Letter from Saugerties-USGA Annual Report

From former USGA Executive Director Frank Hannigan. Past letters of his can be viewed here.

Geoff,

I once sat in a meeting room full of corporate executives who advertise in Fortune magazine. The speakers were Warren Buffett and Bill Gates. After bragging that Gates personally taught him how to get online, Buffett fielded a question about his annual report. Buffett said he regarded his annual report as vital, that he spent much time on it, that it contained nothing he did not regard as true. All one had to do to know what was happening at Berkshire Hathaway was read its annual report.

The recently published annual report of the United States Golf Association is the converse of the Buffet attitude. It is a monument of obfuscation and self praise.

The governing body’s report contains two principle sections. There is a 3-and-a-half-page hunk of prose signed by current president James Vemon. Then comes the financial statement for 2008. Let’s consider the money part first.

There was revenue of $155,814,000. Expenses were $155,747,000. So the “profit” was a pittance of $67,000. In 1997 USGA revenue was only $136 million. Financially the USGA is like a hamster on a wheel. No matter how hard it runs it can’t catch up to itself.

If the USGA wants to have more money the answer is simple – spend less. Concerned, Vemon says they are now reviewing the expenditure of every nickel and dime. Expense reports are to be examined with a new fervor.

That’s not going to get it. Just like the federal government the USGA is eventually going to have to deal with entitlements. Examples:

Expenses for championships and broadcasting are line-itemed at $80 million. There is no breakdown of what was spent when or where although they maintain distinctions internally in finite detail. Most of that money has to be ascribed to “US Open” given it doesn’t cost much to run the Senior Amateur Championship. A person familiar with tournament expenses, anonymous because of ongoing dealings the USGA, says “US Open expenses are completely out of control.”

I wonder where they hide the cost of a private jet to ferry members of the Executive Committee to sites of USGA activities where they are not needed. Perhaps they have dumped the jet in emulation of Citi Group and other corporations – out of embarrassment. You can’t know because it’s a verboten subject.

Denied all detail as to championship expenses, I nevertheless conclude they could be cut by $5 million or more and nobody in the audience would know the difference.

The USGA gave away $3 million in grants via its own Foundation and another $3 million as a gift to The First Tee effort. Vernon points out in his text that the USGA has been the biggest giver to The First Tee. He omits mention of the PGA Tour whose creature is The First Tee. The omission tells us Far Hills does not love Ponte Veda. Probably vice versa too.

Since these gifts have accomplished nothing in terms of “growing the game” (golf is either flat or in decline) I say get rid of them. But if the USGA can afford to and wants to give away money, send it to where it can do some good – to Darfur, the Mississippi literacy program, or the Western Golf Association for caddie scholarships.

I shudder on reading that the combined expenses of its “communications” and “digital media” operations were more than $10 million. The USGA seems to think that if you just throw enough stuff online the result will be that everyone will love you. What difference can it make if the USGA is held in high or low esteem so long as the Rules Of Golf are accepted by golfers everywhere? Achieving uniformity in the rules, in accord with its partner the R&A, is the primary triumph in USGA history. And it happened before anyone owned a computer.

Vernon writes they spent $20 million to redo the Museum and Library. As a former curator of the USGA Museum (I got a D because I misplaced items), I remain a fan of the museum but not $20 millions worth. When the museum reopened in June, admission was charged for the first time. It now costs $7.50 if you want to see The Moon Club.

You will search in vain for museum attendance figures. That’s because even golfers can look at the moon itself – for free. Apparently attendance is limited to elderly people on busses who thought they signed up to catch a matinee at the Paper Mill Playhouse in Milburn. They are startled when the bus passes Milburn and keeps going west on I-78.

The Vernon message is replete with odd usages. He seems to think the USGA began about five years ago when contracts were signed with four corporate “partners” and that NBC is an ally. That alliance consists of NBC giving the USGA about $30 million as a rights fee along with the understanding NBC will never criticize the USGA on air.

The US Open is described as “the most rigorous examination in golf.” Translation: “We want high scores and we get them.”

He enthuses about a 14-point course philosophy. Amazing, but Jones, Hogan and Nicklaus each managed to win four US Opens absent 14-point philosophies.

He enthuses over the introduction of graduated rough. US Opens had graduated rough when Bob Jones was playing. They have introduced a third cut of rough. But, although they surely have numbers they don’t say what effect, if any, the third cut has on the competition.

Vernon cites using different yardages for the same hole among recent inspirations. Excuse me, but alternative tees were used in the 1967 Open at Baltusrol. In all, setting up a course is one third art, one third agronomy and one third guesswork. Fourteen points was what President Wilson tried to pull off after World War I.

It wouldn’t be a USGA annual report without claims of being newly “relevant,” which is what happened when the Open was played on Torrey Pines (where they gouged the City of San Diego.) Each of the four corporate partners were “relevant” to USGA priorities. The automobile sponsor contributed 13,000 “car nights” . When you were a kid, did you beg dad for two “car nights” this week?

The ailing economy sharply reduced the value of the USGA investments. So what? That happened to everyone. The amount of loss should be specified in the president’s message. Instead, you have to hunt for the numbers in the fine print of the financial statement. I doubt it would be there at all but for a legal requirement. Transparency is not a USGA virtue.

We learn that both junior championships this year will be played on courses owned by Donald Trump. Now that does exemplify a new and different USGA. I find it hard to picture historic USGA figures like Richard Tufts, Bill Campbell, Sandy Tatum and Joe Dey hanging around with Donald Trump.

Staff resignations, early retirements and plain old firings in the last two years are not mentioned. It could be argued that staff turnover doesn’t matter so long as the USGA runs splendid championships and nurtures the Rules of Golf. The workers on Henry Ford’s assembly lines were not wild about their jobs but kept on churning out Model Ts.

On the other hand, the USGA is an institution of human relations. It is not Google. The USGA is having people troubles both at home and away.

Only recently there were four exceptional US Open sites in the New York metropolitan area. Now there is one – Bethpage, where this year’s Open will occur. The Shinnecock Hills Open of 2004 was a debacle. It ended with the two parties spitting and hissing at each other. Baltusrol has switched to become a PGA Championship host. The members of Winged Foot last year voted overwhelmingly not to put up with another Open.

Those losses, Mr. Vernon, are relevant.