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Advice and Resources for Private Club Management and Board Members

Why a Private Club Should Consider Annual Independent Audits of their Financial Statements

 Independent CPA audits for private clubs

Private Clubs Should Undertake an Annual Independent Audit by a Certified Public Accountant. Learn the Benefits.

An audit of a Private Club’s financial statements provides an opinion by an independent Certified Public Accountant on whether the financial statements of the Private Club are presented fairly.There are many reasons to undertake an annual independent audit 

An audit requires the CPA to gather sufficient and reliable evidence regarding the information provided in the financial statements. This evidence usually includes understanding the Private Club’s system of internal controls, confirmation of balances and agreement arrangements with third parties, testing of detailed transactions to supporting documentation, interviews of Club personnel and Board members on processes, ethics, and fraud and obtaining management representations of the completeness of the information provided.

There are many reasons to undertake an annual independent audit:

  • Helps Board members fulfill their Fiduciary Responsibility to the membership
    • While an audit is not designed to detect fraud, fraud can be detected and is in any case a reminder to employees that financial records are being examined.
    • As part of their review of a Private Club’s internal controls, the CPA can alert the Board about deficiencies in internal controls. Correction of deficiencies can help reduce the risk of fraud or material misstatements of financial statements in the future.
    • Assures compliance with covenants of any debt instruments are calculated correctly.
    • An unmodified opinion will contain language such as “the financial statements present fairly in all material respects” and “in conformity with accounting principles generally accepted (GAAP)”.
      • If CPA is unable to render an unqualified opinion, a modified opinion may be issued. Some reasons opinions may be qualified include scope limitations and departures from GAAP. This is a red-flag to Board members that needs to be corrected.
  • Audited financial statements are an important element of transparency that helps build the membership’s confidence in the Board.
    • Among other benefits, this could be helpful when membership votes are required for significant projects.
  •  For Private Clubs considering banks borrowings, having audited financial statements may result in:
    • Higher borrowing levels;
    • Lower interest rates;
    • More reasonable covenants; and
    • Facilitated due diligence resulting in quicker transaction closing.

In selecting a CPA to conduct the audit of the Private Club:

  •  The Auditor should be selected by the Board (or an Audit Committee consisting of Board members) and not the management of the Private Club.
  • The Auditor should be “Independent”, referring to the independence of the CPA from parties that may have a financial interest in the Private Club being audited. This would exclude CPA’s who are members of the Private Club or conduct business with employees or Board members of the Private Club.
  • Selecting a CPA that has significant experience in auditing and preparing tax returns for Private Clubs is something that should be considered. The benefits include:
    • Industry perspective.
    • Knowledge of effective systems of internal controls of Private Clubs;
    • Understanding the underlying business of a Private Club produces a more effective and efficient audit;
    • The ability to impart “best practices” of Private Clubs to Boards; and
    • Understanding tax regulations specific to a Private Club can help save money.
      • For tax-exempt Private Clubs, Unrelated Business Income is a real issue.

While having annual independent audits come at a cost, the costs can be mitigated by the possibility of lower borrowing costs, higher borrowing levels, more effective tax planning and, not to mention, increased protection for Board members and transparency to members.


Club Board Professionals is a strategic financial consulting and training firm.  The Principals, Dave Duval and Joe Abely, assist clubs achieve excellence in three areas: governance, financial sustainability and membership satisfaction. Contact us for a complimentary initial assessment of your club.

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