Exclusive golf course posts $ 1 million surplus, thanks to federal COVID-19 relief

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This story is part of The Big Spend, a CBC News investigation examining the unprecedented $ 240 billion the federal government handed over in the first eight months of the pandemic.
The Royal Ottawa Golf Club, one of the largest private courses in the country, has accumulated a surplus of $ 1 million from its last season, mainly thanks to federal subsidies for workers’ wages during the COVID pandemic. 19.

CBC News has obtained the club’s audited financial statements and a recording of its annual general meeting, in which its board of directors briefed members on the club’s “very good financial situation” due to the bonanza in wage subsidies from Emergency of Canada (SCAR).

“We ended up with a pretty substantial grant,” Doug McLarty, club treasurer, told attendees at the Dec. 5 online video meeting. “It was over a million dollars. And it ended in the bottom line. ”

Royal Ottawa, which is located across the river in Gatineau, Quebec, a 12-minute drive from Parliament Hill, was founded in 1891 and has long been a playground for the elite of the capital city. The club offers what it calls “privileged” status to Cabinet ministers, the Leader of the Official Opposition, accredited High Commissioners and Ambassadors to Canada and their respective spouses, and several NHL players are members. .

The Ottawa Senators, including former star Erik Karlsson, have chosen the Royal Ottawa as the venue for their annual charity golf tournament in 2018 (Jonathan Jobin / Radio-Canada)

But in the face of lockdown restrictions that kept its facilities closed from mid-March to mid-May, the club requested and received $ 1.019 million in federal salary support in the spring and summer, and as a result, ended its fiscal year with a surplus of $ 825,000 in its operating fund – 19 times the operating gain of $ 43,883 the club reported for 2019.

A good return on investments owned by the club’s investment fund, along with cost savings, generated an additional $ 213,785, bringing the nonprofit’s total surplus for 2020 to $ 1.038 million.

Members learned that the Royal Ottawa Board of Directors had decided to keep the full amount in order to “provide protection against unforeseen future expenses”.

‘Park’ the grant and paving the land

“Some of you said, ‘Well, you know, why don’t you cut the fees next year?’ Some of you have suggested, “Why not transfer some of it to the capital account? Some people have said, “Why aren’t we speeding up some spending? These were all legitimate ideas, good ideas, ”said McLarty, Chartered Professional Accountant and Chartered Financial Planner, during his presentation at the AGM. “We debated all the pros and cons of each one. But as I suggested earlier, we were trying to be conservative. At that point, we felt we didn’t know what the next year was going to bring us, so we decided to park it. ”

McLarty and other club officials have turned down CBC requests for an interview about their record surplus and how they plan to use it. But a letter issued in response to a detailed list of questions argues the club is under no obligation to return the money to the federal government.

« [The] the premise that an end-of-year surplus should be returned is not only flawed, but does not meet the SCAR criteria at all. In fact, the Royal Ottawa surplus is being used to absorb the very sharp drop in income for the next six months and beyond, ”wrote club president Karen Rothfels and general manager Joyel Singfield.

“Our auditors have professionally advised us that we meet the criteria for the SCAR wage subsidy, and our eligibility is based on those criteria. Without the grant, we would not have been able to maintain our employment levels throughout this very difficult year. ”

According to financial statements and AGM presentations from other board members, some wearing the club’s signature green jackets, Royal Ottawa has had a record year despite restrictions on indoor dining which have slashed incomes for residents. below-average food and drink and sales in his professional shop.

WATCH | Club Treasurer on the final impact of SCAR:

Club Treasurer Doug McLarty explains the impact of SCAR funding on Royal Ottawa’s bottom line. 0:51

With COVID-19 keeping people close to home and spurring demand for safe and remote outdoor activities, facility use has skyrocketed at the Royal Ottawa, the club’s financial report says, with a 40% increase in play on its main 18-hole course and play on the nine-hole par 35 course, up 90% from 2019. Membership demand was strong with 77 new players joining the club last season. And interest remains so strong that the club plans to institute a membership cap for the upcoming season, while increasing its initiation fee from $ 30,000 to $ 35,000.

The statements also show the club spent more than $ 3.4 million on capital projects during fiscal 2019 and 2020, including a newly opened driving range equipped with a radar system that tracks the angle of launch. , speed and flight path of each hit ball. The documents also say the club used some of the surplus to pay off its line of credit ahead of other capital improvements planned for 2021, including repaving the parking lot and renovating the entrance to the clubhouse.

Some members wonder why the club needed CEWS help

Some members apparently wondered why Royal Ottawa needed help from SCAR, especially as the season progressed and revenues stabilized or even improved in certain categories like annual fees and golf fees. . Royal Ottawa estimates it would have run an operating deficit of $ 200,000 to $ 250,000 and says it would have been forced to downsize, without the salary support.

“One question that came up from several members was, you know, do we have to apply for this grant? And the board felt there was a fiduciary duty, ”McLarty said at the AGM. “I can tell you that almost every club in Ontario that we know of and in Quebec has applied for this grant. And a lot of them are in a similar predicament to what we enjoyed this year – they have an operating surplus that they didn’t anticipate. ”

More stories in this series:

In its letter to CBC News, the Royal Ottawa Golf Club says it was forced to temporarily lay off 35 employees at the start of the lockdown and delay the seasonal employment of 45 others. The federal wage subsidy and the reopening in mid-May allowed the club to get all of those people back on the payroll, and the club added additional workers throughout the season, with an employment spike of 160 employees.

The September 30 year-end report only provides a “snapshot” of Royal Ottawa operations at the peak of its revenue cycle, according to the club. And SCAR’s $ 825,000 surplus “has been steadily reduced since then due to the end of the golf season and restrictive food and beverage regulations due to the pandemic.” The club points to recent COVID-19 red zone restrictions that forced it to cancel members’ Thanksgiving dinner at the last minute and blocked all Christmas gatherings.

“We had 300 dinner reservations, but we were forced to stop dinner on 24 hours notice as the food had already been purchased. We were able to offset some of the costs with take out, but the losses were substantial and be absorbed by taking out our surplus, ”the club wrote.

Financial statements show the golf course recorded a loss of $ 556,000 on food and drink in 2020, up from the loss of $ 299,000 recorded in 2019 without a pandemic.

Government says money was only for wages

However, Royal Ottawa’s surplus seems to highlight something the government did not anticipate – that wage subsidies could benefit both employers and employees.

Appearing before the House of Commons finance committee earlier this month, Finance Minister Chrystia Freeland told MPs that SCAR support was only for workers’ wages, not other costs or dividends for shareholders.

“The wage subsidy can, by a very clear and specific design, be used only to pay employees. This money cannot be used for any other purpose, ”she said. “And I want to stress, for the member opposite but also for all the companies listening, that the wage subsidy must be used to pay workers. It’s very, very clear, and we expect companies to comply with that.

Deputy Prime Minister and Minister of Finance Chrystia Freeland addresses the media in Ottawa before releasing her fall economic statement on November 30. She says SCAR’s support is strictly for workers’ wages. (Blair Gable / Reuters)

In a statement to CBC News, Freeland spokeswoman Katherine Cuplinskas said employers who misuse SCAR money can face a penalty equal to 25% of the amount of aid they get. requested and may also be required to refund any money they received.

“The wage subsidy can only be used to subsidize employee compensation that has already been paid by the employer. It’s designed to protect jobs and help rehire previously laid-off workers, ”she writes.

The minister’s office did not respond to the question on how many organizations have been asked to repay SCAR funds to date.

The news of Royal Ottawa’s SCAR surplus comes as hundreds of thousands of Canadian workers now face the prospect of having to repay their own pandemic support from the government. The Canada Revenue Agency has sent what it calls “education letters” to 441,000 self-employed people receiving the Canadian Emergency Response Benefit (CERB), warning them that they may have to repay the funds they received in error due to government confusion and miscommunication. on the eligibility criteria.

Richard Leblanc, professor of governance, law and ethics at York University, says SCAR’s support was aimed at compensating workers for lost wages, not helping an organization’s bottom line. (CBC News)

Richard Leblanc, professor of governance, law and ethics at York University, who trains and advises boards of directors, said all organizations that receive government funds in the event of a pandemic must ensure they are met. use for the intended purpose.

“The spirit of SCAR is compensatory. It aims to keep you fit under pandemic conditions. It is not intended to be a godsend, or for any subsequent purpose, or for any other purpose other than employee wages, ”Leblanc said.

Otherwise, he said, the risks of ending up in the rough are significant.

“You will owe money as an organization. You will also owe penalties and you will also owe interest on the money, ”he said. “Not to mention the damage to reputation. ”

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