ABC intensifies effort to root out circ fraud

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Michael Lavery, Audit Bureau of Circulations president-managing director, has plans to make his organization more proactive in catching circulation fraud, including hiring additional auditors who will carry on more "investigative" audits.

But he also admitted to Advertising Age at last week's 90th annual conference in Toronto that a new wave of questionable circulation claims was brewing at magazines. The claims, executives said, are similar to the recent circulation restatements that came from Ziff-Davis' flagship PC Magazine.

`it's an issue'

This summer, PC Magazine was found to have improperly classified more than 320,000 subscriptions over a period of three years as "paid" when they actually qualified as "non paid" under Audit Bureau rules governing third-party subscription sales-that is, subscriptions sold by a third-party agent hired by a publisher. In Ziff Davis' case, the subscriptions in question came from Web site (AA, July 12).

"It's an issue," Mr. Lavery said. "That may be an issue with other magazines." He did not specify which these may be, but another executive's private comments on the matter suggest some consumer magazines are involved. Mr. Lavery said the Audit Bureau's auditing force will increase between 10% and 15%, or by around 15 staffers. He also said that auditors' marching orders will now include "in-field, more investigative-type procedures."

Auditors for every audited title, he said, will now interview subscribers at their homes in order to double-check publications' claims that these individuals have subscriptions, are receiving the publications and have paid for them. "The objective is to close the expectation gap," Mr. Lavery said, "the expectation an audit is infallible."

"If they don't do something about the perception in the business that the audit process isn't what it should be, they could be entering a crisis," said Steve Farella, president-CEO, TargetCast. "The idea that they'll put more people on and increase the frequency of the audits is timely and excellent."

penalty for lateness

Issues the board was still mulling at presstime included possible stricter regulation of newspapers' barter-like sales arrangements and means to further speed up audits of magazines' circulation statements. There's also the possibility that, should a magazine or newspaper be tardy in providing data for an audit, this foot dragging will be reported to Audit Bureau members.

The latter point looks like a means to pressure less-forthcoming publishers to play ball and a way for a newly combative Audit Bureau to stick up for itself. At this point, Mr. Lavery said, magazine audits that take 12 to 18 months to finish are "problem-child" audits. Audits that take "more than nine months are not [because of] human resources issues" at the Audit Bureau, he said.

harsh spotlight

These developments come as a recent wave of fraudulent circulation claims at key newspapers-among them the Tribune Co.'s Newsday, Belo's Dallas Morning News and Hollinger's Chicago Sun-Times-suddenly placed the typically low-profile Audit Bureau in a harsh spotlight.

Comments at the conference from both Mr. Lavery and Audit Bureau Chairman Robert Troutbeck took on an unusually aggressive tone, which Mr. Lavery hewed to in his remarks to Ad Age.

Newspapers' disclosures of misdeeds, he said came "because of [the Audit Bureau], because they knew at some point they would be caught."

"If there was no audit," Mr. Lavery asked, "would they ever had self-declared?"

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