Ask Me Help Desk - 501c3 misuse of funds

What would you recommend in the following situation. A 501c3 youth flag football league that takes all of their registrations up front before the season even starts. So all of the money for the entire season (including sponsorships) is in the bank account before any games are played. The 501c3 hires an officiating company to referee the games for the season. The referee company is paid for the first few weeks of the season. Then starts to get the run-around for the coming weeks. Before you know it, the season is over and the 501c3 company is about 5 weeks or so behind on paying their referee bills. A promissory note is signed by the 501c3 with an agreed date to have their balance paid off. That date comes and goes. No payment at all. The 501c3 is still several thousand dollars behind to the referee company.

Would this be considered a misuse of non-profit funds? They obviously did something else with the money instead of paying their required bills

What would you recommend the referee company to do in this instance?

Quote:

Originally Posted by superrefss

What would you recommend in the following situation. A 501c3 youth flag football league that takes all of their registrations up front before the season even starts. So all of the money for the entire season (including sponsorships) is in the bank account before any games are played. The 501c3 hires an officiating company to referee the games for the season. The referee company is paid for the first few weeks of the season. Then starts to get the run-around for the coming weeks. Before you know it, the season is over and the 501c3 company is about 5 weeks or so behind on paying their referee bills. A promissory note is signed by the 501c3 with an agreed date to have their balance paid off. That date comes and goes. No payment at all. The 501c3 is still several thousand dollars behind to the referee company.

Would this be considered a misuse of non-profit funds? They obviously did something else with the money instead of paying their required bills

What would you recommend the referee company to do in this instance?

I don't see the "obvious" misuse of funds in this scenario. Do they owe the referees? Without a doubt. Was this a question of not having sufficient funds on hand, something else? Can you PROVE anything?

Go to Small Claims Court and file a claim.

Quote:

Originally Posted by superrefss

... Would this be considered a misuse of non-profit funds? They obviously did something else with the money instead of paying their required bills

Not necessarily. This is just a cash flow problem as far as we know. They can't pay all of their bills. But for all that is known, their bills were all legitimate expenses.

Quote:

Originally Posted by superrefss

... What would you recommend the referee company to do in this instance?

Sue them.