The condensed statements of financial position, activities, and grants paid for the years ended December 31, 2008 and 2007, are presented in this section.
In October 2006, to prepare for significant future growth and to separate our grantmaking from the management of the endowment, the trustees created a two-entity structure. One entity, the Bill & Melinda Gates Foundation (“foundation”), distributes money to grantees. The other, the Bill & Melinda Gates Foundation Trust (“trust”), manages the endowment assets. The trust makes contributions to the foundation to fund the foundation’s grantmaking activities and its operating costs.
Though their purposes are linked, the foundation and the trust are distinct legal entities. For this reason, each entity has a separate set of books and undergoes an independent audit by KPMG, our external auditors. KPMG issued an unqualified opinion on the financial statements of each entity as of December 31, 2008, which are presented in conformity with generally accepted accounting principles (GAAP). Audited financial statements for the trust and the foundation may be viewed in the Financials section of our web site.
Although the entities have separate audited financial statements, given their related purposes and our desire for transparency, we believe it is helpful to present information in a way that allows readers to understand the financial position of the two entities on a combined basis. For this reason, the annual report contains combined financial statements with appropriate eliminating entries and significant explanatory notes.
As shown in the accompanying financial statement and grants paid summary, the following are selected financial highlights as of December 31, 2008, for the combined entities:
- Endowment assets available for charitable activities totaled $29.5 billion. This includes a 20 percent reduction in the endowment portfolio value during 2008 as a result of the general economic decline.
- Total revenues for the year included $1.8 billion in Berkshire Hathaway “B” shares contributed by Warren Buffett, and $183 million in investment management services contributed by Bill Gates.
- There is a $5.3 billion liability for future-year payments on already approved grants.
- Grants expense on an accrual basis totaled $3.6 billion. On a cash basis, the combined entities paid approximately $2.8 billion in grants and direct charitable activities.
- In 2009, we expect total cash payout for grants and other charitable expenses to be approximately $3.5 billion, excluding certain one-time capital expenses related to construction of the new campus and development of a new IT system.
Additional information can be found in the 2007 annual information return, called the Form 990-PF Return of Private Foundation, which is available for the trust and foundation on our web site. Each entity will file its 2008 Form 990-PF with the IRS later this year, with copies posted to the foundation’s web site.
Alexander S. Friedman
Chief Financial Officer