Associated Press | September 7, 2010

SEATTLE—The Bill & Melinda Gates Foundation has taken another step toward increased transparency, acknowledging in its annual report that the world's largest charitable foundation is too secretive and hard to work with.

The report, posted online Tuesday, includes the usual financial information and a look at the foundation's plans. But it also offers a glimpse of the organization's attempts to be more open.

CEO Jeff Raikes draws attention in the report to a grantee survey that gave the foundation poor marks for communicating its goals and strategies, and for confusing people with its complicated grant-making process.

Mr. Raikes originally released the survey results in June—a day before Bill Gates made headlines for launching a campaign with investor Warren Buffett to get other American billionaires to give at least half their wealth to charity.

Few but charity insiders noticed the unfavorable review, and the foundation could have let it fade into obscurity.

Instead, Mr. Raikes points out the results for all to see in the annual report, right next to his letter outlining the foundation's priorities for the near future.

The editor of the Chronicle of Philanthropy believes the foundation is clearly making an effort to improve its communications.

Stacy Palmer credits Raikes, with his years at Microsoft Corp., for knowing the importance of customer relations. But she thinks the foundation has a ways to go.

The Gates Foundation also has been criticized for having a small board of directors—the co-chairs and Mr. Buffett—running such a large charitable organization, Ms. Palmer said.

Pablo Eisenberg of Georgetown University's Center for Public & Nonprofit Leadership said the foundation has a moral obligation to share its decision-making process more broadly as it distributes what is partly taxpayer dollars they saved on taxes by giving the money away.

"There's no substitute for other points of view and perspectives around the table when a so-called board is about to make a decision on priorities and programs affecting $3 billion a year or more," Mr. Eisenberg said.

The foundation does have several advisory boards and other consultants, but Mr. Eisenberg considers them a poor substitute for a governing board that includes strong outside voices.

He wonders if a larger board would have chosen to spend so much money on vaccines or would have pushed the foundation to move in other directions, both globally and in the U.S.

"The question we might ask is why Gates has not put a huge amount of money into our own dysfunctional health system," Mr. Eisenberg said. "They could have led the way and led public opinion."

The foundation, which has an endowment of $33 billion, made grants totaling $3 billion in 2009. By far the biggest portion went to global health, where grants totaling more than $1.8 billion were made last year.

Global development including agriculture and financial services for the poor was the next biggest grant area, followed by U.S. education and construction of the foundation's new Seattle headquarters.

In his annual letter, Mr. Raikes says eradicating polio will be a major push next year, both in dollars granted and vocal advocacy.

Global health, particularly vaccine research and distribution, will continue to be the focus, with an eye toward meeting the United National's Millennium Development Goals by 2015.

"The next five years offer a historic opportunity to have an impact on the health and welfare of people in the developing world," Mr. Raikes wrote. "Even in the face of very tough economic times across the globe, I am optimistic when I think about all that we can accomplish together with our partners."

The public and the grantees acknowledge the Gates Foundation is making a difference around the world, but they want to know more, Ms. Palmer said.

"Who decides how much to spend? Who do they consult about the best ideas and the smartest ways to do things?" she asks. "They don't have a lot of openness about how that process works."

Foundation spokeswoman Kate James said the organization is making an effort to be more transparent, both to better its relationship with grantees and to help build understanding and awareness of its efforts.

At the same time, the foundation has been finding its voice on social media. In 2009, it established accounts on Facebook, YouTube and Twitter, including Bill Gates' verified Twitter account that now has more than 1.4 million followers.

Other new elements in the report include videos of staff and workers in the field, a focus on the organization's nonprofit partners and a section on the foundation's "online communities."