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Published August 2006

Gates Foundation takes
businesslike approach

By Don Brunell
Guest Editorial

When Warren Buffett pledged up to $38 billion to the Bill and Melinda Gates Foundation recently, he helped create the largest philanthropic organization in history. With more than $60 billion in assets, the Gates Foundation, which focuses on global health care and education, will be bigger than the gross domestic product of many countries it is assisting.

One of the most interesting aspects of Buffett’s announcement is why he chose the Gates Foundation.

A friend of Bill and Melinda Gates since 1991, Warren Buffett was impressed by the foundation’s careful management and efficiency. In other words, he liked the businesslike approach the foundation takes to philanthropy.

The foundation thoroughly researches potential recipients, distributes money strategically and closely monitors how that money is used. The foundation builds benchmarks and deliverables into each grant, and programs that don’t perform lose their funding. That may sound harsh, but the foundation’s goal is solving problems, not supporting ineffective bureaucracies.

While this businesslike approach hasn’t been adopted by many of the old-line foundations, newer private foundations are using the Gates Foundation as a model. In contrast, many government efforts are still hampered by political meddling and bureaucratic bungling.

For example, many United Nations programs are under fire for waste, fraud and abuse. The U.S. Government Accounting Office reported last year that at least $500 million of the United Nations’ Oil for Food program in Iraq was wasted because of lax oversight and mismanagement. An internal U.N. report issued earlier this year charged that waste and fraud in peacekeeping procurement had cost the world body as much as $300 million over the past five years.

And investigators looking into the federal government’s response to Hurricane Katrina report that up to $2 billion in taxpayer money was lost to fraud and waste. For example, some 1,100 prison inmates across the Gulf Coast collected more than $10 million in rental and disaster-relief assistance. In all, investigators are looking into more than 14,000 cases of suspected fraud.

Sen. Susan Collins, R-Maine, chair of the Homeland Security and Governmental Affairs Committee, said, “The blatant fraud, the audacity of the schemes, the scale of the waste — it is just breathtaking.”

Of course, government agencies take the lead in national disasters, but the private sector plays a major role, as well. U.S. corporations donated $750 million in the wake of the 9/11 attacks, $600 million to aid tsunami victims in South Asia, and $100 million in cash and millions more in goods and services to aid the victims of Hurricane Katrina.

Some critics will question whether a massive private foundation can actually do better and make a difference. Gates and Buffet believe they can and were inspired by philanthropists of the early part of the 20th century.

According to The Economist magazine, earlier American philanthropists John D. Rockefeller and Andrew Carnegie gave away $7.6 billion and $4.1 billion, respectively, measured in 2006 dollars. Carnegie was the great provider of libraries in the United States, while Rockefeller raised the quality of medical training for doctors in America, found a vaccine for yellow fever and drove the “green revolution” in agriculture that ended famine in much of the world and, by some estimates, saved 1.5 billion lives.

The private sector doesn’t have all the answers, and not all private charities are efficient and trustworthy. But the model created by the Bill and Melinda Gates Foundation is one that government agencies and private charities should emulate. After all, the worst consequence of mismanagement is not wasted money — it’s the lives and opportunities that are lost when we fail to help those truly in need.

Don Brunell is president of the Association of Washington Business, Washington state’s chamber of commerce. Visit AWB online at www.awb.org.

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