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Interesting Trends in Private Clubs Audit

FORT LAUDERDALE, Fla. (August 2012) -- McGladrey LLP, a leading provider of assurance, tax and consulting services, recently released the 2012 edition of Florida Trends in Private Clubs, their 38th annual report on the financial trends in private clubs throughout Florida, the state with the largest concentration of clubs.

"Much ado has been made over the last year or so about the need to 'run the club like a business,'" says Philip Newman, partner with McGladrey and co-editor of the report. "We found that this new idiom has been interpreted in different ways by different members of club management. For a time, many approached the idea through simple cost cutting measures but this approach quickly proved flawed. Clubs were cutting but their ability to deliver the experience members sought was compromised. Clubs need to focus on their mission and ensure they are able to deliver."

"To accomplish this, clubs can and should learn from profit-driven corporate enterprises," adds Tammy Tassitano, fellow partner and co-editor. "Along the way, it is important to acknowledge the differences between a not-for-profit private club and for-profit business. When this understanding is coupled with a full view of business operations, which includes an appreciation for all areas of operations, clubs are able to strengthen their offering to members. This is the theme of this year's report and much of the thought leadership our professionals have produced over this last year."

Key findings in the 2012 report:

Fifty-nine percent of clubs reported positive working capital. While this is an incremental increase over the 57 percent last year, the attention paid to greater fiscal prudence is clear when viewed over the last five years—beginning with only 47 percent of clubs in the positive.

Clubs around the state continue to seek to enhance the membership experience through capital improvements, evidenced by the 77 percent of the population having annual capital assessments. In fact, 38 percent plan to implement a significant capital improvement project in the year to come.

Last year, observations were made that third-party debt is not held in such a negative light at clubs. This continues to hold true, with a nearly stable 66 percent of clubs throughout the state holding third-party debt. The average statewide debt per member totals $6,010.

Payroll remains the largest component of club operating expenses, accounting for nearly 52 percent of total operating expenses (i.e., no change over last year).

In food and beverage operations, nearly 35 percent of clubs raised their menu prices. This increase from only 20 percent in the year before can be attributed to heightening pressures from higher food costs. Nonetheless, the eight percent increase in cost of food continues to explain increasing subsidies from dues in this area of operations.

Golf course maintenance costs per hole increased slightly, from around $76,000 to $77,700 and $78,600 for 18-hole and multiple course clubs, respectively.

The report highlights trends uncovered through the last audit season, as McGladrey audited its more than 200 private club clients in Florida. Findings are presented from the statewide and regional perspectives, and are segmented by type of club (i.e., golf versus yacht, etc.). Club managers use findings in strategic planning and benchmarking. Customized reports are available as a service that pairs a client's information with smaller sample groups.

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