User’s photos, Ribar Gyula

User’s photos, Ribar Gyula

The Anti-Corruption Council of the Government of the Republic of Serbia has analyzed the possible influence of the public sector institutions on the media, through financing of advertising and marketing services, in the period from 2011-2014, and compiled a Report on this issue, containing 24 recommendations. The Report was submitted to the Government of the Republic of Serbia for further action.

The Council has addressed 124 public institutions and requested information about marketing, advertising and PR services, as well as promotional and media campaign services, web site development and maintenance services, sponsorship/donation services, or any business-technical agreements, that have been concluded and implemented starting from the beginning of 2011 until the end of 2014.

During the period from 2011 to 2014 the representative sample consisting of 124 state authorities, organizations, funds, public enterprises, companies with majority state capital, and local self-governments spent more than 60.9 million Euros on the above mentioned services. Most of the amount, 29.87%, was spent in 2012, and the least, 18.75% was spent in 2014.

The trend of cost reduction is evident during 2014, except within the category of highest state authorities, the funds of the Autonomous Province of Vojvodina, as well as Provincial Secretariats of the AP Vojvodina.

Most of the resources, over 57%, have been spent jointly by two of the analyzed categories: companies with majority state capital (42.15%) and public enterprises (15.46%).

In the opinion of the Council, such large expenditures of public enterprises indicate inadequately conducted founders’ control over their business, as well as their depletion by political parties who are appointing inadequate management staff.

The Council notes that expenditures of significant state entities were not the subject of this analysis. On the day of drafting the Report, the Council was partially denied the requested information by the Serbian government, while it was completely denied the requested information by the Ministry of Foreign Affairs, PE “Srbijagas” and Telekom Srbija. Public enterprises “Srbijagas” and Telekom Srbija did not submit any answer even after being penalized by the Commissioner (for Information of Public Importance).

The Council notes that the reported advertising and marketing expenditures amounting to 60.9 million Euros represent only the expenditures of the sampled 124 institutions, i.e. it does not represent the total advertising and marketing expenditures on the state level. If the tested amount was to be extrapolated, it could be indicative for further research of the market size of marketing and advertising of the public sector – and it amounts to more than 840 million Euros for the reference period (2011- 2014).

When speaking about the type of costs, the Council’s analysis shows that more than 57% of the total paid expenses relate to the costs of two categories – the costs of advertising in the public information services (media) (28.83%), and the costs of sponsorships and donations (28.24%). There is an obvious trend of decreasing expenditures per years in all categories, except in the category of event recording, where the costs are higher in 2014 than in 2011 and 2012, as well as in the category of organization of conferences, trade fairs and events, with an evident growth in 2014.

The Anti-corruption Council has placed a special emphasis in the Report on the types and models of contracting advertising and marketing services. The Council has thus identified corruptive phenomena, weaknesses and risks in the advertising and marketing system of the public sector institutions.

Having analyzed numerous contracts, the Council found that the system of public procurement necessary to be applied by the public sector institutions, in practice proved not to be a reliable model for contracting advertising and marketing services. Procurement of marketing services in an open procedure, low value procurements, or purchases in a negotiated procedure are not always a guarantee of transparency, competitiveness and cost effectiveness. Responsibility lies with inefficient legal solutions and political elite that have the need and interest to control these operations.

The Council found that the bid selection in the public procurement processes for advertising and marketing services is often accompanied by subjective or discretionary criteria of the client. In this way, marketing agencies associated with political parties are given preferential treatment. Among the marketing agencies participating in public procurements, there is an informal agreement on simulation of competition. Politicians and owners of marketing agencies help each other by putting fixed prices in submitted offers, or by delivering messy and incomplete tender applications.

The complete absence of the competition principle is evident in contracting video production services for the needs of public sector institutions, which are paid through budget or public funds. Contracts are being concluded by direct agreement, usually in the period of election campaigns, and there is often no evidence that the contracted and paid services have actually been rendered. This phenomenon potentially reveals a payment of fictitious services and drawing money from the state budget. Such activities, by their nature, as well as because of limited access to documentation, overcome the mandate and resources of the Anti-Corruption Council of the Government of the Republic of Serbia.

The Anti-corruption Council has identified several cases of public sector institutions consuming marketing and video production services from legal entities whose main registered activity has nothing to do with the job for which particular legal entities have been hired. “Serbian Railways” is a flagrant example of this, because of the extremely peculiar way they purchased marketing services from legal entities registered for the production of jewelry, laying floor and wall coverings, bookkeeping and auditing.

The Anti-Corruption Council noticed that public enterprises, local self-governments, state institutions and companies with majority state capital appeared as consumers of different forms of public opinion research services. Although, these are not conventional media services, such researches most often contribute to media affirmation of specific politicians, at the expense of the state institution appearing as the client and user of a specific research.

The Council assesses that promotional campaigns of state institutions and public enterprises are most often focused on the promotion of officials or politicians who are at the forefront of those same institutions and enterprises. The public usually has no idea about the extent and type of special shows and regular news programs that are funded by public money through various contracting models. In the Report, the Council has particularly emphasized the examples of disputed contracts concluded with media by politicians from the management of public enterprises and local public utility companies.

When creating specific media content, in exchange for a continuous monthly media funding with public money, the above mentioned contracts present a way to narrow journalistic freedom, censor information and suppress free and critical thinking of journalists. In the cases of violation of contractual obligation of affirmative reporting on the work of public enterprises, i.e. the agreed form and content of the reports, a unilateral termination is stipulated in the contract, which leads to economic suffocation of the local media.

The Council found that state institutions and public enterprises conclude contracts on media coverage with the media, which includes the obligation of the media to invite representatives of these institutions and public enterprises as guests in their news programs. The authorities openly control the media in such a manner that some contracts on media coverage service result in publishing interviews and columns by ministers and state secretaries in the government of Serbia, and officials in the Government of AP Vojvodina. The public is usually not aware of the fact which of the concrete media content, promoting the highest state officials and political parties, are paid by the budget funds.

The Council concluded that sponsoring or donating money directly to the media, for sports activities or organization of events, is one of the aspects of disguised contracting of promotions of politicians. Astronomical costs for sponsorships and donations are present with public enterprises and state-owned subsidiaries. Among the beneficiaries of sponsorships and donations are legal entities whose owners and representatives are associated with political parties.

According to the assessment of the Council there are neither clear and transparent criteria nor any legitimate economic interest for the allocation of funds for sponsorships and donations.

Decisions about this are made in the circles of political elite. Allocating funds for donations or sponsorship reduces or completely eliminates the possibility of critical reporting, that is, the research of business operations and business decisions made by the management. Media that use sponsorship funds report affirmatively about the sponsor. A flagrant example of media control through financial sponsorship is the Public Enterprise “Electric Power Industry of Serbia” with its subsidiaries.

The Anti-Corruption Council concludes that some state institutions and public enterprises contract promotional services which are not useful and economically justified. Those are mainly purchased goods and paid services not logically related to the activities within the scope of work of the body that paid for them at the expense of funds from public sources of funding.

The Council analyzed the costs of promotional activities occurring at the expense of the state bodies and public enterprises, on the basis of web site creation, update, and maintenance services. The bodies of the national and provincial government often opt for contracting IT services by engaging private companies, despite the fact that for this type of work it is possible to engage state resources and infrastructure, free of charge.

The Council generally believes that advertising and marketing of public sector institutions create a strong relationship between the media and representatives of all levels of governmental authorities. Mostly, this relationship is either direct or indirect through marketing agencies that are close to political parties. Media have a financial benefit in this relationship, and the authorities have a more “flexible” and servile media, who are blackmailed by the possibility to lose the funding they obtain from advertising and marketing services.

The Anti-Corruption Council suggests to the Government of the Republic of Serbia to implement the 24 recommendations made in the Report, in order to redefine the field of marketing and advertising more efficiently and effectively, that is, reduce the impact of public sector institutions on the media.

The Anti-Corruption Council of the Government of the Republic of Serbia

Translated by Jelena Zrnic

Edited by Andrijana Jovicic

Pešč, 31.12.2015.