TITLE:  Department of Health and Human Services, Centers for Medicare &, B-302710, May 19, 2004
BNUMBER:  B-302710
DATE:  May 19, 2004
**********************************************************************
Department of Health and Human Services, Centers for Medicare &, B-302710, May
19, 2004

   Decision
    
    
Matter of:   Department of Health and Human Services, Centers for Medicare
& Medicaid Services*Video News Releases
    
File:            B-302710
    
Date:              May 19, 2004

   DIGEST
    
1.  The Centers for Medicare & Medicaid Services*s (CMS) use of
appropriated funds to pay for the production and distribution of story
packages that were not attributed to CMS violated the restriction on using
appropriated funds for publicity or propaganda purposes in the
Consolidated Appropriations Resolution of 2003,
Pub. L. No. 108-7, Div. J, Tit. VI, S: 626, 117 Stat. 11, 470 (2003). 
    
2.  CMS, in using appropriations in violation of the publicity or
propaganda prohibition, incurred obligations in excess of appropriations
available for that purpose.  See B-300325, Dec. 13, 2002.  Accordingly,
CMS violated the Antideficiency Act, 31 U.S.C. S: 1341, and must report
the violation to the Congress and President in accordance with 31 U.S.C.
S: 1351 and Office of Management and Budget Circular No. A-11. 
DECISION
    
In a March 10, 2004, opinion, we concluded that the Department of Health
and Human Services*s (HHS) use of appropriated funds to produce and
distribute a flyer and print and television advertisements, as part of a
campaign to inform Medicare beneficiaries about changes to Medicare under
the Medicare Prescription Drug, Improvement and Modernization Act of 2003
(MMA), did not violate publicity or propaganda prohibitions in the
Consolidated Appropriations Act of 2004, Pub. L. No. 108-199, Div. F, Tit.
VI, S: 624, 118 Stat. 3, 356 (2004), and the Consolidated Appropriations
Resolution of 2003, Pub. L. No. 108-7, Div. J, Tit. VI, S: 626, 117 Stat.
11, 470 (2003). B‑302504, Mar. 10, 2004. During our development of
that opinion, we learned that the Centers for Medicare & Medicaid Services
(CMS), an agency in the Department of Health and Human Services, had
prepared as part of this campaign video news releases or VNRs, including a
news story for television broadcast, to provide information to the
television medium. Letter from Dennis G. Smith, Director, Center for
Medicaid and State Operations, to Gary L. Kepplinger, Deputy General
Counsel, General Accounting Office (GAO), April 2, 2004 (Smith Letter).
The VNRs consist of (1) video clips known as B‑roll film, (2)
introductory and concluding slates with facts about MMA, and (3)
prepackaged news reports referred to as story packages with suggested
lead-in anchor scripts.  Importantly, the prepackaged story packages and
anchor scripts did not include statements noting that they had been
prepared by CMS.
    
Our March 10, 2004, opinion addressed only the flyer and advertisements
and did not address CMS*s use of appropriated funds to prepare and
distribute the VNRs. This decision addresses whether CMS*s use of
appropriated funds to produce and distribute the VNRs violated the
publicity or propaganda prohibitions enacted in the Consolidated
Appropriations Resolution of 2003, cited above.  CMS told us that it used
fiscal year 2003 CMS program management appropriations to produce and
distribute the VNRs.  Smith Letter, Enclosure 1 at 8.  As we explain
below, we conclude that of the three parts of the VNRs, one part--the
story packages with suggested scripts--violates the prohibition.  In
neither the story packages nor the lead‑in anchor scripts did HHS or
CMS identify itself to the television viewing audience as the source of
the news reports.  Further, in each news report, the content was
attributed to an individual purporting to be a reporter but actually hired
by an HHS subcontractor.
    
To perform of our analysis, we requested information from CMS regarding
the production, filming and distribution of the VNR materials.  Letter
from Gary L. Kepplinger, Deputy General Counsel, GAO, to Dennis G. Smith,
Acting Administrator, CMS, March 17, 2004.  CMS responded by letter dated
April 2, 2004.  Smith Letter.  We met with agency officials to clarify
their responses and to gain further factual information regarding the
production and distribution of the VNRs at issue.  In addition to the
information CMS provided us, we also examined available information
regarding the use of VNRs generally by the broadcast media and their
current use as a public relations tool.  
    
BACKGROUND
    
Use of VNRs
    
VNRs have become a popular public relations tool to disseminate desired
information from private corporations, nonprofit organizations and
government entities, in part because they provide a cheaper alternative to
more traditional
broadcast advertising.[1] While the practice is widespread and widely
known by those in the media industry, the quality and content of materials
considered to constitute a VNR can vary greatly.[2]  Generally, a VNR
package may contain a prepackaged news story, referred to as a story
package, accompanied by a suggested script, video clips known as B-roll
film, and various other promotional materials.[3]  These materials are
produced in the same manner in which television news organizations produce
materials for their own news segments.[4]  By eliminating the production
effort and costs of news organizations, producers of VNRs find news
organizations willing to broadcast a favorable news segment on the desired
topic.[5]
    
Since 1990, there has been a notable rise in the distribution of VNR
materials.[6]  With growing use of VNRs, journalism scholars began
questioning the effect of this third-party material upon the perception
that news was derived from a neutral source.[7]  In particular, scholars
raised concerns regarding the influence of third-party sources.[8] 
Given these ethical concerns, there have been a number of studies of the
use of VNRs by the broadcast industry.  Several journalism scholars
attribute the rise in the use of VNRs to the economic circumstances of the
industry.[9]  In smaller broadcast markets during the early 1990s, news
stations suffered significant reductions in staff and budget, and had
difficulty obtaining footage of certain public interest events.[10] 
Footage from an outside source helped stations fill airtime with
programming that would otherwise not be available and helped avoid
depletion of already overextended funds.[11]  
    
Studies also show, however, that most news organizations using VNR
materials often use only a portion or edited versions of the materials
provided.[12]  Still, parties interested in obtaining the maximum audience
for VNR materials argue that, even if the story package or scripted
materials are not used in full, the production of a professionally
complete news story provides a framework for the message conveyed in the
final broadcast.[13]  This allows the story package producer to assert
some control over the message conveyed to the target audience. 
    
Also, the use of VNRs may be attributed to the ease with which the
materials may be distributed.  While some packages are distributed
directly from the source to the television stations, satellite and
electronic news services such as provided by CNN Newsource facilitate
distribution to a number of news markets in a short period of time.[14] 
Broadcast stations subscribe to these services, which provide, in addition
to VNR materials, journalist reports and stories, and advertising.[15] 
While the news services label VNRs differently than independent journalist
news reports, there apparently is no industry standard as to the labeling
of VNRs.  In fact, when
questioned about the use of the VNR materials at issue here, some news
organizations indicated that they misread the label or they mistook the
story package as an independent journalist news story on CNN
Newsource.[16]
    
Professional journalism societies have noted in their codes of ethics that
journalists should resist influence from outside sources, including
advertisers and special interest groups.[17]  Because VNRs consist of
information generated by a group with a distinct perspective on an issue,
the unfettered use of VNRs may run afoul of these principles.[18] 
Moreover, professional organizations warn against using materials that
would deceive audiences.[19]  VNRs that disclose the source of information
to the target audience alleviate these ethical concerns.  
    
CMS*s Medicare VNRs
    
The CMS VNRs consist of three videotapes with corresponding scripts.  CMS
informed us that these videotapes represent what a news organization would
receive when obtaining the VNR materials.  Two of the videotapes are in
English, and one is in Spanish.  The two English videotapes contain three
items:  (1) video clips, referred to as B-roll, (2) slates containing,
among other things, title cards with facts on MMA, and (3) a video segment
called a *story package.*[20]  The B-roll provides news organizations with
footage for use in developing their own news reports.  The slate is a
visual feed from CMS to recipient news organizations that contains some
facts regarding MMA. [21]  The last slate in the VNR materials directs the
receiving news station to contact CMS for information on the VNR
materials.  The story packages are news reports prepared by CMS rather
than a news organization. 
    
The B-roll clips on each videotape are exactly the same and contain
footage of President Bush, in the presence of Members of Congress and
others, signing MMA into law, and a series of clips of seniors engaged in
various leisure and health-related activities, including consulting with a
pharmacist and being screened for blood pressure.   The English videotapes
also include clips of Tommy Thompson, the Secretary of the Department of
Health and Human Services (HHS), and Leslie Norwalk, Acting Deputy
Administrator of CMS, making statements regarding changes to Medicare
under MMA.  The Spanish videotape includes clips of Dr. Cristina Beato of
CMS offering statements about MMA*s changes to Medicare, instead of
Thompson and Norwalk. 
    
The two English VNRs contain segments entitled *story packages* that
consist of self-contained news reports regarding Medicare benefits under
MMA.  Although the English story packages contain several of the same
B-roll video clips and the same narrator, identified as Karen Ryan, the
contents of the two story packages vary.  With each story package, CMS
included a script for a news anchor of the recipient news organization to
read as a lead-in to the CMS produced news report.  One story package
focuses on CMS*s advertising campaign regarding MMA (Story Package 1). 
The suggested anchor lead-in states that *the Federal Government is
launching a new, nationwide campaign to educate 41 million people with
Medicare about improvements to Medicare.*  The lead-in ends with *Karen
Ryan explains.*  The video portion of the story package begins with an
excerpt of the television advertisement with audio indicating *it*s the
same Medicare you*ve always counted on plus more benefits.*  Karen Ryan
explains, *That*s the main message Medicare*s advertising campaign drives
home about the law.*  As more clips from the advertisement appear, Karen
Ryan continues her narration, indicating that the campaign helps
beneficiaries answer their questions about the new law, the administration
is emphasizing that seniors can keep their Medicare the same, and the
campaign is part of a larger effort to educate people with Medicare about
the new law.  The story package ends with Karen Ryan stating:  *In
Washington, I*m Karen Ryan reporting.*

    
The second English story package (Story Package 2) focuses on various
provisions of the new prescription drug benefit of MMA and does not
mention the advertising campaign of CMS.  The anchor lead-in states:  *In
December, President Bush signed into law the first ever prescription drug
benefit for people with Medicare.*  The anchor lead-in then notes,
*[t]here have been a lot of questions about* MMA and its changes to
Medicare and *Karen Ryan helps sort through the details.*  The video
portion of the news report starts with footage of President Bush signing
MMA.   Karen Ryan*s voice narration indicates that when MMA was *signed
into law last month, millions of people who are covered by Medicare began
asking how it will help them.*  Next, the segment runs footage of Tommy
Thompson, in which he states that *it will be the same Medicare system but
with new benefits . . . .*  Karen Ryan continues her narration, stating
*most of the attention has focused on the new prescription drug benefit .
. . all people with Medicare will be able to get coverage that will lower
their prescription drug spending . . . Medicare will offer some immediate
help through a discount card.*  She also tells viewers that new preventive
benefits will be available, low-income individuals may qualify for a $600
credit on available drug discount cards, and *Medicare officials emphasize
that no one will be forced to sign up for any of the new benefits.*  Karen
Ryan*s narration leads into clips of Secretary Thompson and Leslie Norwalk
explaining other beneficial provisions of MMA.  Similar to Story Package
1, Story Package 2 ends with *In Washington, I*m Karen Ryan reporting.*
    
The Spanish-language materials contain the same three items as the English
language VNRs--a B-roll, slates and a story package (Story Package 3). 
After the B-roll segments, the story package segment appears.  This
segment is considerably longer than its two English counterparts.  Similar
to Story Package 2, Story Package 3 focuses on prescription drug benefits
available under MMA.  It does not mention that CMS is engaging in an
advertising campaign.  Here, the anchor lead-in is similar to Story
Package 2, except the anchor indicates that Alberto Garcia *helps sort
through the details.*  The video segment begins with the footage of
President Bush signing MMA into law as Alberto Garcia narrates that after
signing the law, millions of people who are covered by Medicare began
asking how the new law will help them.  The remainder of the story package
contains identical footage of Dr. Beato and of seniors engaged in various
activities as in the B-roll footage.  During the video clips of seniors,
Alberto Garcia narrates that the focus of most of the attention to MMA is
on the prescription drug benefit available in 2006.  He also explains that
prescription drug discount cards will be available in June 2004 and that
*[p]eople with Medicare
may be able to choose from several different drug discount cards, offering
up to 25 percent savings on certain medications.*[22]  Alberto Garcia
concludes his report, stating:  *In Washington, I*m Alberto Garcia
reporting.*
    
In response to our request for more factual information on CMS*s practice
of using VNRs, CMS forwarded to us a fourth videotape.  This tape contains
Story Package 2 and two VNRs, each of which CMS described as a *produced
story segment,* that HHS produced and distributed in 1999 under
then-Secretary Donna Shalala of the Clinton Administration.  Smith Letter
at 2.  These two story packages were designed to inform beneficiaries of
the Clinton Administration*s position on prescription drug benefits and
preventive health benefits.  CMS pointed out similarities between the
story packages in current use and the earlier ones.  Much like the story
packages at issue here, the earlier story packages contain footage of
seniors engaging in various activities, then-HHS Secretary Donna Shalala
appearing to answer questions regarding the provisions of proposed
legislation for a prescription drug benefits and preventive health
benefits, and a report of the Administration*s proposal.  The earlier
story packages end with the phrase, *Lovell Brigham, reporting.* 
    
Distribution of Medicare VNRs
    
CMS explained to us that HHS hired Ketchum, Inc., to disseminate
information regarding the changes to Medicare under MMA.  Specifically,
HHS contracted with Ketchum to assist HHS and its agencies with a *full
range of social marketing activities to plan, develop, produce, and
deliver consumer-based communication programs, strategies, and
materials.*  Ketchum Contract at 2.  Ketchum hired Home Front
Communications (HFC) to create the VNR materials.  HFC is a broadcast
public relations firm specializing in producing video products.  Smith
Letter, Enclosure 1  at 6-7.  HFC wrote the VNR scripts, which were
reviewed, edited, and approved by CMS and HHS.  Id. at 7.   HFC completed
all production work, including filming, audio work and editing.  The final
VNR packages were reviewed and approved by CMS and HHS.  Id.
    
The VNR materials were then distributed to television stations via
satellite, electronic services provided by CNN Newsource, and/or mail. 
Id. at 2.  CMS and HFC staff members contacted some news directors by
telephone to inform the stations that the materials were available.  Id. 
Additionally, CMS e-mailed and faxed news advisories to news stations
regarding the VNR availability.  Id.; see also Smith Letter, Enclosure 4. 
The advisory indicated the satellite coordinates to obtain the materials,
how to find the materials on CNN Newsource, and bullet-point key facts
regarding the new benefits available.  Smith Letter, Enclosure 4.  The
advisory further explains what the visual elements of the VNR consisted
of, including interviews, a story package, and B‑roll.  Id.  All
stations could access satellite distribution.  Smith Letter, Enclosure 1
at 6.  Computers of the subscribing location stations* newsrooms could
access CNN Newsource.  Id.  The advisory directed news stations to contact
Robin Lane, an HFC employee, for more information on retrieving VNR
materials. CMS also mailed videotapes of VNR materials to those television
stations that requested the material.  Smith Letter, Enclosure 4.
    
CMS provided us a list of television stations that aired at least some
portion of the VNRs between January 22, 2004, and February 12, 2004.  This
list contained 40 stations in 33 different markets.  Smith Letter,
Enclosure 3.   CMS did not identify what parts of the VNR each station
broadcasted.  One of the stations that aired the story package was WBRZ,
Baton Rouge, Louisiana.  According to transcripts published on the World
Wide Web, WBRZ broadcast Story Package 2 and used the suggested anchor
lead-in script on January 22, 2004, in its entirety.[23]  At least two
other television stations may have aired either Story Package 1 or 2 in
their entirety.  A review of excerpts of transcripts from Video Monitoring
Services of America show that two stations, WMBC-TV in New Jersey (Story
Package 1) and WAGA-TV in Atlanta (Story Package 2), aired MMA news
stories ending with Karen Ryan*s by‑line.[24]
    
Discussion
This is the first occasion that we have had to review the use of
appropriated funds by government entities to engage in the production of
VNRs.  At issue here is whether CMS*s use of appropriated funds to produce
VNR materials constituted a proper use of those funds.  In its written
response and during our informal interview, CMS contended that the
production of the VNR materials constitutes a *standard practice in the
news sector* and a *well-established and well-understood use of a common
news and public affairs practice.*  Smith Letter at 2.  While we recognize
that the use of VNR materials, with already prepared story packages, is a
common practice in the
public relations industry and utilized not only by government entities but
also the private and non-profit sector as well, our analysis of the proper
use of appropriated funds is not based upon the norms in the public
relations and media industry.  
CMS told us that it used fiscal year 2003 CMS program management
appropriations to produce and distribute the VNR package.  Smith Letter,
Enclosure 1 at 8.  While CMS may have authority to use appropriated funds
to disseminate information regarding the changes to Medicare pursuant to
MMA,[25] this authority is subject to the publicity or propaganda
prohibition appearing in the annual appropriation act.[26]  Specifically,
this prohibition states:  *No part of any appropriation contained in this
or any other Act shall be used for publicity or propaganda purposes within
the United States not heretofore authorized by the Congress.*  Pub. L. No.
108-7, Div. J, Tit. VI, S: 626, 117 Stat. 11, 470 (2003).
Our March 10, 2004, opinion noted that to date we have applied the
publicity or propaganda restriction to prohibit the use of appropriated
funds for materials that are self-aggrandizing, purely partisan in nature,
or covert as to source.  See generally B‑302504.  Of these three
types, the VNR materials on MMA raise concerns as to whether they
constitute *covert* propaganda because they are misleading as to
source.[27] 
CMS asserts that, in keeping with the traditional practices in the media
industry, CMS or the service it used to distribute the VNR materials
clearly labeled the materials as VNRs.  See generally Smith Letter. 
Because they are so labeled and easily identifiable among those in the
media, CMS contends that the story packages could not be considered
misleading as to source.  CMS officials also assert that it was not their
intent to distribute the VNR materials to the broadcast stations covertly
and that the labeling of the entire VNR package clearly attributes the
source of the information to HHS and CMS.  Smith Letter, Enclosure 1 at
4.  
The *critical element of covert propaganda is the concealment of the
agency*s role in sponsoring the materials.*  B-229257, June 10, 1988.  In
our case law, findings of propaganda are predicated upon the fact that the
target audience could not ascertain the information source.  For example,
we found government-prepared editorials to be covert propaganda; although
the newspapers who would have printed the suggested editorials should have
been aware of the source, the reading public would not have been aware of
the source.  B-223098, Oct. 10, 1986.  In that case, we examined materials
concerning President Reagan*s proposal to transfer the Small Business
Administration (SBA) to the Department of Commerce.  Id.   In support of
the Administration*s proposal, SBA prepared and distributed a variety of
materials, including suggested editorials. SBA prepared these editorials
and provided them to newspapers around the country to run as the position
of the recipient newspapers without disclosing to the readers of those
editorials that SBA was the source of the information.  Because the
SBA-prepared editorials did not identify SBA as the source, SBA*s use of
appropriated funds to prepare and distribute the editorials violated the
publicity or propaganda prohibition.[28] 
In a 1987 case, the Department of State*s Office of Public Diplomacy for
Latin America violated the prohibition by paying consultants to write
op-ed pieces in support of the Administration*s policy on Central America
for distribution to newspapers.  B-229069, Sept. 30, 1987.  The State
Department did not advise the newspapers of its involvement in the writing
of the op-ed pieces.  The newspapers published these articles for
distribution to an equally uninformed audience of individual readers. 
These materials were *propaganda* within the *common understanding* of the
term, and they constituted  *deceptive covert propaganda* designed to
influence the media and public to support the Administration*s Latin
American policies.  Id.
In defending its VNRs, CMS fails to distinguish among the three separate
parts of its VNRs and the intended audience for each part.  We do not
dispute the fact that CMS labeled the entire package of VNR materials so
that the receiving news organizations could identify HHS or CMS as the
source of the information, whether they were received directly from CMS
through the mail or retrieved by the news organizations from CNN Newsource
or other satellite services.[29]  However, in both B-223098 and
B‑229069, the readers of the printed editorials and op-ed pieces
would not have been aware of the government*s influence.  In analyzing
whether the three separate materials that make up the VNR package are
covert propaganda, we do not consider the VNR as a whole, because each of
the three items that comprise the VNR was prepared for a different purpose
and audience.  
In its written response and during our interviews, CMS indicated that the
41 million Medicare beneficiaries, who may comprise the news stations*
viewing audience, and not just the television stations themselves, were
the intended audience of the VNR materials.  Some VNR materials, including
the B-roll and the slates, could not reasonably be targeted directly to a
television viewing audience.  By their very nature, the B-roll and slates
were designed to be incorporated in a news story of the receiving
stations* own creation.  CMS clearly identified itself as the source of
these materials to the television stations receiving them.  CMS made
efforts to notify the news stations of the availability of these materials
via e-mail, telephone, and facsimile and the available distribution
sources identified the materials as a VNR.  Smith Letter at 2, Enclosure 1
at 2.  Accordingly, the B-roll and slates do not violate the publicity or
propaganda prohibition.
The story packages and lead-in scripts, however, were clearly designed to
be seen and heard directly by the television viewing audience and not
solely by the media receiving the package.  CMS and HHS officials told us
that the story packages were designed so that television stations could
include them in their news broadcasts exactly as CMS had produced them,
without any production effort by the stations.  The suggested anchor
lead-in scripts facilitate the unaltered use of the story package,
announcing the package as a news story by Karen Ryan or Alberto Garcia. 
Importantly, CMS included no statement or other reference in either the
story package or the anchor lead-in script to ensure that the viewing
audience would be aware that CMS is the source of the purported news
story.
The story packages, similar to the SBA editorials and the State Department
op-ed pieces, could be reproduced with no alteration thereby allowing the
targeted audience to believe that the information came from a
nongovernment source or neutral party.  The story packages of the VNRs
consist of a complete message that could be reproduced directly by the
news organizations to be viewed by the audience of the newscasts.  As
such, the viewing audience does not know, for example, that Karen Ryan and
Alberto Garcia were paid with HHS funds for their work.
The receiving news organization*s ability to edit the story packages to
produce an independent news story does not negate the fact that CMS
designed the segments to broadcast as CMS had produced them.  CMS*s effort
to identify itself to the news organizations that received the VNRs did
not alert television viewers that CMS was the source of the story
package.  CMS has acknowledged that the television viewer was the targeted
audience.  Because CMS did not identify itself as the source of the news
report, the story packages, including the lead-in script, violate the
publicity or propaganda prohibition.[30]
In a modest but meaningful way, the publicity or propaganda restriction
helps to mark the boundary between an agency making information available
to the public and agencies creating news reports unbeknownst to the
receiving audience.  It is not the only marker Congress has placed in
statute between the government and the American press, however. 
Consistent with the restrictions on publicity or propaganda *within the
United States,*[31] Congress has prohibited the U.S. Information Agency
and its succeeding agency, Board of Broadcasting Governors, created by
Congress for the purpose of producing pro-U.S. government news reports and
print materials for international audiences, 22 U.S.C. S: 1461, from
broadcasting to domestic audiences, 22 U.S.C. S:S: 1461(b),
1461‑1a.[32]  In limiting domestic dissemination of the U.S.
government-produced news reports, Congress was reflecting concern that the
availability of government news broadcasts may infringe upon the
traditional freedom of the press and attempt to control public opinion. 
See B-118654-O.M., Feb. 12, 1979.  Congress also restricted
government-produced programming for domestic audiences in the law creating
the Public Broadcasting Corporation.  47 U.S.C. S: 396.  Although the
mission of the Public Broadcasting Corporation includes instructional,
educational and cultural purposes, the statute creating the Corporation
prohibits the Corporation from directly producing any news programming. 
47 U.S.C. S: 396(g)(3)(A) & (B).[33]  While Congress authorized HHS to
conduct a wide-range of informational activities, CMS was given no
authority to produce and disseminate unattributed news stories.
CMS makes two other arguments in support of its use of appropriated funds
to produce and distribute the story packages.  Neither argument is
persuasive.  CMS argues that the VNR materials cannot be covert propaganda
because the VNR materials were not produced as a *purported editorial,
advocacy piece or commentary.*  Smith Letter, Enclosure 1 at 4.  CMS
asserts that the narration by Karen Ryan (and presumably Alberto Garcia)
does not take a position on the MMA.  Id.  While we agree that the story
packages may not be characterized as editorials, explicit advocacy is not
necessary to find a violation of the prohibition. [34]  As with the
SBA-suggested editorials, the content of the story packages themselves
would not violate the publicity or propaganda prohibition if identifying
the source to the target audience were not an issue.  See B-302504, Mar.
10, 2004.  
Further, CMS refers to our recent opinion in B-301022, Mar. 10, 2004,
regarding the Office of National Drug Control Policy*s (ONDCP) open letter
to state-level prosecutors opposing efforts to legalize marijuana and
other controlled substances.[35]  Smith Letter, Enclosure 1 at 3.  The
open letter contained two attachments, one of which did not identify ONDCP
as the source of the information.  B-301022, Mar. 10, 2004.  We found that
the unidentified attachment was not a violation of the publicity or
propaganda prohibition because the document was part of a package that
clearly identified ONDCP as the source and because there was no attempt to
portray the contents of the document as the position of an individual
outside the agency.  Id.    
This reasoning cannot be applied to the story packages at issue here.  The
target audience of the ONDCP letter and attachments, the state
prosecutors, had access to the entire package.  The television viewing
audiences, however, could not view the entire MMA VNR package.  Evidence
shows, and CMS acknowledges, that the story package could be broadcast
without edit or alteration, and actually was broadcasted unedited in some
markets.  Television audiences viewing the story packages were not in a
position to determine the source from the other materials in the VNR
packages.  Unlike the ONDCP materials, the content of the message
expressed in the story packages was attributed to alleged reporters, Karen
Ryan and Alberto Garcia, and not to HHS or CMS.  Nothing in the story
packages permit the viewer to know that Karen Ryan and Alberto Garcia were
paid with federal funds through a contractor to report the message in the
story packages.  The entire story package was developed with appropriated
funds but appears to be an independent news story.  The failure to
identify HHS or CMS as the source within the story package is not remedied
by the fact that the other materials in the VNR package identify HHS and
CMS as the source of the materials or that the content of the story
package did not attempt to attribute the agency*s position to an
individual outside the agency. [36]
    
HHS*s misuse of appropriated funds in violation of the publicity or
propaganda prohibition also constitutes a violation of the Antideficiency
Act, 31 U.S.C. S: 1341(a).  The Antideficiency Act prohibits making or
authorizing an expenditure or obligation that exceeds available budget
authority.  See B-300325, Dec. 13, 2002.  Because CMS has no appropriation
available for the production and distribution of materials that violate
the publicity or propaganda prohibition, CMS has violated the
Antideficiency Act, 31 U.S.C. S: 1341(a).  See B-300325, Dec. 13, 2002. 
CMS must report its Antideficiency Act violation to the President and the
Congress.  31 U.S.C. S: 1351.[37]  Office of Management and Budget
Circular No. A-11 provides guidance to executive agencies on information
to include in Antideficiency Act reports.  
Conclusion
Although the VNR materials were labeled so that the television news
stations could identify CMS as the source of the materials, part of the
VNR materials--the story packages and lead-in anchor scripts--were
targeted not only to the television news stations but also to the
television viewing audience.  Neither the story packages nor scripts
identified HHS or CMS as the source to the targeted television audience,
and the content of the news reports was attributed to individuals
purporting to be  reporters, but actually hired by an HHS subcontractor. 
For these reasons, the use of appropriated funds for production and
distribution of the story packages and suggested scripts violated the
publicity or propaganda prohibition of the Consolidated Appropriation
Resolution of 2003, Pub. L. No. 108-7, Div. J, Tit. VI, S: 626, 117 Stat.
11, 470 (2003).  Moreover, because CMS had no appropriation available to
produce and distribute materials in violation of the publicity or
propaganda prohibition, CMS violated the Antideficiency Act, 31 U.S.C. S:
1341.  CMS must report the Antideficiency Act violation to the Congress
and the President.   31 U.S.C. S: 1351.

   Anthony H. Gamboa
General Counsel
    

   ------------------------

   [1] Eugene Marlowe, Sophisticated *News* Videos Gain Wide Acceptance, Pub.
Rel. J. 17 (Aug./Sept. 1994).
[2] In 1991, it was reported that 78 percent of news directors polled used
edited VNRs at least once a week in their broadcasts.  Bob Sonenclar, The
VNR Top Ten:  How Much Video PR Gets On the Evening News?, Col. J. Rev. 14
(Mar. 1, 1991).  In 1992, another source reported that 100 percent of
polled stations admitted to using some VNR materials in their newscasts. 
Anne R. Owen and James A. Karrh, Video News Releases:  Effects on Viewer
Recall and Attitudes, 22 Pub. Rel. Rev. 369 (Winter 1996).  In 2001, it
was reported that approximately 800 television stations in the United
States use VNRs. Mark D. Harmon and Candace White, How Television News
Programs Use Video News Releases, 27 Pub. Rel. Rev. 213 (June 22, 2001).
[3] Marlowe, supra note 1, at 17.
[4] Id.
[5] Glen T. Cameron and David Blount, VNRs and Air Checks:  A Content
Analysis of the Use of Video News Releases in Television Newscasts, 73
Journalism and Mass Comm. Q. 890, 891  (Winter 1996) (summarizes the
logistic and resource constraints of the media industry attributed to the
media*s decision to utilize VNR material).
[6] Sonenclar, supra note 2, noting the anticipated rise in the use of
VNRs.  Harmon and White, supra note 2, noting the new importance of using
VNRs in the media industry in the late 1980s and into the 1990s. 
[7] See generally Harmon and White, supra note 2, summarizing the various
studies in the 1990s regarding the ethics of using VNRs in the journalism
industry. 
[8] Id.; see also Owen and Karrh, note 2, examining the credibility of
news programming using messages derived from VNRs.
[9] Marlowe, supra note 1, at 17.  See also Cameron and Blount, supra note
5, at 893.
[10] Owen and Karrh, supra note 2.  Cameron and Blount, supra note 5, at
893.
[11] Cameron and Blount, supra note 5, at 893.
[12] Id.  This study showed that most news stations, regardless of size of
the market, did not use the prepackaged news stories on a wide scale
basis.  The study noted that, while most stations used part of the VNRs,
very few stations used the prepackaged story with no alteration.
[13] Id. at 901. 
[14] Harmon and White, supra note 2. 
[15] Zachary Roth, Fact Check, CNN:  Spinning PR into News, CJR Campaign
Desk, Mar. 22, 2004, available at
http://www.campaigndesk.org/archives/000318.asp. 
[16] Id.  The article also notes that most news directors that ran the
VNRs at issue here expressed displeasure with the Administration, and some
thought the distribution of the VNR took *advantage of the smaller
stations* well-known lack of resources.*
[17] See Code of Ethics and Professional Conduct Radio-Television News
Directors Association (RTNDA), available at
http://www.rtnda.org/ethics/coe.html; see also Society of Professional
Journalists (SPJ) Code of Ethics, available at
http://www.spj.org/ethics_code.asp.
[18] SPJ Code of Ethics states:  *Deny favored treatment to advertisers
and special interests and resist their pressure to influence news
coverage.*  SPJ Code of Ethics, supra note 17.  RTNDA Code of Ethics
states:  *Gather and report news without fear or  favor, and vigorously
resist undue influence from any outside forces, including advertisers,
sources, story subjects, powerful individuals, and special interest
groups.*  Code of Ethics and Professional Conduct RTNDA, supra note 17.
[19] RTNDA Code of Ethics states:  *Clearly disclose the origin of
information and label all material provided by outsiders.*  (Emphasis
added.)  SPJ Code of Ethics states:  *Identify sources whenever feasible. 
The public is entitled to as much information as possible on sources*
reliability.*
[20] In addition to these materials, one of the English-language videos
contains footage of an advertisement that appeared on national
television.  Our legal opinion of March 10, 2004, B-302504, reviewed this
material, and found that HHS*s use of appropriated funds for the
advertisement did not violate the publicity or propaganda prohibition.
[21] In addition to the title cards, the slates contain the visual feeds
of the B-roll and the story packages.  Each slate may be separated and
edited for individual use by the receiving television station.  For
example, the receiving station could separate the slate with the B-roll
footage of seniors engaged in health-related activities from the other
B-roll footage and the story packages.  The station could then use this
slate separately from the remaining VNR materials.
[22] In Story Package 2, Leslie Norwalk, in one of her *interview* video
clips, not Karen Ryan, the reporter, made this point.
[23] The transcript, available
http://www.2theadvocate.com/scripts/012304/noon.htm, was accessed on April
7, 2004.
[24] The partial transcripts indicate the time each news item was
broadcast, the topic discussed, some information on visual clips, and the
reporter on the assignment.   For example, the partial transcript for the
WAGA-TV transcript indicated that the story ran for 1 minute and 22
seconds, contained video clips from the television campaign advertisements
and a pharmacy checkout, an interview with Tommy Thompson, and Karen Ryan
reporting from Washington. See Video Monitoring Services of America, Good
Day Atlanta, February 4, 2004, available at www.nexis.com.    
[25] See generally, MMA S: 101(a) (adding new sections to the Social
Security Act and expanding HHS*s authority to engage in information
dissemination activities to inform Medicare beneficiaries about their
benefits). 
[26] We need not speculate, and this decision does not address, what type
of authorization an agency must have, and how specific that authority
would have to be, to prepare and distribute a *news story* absent a
prohibition on publicity or propaganda.
[27] We did not criticize the flyer and advertisements under consideration
in our March 10, 2004, opinion as covert propaganda because all of the
materials identified HHS or CMS as the source to every audience viewing
the material.
[28] We compared SBA*s editorials to lobbying campaigns, attempting to
manipulate the perception that public support for an issue was greater
than it actually was.  Id.; see also B‑129874, Sept. 11, 1978
(criticizing a plan to distribute *canned editorial materials*).
[29] Some news organizations reported that the use of such information was
a mistake due to their own misreading of the label on the materials
received or some confusion as to the labeling by CNN Newsource.  Later
reports indicate that CNN Newsource has changed its cataloguing and
labeling of VNRs in response to these reports.  See Zachary Roth, Fact
Check:  CNN Cracks Down--on CNN, CJR Campaign Desk, Mar. 31, 2004,
available at http://www.campaigndesk.org/archives/000358.asp. 
[30] As we noted in the background section of this decision, CMS forwarded
to us a videotape including what CMS described as two story packages that
HHS had produced and distributed during the Clinton Administration in
October 1999.  These two story packages were not brought to our attention
at that time.  Had we been aware of the use of story packages in this or
other contexts, the principles discussed here would have been applicable. 
We note, however, that accounts of the government are settled by operation
of law three years after the close of the fiscal year.  31 U.S.C. S:
3526(c).
[31] The prohibition restricts publicity or propaganda *within the United
States.*  The Consolidated Appropriations Resolution of 2003, Pub. L. No.
108-7, Div. J, Tit. VI, S: 626, 117 Stat. 11, 470 (2003).
[32] There are some limited exceptions in which Broadcasting Board of
Governors and United States Information Agency materials could be viewed
by a domestic audience.  22 U.S.C. S: 1461(b).  None of these exceptions
are relevant here.
[33] The Administration and Congress have significant control over the
Public Broadcasting Corporation (PBC).  The President appoints and the
Senate confirms the nine members of the Board of Directors.  47 U.S.C.
S: 396(c)(2).  PBC is required to report annually to Congress regarding
its operations, activities, financial condition and accomplishments.  47
U.S.C. S: 396(i).
[34] Although the story package content may not contain strong editorial
positions on the benefits of MMA, they are not strictly factual news
stories as HHS contends.  On balance, the contents of the story packages
consist of a favorable report on effects on Medicare beneficiaries,
containing the same notable omissions and weaknesses as the flyer and
advertisements that we reviewed in our March 2004 opinion.
[35] The National District Attorneys Association sent the open letter and
attachments with its own cover letter to the state-level prosecutors.
[36] CMS also argues that VNRs are similar to press releases as *[e]ach is
designed to provide information to reporters and is crafted for the use by
the media to which it is directed. Each provides quotes, facts and
background that a reporter can use to write or produce a story.  Each is
created to provide context to the issue.*  Smith Letter at 1.  There may,
indeed, be similarities between these two public relations tools.  We are
familiar with the practice of preparing press releases to include
information useful to reporters who then prepare and produce their own
news stories for publication.  With the story packages, CMS prepared news
stories using alleged reporters rather than simply offering information to
reporters who would prepare their own stories.
[37] We were unable to identify the amount of HHS*s violation.  HHS
advised that the English language story packages cost $33,250, and that
the Spanish language VNR cost $9,500.  Smith Letter, Enclosure 1 at 8. 
Although requested, HHS did not provide further documentation of these
costs to us.  We did not audit these amounts.