Certified Appraisal Important To Golf Club Management

By FRED A. BEILMAN

Secy.-Treav — Appraisal Engineering Corporation

It was not until 1927 that country eluh thereby effecting a saving in insurance managements generally became cognizant premiums because policy requirements for of the many benefits that accrue from a clubs are different than those for indus- certified appraisal, and it has only been In trial properties. Also, an experienced ap- the last several years that appraisers have praiser of country clubs will show accu- been engaged very extensively for making rate descriptions of furnUure, linens, appraisals of country clubs. A certified rugs, china, silverware, etc., which. In the appraisal Is an accurate, authentic, Im- event of being totally destroyed by fire, partial Itemized statement of Ihe value of proves to the insurance adjuster that the all physical assets bused on replacement value shown In the appraisal is correct costs less actual accrued depreciation, as for the items as described. •if the date of the report. It is put in book If an appraiser lists, "One 6-ft. up- form and so classified, indexed and ar- holstered sofa, value 5325," the adjuster ranged that instant reference can be made would question this value because he to any one item or totals by floor or build- could buy any number of 6-ft. upholstered ing, as may he desired. sofas for considerably less than $325. The report is generally prepared in However, if the sofa was described cor- duplicate, the appraisal company retain- rectly In detail, giving the kind of cover- ing the duplicate copy together with all ing such as glazed percale, damask, chintz, original field notes and sketches in its etc., the kind of cushions stating if they vault for the further protection of its were reversible, down filled, kind and style client in case the original copy delivered of frame, etc., the adjuster would know becomes lost, destroyed or mislaid. A plat Immediately that the item was valued of the properties Is furnished with the re- correctly; and that the report was no port, This plat is drawn to an appropriate doubt compiled by one who knew his busi- scale showing size and location of the ness. After some further examination he various buildings, fences, walks, parking would undoubtedly accept the complete lots, etc. Such an appraisal provides the appraisal without further delay. client with authoritative values and In- IJliick Payment for Loss Advantage sures a safe and sure basis for the cor- rect placing of fire insurance in compli- It is not only the amount of Insurance ance with co-insurance or other specific you collect, but Ihe promptness in secur- clause requirements and prevents over- ing settlement that measures the actual insurance as well as under-insuranee. cost or a fire. There is no single thing that could work such a hardship as at) In the event of fire or other insurable Inadequately covered Insurance loss or a catastrophe, it provides the client with an long, drawn-out arbitration of such loss accurate proof of loss to be submitted to in the absence of indisputable proof and the adjuster, and assures prompt and Itemized record*. satisfactory settlement to both the In- It is very important that the club offi- sured and Insurer. cers and directors know the exact value Country club appraisals, consisting of of the club's physical assets as they are numerous classifications as clubhouse responsible for the safe and economic furnishings, linens, china, silverware, management of the club properties dur- glassware, uniforms, etc., require ap- ing their tenure of office. They should be praisers who are thoroughly experienced able to show at any time a complete Hat and who have specialized in this type of of all permanent items of furniture, linens, dishes, silverware, golf course equipment, report. etc., not only for Insurance purposes but For instance, there are certain classifi- also to submit to the Incoming adminis- cations in a manufacturing plant that tration for its examination and for Its are set up under the heading of "Equip- record. A certified appraisal not only ment", imechanical), whereas these same furnishes this information, but It also classifications In an appraisal of a coun- shows the worth of the property, estab- try club are shown as building appurten- lishing net insurable values in accordance ances under the head of "Buildings"; with co-insurance or other specific require- merits of existing insurance policies, Value of property segregating or dividing values in different when toss occurred $300,000 locations and groups which take various Insurance carried 160,040 insurance rates, in order to obtain the Insurance requited 180 maximum amount of insurance for Lhe per cent of $300,000) 240,000 minimum premium. Partial present fire loss 90,000 Insurance company The most difficult part of an appraisal, pays 60.000 (%) one that requires intelligence and experi- ence, is the determination of the actual COST OF FIRE TO amount of accrued depreciation. The fac- THE INSURE^ 30,000 ( tors entering into this depreciation are so A certified appraisal of the property many and varied that ordinary bookkeep- would have shown a net insurable value ing is inadequate to depict conditions of $300,000 and if insurance coverage had accurately and fairly. The life of every been increased to the required $^40,000 item of physical assets (buildings, furni- when the appraisal was made, the $90,000 ture, and other equipment) is dependent loss in full would have been paid instead upon one or all of the following factors: of $60,000. The $30,000 more that would wear and tear; deferred maintenance have been received in the settlement of (neglected repairs); age; inadequacy; and the loss represents many times the cost obsolescence. Before arriving at the of a certified appraisal covering a property amount of actual accrued depreciation, of this size. consideration must also be given to the Proof of Ixiss amount spent for maintenance and re- pairs, the construction, nature and present IN THE EVENT OF AN INSURABLE condition of the buildings and equipment, LOSS, RELIABLE APPRAISAL COM- excessive and peculiar use of certain equip- PANIES WILL ASSIST THEIR CLI- ment, idle periods of the property in ques- ENTS, WITHOUT CHARGE, L, PRE- tion, etc. PARING A PROOF OF LOSS. Weakness in Book Value Method Importance of Co-Insurance Clause If no certified appraisal has been made, Many executives buy fire insurance the amount of insurance to be carried without knowing just what their obliga- must be determined from book Values, tions are in connection with the co-insur- insurance engineers' estimate, or hap- ance clause. It is exceedingly dangerous to hazard guess. The book value method is carry co-insurance without a knowledge of used more generally man the latter two. correct property values. Fire insurance, according to the insurance After a tire occurs, U Is not the friendly policy, is based upon replacement value insurance agent, to whom you have been less actual accrued depreciation at the [laying the insurance premiums, that set- date of loss, and not upon cost at date of tles or estimates Ihe amount of your purchase as shown in the books of ac- damage; but an adjuster who possibly counts. Also, the usual clause in standard you have never seen before, who Is only fire insurance policies read. "The insured interested in arriving at the value of Ihe shall give immediate written notice to property In strict accordance with their this Company of any loss. FURNISHING policy provisions, A COMPLETE INVENTORY OF THE DESTROYED, DAMAGED AND UN- Do not mistake Uiese remarks to Infer DAMAGED PROPERTY AND AMOUNT that the insurance companies have any OF LOSS CLAIMED". The book values desire to avoid paying for losses that can do not show this information nor do they be clearly proved. Their business is the show furniture or any other equipment payment of losses In accordance with segregated by buildings, floors or any their contract. other division of fire risks, such as non- burnable items. As an illustration of how the co-lnsur- ance clause operates, let us assume that A certified appraisal will show all these the book accounts show a net property segregations, distinctly separating the value of J200,000 and under an 80 per burnable Items from the non-burnable cent co-insurance clause insurance Is (insurance exclusions I items which en- placed for $160,000. A partial loss of ables the payment for protection only on 590.000 occurs. If the insured can prove such items as are subject to fire hazard. that the $200,000 net book value is actually It classifies and segregates Are risks to the reproductive value tess actual accrued determine exactly how much insurance depreciation at the time of the Are, then should be carried on any building, fix- be will receive the $90,000 loss In full. But, tures, furniture and other equipment. The if the adjuster is able to demonstrate that risks are therefore properly classified as the property was worth more, say $300,000, to insurance rates, and minimum rates the insured immediately becomes a co-ln- applied to low risks instead of allowing surcr to the extent of $30,000 {>•&> of the certain hich risks to penalize the insured loss; as with a high rate on the entire property. Add Factor of Market Fluctuations equipment still remains part of the Nor do the books of accounts take into records, thereby creating inflated values. consideration fluctuations in market prices Accountants Like Appraisal since the date of purchase. Physical items It is a significant fact that modern sold or destroyed often remain in the accountants look to the certified appraisal books of accounts, and, most important of as a valuable aid to successful accounting all, depreciation accumulated on the books practice. It gives them knowledge for of the assured, regardless by which me- property accounts that can be secured In thod computed, does not represent the no other way. actual accrued depreciation as required by the Insurance companies in the event Monthly and annual statements are al- of toss. most certain to be misleading unless the Also, suppose $500 was spent in re- cost of replacements and net sound values pairing a roof on one of the buildings. of the property are known. This is due The books of accounts would undoubtedly mainly to the fact that many items of show this Item (of $500) as expense for additions and Improvements are charged maintenance and repairs, just as they do to the expense account when they should on al! similar items, and in ordinary ac- actually be capitalized. counting methods this would not affect Also, such items as freight, cartage, the depreciation account on the books. wiring, piping, etc., required in the in- An appraisal would give effect to this stallation of certain equipment have been $500 expenditure when figuring the actual charged to expense when they should be accrued depreciation on this building and figured as a part of the value of that thereby show a larger net insurable value. equipment. In other words, the appraisal would pick A great many country clubs, not being up all such repairs and maintenance under subject to income tax, show full invest- the "per cent condition method," giving ment or cost values for buildings and consideration to all factors concerned. equipment on their books, with the result Therefore, one can readily see that book that membership value Is calculated at values are of little help In the placing and an incorrect figure. collecting of fire insurance for the obvious In connection with a correct certified reason that they do not comply with the appraisal, proper "book" and "cash re- requirements of the insurance policy. In serves can be set up in a separate report. nearly every case where book values have The cash reserves set up covers such been taken as a basis for settlement of shortlived items as linens, uniforms, glass- claims, the insured has been compelled to ware, dishes, silverware, kitchen utensils, assume a considerable portion of the loss furniture, general maintenance, etc. This when a fire occurred due to the fact that reserve, accumulated monthly or yearly, the books of the assured did not reflect is budgeted to the various divisions such the actual facta. as clubhouse, restaurant, bar, locker- When a serious fire occurs, valuable rooms. grounds, etc., so that when new records (some perhaps invaluable) are equipment is necessary the money will be often destroyed. These records cover not available to meet the expenditure. In this only the cost of the physical assets, but way an extraordinary expenditure in any also the evidence of what these assets one year will not work a hardship on the were. If an appraisal had been made of club's finances. these properties, the proof of loss would be safely stored in the appraisal com- If detailed book figures are not avail- pany's vault, even though the insured's able, the calculations necessary to estab- copy of the appraisal had been lost in lish these reserves are based on the total the fire. book values, "adjusted" on the basis of the values shown in the appraisal report. This article is not intended to discredit Lump sum figures covering expenditures the accountant. His audits are as neces- for buildings and furniture, golf course sary as appraisals. All country clubs, machinery and equipment are also allo- Industrials, utilities, and other organiza- cated to the individual item on the basis tions in the possession of physical proper- of appraised values. ties, should have periodic audits. How- ever, the appraiser makes a thorough Some of the largest and most prominent actual examination of the physical assets, golf clubs In the country, having been while the accountant depends upon the appraised, have effected considerable sav- book of accounts and records as being ings in their insurance premiums, In addi- correct. tion to the other benefits. We often find that a new piece of After First Year, Cost» are Nominal equipment has been purchased and ac- Up-to-date appraisal values can be cordingly entered on the records, but the maintained year after year, once the piece of equipment dismantled or dis- original report Is compiled in detailed carded and replaced by this new piece of form. Every year a revision or supple- mental report is furnished which gives dents' Association as sponsors of the N. effect to all physical additions, deductions J. Turf Field Day, held their monthly and transfers, price fluctuations and ac- meeting in the evening. Visitors from cruing depreciation or appreciation, since Penna., Long Island, Connecticut, etc. the date of the last report. These changes were present to hear Dr. Fred V. Grau. are checked by an engineer reconciling Director of U.S.G.A. Green Section con- these changes with the previous apprais- duct a discussion on "Poa Annua Con- al, after which all values are adjusted to trol." During his lecture. Dr. Grau sug- coincide with the then existing conditions. gested that experimentation may show Before arriving at the adjusted amount Poa annua to be valuable in combination of accrued depreciation, all expenditures with U-3 Bermuda or with Zoysia. for repairs, renewals and maintenance are taken into consideration. Such items as wiring, piping, Installation expense, etc., Berg Heads Women Pros' which are charged to "expense" in the New Organization book accounts, are capitalized in the re- Patty Berg has been elected pres. of vision report. recently organized Ladies' PGA. Charter A certificate is furnished with the year- members include Mildred (Babe) Za- ly revision report making available au- h arias. Louise Suggs, Betty Jameson. thentic up-to-date values for insurance and Helen Hicks. Helen Dettweiler, Marilynn accounting requirements. The cost of this Smith and Betty Mims White. Fred Cor- yearly service is nominal, running from coran has been engaged as Tournament approximately 15% of the cost of the Director for three years. Girls have original appraisal on large properties to formulated a players' agreement similar approximately 25% on small properties. to that of PGA, Corcoran is working on a tournament schedule of Open events which, it is believed, will also stimulate New Jersey Turf Field Day women's amateur major competition. Attendance was back to pre-war figures First event of the new association was at the New Jersey Turf Field Day held U.S. Ladies' Open at Prince Georges G at N. J. Agricultural Experiment Sta- & CC, Landover, Md., Sept. 22-25, with tion in New Brunswick on Aug. 30th. Louise Suggs the winner. During the war years, most of the turf Possibility is that the new organiza- experimental plot area was discontinued tion will seek affiliation with PGA of due to lack of time and help, and also, America. Men pros' organization has to put more area into food crop studies. shied off from coed proposals in the past. Turf plots are now back to original size, with addition of new strains which have been developed. Plan Repair Work and Supply The Field Tour was conducted by Ralph E. Engel and J. C. Harper. Items Orders for Early Delivery of Interest included: Bent and Fescue Winter months are planning months. strains; lawn and fairway grasses, nurse grasses, fertilizers and application time Plan to get machinery repaired early, and for lawn and fairway turf, methods of order supplies early. cultivation for fairway turf, 1948 and Some greenkeepers spend the winter 1949 plantings of the new strain U-3 months putting machinery in condition for Bermuda grass, time of cultivating bent the coming season. That's a good plan of turf, plantings of Seaside and Colonial operation. Some clubs have lo depend on bent, time effect ot bent crass fertiliza- a repair shop to do their work. In that tion, rates of N.P.K, on bent, fungicide trials, bents under study for fine turf, case, get machinery in now. Too often B27 bluegrass strain, crabgrass plots. The this is neglected with the result that the VVestpoint Lawn Products Co. demon- repair shops are swamped during the spring strated the "mole drain" turf plow. This months, and some fellows who put it off is an American adaptation of a device wilt not have machines repaired in time (or which has been used In England for spring work. By getting those machines many years. in to the shop early, it helps the shop and U-3 Bermuda grass was suggested for above all, it helps the greenkeeper. trial use on tees and vegetative material Another idea that wilt help is that of was offered to those who wished to use It ordering supplies, such as fertilizers, fungi- experimentally. A total of 20 Individuals cides, ctc. early. This helps the supplier to obtained stock for planting. In addition an appreciable number of the group had get art idea as to what he has to have on previously received this grass. These hand for early delivery. It's important that plantings should supply valuable informa- enough fertilizer is delivered in time to tion as to the management of this grass. make those early April applications The N. J. Greenkeeping Superlnten- promptly, — lou>a Newslettrr