LOS ANGELES – In 2020, COVID-19 tried its hardest but it could only postpone the U.S. Open, not cancel it. The 120th U.S. Open, which was won by Bryson DeChambeau at Winged Foot in New York, was held in September rather than June. Things were somewhat better a year later when the national championship was contested at Torrey Pines in June. Still, the USGA took a bath on its big moneymaker – due to limited or no tickets, merchandise and corporate suite sales.
Or did it?
The USGA is a non-profit organization whose mission is to champion and advance the game of golf. As previously reported by Golfweek in 2020, the U.S. Open generates $165 million in revenue annually, or about 75 percent of the USGA’s total revenue. That money funds among other things, the 13 other national championships the USGA conducts annually. But a portion of the losses associated with the COVID Opens was offset by the USGA’s insurance against such an event. According to its 2021 Internal Revenue Service Form 990, the USGA filed an insurance claim for business interruption and received $29.5 million in 2020 which helped it continue core services and the cost of conducting a limited number of championships, in spite of a significant loss of fan-based revenue.
In 2021, the alteration of the U.S. Open fan/hospitality experience due to California COVID law restrictions led to the USGA being paid $25.5 million based on the validity of the claim and the estimated claim total value by Sentry, which also is one of the USGA’s corporate sponsors.
“We were way down,” said John Bodenhamer, the USGA’s senior managing director of championships, of U.S. Open revenue during COVID years. “But the one thing we had was business interruption insurance. Several years ago, our organization through great leadership decided to purchase that. At the time, there was a lot of skepticism why we needed it. Everyone used to think we were crazy. Now everybody’s patting themselves on the back.”
But it does beg the question: Why does a non-profit 501-C3 need to file a claim with about $740 million in net assets, according to its 2022 filing?
Susan Pikitch, the USGA’s chief financial officer, who earned approximately $725,000 in 2020, was unavailable to speak to Golfweek last week but responded to multiple email questions.
“The USGA currently has approximately $400 million in reserves that our Finance Committee recommends as a fiscally responsible best practice. That $400M represents less than two years of operating funds,” she wrote. “It is a prudent business practice for organizations to have at least three years of operating expenses as contingency reserves to continue critical services and mitigate the overall risk for catastrophic or long-term effects to affect the business operations. As we learned during the pandemic, having such funds on hand is critical to ensure continuity.”
“The USGA has had event cancellation/curtailment insurance for at least 10 years. We continue to hold that insurance as a financial best practice, but it no longer covers pandemics,” she added.
“Our business was significantly impacted in 2020 at the start of the pandemic, especially when we postponed the U.S. Open and conducted it without normal fan and hospitality functions that drive significant annual revenue for our programs,” she wrote. “In spite of returning all 14 championships in 2021 and continuing our work in golf course sustainability, growing the game, governance, GHIN/handicapping and significant support to our Allied Golf Association network, the financial outcome of our two key revenue-generators – The U.S. Open and U.S. Women’s Open – were heavily influenced by California-based COVID restrictions. This reduced the amount of corporate hospitality, ticket and other revenue we normally receive. Based on projections of revenue loss, our insurance policies enabled us to recoup a portion of that revenue to continue our core services.”
When the question about the reserves was proposed to Bodenhamer on Wednesday, he said, “You think about the U.S. Open, it means more than the trophy we present and the gold medal. This championship means a lot for the game. When you think about everything we’ll do for amateur golf, the Adaptive Open, to educate on the Rules of Golf, there’s not a golf course in this country that hasn’t benefited from our turf-grass research fund, which we’ll spend I think $3 million this year. Nobody knows about this stuff but those are things that don’t make money. It’s the power of the U.S. Open.”
“The USGA’s Finance Committee recommended business disruption insurance several years ago for exactly these reasons, to continue core functions when key revenue sources – with the U.S. Open being the primary source – are disrupted,” Pikitch added. “We felt fortunate, like many other sports organizations, to have this insurance in place so we weren’t faced with layoffs and other hard decisions.”
The USGA declined to disclose its insurance premiums, but on page 71 of its 2022 public filing, it cites a payment of $135,122 to Sentry Insurance.
Here are some other relevant and interesting figures that are detailed in the USGA’s full-year 2021 Form 990, which is the most recent year available to the public:
- Longtime chief executive officer Mike Davis earned $4.4 million ($895,252 in base compensation, $2,122,548 in bonus and incentive compensation and $1,440,292 in other reportable compensation) plus $89,000 in retirement and other deferred compensation and nontaxable benefits in his final year with the association. As Pikitch noted, “Davis completed 31 years of service when he departed the association on June 30, 2021, and served in an advisory capacity through the remainder of 2021 as part of the leadership transition process. His reportable 2021 compensation includes base salary, bonus, ancillary benefits and an initial distribution from the USGA’s retirement plan.”
- Quoting from the 990 Form includes a few more details: “Michael Davis served as CEO of the USGA through June 30, 2021. Also served in an advisory capacity to the USGA and the new CEO Mike Whan from July 1, 2021 through December 31, 2021. Davis received two payments in early 2022 which have been reflected and reported in his 2021 compensation. Davis received a distribution from the USGA 457F Plan in January 2022 of approximately $1.2 million. This payment is reported on schedule J Part II columns B (II) and F. In addition, Mr. Davis received a discretionary bonus of approximately $1.7 million in January 2022 related to his position and length of service with the USGA. This payment was reviewed and approved by the compensations committee of the This payment is included in schedule J Part II B (II).”
- Mike Whan, who replaced Davis, was paid $884,000 for less than six months of work plus $55,000 in other payments.
- Revenue totaled $304 million, with 37 percent from broadcast and media rights, $30 percent from championships, and 15 percent from corporate partnerships.
- The USGA netted $45 million on sales of securities in 2021.
- The USGA listed $36 million in gifts and contributions for 2021, and a five-year total of $122 million.
- Membership dues totaled $13.2 million in 2021. “As a non-profit organization,” Pikitch noted, “we are thankful for the private donors who support our mission and work for the game…Most donations are pledges for USGA core programs that do not generate revenue.”
- The FOX TV termination fee was $323.44 million. “When the USGA renegotiated its domestic broadcast rights in 2020, switching from Fox Sports to NBC Sports, we received a lump-sum payment related to the termination of the Fox contract,” Pikitch explained. “While paid upfront, this payment has been set aside in a board-designated reserve set up by the Finance/Audit Committees to be used annually through 2026 (covering the full term of the original contract) and solely for operational expenses that were otherwise affected by the switch…They annually transfer each year’s allocation back into the operations budget, so we can continue core services at the same budgeted amount”.
- The USGA also confirmed that its TV rights fee was reduced by moving the championship to September in 2020 when it had to compete against football, but didn’t disclose how much.
The USGA lists 95 different Allied Golf Associations and schools with turfgrass research programs that it gives grants to further its mission to champion and advance the game. Many of these missions support junior programs and golfers with disabilities.
This year, the USGA announced an initiative that over the next 15 years it will invest $30 million to help courses reduce their water usage by up to 45 percent.
“It would be a mistake to rest on our laurels,” USGA’s Mike Whan wrote in his CEO message posted online. “In fact, when golf is this strong we have a heightened responsibility to nurture its growth, and make sure we leave this game even better for the generations that will follow.”
