Archive for the ‘internal control’ Category

Potential Internal Control Problem Areas

Monday, September 24th, 2012

There are a number of areas of club operations that present special internal control problems.  Managers at all levels should pay particular attention to these areas to prevent loss.

Snack Bars

Snack bars are operations with many small, easily pilfered items and relatively low paid employees who operate with a minimum of supervision.  Without proper controls and oversight, a great deal of loss can occur in these operations.

The most effective way to curtail loss is to conduct frequent inventories of food and beverage stocks and to compare product consumed (per inventory) with sales for the same period.  If this is done on a regular basis, any pattern of ongoing loss will be quickly spotted.  In most cases, the mere fact of frequent inventories and questioning staff about shortages will have a diminishing effect on such loss.

This coupled with a policy of termination for theft and following through on this policy when theft occurs will send a clear message to staff that pilferage will not be tolerated.

Beverage Cart

The beverage cart has the same potential for loss as snack bar operations.

It is essential that all beverage cart sales be recorded on member charge slip signed by the member.  These charge slips must then be rung into a point-of-sale terminal at the end of each shift.  The original member-signed charge slips must be attached to the printed POS charge slip.  All charge slips must then be turned in to the Accounting Office with the departmental daily report.

One way to control stock on the beverage cart is to require all items carried on the cart to be requisitioned from the Turn House attendant.  The cart attendant is required to track all sales on a  pre-printed form with all product normally carried.  At the end of the shift/day the extended sales form is compared to the extended product consumed form (issues less returns).  If signatures from both cart attendant and Turn House attendant are required on inventory forms, a measure of accountability is assured.

Finally, a manager must compare sales to the inventory consumed on a regular basis and question all shortages.

Bar Operations

Beverage operations are notorious for loss potential.

The three major problems are routine over-pouring, pilferage by employees, and pouring excessive amounts of alcohol in anticipation of a cash tip (despite the policy against tipping in most clubs).

The only real defense against both of these potential problems is frequent inventories.  The club requires daily inventories by bar staff.  These inventories must be checked closely by management.  Periodic inventories by management must verify the accuracy of these daily inventories.  All discrepancies must be investigated.

In most cases, a vigilant management that questions all discrepancies will go a long way toward reducing loss from bar operations.

Golf Course Maintenance Purchasing & Receiving

In most clubs, golf course maintenance is far removed from the clubhouse and normal receiving areas.  The lack of senior management oversight that this distance creates makes the purchasing and receiving of large and expensive stocks of fertilizers, chemicals, and other supplies problematic in that the same person who does the purchasing is also doing the receiving.

The best course to encourage sound internal controls is to require the use of purchase orders or annual purchasing contracts for the great majority of golf course maintenance supplies and materials.  In this way, the General Manager will review and sign all POs and Purchasing Contracts.  Management periodically checking prices, as with food purchases, is an appropriate internal control best practice.

Golf Course Maintenance Payroll

The same problem with distance can also cause problems in payroll, especially if timekeeping is performed manually.  It is a good idea to use the same electronic timekeeping system in golf course maintenance that is used in the rest of the club.

Again, because of the remote location, it is essential to ensure that all employees who are being paid actually exist.  This can be done by requiring golf course maintenance personnel to come to the club’s administrative offices to pick up and sign for their paychecks.

Benchmarking

While benchmarking is not an internal control, per se, it can be used to establish the norm of operations and allow management to quickly spot out-of-line numbers which may be indicative of fraud or abuse.

Management can do itself a big favor by ensuring that areas of the operation which present potential internal control problems are thoroughly benchmarked.  In many cases, the only indication that something may be wrong in an operation will come from volatile or extraordinary benchmarks.

Thanks and have a great day!

Ed Rehkopf

This weekly blog comments on and discusses the club industry and its challenges. From time to time, we will feature guest bloggers — those managers and industry experts who have something of interest to say to all of us. We also welcome feedback and comment upon the blog, hoping that it will become a useful sounding board for what’s on the minds of hardworking club managers throughout the country and around the world.

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