Jeff Raikes, CEO of the Bill & Melinda Gates Foundation, admits that the world's largest charitable foundation needs to improve its internal processes and the quality of its outside partnerships.

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Jeff Raikes, CEO of the Bill & Melinda Gates Foundation, admits that the world’s largest charitable foundation needs to improve its internal processes and the quality of its outside partnerships.

“Our staff also told us that it can be hard to get things done at the foundation,” Raikes wrote in his first annual letter as CEO, a post the Microsoft veteran began nine months ago. “We need to clear some hurdles so we can all focus our energy on the people we aim to help.”

The feedback came from a survey of employees (the first one the foundation has ever taken) earlier this year, Raikes wrote. His letter is part of the foundation’s 2008 annual report, which was released today.

ELAINE THOMPSON/ASSOCIATED PRESS

Jeff Raikes discussed the transition from business to philanthropy in his first annual letter, showing some of the humility and frankness he was known for at Microsoft.

Raikes said his first priority is to “make sure our internal processes run smoothly,” and his second is to “improve the quality of our external partnerships.” (I guess you don’t hone phrases like that without a couple of decades as a software executive. Was he talking about Office?)

“I know we are not doing as good a job as we can in this area,” he wrote. “Starting with me, everybody at the foundation needs to make a concerted effort to listen more carefully to what our partners in the field have to tell us.”

In a time of economic uncertainty, such changes can make each dollar spent have greater impact, said Raikes.

Looking at finances, the foundation paid $2.8 billion in grants and other charitable expenses last year and expects to pay out $3.5 billion in grants and related expenses in 2009.

It reported endowment assets of $29.5 billion, following a 20 percent drop in its portfolio value last year as a result of the economic downturn. In 2007 its assets stood at $38.7 billion.

Warren Buffett contributed $1.8 billion in shares of Berkshire Hathaway “B” stock to the trust that manages the endowment, while Bill Gates contributed about $183 million in investment management services.

But the world’s top two billionaires weren’t the only ones giving money.

“Several donors from the general public made contributions to the trust and foundation,” according to a footnote in the report. Even though the foundation doesn’t solicit donations, it received $10.4 million from individual, unnamed donors in 2008.

Raikes, who grew up on a farm in Nebraska, has had a chance to get back to his roots in agriculture. He traveled to Kenya and Zambia earlier this year to visit projects, including a milk-chilling plant that Gates funded with Heifer International. Raikes said the investments in feed storage and refrigeration are helping African farmers produce more milk with their cattle and find new markets to sell it.

Global health accounted for 65 percent of the foundation’s spending in 2008. Raikes said the foundation plans to spend “tens of millions” to help fund the final phase of clinical trials for a malaria vaccine, which started last month.