The University of Illinois and a group of conservative donors have parted ways.

Founders of the Academy on Capitalism and Limited Government Fund and UI officials announced Monday they would terminate an agreement that created the academy fund and that would have provided money for teaching and research on capitalism and limited government.

"Despite the good intentions of the donors and the university, there were structural incompatibilities between the fund's operational mode and that of the university," said Chancellor Richard Herman in a statement released Monday morning.

The fund instead will become a non-profit foundation separate from the university. It will still offer grants to support programs and research.

"This academy will be an independent, off-campus corporation which will undertake its grant activities in the same fashion as the numerous other foundations which already provide support to the University of Illinois," according to a statement released by the group's advisory board.

The academy fund was created in July 2006 as a fund within the UI Foundation, the fund-raising arm of the university. It debuted publicly last September with a conference that included speakers such as Steve Forbes and Robert Novak.

But early last fall some faculty raised questions, such as whether it was an academy or a fund, and they expressed concerns which have ranged from academic freedom to quality control and shared governance.

Chancellor Richard Herman assembled a committee to address those concerns and work with the donors. Discussions between the two groups had been ongoing since last fall.

"The committee recommended a new agreement, and worked with fund officials for nearly a year to strike a deal that addressed the university's concerns," said UI law Profeesor Thomas Ulen, who chaired the committee.

"It was a good faith effort on both sides and there were never any hard feelings. I don't doubt there will be interest on this campus in the grants and some of the other activities the academy will sponsor."