How Revenue is Spent at the PGA

The Professional Golfer’s Association of America (PGA) is always a headline grabber but recently for all the wrong reasons. Seems the PGA is being investigated by the US Justice Department for anticompetitive behavior in their battle with the new Saudi Arabian start up, LIV Golf circuit.  Apparently, the PGA has suspended players who have chosen to play the for LIV Golf (a new start-up circuit offering vast sums of earnings for players who join and play golf on their circuit).

The PGA is a tax-exempt non-profit 501 (c) 6 – a professional business association –  that is set up and operates differently than most other professional non-profit business associations:

• The PGA has 2 related tax-exempt related organizations: PGA Foundation, a 501 (c) 3; and PGA Financial Assistance Fund, Inc, also a 501 (c) 3.  Both operate out of the same office as the PGA in Palm Beach Gardens, Florida.
• The PGA has 2 related organizations taxable as a partnership:  PGA SIF LP (for investments); and Valhalla Golf Club Limited, a golf club.  Both operate out of the same office as the PGA in Palm Beach Gardens, Florida.
• The PGA has 10 related organizations taxable as a corporation or trust:  PGA Corporation, PGA Golf Development Inc, PGA Golf Enterprises Inc, PGA Golf Properties Inc, PGA Golf Partners Inc, PGA Management Services Inc, PGA Reserve Inc, PGA St Lucie Inc, PGA Tournament Corporation Inc, and PGA Valhalla Inc. All operate out of the same office as the PGA in Palm Beach Gardens, Florida.
• The PGA claims to have no employees yet the PGA reports paying for first class or charter travel, travel for companions, health or social club dues or initiation fees, personal services (maid, chauffeur, chef), gross up payments or the provision of tax indemnification.  The Form 990 reports that the PGA Corporation (listed above) is the direct employer for most of the related organizations and shares employees.
• In the most general terms, the PGA is a non-profit that raises about $100 million annually and spends most of this revenue on management and other fees (television rights and tournament sponsors generally provide the purse winnings).  In other words, the PGA uses revenue to primarily pay related or affiliated organizations for management services.

In 2020, revenue totaled $94 million (compared to $128 million in 2019), most of which came from tournaments ($68 million), investments and gains ($15 million), education ($6 million), and membership dues and assessments ($3 million).

Expenses totaled $133 million in 2020  – meaning the PGA spent about $40 million more than they received – with expenses categorized as follows:

• $66 million (70% of revenue):  Management Fees
• $14 million (15% of revenue):  Other Professional Fees
• $14 million (15% of revenue):  Internal Service Charge for Fees
• $ 9 million (10% of revenue):  Travel and Conferences
• $ 9 million (10% of revenue):  Advertising and Promotion
• $ 8 million (8% of revenue):  Section Business Operations (no detail provided)
• $ 5 million (5% of revenue):  Supplies and Office-Related Expenses
• $ 2 million (2% of revenue):  Other Fees
• $ 2 million (2% of revenue):  Tournament Prizes
• $ 2 million (2% of revenue):  Other Expenses
• $ 2 million (2% of revenue):  Grants

Using the above information, every $100 was spent as follows:

$100:  Revenue

-$ 70:  Management Fees

-$ 15:  Other Professional Fees

-$ 15:  Internal Service Charge for Fees

-$ 10:  Travel and Conferences

-$ 10:  Advertising and Promotion

-$  8:  Section Business Opertions

-$  5:  Supplies and Office-Related Expenses

-$  2:  Other Fees

-$  2:  Tournament Prizes

-$  2:  Other Expenses

-$  2:  Grants

-$141: Total Expenses

As illustrated above, the PGA spent $141 for every $100 of revenue received which appears to be due to the onset of the pandemic.  Because the PGA had $254 million in net assets, the organization could absorb the excess expenses over revenue.  However, the excess expenses coupled with unrealized losses on investments ($18 million) and a $5 million negative adjustment to net assets (described as “partnerships items”) resulted in net assets deteriorating to $193 million at year-end.

To read the IRS Form 990 (2019 for the year ending March 30, 2020), click here.