There is a new report about a youth sports official embezzling money or committing financial wrongdoing seemingly everywhere you turn. It is so prevalent that Little League International has a checklist for addressing and recovering from embezzlement on its website.
Close to $200K in Pennsylvania and just under $100K in Florida. Another $300K in Texas and $175K in California. Over $40K in Louisiana and $50K more in Oregon. Don’t forget the $600K in Colorado or the $2.4M (yes) in Canada. And that is just a fraction of what pops up with a simple Google search.
The ill-gotten funds go toward Amazon purchases, gambling addictions, hair extensions, even other youth sports expenses. And the malfeasance can go undetected for years, often only being discovered when an organization is blindsided with embarrassment and potential financial and reputational ruin.
“Most of these clubs were started because you have people who were passionate about the game and about the kids,” Club Capital VP of Youth Sports Lisa Wolf told Buying Sandlot.
“They are not business people, generally speaking. And then you now have somebody who is in charge of a business who is really a coach. … The time and ability to really weigh the importance of reviewing the financials just falls to the wayside.”
Some of the factors to consider:
Youth sports orgs’ growth has mirrored the industry as a whole
Orgs operate like startups — a small leadership group wearing many hats — and people with little/no financial experience are thrust into those roles
Segregation of duties — one person has complete control of finances
Main focus is sports and kids— financial protocols are often a low priority
Seasonality — i.e. a baseball league collects 95% of annual revenues from March to June — can make it harder to pick up on red flags
Orgs often operate on “gut feels” regarding finances that lead to a false sense of security or unwise spending
Financial neglect tends to snowball over time if not corrected
“Organizations have experts when it comes to the game and the technical side of it,” Wolf said. “You should have experts on the business and admin side as well.”
Club Capital says it provides accounting, budgeting, compliance and tax services not only for youth sports organizations to prevent theft, but also to catalyze continued growth — the consequences of poor financial controls are not always criminal.
“We are doing financial statements every single month,” Wolf said. “We are reviewing variances on a timely basis so anything that starts to bubble up, we are quickly on top of it. We are building a budget for you, comparing it to actuals, looking at general controls, tightening up those gaps. And then the fun part starts and we get to go more strategic with you. … There is a cost, but it is a cost that helps protect your organization.”
Club Capital works with clubs that generate $300K a year and clubs that make over $10M, Wolf said.
“We are there to walk with them,” Wolf said. “We are not there to shame them for whatever they’ve done. We’re partners. Let’s start where we are today, walk down the path together and make it better.”
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