September 15, 2021

Best practices for managing team bank accounts

As part of Groundwork’s goal to share best practices and help educate youth sports organizers, we’ve invited special guest author, Monica Burgeson CPA, to share her expertise on managing team bank accounts. Monica is the Former CFO of Colorado Rapids Youth Soccer Club (formerly Colorado Storm Soccer Association) where she managed over 300 team bank accounts. She specializes in nonprofit management and advises the Colorado Soccer Association on financial best practices for youth soccer organizations. Prior to working with nonprofit organizations, Monica worked as a CPA for PwC’s audit and assurance practice.  She currently serves as the Director of Finance for the US Center for SafeSport.

Introduction

Many nonprofit organizations establish a cash management policy after cash has gone unaccounted for, or even gone missing.  Given their lack of resources, it’s common for nonprofits to have volunteers handling money, which creates more opportunities for money to be mishandled. As a result, millions of dollars go missing every year in youth sports alone.

As youth sports organizations grow larger, many utilize team bank accounts that are managed by volunteer team treasurers. This enables teams to operate semi-autonomously and minimize the burden on the club administrators. While this can provide a win-win for the club and team for operating flexibility and cost, it creates risks for the club when not managed correctly.  

The Center for Fraud Prevention, which helps youth sports associations fight theft and embezzlement, describes three reasons why youth sports organizations are uniquely vulnerable to fraud:

  1. Members are volunteers and managing the money is a job that no one wants. This results in treasurers who have little financial experience and a situation ripe for abuse.
  2. The organization lacks formal structure and systems of oversight and accountability of volunteers handling money.
  3. Volunteers are part of the community they serve. This creates an environment of trust which weakens oversight and emboldens volunteers willing to steal from the organization.

In this article, we’ll talk about how clubs that utilize team bank accounts can do so with confidence. 

Risks of improper management of team accounts

The first step in effective management of team accounts is to gain an awareness of the specific risks involved when volunteers manage money and act as official signers on team bank accounts. 

Risk #1: The team treasurer goes rogue

One of the most common occurrences with volunteers handling team bank accounts is that the team treasurer goes rogue and mishandles team funds in some way. This can range from the relatively benign -- like not following the club’s policy on how to reimburse coaching expenses -- to outright theft. 

It’s important to remember that team funds are the collective funds of families who pool their resources for the benefit of the team. When a team treasurer goes rogue, they are stealing from all of the families. When money goes missing, families will look to your club to rectify the situation. 

But the loss to a club isn’t just financial. When money is mishandled, families assign blame to the club for poor oversight, and the club suffers potentially long-term reputational damage with the community.

Risk #2: Club administration is not accountable to its members, donors or funders

Club administrators are often not able to answer questions about how much money is being held in a team bank accounts because volunteers are in charge of establishing and maintaining these accounts.  Although the team accounts are set up under the umbrella of the club, funds are managed by volunteers, so club administrators do not see how much each player/family has contributed to an account.  Clubs may not be notified when donations have been made, or if each player is not contributing his/her fair share.  When issues with team accounting arise, members expect the club to step in to resolve the issue and cover any outstanding balances.  Moreover, volunteers are put in an uncomfortable position to manage team financial matters.  This often leads to issues beyond inaccurate financial reporting, such as team turmoil and loss of players.  

Risk #3: The club fails an audit for insufficient financial controls

A major part of any outside audit is examining the financial controls of an organization. Auditors will see team accounts as an extension of the club and look for systems of accountability and control over these funds. Not having effective financial oversight and controls over team funds is a risk for clubs failing an external audit.

In order to minimize, or even eliminate these risks, a club must establish best practices related to how they handle team accounts and volunteers.

Best Practice #1: Establish financial controls

In this section, we share prescriptive advice for how clubs should establish financial controls over team accounts.

The club should open and control team bank accounts

The only way for the club to establish financial controls over team funds is for the club to control the team bank account. Giving the club the ability to access bank records and remove signers from the account provides the most basic level of financial oversight.

In a similar vein, clubs should prohibit the use of personal Venmo or PayPal accounts to collect payments from families since clubs have no visibility or control into these accounts.  Even if these accounts are only set up for the team, volunteers must provide personal information and the accounts are not transferable.  

Establish clubs policies in a team handbook

The club should set “ground rules” for how team treasurers manage money, including the club’s policies on acceptable expenses, record keeping and ways of doing team fundraising.  Any donations made to the team should go through club administrators, not directly to team accounts.  The Colorado Rapids Team Treasurer Handbook is an excellent example of a well thought out set of ground rules.

Note from Groundwork: Groundwork provides all of our customers with a Groundwork Team Treasurer Handbook Template as a starting point for them to create their own handbook for using Groundwork’s all-in-one team financial management solution with built-in oversight and controls.

Establish and review team budgets

One of the best ways team treasurers can communicate the financial plan for the season is to complete and distribute a team budget to all players and families. To make this an effective tool, the club should create a uniform template for team treasurers and require that it is completed, and turned in to club administration, prior to the team’s first game (or some other deadline established by the club). The team budget, or team plan, should include all tournament registrations fees, trips and travel expenses, plus any other events that will involve team coordination and payments.   

It is important for clubs to remember that volunteer team treasurers may not be familiar with how to complete a budget template, so it should also come with clear instructions.  Lastly, the club should periodically review the budget vs actual spending, or at the very least when the season ends. Reviews ensure that team spending is in-line with club policy; moreover, communicating to treasurers that reviews will be performed and records must be kept creates an environment that is less prone to abuse. If time is limited, a random sample of teams can be reviewed instead.

Best Practice #2: Account for team funds

Part of any external audit will require clubs to provide the balances and monthly reconciliations of their cash accounts. Cash is classified as assets of the club. This can include operating accounts, savings accounts and investment accounts.  

Classify team bank accounts as “pass-through” accounts

A common concern for clubs is that, by controlling team bank accounts, the club has to record and reconcile each account, or account for the cash in each account as income.  The reality is that the cash in the team accounts is not an asset of the club. Since team accounts function to pool money from families to pay for team expenses and the money does not belong to the club, clubs can classify team bank accounts as ‘pass through’ accounts, and carry the balance of these accounts as a liability account on their balance sheet.  

It’s important to remember that team funds are not the club’s money -- it belongs to the families, and the club is a temporary steward of the money to ensure accountability until the money is disbursed. At the end of the season, if any funds remain, they should be returned to the families, or applied to next season’s team expenses if the families continue with the team into the next season.

As teams funds are spent, the amount recorded on the balance sheet decreases. Clubs can track this liability as the total sum of the balances of all team accounts. The club does not need to reconcile every transaction, but should ensure that teams do.  

Note from Groundwork: using our digital banking platform allows clubs to easily see and export the balances in each team account in real-time while providing an ongoing sum of all accounts so you can easily perform club accounting functions.

When discussing team accounts with auditors

If the club undergoes an external audit, they will have to explain the concept of team accounts and sufficiently document the controls that are in place to manage team accounts. Clubs will need to point out that, since the club does not provide services to ‘earn’ the money in the team accounts, it is not classified as income to the club.  Similarly, clubs will need to explain that team accounts are not assets of the club and, therefore, are not subject to the same testing or reconciliations that are required for the club’s operating accounts. 

The control documentation should include the process of opening a team account, the requirement of submitting team budgets, plus dissemination of the treasurer handbook.  It should also detail the monitoring and reviews that are completed by club administration.     

The bottom line

Team accounts managed by volunteers can be a great way to enable teams in your club to operate autonomously, while simultaneously minimizing the burden on the club administration. When going this route, it’s essential to establish effective financial controls and accounting for team funds.


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