Financial Fraud in Youth Sports
“You try to be a good example to your children,” Mr. Farley, whose son and daughter had played for the club, told the gathering. “What I did was one of the worst examples you could ever set for your children.”
Yes--you read that correctly: sadly, according to the NY Times, Brian Farley stole money from the Tri-Boro Youth Soccer Club in eastern Pennsylvania, where he had served as the longtime treasurer for the all-volunteer, nonprofit club.
Youth sports today bring in hundreds of thousands of dollars, and the temptation, in today's thwarted economy, is oftentimes too great...and previously honest people end up stealing to line their own pockets. In fact, according to the article, "Investigators and prosecutors in several states say embezzlement investigations involving youth sports have become common, almost always committed by unpaid board members who are highly regarded in their communities."
The cost of such treachery is multi-fold: "Some leagues have dissolved as a result. Most organizations survive, but they often must defer buying new uniforms; fixing up insufficient or dangerous fields; purchasing equipment; and financing capital projects." Additionally, what about the message it sends to the children?
Don't be like Brian Farley - when you form your tax-exempt, nonprofit corporation, make sure to have protocols in place to ensure oversight and regulation, and help prevent embezzlement and other corruption from "trusted" officers, directors, and other organization and corporate staff.
Make sure you include the following internal controls and best practices as part of your financial and fiscal responsibility:
Conduct routine checks and balances, such as having multiple people in charge of the money.
Treat the organization like a business, and include all the same internal and external financial controls a for-profit business would include.
Insist on monthly meetings with the people handling the accounts.
Make sure at least two people must sign checks, no matter the amount, for any and all purchases.
Instill policies mandating invoices and receipts for any reimbursable expenses, regardless of how small the sum.
Make sure at least two board members are required to extensively review the club’s books monthly.
Finally - do not let anything go un-examined.
Don't let your organization's finances go unwatched. Make sure you practice fiscal responsibility, and if you start now, you may find you'll save your organization. And if you begin instilling protocols now, and the person currently handling the organization's finances balk at the changes - it's probably time to take a serious look at the books!
According to James Martin, the Lehigh County district attorney, whose office prosecuted Mr. Farley’s case, “Yes, everyone starts out with the best intentions, but then something usually goes wrong and no one is really watching.”
For more information on how you can prevent such fraud from destroying your organization, check out The Center for Fraud Prevention. This organization aims to mitigate embezzlement in youth sports.