Mailing Address:

 

Charities Offer Many Opportunities for Athletes to Give Back

 

By MARC POLLICK,

From the Field of Philanthropy

Published: March 16, 2006 : Page 15

 

Many professional athletes seek to give back to their communities by establishing a charitable foundation. That is a noble ambition.
 
But starting a foundation is not the best fit for every athlete looking to make a positive difference in the community. Having a successful foundation requires a significant amount of funding, time and expertise.
 
Too many foundations are created by athletes who end up supporting little or no charitable cause or mission because they are unprepared for the infrastructure costs.
 
In the foundation world, the ratio of direct charitable dollars spent to overhead expenses is a critical guideline and a standard for evaluation. According to the Better Business Bureau, a charity should spend at least 65 percent of its total expenses on program activities and no more than 35 percent of related contributions on fundraising and overhead.
 
The best-managed foundations often boast 4-1, 5-1 or even 9-1 ratios of dollars going directly to charitable programs versus overhead expenses.

 

Expenses

Consider the expenses when establishing even the most basic foundation.
 
Let’s say an athlete wants to establish a foundation with one paid staff member. The expenses would include salary, benefits and workers’ compensation, annual audits and accounting, director’s and officers’ liability insurance (to protect them from lawsuits), rent, office supplies and equipment, travel, and legal fees.
 
One would be hard-pressed to keep all these expenses at less than a total of $100,000 a year, and that is before giving away any money to charity.
 
To make sure that ratios for administrative expenses are kept in line, most philanthropic advisers suggest starting a foundation with at least $500,000 in assets — or the expectation to reach that in one year.
 
For many young athletes new to wealth and philanthropy, and unsure about how long their careers might run, that kind of money is probably not what they have in mind. Over time, as their financial security and endorsement value increase, that may not be so intimidating a figure.
 
Giving back should be fun and personally rewarding. Creating a foundation that becomes an albatross around the neck of the athlete and his advisers is neither of those.
 
For an athlete looking to give wisely but on not quite so grand a scale, several excellent charitable alternatives are available.

 

 

Estimated Expenses for Stand-alone or Private Foundation Set up Cost 501(c)(3) status $5,000 and up Office furniture $5,000 and up Computers (hardware and software) $4,500 and up Fax machine, printers $2,500 and up     Personnel Cost Executive director (2-5 years experience) $55,000 and up Secretarial $27,000 and up Benefits, taxes $22,000 and up     Professional services Cost Day-to-day accounting (audit, tax returns, payroll) $15,000 to $40,000 Technical support $1,500 and up     Office expenses Cost Rent $10,000 and up     Administrative Cost Health insurance $9,500 Postage $1,500 Office $2,500 Phone/fax $3,500 Dues, subscriptions, conferences $4,500 and up

 

 

DAFs and direct contributions

In recent years, many donors — athletes among them — have turned to the much more economical charitable vehicle called donor-advised funds, which allow for the same tax deductions as a stand-alone public charity and are commonly found at community foundations or large financial institutions.
 
While the typical DAF does not offer the ability to hire staff or hold special-event fundraisers, fees for administration generally run at less than 3 percent annually of the assets in the account.
 
DAFs are good starting points for donors who are just getting their charitable feet wet. The funds are focused on making grants, as opposed to creating charitable programs or holding fundraisers.
 
Recently, Congress passed sweeping legislation around DAFs after several years of some rather creative and wide-ranging interpretations of their original intent by some charitable and financial institutions. While the full repercussions of these new laws are yet to be determined, the DAF remains a good alternative for one looking to give back without a lot of administrative time or cost.
 
One important caveat for athletes who wish to start a DAF is to look for a national community foundation or financial institution rather than a local one.
 
If an athlete opens a DAF at the Cleveland Foundation, for instance, and is traded the next year to Seattle, he will face a problem. The Cleveland Foundation is mandated by its mission to focus on the Cleveland community; it would not be an ideal place to do grant-making in Seattle.
 
Making a direct contribution to a carefully vetted charity already doing work in the athlete’s area of interest is another way to give wisely without worrying about administrative overhead.
 
Becoming an ambassador or a celebrity spokesperson for a charity also has many advantages. This choice can be particularly rewarding as long as the obligations of both the athlete and the charity are carefully explained and understood from the beginning.
 
Both of these examples are powerful ways for athletes to leverage their celebrity while avoiding the risks and the obligations of a stand-alone foundation. Plus, the athletes benefit from the expertise of the charity’s professional staff, with limited individual responsibility and liability.
 
It is essential, however, that the athlete who becomes a spokesperson for a charity make a meaningful personal financial contribution to that charity before engaging the public. If there is any doubt about the necessity of making this contribution, just imagine the athlete in a room full of reporters when he is asked the question, “You are asking your fans to support this charity; have you yourself made a gift?”
 
Being a professional athlete in today’s society affords one a tremendous opportunity to make a real difference in one’s community. When it comes to considering philanthropy, athletes and their advisers would be well-served to consider all the charitable options before rushing out to hang a shingle announcing a new charitable foundation.
 
If an athlete is in it for the long haul, a foundation may be a good idea. In the short term, however, there are many other charitable options that offer great impact but fewer potential complications.
 
Marc Pollick is president and founder of The Giving Back Fund, a national nonprofit organization that helps athletes and entertainers create and manage high-impact philanthropy.