In conversation with the Marketing Procurement Manager at one of our long-standing clients, it became apparent that the Head of Media had recently left the business. This meant that, for the first time, the Marketing Procurement team was responsible for media procurement.
The Marketing Procurement Manager then went on to ask us: “Which of our agencies should we audit this year?”
Our immediate reply: “Media,” as it had not previously been possible to audit this area.
We were duly appointed to carry out a compliance audit of the media agency contract covering a two-year period, during which time the agency’s basis of remuneration had changed significantly, as had the brand’s spend.
From the brand’s perspective, it had seen the change in remuneration purely as a cost saving that it had managed to negotiate with the agency with all other aspects of the commercial relationship remaining the same.
Wherever possible, we audit the agency’s time records relevant to the account. And here we compared the grades of staff working in 2011 to those working in 2012. It came as something of surprise, therefore, to find that there had been a dramatic shift in the profile of the staff working on the account and that it was now being serviced by a much more junior team. The brand was genuinely shocked as the statements made by the agency during the renegotiation did not highlight this as a potential outcome.
Our audit work also highlighted:
- unbilled media which had not been refunded to the brand — amounting to a six-figure sum
- rebates, which were due to the brand, but which had not been paid — a material five-figure sum
- loopholes in the contract, meaning that the agency did not have to substantiate rebate amounts
- a lack of evidence that necessary reconciliations were being performed
- that the previous Head of Media had not kept sufficiently detailed records to substantiate the commercial agreement in place in earlier years.
As a result, the Marketing Procurement Manager was able to engage meaningfully with the Marketing Director and a cross-departmental team was formed to review media spend. The detailed information resulting from our audit work served as a useful data source for a subsequent pitch process.