Gates Foundation donated $2.5 billion in 2010

SEATTLE — The Bill & Melinda Gates Foundation gave away $2.5 billion in 2010, but its CEO acknowledged in its annual report released Wednesday that the world's largest charitable group isn't doing a good job making sure recipients know what they're expected to do.

Part of the problem is how difficult it is to get useful, honest feedback from the organizations that get the grants, foundation head Jeff Raikes said.

“If we can work more effectively with our grantees, that will increase the impact that we aspire to,” Raikes, a former Microsoft executive, said in a telephone interview before the report was released.

The Gates Foundation, with assets totaling $37.1 billion, is not alone in the problem, said Phil Buchanan, president of the Center for Effective Philanthropy, an organization that helps foundations break out of what he calls the “bubble of positivity.”

Such feedback is important because philanthropic organizations can't turn to the stock market or sales figures to see how they're performing, Buchanan said.

The Gates Foundation got its first report from the Center for Effective Philanthropy more than a year ago and has been working to improve its relationship with its grantees, Raikes said. The center has done similar surveys for about 200 of the nation's largest charitable foundations in the past eight years and shown them how they compare with each other.

The Gates Foundation, which focuses on global health, world development and education, has not done a good job communicating its goals and strategies, Raikes said, and some grantees are confused by the foundation's decision-making and grant-making process. People using foundation money in the field also said staff turnover has created extra work for them.

The $2.5 billion in grants made by the foundation in 2010 was about $500 million less than 2009. Raikes explained that some grants were delayed until 2011 to give the foundation more time to think about its plans.

This year's grants will be increased as a result, he said.

Raikes acknowledges some communication problems could be related to rapid expansion. The foundation has quadrupled its staff to 927 in the past five or six years and ramped up giving since investor Warren Buffett started adding billions of dollars to its endowment.

In July, Buffett made his fifth annual gift of Berkshire Hathaway stock to the foundation, equivalent to about $1.5 billion this year.

The foundation needs to have enough staff to coordinate with groups working in Africa, Asia and elsewhere, Raikes said, but internal and external communication and training also needs to improve.

Raikes has given his staff until 2013 to improve before he has the center survey grantees again.

“It's not a popularity contest,” he notes. “It's how you build effective relationships.”

The Wallace Foundation, a New York-based organization that focuses on education, is another foundation that has employed the center to track grantee feedback. It was mentioned by Raikes as an organization the Gates Foundation wants to emulate.

“We found that grantees were giving us relatively low marks on being clear about what we wanted them to do,” Wallace spokesman Lucas Held said. “I think the main reason that we care about this is because as a foundation we can only succeed if our grantees succeed.”

Edward Pauly, director of research and evaluation for The Wallace Foundation, said charitable groups need to become more effective because the money they have to spend is so scarce, even for an organization as large as the Gates Foundation.

Pauly pointed out as an example that trillions of dollars are spent in the U.S. from all sources each year on education, but the total spent by all the charitable foundations together on that issue, including Gates, represents less than $10 billion of that total.