Rash of Embezzlements Driving Push for Transparency in Youth Sports
17 Oct, 2018By: Michael Popke
In February, the president and treasurer of Holbrook Little League in Jackson, N.J., were charged with pilfering $118,000 from league coffers — an incident that now has state lawmakers considering creating transparency requirements for youth sports leagues.
Judging from the uptick in similar stories – even Forbes carried an in-depth piece on whether embezzlement could be prevented – it may be an idea whose time has come.
Introduced by New Jersey Assemblyman Ronald Dancer, R-Ocean, the legislation specifically references the Asbury Park Press investigation about why it is “easy” to steal from Little League and other your sports organizations. The investigation cited weak laws and lax regulators.
Authorities charge that officials have stolen more than $1.4 million from youth sports leagues over the last 10 years in [New Jersey’s] Monmouth and Ocean counties alone.
If signed into law, the bill would require youth sports leagues to adhere to transparency requirements that, though seemingly simple, are practically unheard of among the hundreds of leagues investigated by the Press.
Those requirements include:
• Maintaining a website that includes financial statements, tax returns, audit reports, meeting agendas, meeting minutes, applications and licenses to hold raffles.
• Conducting an annual audit, the results of which will be posted to the league website and submitted to the state Division of Consumer Affairs.
• A minimum five days' notice of a board meeting, including if any action will be taken, and minutes recorded for each meeting.
In addition, the bill directs the Division of Consumer Affairs to issue guidelines on chain of custody for donations, including cash, as well as checks and balances and record keeping.
“When you see how much money some of these organizations bring in, it’s clear. Youth sports is big business, from Little League and Pop Warner, to lacrosse and ice hockey teams," Dancer said in a statement. “Every season, leagues and teams raise tens of thousands, sometimes hundreds of thousands of dollars. Unfortunately, there have been times when accounts are drained, money goes missing, and officers and board members are unaware until it is too late. Increasing accountability boosts security. Temptation runs high when you keep the money hidden away in a dark corner. Shine a light on it, open the books, and keep everything on the up-and-up. The money should be helping the kids.”
It’s worth noting that Holbrook competed in the 2017 Little League World Series.
But is it worth it to just pass legislation? What about public accountability? That's what happened to Brian Farley, the longtime treasurer who had to appear before parents and children at the Tri-Boro Soccer Club after he pocketed $120,000 from the club's treasury.
Extra security had to be hired, said the New York Times, in case parents tried to rush the field and attack Farley as he tried to explain his actions -- and allow children to understand what he had done.
But Farley's shame, no matter how profound, is hardly an isolated incident, notes the Times. The problem continues.
Across the country, people who volunteered as treasurers and other officers for Little Leagues and sports clubs have been prosecuted for pilfering gobs of money from the coffers: $220,000 in Washington, $431,000 in Minnesota, $560,000 in New Jersey, and so on, according to law enforcement authorities, league officials, experts on nonprofit organizations and news reports. The approximately 14,000 youth sports organizations in the United States take in annual revenue of about $9 billion, according to the National Center for Charitable Statistics. Oversight of those sums is haphazard and not centralized, as there is no national agency in the country watching over youth sports.
Oh, wait. You thought this was just the New York Times? Try these, from the clickbait-worthily titled blog, Your Kid's Not Going Pro: "In Florida, there’s a woman booked into a room at the Graybar Hotel for the next 18 months and forced to repay the $40,000 she embezzled from a soccer league over two years. Another soccer mom, this one in Pennsylvania, is facing jail time after being convicted of embezzling $75,000 from her son’s soccer league. Finally, a New Jersey baseball dad just got arrested on charges of stealing $20,000 from the league whose finances he handled. In each case, no one suspected anything until people started calling to collect bills everyone else in the league thought had already been paid."
One of the problems is that many parents' groups are trusting and often, no criminal background checks - or checks of any kind are conducted when someone takes over as treasurer, president or in any other position of fiduciary responsibility. In many cases, someone takes over the job because nobody else wants it, meaning nobody else will take the time to look at it twice. And therefore, nobody ever asks to see where money goes or how it is disbursed, even though this sort of information needs to be publicly available, particularly in non-profit organizations.
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. In addition, the Times article notes, the problem often never goes public, despite the fact that ther have been hundreds of arrests and convictions in 43 states involving 15 sports, according to a study of news accounts and a database compiled by the Center for Fraud Prevention, an organization that aims to mitigate embezzlement in youth sports.
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.
Overall, the rate of fraud across the youth sports landscape, which includes thousands of prosperous travel teams, is probably small in scale given the vast scope of youth sports. In general, there is little data of any kind on how extensive embezzlement is among all nonprofit groups, let alone youth sports associations. But those whose self-appointed job it is to oversee the industry have noted that .. youth sports organizations rarely put in place routine checks and balances, such as having multiple people in charge of the money, opening the door to fraud. And says the New York Times, they're hardly isolated.
"People treat youth sports groups as social clubs and vest all their trust in one individual because they all know each other, but these organizations need to be treated like businesses with all the same internal and external financial controls,” said James Martin, the Lehigh County district attorney, whose office prosecuted the Tri-Boro case. “Yes, everyone starts out with the best intentions, but then something usually goes wrong and no one is really watching.”
Some organizations, such as this CPA firm, have published guidelines for parents on how to increase accountability and decrease the potential for problems in management of organizations. Additionally, there are steps organizations can take. With every one of these, notes this article, a hurdle is thrown into the path of a potential embezzler. According to Montgomery County, Pennsylvaia, controller Stewart Greenleaf, Jr., nothing is foolproof, but every step counts.
"No one thing you're going to do is going to stop theft," he notes, "but the more obstacles you put into place, the higher the chance that someone is going to stumble over one of them and get caught."