Perhaps needless to say, but this is quite distressing to read about. It is hard to imagine that any of the donors to your junior team fund raising effort last year are going to be happy when they learn of how their donations have been (mis)handled, or really, more bluntly, how the intent to do something directly of tangible and immediate good for the Junior Team has been subverted.
And it is hard to think of a more effective means of undercutting future donor generosity than what has been done here at the highest level of the organization. Negligence would be one thing, forgetfulness another, but here is an example of deliberate adoption of a really poor course of action.
With regards to #2, it's time for a change. Past time.