Club Managers Offer Audit Advice

Tax season may be over, but unfortunately the IRS hasn’t closed their doors for the year. In fact, the fun never stops. The IRS can still audit your club at any time.

The chances of your course getting audited may not be monumental. In fact, only about 2 percent of golf courses will be subjected to an audit, but the fact remains that audits are anything but fun for you and your club. That is why many club managers are saying that it is always better to be safe, rather than sorry.

Because audit standards have changed and audit costs have increased, the Hospitality Financial and Technology Professionals (HFTP) Research Institute wanted to find ways to lessen the impact of an audit for club managers. So who better to ask advice from then club managers themselves? HFTP surveyed these superintendents on what actions they were taking to minimize audit costs at their own properties. The following list shows results from this survey:

1. Be Prepared. The number one piece of advice is to be prepared when the auditors arrive. Write reports and prepare most of the work papers before auditors are on site. The auditors can then concentrate on sampling and proving the figures; therefore, reducing the need for additional junior staff. The following list provides a few of the items which should be prepared ahead of time. Your audit firm should provide you with a complete list of all work papers, which can be completed before they arrive.
Some examples include:

• Accounts payable listing at year-end
• Accounts receivable aging by member
• Bank reconciliations at year-end
• Copies of loan closing statements and amortization schedules
• Copies of new lease agreements
• Copy of minutes from board meetings
• Final inventory valuation reports
• Fixed assets and depreciation schedules
• List of current officers and directors
• Schedule of insurance
• Schedule of non-member and reciprocal income
• Schedule of prepaid expenses
• Trial balance and internal financial statements at year-end

2. Be organized. Being organized and being prepared are related topics, but one could be very organized, but not prepared for the audit. Several respondents indicated that they have binders full of information coded and prepared for auditors when they arrive on site. Also, have files from the prior year easily accessible.

3. Document, Document, Document. Make sure you keep continuous documentation on file. Make copies of all backup documentation to accompany all schedules. When auditors arrive, you are able to provide the appropriate backup. Some of the items you should have on file include board of director’s minutes, changes to club officers, bank signature cards, wire authorizations, corporate resolutions, bank notes, etc.

4. Educate. Many respondents stated that having professional accounting staff reduced audit fees. Make sure that current accounting staff are educated on audit procedures and are able to answer questions posed by auditors. One way to do this is by compiling a policies, procedures and internal control manual. Respondents also stated that it is important to inform managers and board about fiduciary responsibilities.

5. Utilize Technology. Get ahead of the game and e-mail necessary documentation to auditors before they arrive at your property. Auditors are then able to setup files prior to fieldwork.

6. Monthly Maintenance. It is important to keep on top of things on a monthly basis so you do not get overwhelmed at the end of the year. You can do this by conducting a monthly internal audit. Also, ensure that each balance sheet account is reconciled monthly.

7. Time Management. This piece of advice has two meanings. First, club managers must ensure that all documentation is provided to their auditors in the timeframe they requested. Secondly, managers must keep the auditors on a tight schedule which will reduce their billable hours and their resulting fees.

8. Bid The Audit. In order to keep rates competitive, many clubs have sent their audit out to receive bids from various firms. When looking at bids, keep in mind that the least expensive audit is not always the best. Also look at what kind of added value each firm offers. Many clubs who responded to this survey are opting for an annual review and conducting an audit every three to five years. Proceed with caution when deciding to switch to a review instead of an audit. Reviews are not as comprehensive and sometimes just as pricey.

9. Club Familiarity. Try to find auditors who are familiar with the club industry. Several respondents mentioned that they are forced to go with the auditing firm providing the cheapest fees. This firm may not be familiar with the club industry; therefore, there is no added value to the relationship.

10. Ask For Help. When treading into uncharted territory, contact your CPA firm and talk to them about unusual situations

To find the complete survey results, check out the September 2007 issue of The Bottomline, HFTP’s bimonthly journal.