Funders: It’s Time to Talk to Our Legal Teams About Power, Compliance, and Trust-Based Philanthropy

Editor's Note: Today we're pleased to cross-post a piece by our colleague Brenda Solorzano, CEO of the Headwaters Foundation. Brenda tackles some of the legal aspects and considerations for foundations in using a trust-based approach. You can view the original post on Grantcraft here.

For philanthropy to have more equitable practices, we must examine and reimagine the way we do our work. Only when funders are proactively working to shift power and build grantee-funder relationships rooted in transparency, dialogue, and mutual learning will philanthropy be a more equitable field.

In theory, this is an approach that most philanthropic leaders can get behind. Trust-based values include leading with trust, centering relationships, collaborating with humility and curiosity, redistributing power, and working for systemic equity. But as foundation staff and leadership begin to operationalize trust-based values, practical questions arise about what these new practices mean for compliance.

As a trained attorney, I have been part of many philanthropic efforts to mitigate risks. What I have learned is this: when we use risk-mitigation as our central framework, we become a more controlling, un-trusting, and risk averse field. At Headwaters Foundation, we do not let compliance drive our grantmaking approaches. Instead, we start by developing trust-based grantmaking practices and then get creative about how to meet compliance requirements.

Our GO! Grants program is an example. GO! Grants are awarded to mission-aligned nonprofits in our grantmaking region. It takes applicants about ten minutes to apply, we can approve the grant in 24 hours and have funds in a grantee’s bank account within two weeks. We are thrilled to be able to provide this kind of support, which eliminates unnecessary barriers and hoops for grantees and meets all financial and auditing requirements for the foundation. Rather than getting in the way, our financial and legal team said, this is a great innovative approach, let’s figure out how to make it work. Key to this is that our CFO, lawyer, and auditors come to this work as partners instead of as “the compliance police.”

I’m not the first one to point out this necessary piece of the puzzle. Jean Tom, Partner at Davis Wright Tremaine LLP, presented a webinar last summer on Legal Considerations for Trust-Based Philanthropy (you can watch it here), and the Trust-Based Philanthropy Project has a resource by the same name (PDF) on this topic. This primer addresses frequently asked legal questions about trust-based philanthropy and offers guidance on how to work within legal parameters to reinforce trust and relationship building with grantee partners. Questions include, "How do I talk to my lawyer about trust-based philanthropy and bring them along on this journey?" and "Is trust-based philanthropy consistent with legal requirements?"

On June 9, the Trust-Based Philanthropy Project will host a trust-based philanthropy conversation with the Headwaters CFO, an attorney, a tax expert, and an auditor who will share how they’ve designed and implemented practices that are both aligned with the vision of trust-based philanthropy and also fully compliant with all legal and financial regulations.

If funders truly want to remove unnecessary roadblocks for grantees, we must begin working alongside our legal and financial teams to understand what we’re asking of grantees and staff, and which of the old ways of doing things perpetuate inequitable practices and create unnecessary burdens under the guise of compliance . I hope philanthropic leaders will join these conversations, and begin to see themselves as part of the solution to making the field adopt more trust-based practices across the board, including their approach to compliance.

Brenda Solorzano (she/her/hers) left her beloved San Francisco to become CEO of the Headwaters Foundation in Missoula, Montana, where she is reimagining and reinventing philanthropic practices to become trust-based from the ground up.