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Zachary
Zachary, Attorney
Category: Legal
Satisfied Customers: 3814
Experience:  Lead trial/International commercial attorney licensed 11 yrs
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Im hoping you can help me with this question: My husband

Customer Question

I'm hoping you can help me with this question:

My husband and I were recently tasked with heading up a youth baseball team. One of the requirements was that we put together fundraisers to cover the team's expenses. I run a small business and had some contacts and was able to arrange for several items that we could sell. Some of which had a definite final price and some where the final price would be based on shipping charges from the order (which I wouldn't know until after the fact.) I presented the 3 different items to the teams with the prices and made a price estimate on the last one (Item C). I stated to the parents that cost of Item C should not be more than $15 and that the vendor recommended a retail price of $20, but we could do $25 as that is what the item sales for in stores. The team elected to sell Item C for $20. The other two items were also presented and elected to be sold as well. Near the end of the season, we discovered that the first two items A & B were not selling as well and we would unfortunately be left holding quite a few pieces. We had to pre-order them and in a minimum quantity as they were custom items personalized with the park's information. When I was reviewing bills, I discovered that I had overestimated the base price for item C and they would cost a little less than originally thought. I then decided rather than go the typical route of only receiving funds one the base invest was covered to use the difference from Item C to cover the moneys lost for Items A & B. Otherwise, no one would have made any money on the items that had sold for A & B. I was willing to take a loss if it didn't cover all of it, but I did hope it would cover most. I did not ask permission to do this nor did I advertise the fact. It never crossed my mind to do so.

Unfortunately, as is the case with ball teams, we had a couple of parents who became disgruntled and now have an ax to grind with the coach. When they found out what I had done, they went before the governing board and stated that we should not have done that and it was charitable fraud. It never crossed my mind that it should even be an issue. We were using the funds to cover team expenses. No one was asked to pay for the leftover items of A & B and the ones that were covered by the monies from Item C were donated to charity. I reaped no reward and was still out between $50-100, when it was all said and done.

So, my question is two-fold:
1. Did I do anything wrong? Do they have a case
and
2. Although, it was never my intent to sell them the items at anything other than my cost, if I had elected to do so, is that illegal or inappropriate? I'm asking, because I am concerned they will try to say it was deliberate from the beginning. So, I would like to know from both standpoints. This was truly a case of covering team expenses, but had it been otherwise, would that change things?
Submitted: 1 year ago.
Category: Legal
Expert:  Zachary replied 1 year ago.
Hi,

Thank you for your question. I have experience with charities and have been in your situation before.

The sale of items for charity is different from accepting donations. When a party takes a donation and states that the money will be used for a specific purpose, then it is fraudulent to use the money for another purpose.

This situation is different. You decided to sell several different items and had to make an initial expenditure to purchase those items for sale. The sale of all the items should be used to cover the costs of the expenditure to purchase the items and any remainder would then be the net profit that goes to the team for funding. The fact that you are using proceeds from the sale of one item to cover the loss taken on the other item is not wrong.

Now, it sounds like from your description of the facts that there are different teams involved in the fundraiser. If all the funds from the fundraiser were going into a single account, as opposed to each team having its own account based on the funds it raised, then again I do not see any illegality in your actions.

I do not think there is a legal claim that these parents can make against you.

Please let me know if you want to discuss this further.

-ZDN
Customer: replied 1 year ago.

Thank you for the reply. I do have a follow-up question or two:


 


First, to answer your question: it was one team involved. Due to the disgruntled nature of the parents, I am dealing with extenuating circumstances.


 


1. They are stating that they didn't agree to all of the items that we elected, which is not true. Is that an issue?


2. Am I obligated to sell it to them at my cost for them to use in resale or can I set my own price even if it is higher than what it cost me. They received the profit they were told to expect from the first day on all items. Again, I didn't profit from any of it, but if I had, would that be an issue?

Expert:  Zachary replied 1 year ago.
If you take personal profit on the sale of the items, then that could be an issue unless you disclose prior to taking the profit that you plan on taking a profit. In this situation, taking a personal profit on any of this would definitely be a problem as it was not part of the original arrangement (based on what you've said).

As far as selling them at cost or higher, I'm not sure I understand. I think we may need to back up a bit and make sure we are on the same page.

Were the teams funds used to purchase the items to begin with, or was this your personal funds?

If it was your personal funds then you own the items outright. If you arrangement with the team was that you purchase the items and then they sale and reimburse your for the costs and then they get whatever is left over, then again you have not violated any laws.

In that case, if the team now wants to purchase the items from you to resale them later on, then you can set whatever price you want. The team does not have to agree to it.

If the items were purchased with team funds, then you cannot take any profit whatsoever.

Let me know if that clears things up.

-ZDN
Customer: replied 1 year ago.

I really appreciate your time. Thank you for speaking with me.

 

To try to clarify

 

There were no starting team funds. I fronted everything from the beginning.

 

So, basically....I bought item C with my funds. I gave them to the team at a cost of $15 and they sold it for a fundraiser at $20. As they sold their items, they turned in monies paid to them for the merchandise to me. I then took $15 from the monies turned in to cover the cost of Item C and put the $5 profit into a fund for them to put against their balance for uniforms, etc. I had paid upfront for all the uniforms and supplies, so as I received money, I applied it to their balance. Once their expenses were paid, if they continued to raise funds in excess, I cut them a check for the extra funds.

 

I later discovered that Item C was only $10. Was I obligated to go back and give them the additional $5, is my question, when they were told they were getting it for $15. Or could that additional funds be used at my discretion?

 

They are speaking negatively of us in the community. The coach has now been penalized for this and I wonder if he has any recourse to be reinstated and did they truly have grounds to penalize him?

Customer: replied 1 year ago.
Relist: Other.
Wait too long
Expert:  Zachary replied 1 year ago.
Thanks for your response and sorry for the delay.

The funds may not be used at your discretion. However, you can use the $5.00 extra per item C that you found to reimburse your out of pocket expenses for items A and B. The team's parents should understand that you did not purchase all the items with no recourse as to obtaining reimbursement on the purchase price of those items. Once the purchase price on all the items has been reimbursed to you, then the remainder will be given to the team.

In short, you may be reimbursed for your out of pocket expenses, but you cannot profit or otherwise use the money.

As long as you are not profiting from the transaction (without having some sort of approval and disclosure of the expected profit beforehand), then there is no illegality. They are simply bickering over your accounting methods.

-ZDN
Zachary, Attorney
Category: Legal
Satisfied Customers: 3814
Experience: Lead trial/International commercial attorney licensed 11 yrs
Zachary and 14 other Legal Specialists are ready to help you
Customer: replied 1 year ago.

Thank you for your time!

Expert:  Zachary replied 1 year ago.
Good luck in getting this resolved. Check back with me if you have any follow up questions or if there is something else I can specifically help you with on this issue. I'm interested in the outcome.

-ZDN

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