5/11/2015

Audit of ESDC Finds Few Measurable Results for $211 Million State Advertising Contract, May 11, 2015

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May11,2015,Contact:PressOffice(518)4744015

AuditofESDCFindsFewMeasurableResultsfor$211
MillionStateAdvertisingContract
SubHeading
TheEmpireStateDevelopmentCorporation(ESDC)spent$211milliononanadvertising
contracttopromoteeconomicdevelopmentandtourisminNewYorkstatewithnotangible
results,accordingtoanauditreleasedtodaybyStateComptrollerThomasP.DiNapoli.
WhengovernmentspendshundredsofmillionsoftaxpayerdollarstosendamessagethatNew
Yorkisaplacetovisitandopenforbusiness,itshouldhaveclearobjectivesandshowthepublic
actualresults,DiNapolisaid.ESDCsattemptstomeasuretheresultsofthisadvertising
campaignwereweakatbest,leavingrealquestionsaboutwhethertheresultsjustifythecost.
InDecember2011,ESDCawardedacontracttoBBDOUSALLC,anadvertisingandmarketing
agency,forupto$50million.ESDCamendedandincreasedthecontractfourtimes,bringing
thetotalofthecontractto$211.5million.Ofthis,$36.5millionwastargetedtopromote
tourismandbusinessinthewakeofHurricaneSandy.Theremaining$175millioncouldbe
spentattheauthoritysdiscretion,whichESDCallocatedtopromotingStartUpNY,tourism,
TasteNYandMasterbrand.
Asrequiredbylaw,theStateAttorneyGeneralsofficeandtheStateComptrollersoffice
reviewedthecontractandamendmentsandfoundthestatesprocurementandlegalprocess
wasfollowed.
ThepurposeofDiNapolisaudit,whichcoveredDecember2011toNovember2014,wasto
determineifESDCreceivedtheservicesitpaidforandwhetheritsadvertisingeffortachieved
sufficientoutcomes.AlthoughauditorsfoundthatESDCgottheadvertisingservicesitpaidfor,
atafairprice,theyfoundESDCwasnotabletoeffectivelyquantifyandassesstangible
outcomesfromtheinitiatives.
ESDCofficialstoldauditorstheydonotbelievethattheadvertisingprogramshouldbeformally
measuredagainstoutcometargetsestablishedforthevariousprograms,andthatthe
advertisingwasnotintendedtodirectlyproducepositiveeconomicbenefits.Insteadofficials
stressedthattheprimaryexpectationforthecontractwastoimproveperceptionofthestateas
agoodplacetovisitandtodobusiness.
AuditorsrepeatedlymetwithESDCofficialsabouttheobjectivesofthespecificprograms
supportedbytheadvertisingcontract.ESDConlyprovideddetailsaboutStartUpNY,ataxfree
incentiveprogramforbusinessesaffiliatedwithcollegecampusesthatbeganinOctober2013.
BetweenOctober2013andOctober2014,auditorsfoundthatESDCspent$45.1millionto
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5/11/2015

Audit of ESDC Finds Few Measurable Results for $211 Million State Advertising Contract, May 11, 2015

advertisetheStartUpNYprogramtoencouragebusinessestoapplyfortheprogram,or40
percentofthe$111.6millionavailableforadvertisingduringthatperiod.
Duringthistime,ESDCreceived18,203applications,butonlyabout10percentofthe
businessesthatappliedwereeligiblefortheprogramandonly41enrolledintheprogramduring
thetimeperiodexaminedbyauditors.The41businessesplantocreate1,750jobsoverthenext
fiveyears.AuditorscalculatedthatESDCspentmorethan$25,000onadvertisingforeachof
thepromisedjobs.
AuditorsalsoquestionedwhyESDCcontinuedtoallocatemoreandmoremoneytoadvertise
StartUpNYevenasapplicationsfellfromapeakof5,300inJanuary2014toabout500in
June2014withoutanyanalysisofspecificgoalsormodificationofoutreachefforts.Auditors
alsonotedthatspendingonadvertisingdidnotproducetheoutcomeofincreasingthenumber
ofapplications(seechartsonpage10and11).
EventhoughESDCdidnotsetspecificquantitativetargetsorbenchmarks,auditorsfounditdid
makesomeefforttoevaluatetheeffectivenessoftheactualadscreated.Theefforts,however,
onlylookedatwhetherafewfocusgroupshadtheirperceptionschangedafterviewingtheads
aboutdoingbusinessorvisitingNewYork.Whenauditorspressedagainforgoalsandresults,
ESDCnotedthatattendanceincreasedatthefivetouristdestinationsfeaturedinitsmarketing
campaign,includinga17percentincreaseinattendanceattheBaseballHallofFamein2014.
Auditorsnotedthattheinducteesfor2013hadalldiedpriorto1940incontrasttotheattention
generatedbywellknowninductionclassof2014,whichincludedformerNewYorkYankees
ManagerJoeTorre.
DiNapolisofficerecommended:
Futurestrategicandmarketingplansincludeperformancemeasuresformonitoring
outcomestodetermineifthecostgeneratedareturnfortheinvestment
Setspecifictargets,goalsandbenchmarksforevaluatingperformanceoutcomesanduse
thesemeasuretomonitorperformanceand
Regularlyevaluatetheprogramoutcomesassociatedwiththemarketingeffortsanduse
thisinformationtoperiodicallyreview,andifneeded,adjustprogramgoals,strategiesand
resourceallocations.
InESDCsresponsetotheaudit,theauthoritygenerallymaintainedthatitdoesmonitor
performanceandreassertedthattheadvertisingcampaignwasintendedtobuildabrandand
changeperceptions,notcreatejobsorgenerateeconomicdevelopment.Theauthorityagreedto
haveitsmarketingagencyreportonperformancemeasurementsandmetricsinfuture
contracts.Theauthoritysresponse,alongwithdocumentsnotpreviouslyprovidedtoauditors,
areincludedintheaudit.
DiNapolisofficeisalsocurrentlyauditingtheExcelsiorJobsprogram,whichreplacedtheEmpire
Zoneprogramin2010.
SeeESDCMarketingServicePerformanceMonitoringor
https://www.osc.state.ny.us/audits/allaudits/093015/14s10.pdf
SeeESDCcontractwithBBDOorhttps://www.osc.state.ny.us/contracts/contractnoC201101.pdf
AlbanyPhone:(518)4744015Fax:(518)4738940
NYCPhone:(212)3831388Fax:(212)6817677
Internet:www.osc.state.ny.us
EMail:press@osc.state.ny.us
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OfficeoftheNewYorkStateComptroller

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