Last summer, then drug czar Gen. Barry McCaffrey and the Office of National Drug Control Policy (ONDCP) got their hands slapped by Congress and the press when Dan Forbes broke the story about how the office's National Youth Anti-Drug Media Campaign was manipulating the content of television shows and magazine articles to secretly further the administration's anti-drug agenda. In the reports and hearings that followed Forbes' initial piece, rumors surfaced that the Ogilvy & Mather advertising agency had over-billed the feds for its work on the campaign.
The advertising firm had won a contract for Phase III of the campaign, a continuation of the advertising blitz undertaken in earlier phases. The $684 million contract began in January 1999 and extends to December 2003. Ogilvy was tasked with producing and placing anti-drug ads, as well as building partnerships with community anti-drug groups. The General Accounting Office (GAO), the investigative arm of Congress, took a look at Ogilvy's work, and in a report released this week, found the ad agency had over-billed the ONDCP as much as $7.5 million by charging the drug czar's office for work not done.
After reviewing the documentary record and interviewing all of the parties involved, including a dozen Ogilvy employees, the GAO diplomatically found that "some of Ogilvy's labor charges to the government were not reliable and included charges for time that its employees did not work on the contract."
Based on interviews with Ogilvy officers and an internal e-mail to which it gained access, the GAO determined that in the summer of 1999, as revenue from the government contract failed to meet Ogilvy projections, some Ogilvy managers instructed employees to "review and revise" their timesheets to reflect more time devoted to the ONDCP contract. But, the GAO noted, some Ogilvy employees told its investigators the increased hours were not actually devoted to ONDCP work, and other employees told the GAO they did not make the changes evident on their time sheets and did not know who did or why.
In the internal e-mail, a July 1999 memorandum sent by Ogilvy's then government contracts manager to other high Ogilvy officers, the manager laments a $3 million shortfall in projected revenue from the government contract, but offers up the cheery note that he is "confident that we can reach the number we are committed to as long as we take some specific steps as soon as possible." Among them, he noted, was "all of these time sheets are being reviewed and are subject to revision."
The GAO examined thousands of Ogilvy time sheets and found "hundreds containing scratch-outs, white-outs and other changes to the amount billed to the ONDCP contract, all lacking the employee's initials." In talking to the Ogilvy employees whose records it examined, 4 of 12 said they had no idea who changed their time sheets.
For these and other discrepancies related to over-billing for temporary employees and for non-billable expenses, such as paid absences and training, government auditors have withheld $7.6 million of the $24.2 million in total labor charges submitted by Ogilvy for the first 19 months of the contract. Ogilvy admits some "mistakes" and in an opening gambit proposed that only $850,000 of its billings be disallowed. Ogilvy is now in negotiations with government auditors over the issue. The GAO said it had referred its findings regarding improper billings to the Justice Department.
But the GAO also allowed that the fault was not only Ogilvy's. "The government did not adequately manage aspects of the contract award," the investigators noted. It did not obtain required disclosure forms from Ogilvy that would have revealed cost accounting problems, nor did the government "adequately administer the contract by resolving billing problems when they arose or by auditing the contractor, despite clear indications that Ogilvy's cost accounting system and timekeeping procedures were deficient."
GAO is recommending "corrective action" to the ONDCP and government auditors, it said. Meanwhile, US taxpayers pay extra for the privilege of having the government tell them which drugs are bad, and one more firm grows fat feeding at the trough of drug prohibition.