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A local nonprofit football and cheer federation has retained an outside accounting firm to monitor its associations’ tax filings after the Star discovered that two of its associations were stripped of their nonprofit status last year.

Tucson Youth Football and Spirit Federation is a football and cheer program for kids ages 5 through 15. The federation is made up of 14 associations, each of which manage several football and cheer squads.

Two of the associations, the Raiders and Falcons, lost their nonprofit status for failure to file their tax returns three years in a row, according to the IRS nonprofit database. The last time either association filed a return was in 2013.

The Star first contacted TYFSF commissioner Julius Holt on April 12 to inquire about the associations’ nonprofit status. Organizations that claim nonprofit status are legally required to provide their three most recent forms upon request.

Holt eventually referred a reporter to attorney Ali Farhang, who on Friday said both associations have since corrected the situation. It’s another example of what a national expert says is a growing problem: a lack of oversight in the big-money world of youth sports, one where many of the executives are volunteers.

“In light of all of this, TYFSF and its relatively new commissioner, Julius Holt, are putting new procedures in place to make certain such oversights do not occur in the future,” Farhang said. “As you know, with the evolving nature of the board and each organization, it is imperative that a constant third party be entrusted to annually monitor the situation.”

What happened

TYFSF has a group tax exemption number that the associations can use, but each association is still required to file a tax return with the IRS each year.

The Falcons used the incorrect employer identification number when filing returns from 2014 through 2016; as a result, the IRS did not accurately record them, and the association lost its nonprofit status, Farhang said.

The Raiders simply didn’t file tax returns between 2014 and 2016, and the association’s nonprofit status was revoked in May 2017. The association then applied for its own nonprofit status independent from TYFSF. The application was approved and the Raiders’ tax exempt status restored on April 12, Farhang said. The IRS’ website had yet to reflect the change as of Saturday.

TYFSF will use local accounting firm BeachFleischman to ensure all associations properly file their tax forms annually. The league will begin annual mandatory training for each association about bookkeeping and tax preparation, Farhang said.

“TYFSF and each separate organization is made up of a number of very dedicated volunteers who endeavor to make a positive impact on our kids and community,” Farhang said, adding that volunteers contribute “countless hours” and make significant efforts to teach kids strong values.

Farhang was previously president of the now defunct Tucson Chargers.

“While there can be missteps and mistakes will happen, the overwhelmingly positive impact TYFSF has had on Tucson and Southern Arizona over the years cannot be overstated,” he said.

Lack of oversight

TYFSF’s lawyer says simple bookkeeping errors were to blame for the IRS troubles. It’s one example of disorganization — and, occasionally, wrongdoing — in a largely unregulated arena.

Youth sports is a $15.5 billion industry in the United States, according to a WinterGreen Research study released last year. That’s more money than the NFL, at $14 billion, brought in.

Problems have arisen with the rapid rise of youth sports, said Jon Solomon, editorial director of the nonprofit Aspen Institute’s Sports & Society Program.

Some of the issues can be traced to honest mistakes by people — most of them volunteers — who don’t have the time or knowledge for proper accounting.

But theft is also common, Solomon said.

“Generally speaking, there’s quite a bit of theft and embezzlement in youth sports and not much oversight,” Solomon told the Star. “You end up having people who work as treasurers and presidents and people know each other … and don’t think necessarily to have the proper oversight or proper governance or any kind of accountability.

“Youth sports has become so commercialized and there’s so much money involved, but it’s not necessarily professionalized. There would be more people who understood how to do accounting and finances. I think in some cases it’s just grown so quickly and increased by so much money that you don’t have the proper people or training or accounting services in place.”

Organizations can implement common-sense measures to prevent embezzlement, like requiring a second signature on checks, having an outside party review credit card statements, not accepting cash during registration or fundraising events, keeping detailed inventory records and performing regular audits of equipment and finances, Solomon said.

Big money

Youth football is booming in Southern Arizona. An estimated 100 football teams and 100 cheer squads are expected to participate in TYFSF’s upcoming season, according to the league’s rulebook. More than 4,000 kids will participate.

Total earnings for the 14 associations varied greatly in 2015 and 2016, ranging from $35,000 to $170,000 per year.

The Southwest Rams, the association with the smallest boundaries, reported $170,215 in gross receipts for 2015, with $114,194 coming from “gifts, grants, contributions and membership fees.”

TYFSF associations set their own fees, which range between $100 to $175 for flag football, $165 to $260 for tackle football and $115 to $250 for cheerleading.

The Rams raised $27,250 by selling raffle tickets, $7,650 during a walkathon and $21,120 during 12 other unspecified fundraisers. The Rams outlined several individual expenses for the 2015 year, including $28,358 for equipment and $20,232 for uniforms.

It also recorded $91,076 in undisclosed “other expenses.” A year earlier, it cited $35,327 in other expenses; the previous year’s total was $49,535.

Rams president Marcos Romero did not respond to multiple emails from the Star requesting the team’s current tax forms and details about the $91,000 in expenses.

“As a separate legal entity, each individual organization is responsible for its own finances and operating in accordance applicable law and with their own rules and bylaws,” Farhang said.

“Any individual failing to comport themselves with integrity or consistent with the highest standards of conduct will be expelled and prohibited from any affiliation with TYFSF.”

The Rams — and the 13 other associations within TYFSF — still have voting rights when it comes to contracts, purchases, regulations and policies, despite rules that strip voting rights from teams that fail to file their tax returns.

After Holt was informed of the revocation of the Falcons’ and Raiders’ nonprofit status, he waited several days to respond to the Star, eventually saying that the two teams “provided their nonprofit status letter and tax return information” and “are in compliance based on the information I’ve seen.”

Nonprofits have until May 15 to file tax returns for 2017.

While many of the 12 remaining associations had filed tax forms through 2016, a search of several nonprofit databases revealed that two additional associations — the Rams and Redskins — have not filed 990s since 2015.

Only three of the 14 teams — the Scorpions, Dolphins and Redskins — responded to the Star’s requests for copies of their most recent tax returns.

Contact reporter Caitlin Schmidt at cschmidt@tucson.com or 573-4191. On Twitter: @caitlincschmidt