Changing banks was easier than cancelling a Sackville Sports Stadium gym membership, and that could end up costing HRM over a quarter of a million dollars.
A report headed to Wednesday’s Audit and Finance committee is asking city council to write-off slightly over $295,000 in outstanding accounts from the Lower Sackville fitness centre.
The lost money is a result of changes the stadium made to its membership contract a decade ago, as per the advice of an “independent private fitness facility consultant.”
Under new policies, customers were no longer able to cancel their fitness centre memberships early. Automatic payments continued to be taken from their bank accounts for the entire annual contract.
In response, many of those customers simply changed banks.
“The continued billing process that resulted from this policy (either through credit card or authorized withdrawal from the clients’ financial institution) forced many former members to cancel and/or change their financial service providers to stop SSS from continuing to process their payments,” reads the staff report. “Despite this reality, SSS continued to invoice the monthly membership fees and subsequent [non-sufficient fund] fees as accounts receivable until the end of the original membership contracts.”
The municipality absorbed operations of the Sackville Sports Stadium in 2014, but the policies remained in place for another two years. City hall’s legal department has since reviewed the paperwork and found many of the contracts lacked enforceable language and sufficient signatures, making them invalid.
“The rigid membership policy, in addition to lack of documentation, provided a real challenge with respect to collections,” says staff.
“As the majority of the accounts are very old and have not been acted on in a while from a collections perspective, it is staff’s recommendation that they be written-off.”
The Sackville Sports Stadium generates roughly $1.8 million in annual revenue, though it’s faced declining membership in recent years due to competition from private facilities like Goodlife. The stadium shut down its women’s gym in 2015 citing declining usage.
This is the stadium’s first formal write-off . Regional council approved $73,000 in writes-offs across all of HRM at the end of last fiscal year.
This article appears in Oct 12-18, 2017.
Will heads roll? It’s an appropriate accounting practice to carry the AR over with the intent of writing them off as an expense. However, whoever managed the accounts would have been able to see the gravity of the situation – the effect of the new policy correlating to massive increase in receivables and related charges. Who is over-seeing the books? Why was the issue not addressed earler?