewing the costings provided by the advertising agency, a decision was made to use a single repeating generic television advertisement, rather than producing new advertisements for each change in entitlements, as this was considered more cost effective.
46. The MSD also told us that the use of generic advertising (through television and other media) is intended to provide high level “brand awareness” of the Working for Families changes (covering both MSD- and IRD-led changes), while also meeting the information requirements of the Guidelines. This appears to be a change from the Communications Strategy recommendation for the centrepiece of the campaign to be story-telling advertorials.
47. In addition to the generic advertising, it is intended that there will be specific promotional campaigns to promote the particular changes as these are rolled out. The budgeted costs for the specific campaigns to be run by the MSD are each $500,000. The budgeted costs for the separately produced campaigns to be run by the IRD are $3.5 million, $3 million, and $1 million respectively. A timetable for the major advertising campaigns and their costs, and the major elements of the Working for Families package are attached as Schedule 1.
Separate and differing approaches to specific advertising campaigns
48. The costs of the specific advertising campaigns led by the MSD and by the IRD are budgeted for in Vote Social Development and Vote Revenue respectively. The costs of production and placement for the generic advertising are budgeted for in Vote Social Development.
49. Given the proposed strategy of repeatedly using generic television advertising to promote the overall package, followed by specific communication of particular changes, the approaches of the MSD and the IRD to their own specific advertising campaigns are quite different in nature and cost.
50. For example, the IRD has budgeted to produce separate television advertisements to promote the changes that it is responsible for, rather than relying on the generic advertising that is to be developed by the MSD. We note that the IRD has also budgeted to produce new advertisements for the second year of changes, which contrasts with the MSD’s decision to use a single repeating generic advertisement (with updated messages as necessary) in order to reduce the budgeted costs.
51. The MSD has budgeted $2 million (excluding GST) for generic television advertising in November/December 2005 and $2 million (excluding GST) for a similar campaign in November/December 2006. There are no major changes to MSD-delivered entitlements during these periods. However, there will be significant changes in April 2006 and April 2007 to entitlements provided by the IRD (new In-Work payment and changes to family support and family tax credit), and the IRD’s part of the Communications Strategy budget includes $4 million (excluding GST) to promote these changes, with a separate campaign that includes the IRD’s own television advertisements.
52. It therefore appears that the degree of reliance that the MSD and the IRD are placing on the use of generic advertising is quite different. The MSD is planning to use generic television advertising, followed by small, targeted direct marketing campaigns. The IRD is however planning quite large campaigns, including television advertisements separate from the MSD’s generic advertisement.
53. In considering the appropriateness of the costs of the specific campaigns, we asked the MSD and the IRD how many people likely to be affected by each of the changes would not benefit unless they actively applied to the MSD or to the IRD, and the expected uptake levels. This information has been included in Schedule 1 to this letter. Whereas the specific campaigns for the IRD-led changes are significantly larger in scale and expense than the MSD-led specific campaigns, the expected number of “new clients” is only slightly greater than for the IRD-led changes.
Our conclusions
54. For the overall Communications Strategy for the Working for Families package to be effective and efficient, the MSD and IRD need to continue operating in a co-ordinated manner, particularly for planning, production, and delivery of mass media advertising.
55. We acknowledge that factors such as differences in target audiences may result in differing approaches to communications, even under an integrated strategy. Nevertheless, in our view, the planning of the communications strategy in the period leading up to the Budget announcement evidences a disappointing lack of consistency. This is particularly clear from the manner in which the departments went about planning for separately produced television advertisements, and the separate and differing approaches to the nature and scale of the specific campaigns to promote the changes that each of the departments would be leading.
56. We are pleased to note that the departments’ ongoing work for the Communications Strategy is being co-ordinated by a joint communications working group, which includes representatives of both the MSD and the IRD. The departments undertook a joint Registration of Interest process and are issuing a joint Request for Proposal to identify a single advertising agency to plan and execute the mass media advertising.
57. We understand that the joint communications working group will review the proposed Communications Strategy when an advertising agency has been selected. We expect this review to include confirming whether the information needs of the target audiences are best met by a combination of generic television advertisements to promote the package as a whole, as well as a separate television advertising campaign for the IRD-led changes.
58. The MSD and the IRD also told us that the joint communications working group is planning the following steps when implementing the Communications Strategy:
- detailed market research into the best way to reach the intended client groups;
- assessment of the optimum communication channel for each of the planned release points;
- maximising existing communications processes and resources; and
- ongoing real-time evaluation of the current approach and whether any changes are required to improve the communication process.
Our conclusions on the reasonableness of the Communications Strategy budget
59. The estimated costs of the proposed Communications Strategy in the Budget 2004 bid are consistent with the cost information supplied to the MSD and the IRD by the advertising agency, based on the limited information provided to the agency.
60. However, this letter has set out our concerns about the robustness of the process for costing the Budget bid, and the lack of consistency in approach. Those concerns mean that is not possible, in our view, to say that the budgeted costs are a realistic reflection of the likely actual cost of the communications campaign to promote the Working for Families package.
61. The MSD and the IRD will continue to work together in the planning, production, and delivery of the Communications Strategy, when the advertising agency to run the mass media advertising campaign has been selected. We envisage that there is potential for cost savings once the steps outlined in paragraphs 57 and 58 have been implemented.
62. We will continue to monitor the development of the Communications Strategy, as indicated above, to ensure that it is consistent with the requirements of the Guidelines in relation to the information to be communicated, and the targeting of intended audiences.
Yours sincerely
Kevin Brady
cc: Georgina Beyer, Chair Social Services Select Committee,
Clayton Cosgrove, Chair Finance and Expenditure Select Committee
Peter Hughes, Chief Executive, Ministry of Social Development
David Butler, Commissioner of Inland Revenue
John Whitehead, Secretary to the Treasury
SCHEDULE 1
Timetable for planned Communications Strategy and major Working for Families changes
| Date | MSD-led changes | Number of forecast "new" clients1 | Communications Strategy – Vote Social Development | MSD budget2 $m | IRD-led changes | Number of "new" clients | Communications Strategy – Vote Revenue | IRD budget $m |
|---|---|---|---|---|---|---|---|---|
| Aug/Sept-2004 | |
|
Generic campaign | $3.8m | |
|
|
|
| Oct-2004 | Accommodation supplement changes to abatements and thresholds | 15,000 | Specific campaign |
$0.5m
|
|
|
|
|
| Oct-2004 | Childcare rates increase - more eligible, abatements change and co-ordinators | 7,000 | Included in above | Included in above | |
|
|
|
| Dec 2004-Jan 2005 | |
|
Generic campaign | $2.0m | |
|
|
|
| Apr-2005 | |
|
|
|
Increase in family support rates (plus foster care allowance, unsupported child benefit, orphan benefit). | 19,500 | Specific campaign | $3.5m |
| Apr-2005 | Accommodation supplement maximum rates and areas change | 15,000 | Specific campaign | $0.5m | |
|
|
|
| Oct-2005 | Childcare rates increase | |
|
|
|
|
|
|
| Nov/-Dec 2005 | |
|
Generic campaign | $2.0m | |
|
|
|
| Apr-2006 | |
|
Specific campaign | $0.5m | New in-work payment | 20,500 | Specific campaign | $3.0m |
| Apr-2006 | |
|
|
|
Change in family support abatement | Included above | Included above | Included above |
| Apr-2006 | |
|
|
|
Increase in family tax credit | Included above | Included above | Included above |
| Nov/-Dec 2006 | |
|
Generic campaign | $2.0m | |
|
|
|
| Apr-2007 | |
|
|
|
Increase in family tax credit | 8,000 | Specific campaign | $1.0m |
| Apr-2007 | |
|
|
|
Increase in family support rates | Included above | Included above | Included above |
1 The number of forecast “new” clients is the number of people who are forecast to register for assistance that are not currently receiving assistance. This will be less than the number of “new” people eligible, as take-up will not be 100%. The overall target audience includes existing MSD and IRD clients, people who are not currently eligible but who may become so as their circumstances change, and people who may not be eligible but can inform others of their possible entitlement.
2 All costs are GST exclusive.