Archive for the ‘good governance’ Category

Guest Blog: Enron & Madoff are Stealing from Your Club!

Monday, September 13th, 2010

Before you close the bank accounts and padlock the doors, we propose that these financial scandals have led to unprecedented scrutiny of your club’s financial wellness.  In a “normal” economy, an equity investment in club membership for most members and prospects is a large commitment and important financial decision.  Particularly the case if your member is a resident in the adjacent or “bundled” community.  In the current economy, amid corporate collapses and failing golf and country clubs, any unexpected increases in dues, fees and operating or capital assessments are devastating to the club’s creditability and growth potential.  Your proactive response as club leaders and management must be a commitment to superior governance practices.


The Enron scandal, revealed in October 2001, led to the largest bankruptcy reorganization in American history at that time.  WorldCom, Lehman Brothers and three others have since filed even larger bankruptcies.  Enron is undoubtedly the largest audit failure and led to the dismantling of the once highly credible Arthur Anderson CPA firm.  In July 2002, the federal government responded with what is commonly known as the Sarbanes-Oxley Act requiring the Securities and Exchange Commission (SEC) to regulate corporate governance for investor protection.

While Sarbanes-Oxley has not mandated reforms for non-profit organizations such as private clubs, it has raised the bar for the financial governance practices of all organizations.  In June 2007, the IRS released a new Form 990 that requires significant disclosures on governance and boards of directors.  The Form 990 disclosures do not require but strongly encourage nonprofit boards to adopt a variety of board policies regarding governance practices.  These suggestions go beyond Sarbanes-Oxley requirements for nonprofits to adopt whistleblower and document retention policies.  The IRS has indicated they will use the Form 990 as an enforcement tool, particularly regarding executive compensation.  Sarbanes-Oxley has had a considerable impact by modernizing terms such as whistleblower, fiduciary responsibility, accountability, transparency and independence.  Despite this, the Madoff scandal broke in December 2008 and is widely considered the financial crime of the century.  Madoff serves as a grand wake-up call to the SEC and IRS that watchdog controls are not yet and may not ever be completely effective.

Good governance policy is not only best practice but a required foundation of a club’s creditability.  Club leaders and management must focus on defining their risk tolerance and achieve a balance between strategy, operations, and controls.


  • Financial and other reporting in a complex regulatory environment
  • Fiduciary responsibilities and risk management
  • Internal control design and testing
  • Protecting business information and computer systems against security threats
  • Business critical event identification and establishing responses
  • Growth in membership and ancillary income in a competitive environment
  • Effective and efficient use of resources

Effective club governance goes beyond establishing an audit committee and obtaining an independent financial statement audit.  To address member concerns about financial risk, as club leaders and club managers you must demonstrate an on-going commitment to risk assessment, internal control development and testing, long-range planning and adherence to a comprehensive code of conduct for board members and staff.

By the way, do consider periodically changing your bank account and door locks as a good governance measure.

Mark Alviano, Americlub Financial

Mark Alviano is a leading financial advisor to America’s private clubs.  His expertise helps club leaders overcome financial challenges on the path to prosperity.  He is the Managing Partner of Americlub Financial, a boutique club advisory firm with national headquarters in Raleigh, NC.  Based on an expertise in finance, accounting, HR, technology and regulatory compliance, Americlub’s products, services, and solutions create opportunities for cash flow improvement and sustainable financial growth.  Find out more about Mark at

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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