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Spring is in full bloom and that means baseball, allergies, barbecues and charity golf tournaments. While you might need to watch for foul balls, the pollen report and undercooked burgers, it’s the last one — golf tournaments — with which non­profits should be most concerned.

Kevin Kolenda, 56, of Norwalk, Conn., was sentenced in February in Washington state to 86 days in jail and he was ordered to pay $15,000. Kolenda sold hole-in-one insurance without a license, and often failed to pay when a golfer made the shot.

According to a statement from Washington state Insurance Commissioner Mike Kreidler, Kolenda “has been investigated or prosecuted for similar charges” in Montana, Ohio, Georgia, California, New York, Hawaii, Alabama, Massachusetts, Florida, Connecticut and North Carolina. “I am delighted that Mr. Kolenda has finally been brought to justice after years of thumbing his nose at state regulators, golf tournaments and charities, and golfers,” said Kreidler via the statement.

“If (insurance is) regulated properly, they can’t do that,” said John Everhart, chairman and CEO of the National Hole In One Association (NHIOA) in Richardson, Texas. “I don’t mean to say every state doesn’t regulate properly, but Mr. Kolenda has operated since 1995. Like most people who are stealing from the public with a fountain pen, they’re trying to evade laws and regulation.”

A hole-in-one prize is usually used to draw more participants into a charity golf tournament. It’s often a big-ticket item, such as a luxury car. “The people who want to be visible to this audience will do so by putting up a high-value prize,” said Everhart. “Those prizes are offered to add excitement and conversation to the golf tournament. It increases the participation, which benefits the charity through greater participation.”

Insurance on a hole-in-one prize is simply the transference of the risk of losing the prize from the tournament organizers to an insurance company, according to Everhart. He said the coverage price is based on the value of the prize, the number of participants, and, to a lesser extent, the difficulty of making a hole in one on a particular hole. When someone such as Kolenda fails to pay a claim, the tournament organizer is on the hook for the prize.

Maria Clark, vice president of distinguished partners at the American Cancer Society, oversees all of ACS’s golf events nationwide. She said about half of ACS tournaments have a hole-in-one prize, and it’s usually the prize sponsor that purchases the insurance. “If it’s a high-value prize, it’s a hard expense for the nonprofit to assume,” she said.

“The biggest challenge is finding a prize that’s exciting enough to draw participants,” said Clark. “We rely on volunteers if they have connections or opportunities to work with a car dealership or other businesses. It’s not a make or break for a tournament.”

Clark said ACS often runs silent auctions as a way to engage participants. “We’ll get nice gifts donated from golf shops, such as clothing or golf clubs, or restaurant coupons,” she said. “And, we always try to provide an opportunity for a direct gift to the American Cancer Society. People feel really good about what they’re doing.”

Everhart does not believe that fraud is more common in hole-in-one insurance or more generally in charity golf tournaments, but the potential is there. “Hole-in-one insurance has been rather lax in state regulation,” he said. “It’s truly an insurance product but because it’s not a large premium producer, a lot of regulators have been complacent in pursuing these few people acting improperly.”

The best way to get reputable specialty insurance, such as hole-in-one insurance, is to ask your own agent, said Everhart. Your insurance company can either provide it directly or put you in contact with another agency that can.

Clark said ACS doesn’t spend much time thinking about legal issues and fraud, aside from purchasing relevant insurance. “The legal ramifications are not what we focus on first,” said Clark. “Our first focus is creating a golf tournament in a community that can support it. We work to find volunteers and sponsors to make it happen, and we make sure we have a safe environment for all participants so we cover ourselves for any risks.” Clark said ACS usually has special event insurance and asks the venue and any vendors to provide proof of their own insurance.

Charity golf tournaments are big fundraisers for nonprofits. Golf was used as a vehicle to drive $3.9 billion to charity in 2011, according to a study by the National Golf Association. Everhart estimates it will grow to $4 billion by 2015. Golf tournaments raised approximately $9.5 million for ACS last year, and this year Clark is hoping it exceeds $11 million. ACS runs some 85 golf tournaments a year and the organization is making a push into new markets.

Most of the revenue, said Everhart, is from entry fees, but smart nonprofits can stretch the tournaments’ usefulness. “A lot of fundraisers are appreciative of entry fee revenue, but the real money is in sponsorships,” said Everhart. “If they want to buy hole-in-one insurance and then sell a sponsorship, that’s an excellent source of getting other revenue. If you go to all the trouble of running a golf tournament, go out and ask a sponsor to sponsor holes for a valuable prize.”

It shouldn’t be difficult to secure sponsors for your tournament. The people who play in golf tournaments are often at an income level attractive to sponsors. “Golf has great demographics,” said Everhart. “So many people in management and mid-management are the people who take off from work on Mondays to participate in a local charity fundraiser at a country club. For these hole-in-one prizes, these are (sponsors) who want to be visible to the profile who participate.”

Sponsorships are extremely important for ACS golf tournaments, said Clark. When sponsors are covering a large amount of setup costs, the revenue from entrance fees and auctions can go back to the ACS’s mission. Clark looks to her volunteers to help obtain sponsorships. “Volunteers are the backbone of the American Cancer Society,” she said. “They know the community, the players and the people who have an interest in fighting cancer. They know the companies and firms that have an interest in our cause but also want to engage with the people in the market.”

In addition to monetary benefits, charity tournaments can also help nonprofits to build their email lists. Participants, by the very fact they are participating, have some affinity to your organization, and generally have the capacity to give. “When people register for a golf tournament, you get their email address, street address, maybe the name of their company,” said Everhart. “The primary benefit (of a golf tournament) is monetary, but an indirect benefit is building that mailing list.”

Golf tournaments are a great way to build ACS’s email list and engage more people with the organization’s mission, said Clark. “Most people know who we are and have a good feeling about us, but we want to have deeper relationships,” she said. “It’s always good to acquire new donors, and golf tournaments are very good for that. The more people we can get to participate in golf events, the more people we can engage with the American Cancer Society.” NPT

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