Community Foundations and Donor Intent: Learning from the Dispute Between the Chicago Community Trust and the Searle Family

Source: 
Loyola University Chicago

Date

2007

Case Study Sector

Management

Community foundations occupy a unique position among philanthropies. Created to serve the specific needs of a geographically defined community, community foundations are public charities that are legally accountable to the communities they serve. Many serve communities historically under-served by government and private foundations, often communities of color. They receive funding from multiple sources including private individuals, families, corporations, institutions, and even other foundations. Donors to community foundations enjoy greater tax benefits than do donors to private foundations. While community foundations are not legally accountable to their donors, most make an effort to at least be consistent with the “spirit” of their donors, and offer their donors the opportunities to be involved in the grantmaking process. This need to balance community accountability and donor intent offers a unique challenge to community foundations.

There is a growing trend in philanthropy with implications for community foundations—donors are seeking to exert more control over how their donations to foundations are used. Many donors are worried about an erosion of respect for their intent, or “foundation drift,” which pertains to the tendency for foundations to stray from the original intent of their donors. In the last decade, some donors have legally challenged the use of their gifts, a trend that is cause for concern on both sides of the issue. Foundations are concerned about multiple lawsuits from unhappy donors, as well as the potential of lawsuits to infringe on the ability of staff and boards to make grants and set foundation policy. Community foundations seem particularly vulnerable to this trend, given that they receive funding from a wide range of donors, and the financial crises such conflicts can create for them.

This case highlights the significance of the issue of donor intent for community foundations, focusing on one dispute between the Searle family and the Chicago Community Trust (CCT). The case offers important lessons on the issue of donor intent, community foundations, and the implications of such disputes for communities of color and low-resource communities.

This case study appears in the collection Lessons from Philanthropy: A Case Studies Approach: A Report to the Ford Foundation. The case studies are designed to increase the relevance of philanthropy teaching curriculums and better prepare future leaders that are engaged in philanthropy and nonprofit sector work. The overall goal of the present project was to develop case studies that would serve as teaching/learning tools about philanthropy by providing in-depth examination of critical issues and experiences related to foundation decision-making, governance and fund- distribution. Throughout the development of these cases, a special emphasis on philanthropic involvement in communities of color and other underserved communities was maintained in order to improve philanthropy’s work in relation to these populations.

Link

Keyword

  • Evaluation
  • Partnership
  • Strategy

Region

  • Northern America

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