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Preventing fraud in your nonprofit youth sports league

A few years ago, the popular and well-compensated executive director of a west coast youth soccer league was accused of fraud. After scrutinizing the club’s books, the league’s board of directors couldn’t account for $80,000. Criminal charges were eventually dropped, but many similar cases have concluded in embezzlement findings and significant losses.

According to The Washington Post, youth sports has become a $19 billion proposition. Unfortunately, many of the not-for-profit clubs are loosely managed by people without extensive financial experience or knowledge about preventing fraud. If your league doesn’t already have antifraud policies in place, here’s what you need to do.

Preventing fraud – It takes a team

By far the most important step youth leagues can take towards preventing fraud is to segregate duties. This means that no single individual receives, records and deposits funds coming in, pays bills and reconciles bank statements. So one person might handle deposits and payments, another would receive and reconcile bank statements and a third would monitor the budget.

Also, every payment (or at least payments over a certain threshold) should be signed by two individuals. If your league has credit or debit cards, someone who isn’t an authorized card user should be assigned to review the statements. If your staff is limited, tap trusted board members and professional advisors for help.

Where the funds are

If your league still uses paper registrations and accepts payment by cash or check, look into electronic payment options. Cash can be pocketed in the blink of an eye, and checks can be diverted to thieves’ own accounts. But with online registration, payments are deposited directly into the league’s account.

Also, monitor your league’s treasurer. People in this position are the most likely youth sports league officials to commit fraud because they have the easiest access to funds and the ability to cover their tracks. No one person should stay in the treasurer position for more than a couple of years. If funds are available, your league might consider hiring a part-time bookkeeper who will report directly to the board.

The treasurer should submit a report to your club’s board for every board meeting, with bank statements attached. And your board should receive and review financial reports at least quarterly — including when the league isn’t in season.

What fraud perpetrators hope

Even if everyone involved in your youth sports league seems to be passionate about the cause and welfare of its participants, someone may be financially desperate enough to succumb to temptation and steal. So make it as difficult as possible with strong controls, such as segregating duties. Contact us. We can help.

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