We always hear about professional athletes making large contributions to different charities. Most of the time, players make contributions with good intentions, whether it's to help children from disadvantaged backgrounds or to promote some other worthy cause they have a connection to or feel passionate about. Unfortunately, sometimes the money never reaches the children or the cause it was intended to reach.

A number of NBA players chose to start up their own charities to enhance their player image or brand, instead of making donations to established NBA team foundations or other established philanthropic organizations with experience in running a bona fide operation. What many players fail to recognize is that it takes hard work to manage a charity, often costing thousands of dollars out of a player's pocket to maintain and leading to legal problems if the entity is not run properly.

In an article entitled NBA player charities often a losing game, The Salt Lake Tribune conducted an analysis of 89 NBA player charities and found that many of the charities “face a dizzying array of problems.”

The Tribune’s analysis found that the 89 charities together reported revenue of at least $31 million between 2005 and 2007, but only about $14 million of it actually made it to the cause.

The problem facing many player charities is poor planning. Ideally, a player will start up a charity with his own money, with aspirations to turn the charity into a publicly-supported corporation. But more often than not, the charities fail to acquire the anticipated public support and eventually close down due to a lack of funding.

Allen Iverson’s Crossover Foundation
took in $10,000 in 2005 and $5,000 in 2006, and after contributing $11,895 to charity, the organization had a $3,664 loss. Dirk Nowitzki’s foundation increased its revenue from $5,926 in 2006 to $37,020 in 2007, but showed a deficit of $14,879 at the end of 2007. Shaquille O’Neal’s Real Models Foundation closed after failing to file the required documents with the state of Florida. Other players whose charities have been forced to close include Hall of Famer Michael Jordan and Superstar Kobe Bryant.

A big reason for the dissolution of the charities can be attributed to the failure of hiring full-time experts to run the organizations. Instead, players hire family members, friends, or other sports associates to be on the board of their organizations. The Tribune reported only about a dozen of the 89 charities analyzed hired full-time directors. Not only is a board consisting of only family members or friends in violation of IRS rules, but the family members also lack the expertise and experience to manage and organize the charity and events.

Players' pricey, “lavish” fund raising events also contribute to the downfall of many of these organizations. In 2005, Robert Horry’s Big Shot Foundation reported spending $206,086 in fundraising expenses, but no revenue was ever generated. In 2006, Chris Webber’s Foundation poker and golf charity event, “C-Webb’s Bada Bling,” reported spending about $570,561 on the event. However, Webber’s organization reported losing $530, 590 on “special events” for that same year.

The NBA and the NBA Players Association have recognized the problem and begun incorporating informational sessions about establishing and maintaining a charity at the league’s annual Rookie Transition Program. Players are told to “take their time” before setting up a foundation. There are other avenues that players can take to ensure that their donations will end up helping those in need. Players can give checks, or lend their name, to well-established, professional organizations. Or, players can also contribute to one of the NBA team foundations that are established to contribute to various causes. For example, the Giving Back Fund—which superstars Yao Ming and Carlos Boozer are a part of—manages funds for more than 40 NBA, NFL, and Olympic athletes. The organization reported $1.1 million in revenue for 2007 and donated $824,092 to charitable causes.

The lesson from this is do not rush into setting up a foundation without first doing your research, having a team of capable professionals in place, and making sure that all the rules are being followed and the entity is properly funded. But most importantly, if you are going to start your own foundation, find a cause that you are passionate about so that you will be driven to make a difference.