SPH Media files police report following investigations into inflated circulation numbers

SPH Media Group has revealed the findings from investigations into overstated circulation figures and has confirmed that it has filed a police report for potential offences that were highlighted by its audit committee. 

The investigations come after SPH Media confirmed to MARKETING-INTERACTIVE earlier this year that it had found inconsistencies in its circulation data, following a review of internal processes. According to the company, these inconsistencies include subscription contracts. The discrepancy was of 10 to 12% which is around 85,000 to 95,000 daily average copies across all titles. There was also double counting of subscriptions and destructed copies included in the count.

After an investigation conducted by SPH Media Holdings Board’s Audit and Risk Committee (ARC), it recommended that a police report be filed for certain observations. These potential offences were redacted in ARC's report that was released publicly. It was confirmed by The Straits Times that the police report was not made against any one specific individual or entity but rather comprised the investigation findings.

In its statement, SPH Media noted that it filed a police report on 21 June and that it will "fully cooperate with the police in their investigation".

Don't miss: Former ST editor calls out SPH Media for number of ex Accenture staff hired, SPH clarifies recruitment practice

Key findings from the report found that the accounting impact was not deemed to be material to the financial statements of SPH Media Group for the financial year ended 31 August 2022 taken as a whole. It also decided that the actions taken against employees and ex-employees identified were reasonably justified and in compliance with SPH Media Group’s policies.

Furthermore, it added that there was no evidence of the involvement of the journalism and editorial departments in the overstatement of the circulation numbers.

In the reporting of circulation numbers, ARC found that the overstatement of circulation numbers amounted to approximately 82,600 average daily copies for the month of August 2021. This included bulk copies via the NIE Fund reported but not distributed at 49,000, An arrangement termed as "Y deal" copies at 5,000 while "X barter" deal copies at 15,000 and school, airline, agency and all-in-one copies at 13,600. 

"As the X barter deal may not have been a genuine arrangement, there was an overstatement of revenue and expense of approximately SG$830,000 (but no impact on profit and loss) in the financial statements of SPH Media Group for the financial year ended 31 August 2022. This was previously not adjusted as investigations had not commenced as to the substance of the arrangement," said ARC. 

Under the redacted Y deal in the report, Y paid SPH royalty fees of a redacted amount each month and was granted an exclusive limited license to print and distribute 5,000 daily copies of Straits Times from 2013 to 31 March 2022.

The report added that on a redacted entity's instructions, Y was charged a nominal sum under the Y deal from November 2021 onwards, in order to allow the 5,000 copies under the Y deal to continue being reported in SPH’s circulation numbers.

Under the X barter deal, it was noted that barter arrangements are not, in and of themselves, improper and can be appropriately recorded as long as they satisfy specified recognition criteria. The original intention behind barter deals was to expand SPH news publications’ outreach and distribute such publications in other jurisdictions at zero or low (real) cost and to promote SPH news publications in Singapore by bundling SPH subscriptions with complimentary subscriptions to other foreign news publications, it said. 

According to a redacted name in the report, barter deals were also for the purpose of boosting circulation numbers to cushion the drop in circulation numbers from the print decline. "Whilst the Listco Board was aware of the existence of barter deals (which were referenced in the management reports), there is no available evidence that the Listco Board was apprised of the operational details of these deals," it said. 

The X barter deal was a barter (or contra) arrangement between X and SPH wherein X provided X e-paper digital subscriptions to SPH in exchange for 15,000 Straits Times and Business Times digital subscriptions. "The amounts to be paid by X to SPH and vice versa were offset against each other, and no real cash changed hands under this arrangement. 15,000 circulation copies arising from this arrangement were included in SPH’s reported circulation numbers," the report said. 

The X barter deal could potentially have evolved into a questionable arrangement entered into for the sole purpose of inflating circulation numbers and revenue, without a genuine intention to execute the arrangement, said the report. 

The red flags in relation to the X barter deal include unexplained variances in the terms and conditions of the X barter deal and an absence of evidence showing distribution of the digital activation codes. If the X barter deal were not a genuine arrangement, the corresponding revenue and expenses should not have been recognised and the corresponding circulation numbers should not have been counted.

Recommendations moving forward

Taking into account the findings, ARC recommended that a police report be filed and that in relation to the ongoing rebasing exercise to formulate a methodology to report readership numbers, the methodology should be benchmarked to internationally accepted standards, audited by an external independent third party, if possible and clearly recorded in guidelines. This should thereafter be made available to all SPH Media Group employees and reviewed on a regular basis to ensure compliance with international standards for reporting circulation numbers.

SPH Media Group should also take the opportunity to evaluate its risk culture, enhance its risk management practices and continually improve its internal controls and processes, said ARC.

In response, SPH Media noted that apart from measures already taken to improve internal controls, it will act on the ARC’s recommendations on benchmark reporting and further enhance its risk management practices in the coming months.

Related articles:
SPH Media and Nikkei to digitally transform their newsrooms in new collaboration
3 reasons govt will continue to fund SPH Media despite circulation debacle
Association of Advertising and Marketing SG asks for 'absolute transparency' from SPH