Moderated by Jim Hankowski, CPA, Condon O’Meara McGinty & Donnelly LLP
This week’s club-focused HFTP Hangout spotlighted “Managing the Ever-Changing Landscape During COVID-19.” It was moderated by James (“Jim”) Hankowski, CPA, a partner of Condon O’Meara McGinty & Donnelly LLP and past HFTP Global Board member. Jim’s firm specializes in the auditing and accounting for over 325 private clubs in 16 states, with Jim prominently handling their New Jersey Club practice.
The current situation may be completely unprecedented, but Jim was able to share what he and his fellow financial experts have seen so far in the club industry. He also presented an overview of practices on how to deal with the new challenges that clubs are facing due to COVID-19 restrictions.
With all of the unknowns, clubs have no way of knowing where they are going to end up at the close of the year. As operations significantly slowed down or ceased altogether, clubs rushed to pare down their excesses, cash flows stalled and, without a lot of excess cash, unforeseen burdens crushed cash flow budgets. It is difficult to see what the overall financial model for clubs is going to look like.
One observation of the cash flow forecast is that clubs are moving away from traditional budgeting processes and looking to apply for a line of credit to support finances during this downturn. Clubs should contact their banks to see what kind of credit is available and how favorable are the current rates.
Many clubs are also trying to take advantage of the federal relief programs that have become available, which supplement payroll taxes, unemployment, paid sick and family leave, and small business loans. Like other segments of the industry, clubs are making tough decisions involving staff lay-offs and furloughs, as well as reducing work weeks (i.e. four work days per week). Clubs are seeking debt service relief and deferring their non-essential capital expenditures.
One critical task is to communicate effectively with members regarding the impact of COVID-19 on the club. While not exactly altering dues programs, clubs are injecting some flexibility into them by allowing extended payment, reducing fourth quarter dues or issuing account credits that can be used once the club goes back into full operation towards services like dining and cart fees.
With the altered work environment, clubs need to pay attention to internal controls and how they may have been impacted by the new workflow. To help reduce exposure, some internal controls to pay attention to include:
- The check signing process has changed. Officers do not want to go into the office, so managers and controllers are signing more. As well, there are more ACH payments being made, so that clubs can make payments without using paper checks.
- Access to banks should require dual authentication.
- There should be no cash transfers without verbal communication with the manager or controller.
- Daily review of bank statements is a MUST.
Internal controls must also consider cybersecurity measures to protect the club against phishing or hacking attacks, which have increased as operations and staff move to work-from-home practices. Some of these IT controls for telecommuting include:
- Ensuring that back-up procedures are not compromised
- Consulting with IT professionals regarding secure access and firewalls
- Setting IT policy for tele-commuting that includes no personal use of company computers
Clubs must also remember to properly “close the door” on telecommuting access when operations resume.
The tax department at Condon O’Meara McGinty & Donnelly LLP regularly produces a periodical called Tax Views for the private club community that provides periodic updates on tax developments of interest and explicates the broad range of issues confronting tax exempt social clubs.
You can read one of these Tax Views that was published on HFTP Connect in March: “Social Clubs and the Coronavirus Pandemic: A Tax View on Qualified Disaster Payments.”
The next club-focused HFTP Hangout on Tuesday, April 21 will be moderated by Ray Cronin, founder and chief innovator at Club Benchmarking. Ray will cover findings from Club Benchmarking’s white paper “The Framework for a Strategic Response to the COVID-19 Crisis.” Be sure to bring your questions to the session. Sign up to attend.
Briana Gilmore is the HFTP Communications Coordinator. Briana can be reached at Briana.Gilmore@hftp.org or +1 (512) 220-4017.