More Dues and Don'ts for ABC

By: Jay Schiller As a result of what's happened at several large newspapers lately, the Audit Bureau of Circulations is making changes involving more "dues" (4% increase in audit fees) and more "don'ts." The "don'ts" involve a get-tough approach to the audits. On July 7, ABC put out a committee report listing the following provisions for newspapers. For those not fluent in ABC, this former auditor will take the liberty of translating:

1. Review "days omitted" rule.

Translation: Less omitted days. Why did it rain for 40 days and 40 nights? Because that's how many eliminated days Noah was able to take. If Noah was a circulation director now, he'd probably be looking at a dozen.

2. Review qualification of third party sales through "barter" agreements.

Translation: Whose dumb idea was it to let newspapers report paid circulation by replacing money with "stuff"? What is the value of bartered items? Who determines the value? Why don't we just throw out this barter crap? If nothing else, audit the hell out of it to establish its legitimacy or lack thereof.

3. Reinforce auditor's need to access general accounting records.

Translation: Stop blowing off the auditors and let them see whatever they want to see! It's not that all of the auditors can read the general ledgers but some of them can. ABC wants to see some ledger detail to see if newspapers are buying their own copies. ABC wants to look at credits to ensure it's not happening. Besides, looking at the accounting record provides ABC with future insulation when the audits end up as part of court cases.

4. Require all independent distributor contractors to make records available for audit.

Translation: ABC needs to see "laydowns" (in/out) sheets so they can go into the field and verify the information. You can blame this on Chicago and those damn Teamsters. ABC has never been able to get records from them. They claim to sell a whole lot of newspapers but ABC can't get it broken down by location so they can't verify draw and returns. The same thing happened at Newsday. ABC knew that a contractor got thousands of copies a day but had little if any idea where they went.

5. Change current policy governing "hawker" sales to rule, and make suggested records per policy mandatory.

Translation: Newspapers can't keep throwing papers in dumpsters and counting them as paid. Hawker sales are often inflated and now if a newspaper is doing a hawker program, it will be receiving increased scrutiny. Tip to newspapers: The further away from the alleged site of sales that the papers are dumped, the less likely they will be found.

6. Require annual route list submission for all carrier collect and independent single copy distributor operations (major metro only).

Translation: The carrier collect part is not a problem for a lot of newspapers since they are 100% office collect, but if you're a newspaper forcing extra copies on your carriers, watch out. Again, ABC is making noise about actually going into the field and checking on hotels, hawkers and single copy outlets.

7. Make copies of all agreements with outside solicitation firms available to the auditors.

Translation: Think subscriber-level auditing. An auditor could test all new orders where the commission was greater than the subscription price. Sir or madam, did you order the newspaper? Do you understand that you have to pay for it? (Well, the salesperson told me it was a free sample.) This is to do discovery and find out if expanded testing is necessary. Expanding testing equals expanded audit cost and deflated circulation.

8. Advise membership that auditors will confirm single-copy sales to retail outlets.

Translation: More field testing. No more ghost outlets.

Further translation: Hoy, Newsday and the Chicago Sun-Times got largely nailed for phony outlets or inflated sales at outlets. The auditors did not do adequate field testing. Back in the late 1980s and early 1990s, auditors in competitive markets used to go "dumpster diving" in search of bundles of unopened newspapers being reported as paid copies. As there are no ABC minimum requirements on wholesale rates or no limitations involving credits to contractors, newspapers can give contractors papers at no cost and also give them financial incentives to throw newspapers away.

Hotels will get increased attention. How are the numbers generated? Based on occupancy? (A lot of times the draws are flat, which is OK if returns are reported). Are the papers delivered to the rooms? Are the papers referenced on the registration card or itemized on the bills? You can bet that hotel papers will receive a lot of attention. Also, hotels sales could be tested while audits are not going on. Ditto for event sales.

The lower the basic rates of a newspaper and the lower the wholesale rates (and higher the allowances and fees) the independent contractors are charged, the more attention the copies will receive.