BY EVAN NICOLE BROWN | HollywoodReporter.Com

Troy Warren for CNT #Lifestyle

Wyclef Jean and Madonna provide cautionary tales for stars thinking about founding their own charity: “It’s hard to keep raising money. It’s hard to start and maintain your board,” says Greg Propper, co-founder of social impact firm Propper Daley.

When celebrities are considering starting their own nonprofits — as such stars as Leonardo DiCaprio, Lady Gaga and Beyoncé have done — a myriad considerations come into play in determining whether it’s the best and most effective investment of an artist’s energy and money.

Celebrity nonprofits have landed their founders in hot water; in 2010, for instance, Wyclef Jean’s Haitian aid organization, Yéle Haiti, underwent criminal investigations for accusations of fraud before shutting down in 2012. In 2011, Madonna’s Raising Malawi, a charitable foundation that promised to build a $15 million school in the southeastern African country, notoriously mismanaged $3.8 million raised through donations, and the project never broke ground.

To avoid pitfalls, professionals who work with stars on charitable endeavors recommend taking these steps.

DO THE RESEARCH ON HOW TO AFFECT OUTCOMES

“I think there is often a tendency to sometimes let tactics or ideas come before outcomes. And so then you end up spending a lot of time and money and resources on, you know, PSAs that have a lot of really great celebrities in them but don’t actually get anybody to do anything,” says Greg Propper, co-founder of social impact firm Propper Daley. The more successful and safe approach is to problem-solve backward, prioritizing how and where to allocate funds before asking for them in a public-facing industry.

With his clients, who include John Legend, Kerry Washington and Shawn Mendes, Propper first asks what they care about and the outcomes they’re trying to achieve, then asks questions like, “What are the levers of change?”

Legend, for instance, wanted to tackle the problem of mass incarceration and spent years on what Propper describes as a “multiyear listening and learning tour” visiting prisons and detention centers and talking with impacted people. Taking the time to dive deep into the issues helped Legend become surgical about his game plan.

AVOID REDUNDANCY

The philanthropy market is fairly crowded; there are some 1.6 million 501c3 organizations in the U.S. So creating a new one demands that celebrities be unique in their approach to addressing a problem. Research, along with hiring an adviser, helps stars scan the philanthropy space to find gaps that are not yet filled.

Hannah Linkenhoker, senior political strategist at ICM Partners and co-founder of political impact agency Vivify, says that talent should seriously consider lending their energies to existing groups. “Los Angeles has one of the most robust philanthropic communities probably anywhere in the country,” she says. “We have incredible nonprofit organizations.”

She continues, “When a client comes to us and says ,’I want to start an organization,’ we go: ‘OK, that’s great. But let’s look at who’s out there doing work that’s exactly what you want to do. And let’s figure out if there’s a way to partner with them, if there’s a way to fold you into and support the work that they’re doing.”

BE EAGLE EYED ABOUT FINANCIAL ACCOUNTABILITY

Foundations are public trusts, so they require accountability, with the understanding that misuse of funds or being derelict in any way could balloon into a major liability.

“The public’s assumption is that you are going to be the fiduciary steward of their money and you’re going to do a good job with it. That’s a serious breach of trust if you don’t,” Propper says. Adds Linkenhoker, “There’s a lot of financial auditing, reporting and administrative work, and then you’re not paying taxes, so the government wants to ensure that you’re working in the public good.”

CONSIDER FINDING A HOST FOR A PHILANTHROPIC FUND

In lieu of going the route of creating one’s own nonprofit, Propper often promotes the greater flexibility of using a fiscal sponsor or a donor-advised fund. Legend, Washington and Mendes all have charitable funds or projects fiscally sponsored by the Social Impact Fund; they look like foundations but are actually operated by a sponsor who already has a board and does legal filing, so there’s less risk and labor for the star involved. Likewise, the Entertainment Industry Foundation is a resource for creatives in entertainment seeking to leverage their celebrity for philanthropic impact. EIF hosts and manages nonprofits for a robust roster of such clients as Cher, Charlize Theron and Colin Kaepernick so that navigating the labyrinth of starting and running an initiative is a collaborative endeavor.

BE IN IT FOR THE LONG TERM

“I think it’s really easy to start a foundation; it is incredibly difficult to keep a foundation,” says Propper. “It’s hard to keep raising money, it’s hard to start and maintain your board. And if you look at the number of dormant funds out in the world started by folks in the entertainment community, there’s millions of dollars sitting in those funds not doing anything, because it’s hard to give away the money, and it’s hard to maintain the money.”

Concludes Linkenhoker, “I think that there are a lot of clients who come to it from a very well-intentioned place. But that doesn’t necessarily mean that the best outcome is starting and running your own organization.”