When people discuss the problems with US youth soccer, they often point their fingers at the pay-to-play structure, which prices many players out of the game, or its lack of professional infrastructure. One thing, however, that few people discuss is embezzlement.
You don’t have to look far to find examples of the breadth of the problem. In recent years, teams as far afield as small town New Hampshire and California’s farm country have suffered financial losses in the hundreds of thousands of dollars.
While those dollar figures might sound fantastically large, they are not uncommon. Over the past few decades, youth soccer clubs in the United States have evolved from small operations, where players and their parents paid for little more than uniforms and equipment, into enormous organizations with dozens of volunteers, hundreds of players, and budgets that in some cases surpass $1m.
Few clubs illustrate the perils of this growth as well as Fullerton Rangers. With an income of just under $1m in 2013, more than 2,000 registered players and two national championships (and under-14 and -15 levels) in 2011 and 2012 respectively, the Rangers rank among the most prestigious and respected youth soccer organizations in California. Yet despite its budget and its size, the Rangers organization was still organized much like it had been for most of its 50-year history. Volunteers, as they are at many clubs across the US, formed the backbone of the organization, bringing with them a barrage of new challenges.
“When you’ve got 1,600 to 2,000 kids you’re no longer small,” says the current Rangers team president, Munish Bharadwaja, himself a volunteer. “When you’ve exceeded a couple hundred thousand dollars in revenue you’re no longer small. You can’t operate like that. You’ve got to spend the money to be a professional organization.”
And with a lack of professional oversight, cracks emerge. Last February, the Rangers’ former volunteer treasurer, Laura Zellerbach, pled guilty to having stolen $174,000 in funds from the team’s accounts between 2012 and 2014. Zellerbach’s methods weren’t too sophisticated either: she had transferred team funds into her own personal accounts. “A lot of people they just don’t know that this is really easy to do if you don’t have financial professionals that are there to guide you along the way,” Bharadwaja says.
The statistics are startling.
According to an estimate from a 2014 study by the Association of Certified Fraud Examiners (ACFE), the typical organization loses 5% of its yearly revenues to fraud. A 2016 embezzlement study by Hiscox, an insurance broker, found that non-profit organizations like Fullerton Rangers account for the second-highest number of cases of financial fraud. Most troublingly, the ACFE study found that in 58% of cases reviewed, the victim organizations had not recovered any of their losses, and just 14 % had fully recovered their lost funds.
Still, it’s impossible to know how pervasive embezzlement is among youth soccer organizations. As Steve Pedneault, a forensic auditor and adjunct professor at the University of Connecticut, puts it: “Every time you see [a story about financial fraud], multiply it by nine and that’s how big the problem is. Because eight out of nine [stories] never hit the press.”
According to a New York Times story, law enforcement officials estimate that they see only half of the actual fraud cases in youth sports. Some organizations, they posit, cover up smaller misappropriations to protect their reputations.
Fullerton Rangers took a different route.
While Bharadwaja says he is not at liberty to discuss the details of the Rangers’ case, he did share the steps the club took to earn back the trust of the Fullerton community. Almost immediately after discovering the fraud on its books – “a fluke,” according to Bharadwaja – the club hired a forensic auditor and an attorney who works with non-profits. Then, Rangers hired a professional outside CFO to take over the team’s accounts on a part-time basis along with a separate tax professional responsible for filing the team’s returns. This way, Bharadwaja says, the organization has three layers of oversight built into its financial structure.
“Our parents deserve it,” he says.
Most clubs, though, are not as fortunate as Rangers to have a volunteer club president like Bharadwaja who has a background in both business and law enforcement (he left the world of business to become an Los Angeles police officer in 2012). Nor do many clubs have parent professionals – particularly lawyers, accountants, and actuaries – who have the time (Bharadwaja estimates that the Rangers’ board members spend as many as 20 to 30 hours a week on club matters) and inclination to provide the level of oversight essential to clubs of this size. Similarly, only a handful of youth soccer clubs have the funds to hire a CFO, an accountant, and an attorney to resolve a fiscal crisis.
So while Fullerton have successfully rebounded from Zellerbach’s crime, they are still in a strong position. What about the clubs who don’t have Rangers’ benefits? What becomes of them?
According to Pedneault, the forensic auditor, clubs should start by talking to board members about finances. Once that’s done, clubs can more successfully implement necessary checks and balances: two people signing checks, two people reviewing the books, two people involved in almost every area where money is collected or paid out.
“Be vigilant,” Pedneault tells organizations. “You can’t easily identify who may be the person that’s going to embezzle. It seems to be across the board now. Just because you know Steve and Steve’s a good guy and he’s an accountant and he’s willing to be our treasurer doesn’t mean you really know Steve and doesn’t mean Steve won’t take from you. Trust is not an internal control.”
Despite the scope of the problem – a quick search of “US youth soccer club embezzlement” yields just over 3.1m results – the issue remains largely off the radar of youth soccer’s largest governing body, US Youth Soccer. However, this may be as much a consequence of oversight and responsibility as it is of a lack of awareness.
“Each league is their own organization and they’re responsible for their own finances,” says the US Youth Soccer CEO, Christopher Moore. “So we can’t tell them what to do or how to run their businesses.”
With four regional bodies operating under the auspices of US Youth Soccer and with 55 state organizations overseeing member clubs, there’s little that US Youth Soccer can do to control its members aside from emphasizing best practices regarding internal financial controls.
Ultimately, clubs must recognize that embezzlement is a problem that could easily affect their organizations as it did the Rangers’ and thus hamper their ability to achieve their mission of providing kids with an opportunity to play organized team soccer. It is young players – and potential US stars of the future –who stand to lose the most from failed financial oversight. “It’s unfortunate but these people are stealing from children,” says Bharadwaja. “If we had gone under and we weren’t strong enough to recover so quickly from this, you’re talking about kids whose soccer careers [would be jeopardized] or whether they’re going to be soccer players in college … All of those peoples’ futures are at risk.”
While there are certainly substantial steps that clubs can take to prevent financial fraud – checks and balances, open dialogue, even insurance – Moore recognizes that there’s no quick fix, no “silver bullet.”
“You’re never going to fully root it out,” he says of embezzlement. “All you can do is hope to put safeguards in place to try and prevent it from happening. Unfortunately, there are just dishonest people out there.”