Gates’s
Charity Races to Spend Buffett Billions
Published:
August 13, 2006
Largely lost in the June
announcement of Warren E. Buffett’s gift of
$31 billion to the foundation were its terms. Mr. Buffet will make the
contribution in annual increments. For tax reasons, starting in 2009, the
foundation must give away every nickel that he contributed in the previous
year.
At the current price of
the Berkshire Hathaway stock Mr. Buffett will be donating, the foundation will
have to distribute $3 billion annually, or a little more than twice what it
distributed last year.
“It’s like having a
second child,” said Dr.
In the next two years,
the foundation plans to double its staff to about 600 people to handle the
additional money, said Cheryl Scott, the foundation’s new chief operating
officer, and it is building a new headquarters complex in Seattle. “We’re very
thankful for the two years he gave us to ramp up,” Ms. Scott said. “I think he
understands that you don’t just turn this kind of thing on and off.”
“I’ve been a m
The foundation has said
it intends to continue to focus its philanthropy on education and global health
while adding a new area, global development, to help the poor in third world
countries. Before Mr. Buffett’s donation, the Gates Foundation had assets of
almost $30 billion.
Dr. Gayle said the
foundation’s way of doing business had evolved from its early days, when it
believed in giving out a few large grants, rather than many small grants, to
avoid building a huge staff and becoming a big institution. Now, she said, it
has a more formal, structured process. Increasingly, it creates horse races
among potential recipients through requests for proposals, more like a
business, Dr. Gayle said.
“That takes time and is
very hard to do piece by piece, project by project when you’re trying to get
that much money out the door,” Dr. Gayle said. “In addition to the traditional
approach of requests for proposals for specific projects, they may need to look
at ways of giving out money over longer terms and turning to institutions that
have the capacity to spend large resources.”
Externally, the
immensity of the amount the foundation will have to give away each year is
reviving debate about its size and influence.
“One out of every 10 foundation
dollars spent is going to have the Gates name on it, and that gives it
influence that is impossible to calculate,” said Rick Cohen, executive director
of the National Committee for Responsive Philanthropy, a research group.
“And as currently structured,
just four people are deciding how to spend all that money,” Mr. Cohen said,
referring to Mr. and Mrs. Gates; William Gates Sr., Mr. Gates’s
father; and Patty Stonesifer, the foundation’s
co-chairwoman and president.
Mr. Cohen and others
said the large amount of money also allowed governments and other donors an
excuse not to spend their money.
In its 2007 budget
proposal, for example, the Bush administration eliminated a $93.5 million
program to underwrite the development of smaller schools, specifically citing
the increase in support for those schools from “nonfederal funds” from the
Gates Foundation and the Carnegie Corporation.
Then there is the issue
of accountability. Foundations by and large police themselves because of the
paucity of federal and state resources devoted to oversight of the nonprofit
sector.
The Gates Foundation
goes further than most in revealing its warts. Its Web site acknowledges
various missteps and challenges, be they unexpected complications in starting
its AIDS-related
program in
“There is skepticism
about whether a foundation can be a responsible and effective steward of this
kind of money,” Ms. Scott said. “For us, it’s a question of teeing up the issue
squarely, because it is a real one, and telling the story as fully and openly
as we can. We do not want to be a black box.”
Others say the critics’
concerns are overblown because influence can be achieved with even small
amounts of money.
“It doesn’t take
billions of dollars to influence public policy,” said James
Dr. Smith said that
although the Gates Foundation grants were typically many times the amount of an
average foundation’s, its donations paled in comparison with spending by
government-financed organizations like the National
Institutes of Health, which has an annual budget of $29 billion.
Foundation officials
make the same point. “It’s still, in absolute terms, a small amount of money,
given the problems we’re working on,” said Raj Shah,
who oversees the foundation’s new financial services for the poor and efforts
to improve agricultural productivity. Mr. Shah said the foundation’s primary
focus was on some 550 million households in the world that survive on less than
$2 a day.
Mr. Shah’s
responsibilities include a new global development program. It is concerned with
making financial and agricultural advances, and water and sanitation
improvements for the poor. In
The new endeavors, which
grew out of a 16-month review aimed at determining how to expand the
foundation’s operations in ways that complement its work on global health
issues, give it new opportunities to spend its money.
Dr. Gayle said the
foundation’s work had been evolving in the past year to include broader goals.
In reproductive health, for example, it has been moving beyond grants
supporting the delivery of services to broader goals like reducing maternal
mortality, increasing access to contraception and providing education to girls.
The foundation had begun
working toward an expansion more than a year before the Buffett gift was
announced. The Gateses have long said they intend to
give much of their fortune, pegged at $51 billion by Forbes magazine, to the
foundation, and Mr. Gates is ceding day-to-day control of Microsoft to devote
himself to foundation work.