John T. Casteen III
July 23, 1999

In addition to the customary annual items, this report details progress on new initiatives presented in the July 1997 report as well as the planning program developed last spring with the Board's concurrence. This report should be read in conjunction with the 1998 and 1999 State of the University reports (copies attached) and my annual published reports to the general public. My personal report and assessment of progress on the current five-year plan appear at the end of this document.

This report also deals with several long-term initiatives that have already produced benefits. In accord with the quality assurance/quality improvement program begun at the Board's initiative in the early 1990s, efforts continue to replace institutional habits of reaction with a culture that deliberately designs, directs, and uses change. This change process has been most visible in our managerial units, but it has been at least equally beneficial in academic and clinical departments. TQM in the hospital, the University Seminars program for undergraduates, and technological advances in the libraries reflect the progress made in this regard.

Reduced state support has compelled a healthy sense of entrepreneurial necessity in many of our departments, but other causes have also contributed to contemporary receptivity to productive change within the University. Today's faculty leaders are the best informed and most creative colleagues with whom I have ever worked. State deregulation, national recognition of excellence in core academic programs, a maturing capacity to raise private gifts, success in attracting other non-state revenues, and maturing systems of self-assessment and continual improvement — these and other current trends are making the University more self-sufficient than it has been since Jefferson's time.

Several current prospects or challenges can yield early benefits. These include the work of the commissions drafting strategic and long-range plans for the fine and performing arts, science and technology, international programs, and public service and outreach. They include also developing an integrated administrative computing system to replace outdated, often stand-alone systems in both the Academic Division and the Health Sciences Center, various managerial reforms consistent with the Board's responsibilities under codified autonomy for the hospital and related clinical enterprises, and new directions for strategic fund raising in the months immediately following December 2000.

Opportunities always imply risks and costs. The challenge for the near future is to choose among a range of options and to act boldly when the projected benefits of success make the risks and costs worthwhile.

General Organizational Matters

We are a large organization comprising many more-or-less independent sub-units. In some respects, our organizational structure is an anomaly. The organizational model adopted in 1993 by the Board has matured into a management team and style that are efficient, seasoned, and astute. It is also complex. Our 1998-99 expenditure budget is $1.09 billion, of which we generate $939 million from sources other than state tax accounts. I know of no public university anywhere that derives such a small proportion of its total expenditure budget from state tax sources, and I doubt that any has ever existed.

We employ more than 11,000 persons, of whom some 1,800 are instructional or research faculty. We enroll 22,850 (headcount) students, of whom 18,463 study on the Grounds here in Charlottesville. We have no fewer than 577 buildings or major facilities. Approximately 100 have been built, substantially remodeled, or acquired since 1990. Virtually all of these projects have required unconventional financing because conventional state surplus moneys have not been available.

Complexity of this order demands continual rethinking of roles, responsibilities, and functions. Many of the organizational changes accomplished these last two years reflect emphases on service, operational efficiency, outreach to the community, and the University's growing stature. The declining portion of our total expenditure that goes to managerial support (by various methods of analysis, 8% - 10%) has been, at least in recent times, a useful gauge of effectiveness in doing more with less. No Virginia public institution comes close, and national data show that no other major university has a comparably lean operating budget.

Significant organizational and operational changes during the last two years include the following:

In March 1998, Gene Block became vice president for research and public service. This appointment reflects the research's growing importance here — as a core scholarly venture, as a source of revenue, as an engine for economic development, and as a vehicle for attracting top faculty. Mr. Block's charge is to increase research funding, to promote the transfer of research products into the marketplace, and to develop sound academic and research plans for the research parks. The emphasis on public service reflects determination to promote faculty work that benefits Virginia.

(Funding for sponsored research is a fair gauge of our success in scientific and medical research. This year, faculty members qualified for approximately $183 million in externally funded competitive research grants, a 12% increase over last year. Since the state budget cuts of 1990-92, sponsored research grants have come to be the largest single source of the University's revenue. These funds, including the indirect costs allowances that accompany them, support graduate student fellowships, new science facilities, and research opportunities for undergraduates. More than half of our sponsored research is in Medicine. Graduate Arts and Sciences and Engineering account for most of the remainder. In the course of the coming year, we will reexamine how indirects are allocated within the University. This question matters because it helps define our support apparatus at a time when we are working to improve our programs' competitive standing.)

Two significant name changes have occurred. First, effective July 1, 1999, the name of the Health Sciences Center was changed to U.Va. Health System, a title that matches current practice elsewhere and accurately describes the relationships that link the schools of Medicine and Nursing, the Medical Center, the satellite clinics, and the Health Services Foundation. Second, effective July 1, 1999, Clinch Valley College of the University of Virginia became The University of Virginia's College at Wise. Following negotiation, the Board of Visitors, the General Assembly, and the Governor approved the change.

Refinancing the University

In 1999-2000, the state appropriation from tax revenues is projected to be $170.3 million, or 14.2% of the total budget of $1.2 billion. General fund revenues for 1999-2000 have increased by some $6.7 million to fund a 20 percent reduction in in-state undergraduate tuition and required fees. This is a fund replacement, not an overall increase in state support. Non-state revenue sources, including private support, research grants, and the tuition paid by out-of-state students, continue to outpace state revenues in financing growth and programmatic improvements. Out-of-state students' contributions in excess of 100% of our costs incurred in educating them are particularly important in the mix.

Several state undertakings may change the revenue picture. The General Assembly, which by law controls the University, is conducting a study of financing aimed at constructing a funding model to replace Appendix M, the formula by which higher education appropriations were determined before 1990. The state ceased using Appendix M at the beginning of the last recession, and the Budget Office no longer maintains the model. The Governor's Commission on Higher Education appears to be examining financial matters as well. As the Code requires, SCHEV is moving through the biennial process of adopting its strategic plan, and in the process this agency appears to be proposing a variant of the performance funding model first proposed by Governor Allen at the end of his term. These several efforts differ from all previous state planning efforts in that they are apparently not examining the state's role in (or responsibility for) supporting new programs that serve the state's social or economic needs. We do not know what impact these initiatives may have on upcoming sessions of the General Assembly.

The growing disparity between Virginia's per student appropriations of tax dollars and appropriations in other states underscores the importance of sustaining and enhancing the non-state sources of revenue to support academic programs. The Rector and Visitors' component of the endowment has grown from about $400 million in 1990 to somewhat more than $1.1 billion today. The total endowment, including the foundation endowments, is now well above $1.5 billion. Before the campaign began, the endowment contributed about $16 million a year to the operating budget. In 1997-98, the endowment contributed $47 million. Most of those private dollars went to three core activities under the Board's direct control: new programs or changing conditions; the faculty salary account; programs that benefit students directly, especially financial aid programs.

We now have the fifth largest endowment held by a public university. The larger ones include three university system endowments (University of Texas system, University of California system, and Texas A&M University System and Foundations) and the freestanding University of Michigan. These other large endowments are growing rapidly, and all of these institutions receive significantly more generous state tax support than we receive. Our administrative challenges are to sustain the current rates of giving beyond the campaign and at the same time continue to effect managerial economies while building academic strength in disciplines identified as essential to the future. The Board's challenges are to achieve endowment total returns at least as strong as those achieved by other large endowments while continuing to support our fund-raising programs. Our institutional stature is currently in jeopardy because state tax support compares so unfavorably to other states. All of us must understand that to fail on any of these challenges is to incur for the University serious consequences that will appear quickly and remain for a very long time indeed.

The Physical Plant

In this decade, we have carried out one of the most vigorous and successful plant renewals of any major American university. The expenditure totals some $340 million for new construction and renovations. Yet the bulk of what has happened here has not been financed by the state. Of the component that was financed by the state (about 16 percent), the lion's share was financed directly by the voters through the 1992 General Obligation Bond bill. With the exception of only one year in this decade, recent governors and the General Assembly have not proposed the customary surplus-based capital outlay programs.

In fiscal 1998, physical planning and construction continued at a brisk pace, and Virginia firms and suppliers have competed successfully for the majority of our work. Some 187 contracts totaling over $15.6 million for architectural and engineering services were awarded. The projects include the Scott Stadium expansion, Clark Hall renovation and expansion, the Biomedical Engineering and Medical Research Building, and the Clinch Valley College Football Facilities. Design work on the Special Collections Library, the Health Sciences Center Library, and a 140-bed student residence is progressing. Architects also have been selected for a student activities building and a 100-bed student residence at the University's College at Wise.

As important as new facilities are if the University is to grow and improve, we must also continue to make disciplined reinvestments in the existing plant. The trend in our capital outlay appropriation to support renovation projects is healthy. We have seen a modest increase in the maintenance reserve funding from the state; further increases are essential to maintaining our physical assets, including historic structures. Our reinvestments over the last few years have resulted in improved facilities for our students, faculty, and staff, as well as energy cost avoidance of over $4.6 million per year for the University.

In fiscal 1998, we awarded 53 construction contracts totaling $24.7 million. The projects include Scott Stadium North End Zone Site Work, Scott Stadium Scoreboard, site preparation for the new 140-bed student residence, Medical Center Stormwater Management and Parking Garage, Chemistry Building Chillers, Clinch Valley College Zehmer Building Renovation, and the Clinch Valley College Football Stadium.

Completed projects have included the Newcomb Hall Renovation and Expansion and the Law School Expansion. These projects involved innovative techniques for managing design and construction of large undertakings. At Clinch Valley College, the Educational Development Center (Commonwealth Hall) was occupied in Fall 1997 and the Wyllie Library Renovation and Addition, in winter 1997-1998.

We continue to improve classroom space by installing enhanced lighting, state-of-the-art technologies, and other improvements. A typical project (for example, the New Cabell Hall project) included installing a permanent multimedia projector and upgrading lighting in five classrooms. A Mechanical Engineering Building auditorium has been converted to use as a high technology teaching space. A major lecture space in Clark Hall has been converted to use as a multimedia auditorium by installing a computer-controlled multimedia sound and projection system, new lighting, new ceiling system, and a new floor.

We will open the Robertson Media Center in Fall 1999. Conceived by and named for Tim Robertson and his wife, Lisa, this project involves both a physical site in the renovated third floor of Clemons Library and an academic program built around a new professorship in modern media studies. The Alumni Board of Trustees and other private sources are providing additional equipment and furnishings for the Center. Arrangements are not complete, but a private source has also offered to underwrite the hiring of a distinguished practitioner from the contemporary media to put into place the Center's initial program. The library will oversee operation of the Center. The initial appointment to the professorship, which can be assigned to any school within the University, is in the College. As it develops, the program will incorporate all aspects of media studies, traditional and modern, and will provide opportunities for advanced training for students and faculty alike. It will also generate special programs for practitioners, scholars, and the general public.

We continue the building program for the Health System. Planning for two new biomedical research buildings for the School of Medicine has begun. These projects are related to the growth of externally funded research in Medicine. Current projections suggest that funds available for biomedical research will double over the next five years. Work continues on the $19 million parking structure (650 cars) in the Medical Center. This self-financing project addresses deficiencies in the availability of parking for patients, visitors, and staff.

Ground breaking for the new Orange Medical Center (24,000 square feet) occurred in July 1998. This project is a component of the program to consolidate outpatient services in internal medicine, family practice, pediatrics, radiology, gynecology, obstetrics, cardiology, dialysis, radiology, and dermatology.

Planning and Assessment

Our programs of planning for change and accounting for progress remain among the nation's best, and in many ways they have improved in this period. These efforts have allowed us to make tough choices in difficult times, and they have prepared us to make similarly difficult decisions about building new strength in areas of opportunity. Few universities can match the regular process of self-scrutiny, of asking the hard questions and of answering them honestly and accurately, that characterizes the University's institutional culture nowadays.

We began this decade with the first systematic institutional planning undertaken since Jefferson's time. The Plan for the Year 2000 (published in 1992) and the more ambitious institutional plan that comprised the central section of our 1996 self-study for SACS reaccreditation have generated improvements in numerous academic programs. In addition, the processes of making, updating, and monitoring these plans have themselves contributed to faculty and administrative morale, drawn faculty and Board members together in ways not previously possible, and improved general management practices. We track and publish progress on these plans, and on the related state restructuring plan, annually. These progress reports are accessible from the Provost 's web page.

Highlights of the restructuring effort were reported in a separate brochure published in December 1998.

The next phase of long-range planning, which the Board endorsed in May 1998, is now under way. This project focuses currently on four areas: science and technology; the fine and performing arts; international activities; and public service and outreach. Other great American universities excel in all of these areas. None has previously received serious, analytical attention here. This work and the next phase, which addresses financial strategies to underwrite excellence in endeavors that do not receive sufficient state tax support, will require serious and sustained effort over several years. The end results will be a blueprint for investment, fundraising, and growth for the next 20 years. A fifth commission charged with handling emerging needs and priorities will begin its work in fall 1999.

Other kinds of programmatic assessments are ongoing. Five basic science departments underwent peer review this year. Engineering departments are being evaluated now. The results of those assessments will inform the work of the commission on science and technology; they also will guide departments in making improvements in the short term.

Planning for the proposed Carr's Hill Arts Precinct has seen mixed success this year. At its best, it entails careful assessment of current needs benchmarked to successful programs and practices at peer institutions. It, too, feeds information to a planning commission. At its least effective, this exercise has not yet provided useful information to support fund raising. The lack of usable information on construction needs has been a painful and visible shortcoming. Mr. Sandridge is overseeing the employment of experts who can address this deficiency in anticipation of future fundraising opportunities.

Other recent assessments or planning exercises have generated various useful results. The task force on alcohol abuse found that event programming for students had deteriorated over about five years. Because this programming is particularly important to the cultural and social life of a residential college, we have joined with students to develop a broadly accessible program of student activities extending from the first through the last day of the academic year. Mr. Harmon, Mr. Sandridge, and student groups are working together to provide resources and leadership. The task force also identified weaknesses in the former program for orientation of new students. The new orientation program is mentioned elsewhere in this report.

The longitudinal assessment of the class of 1992 told us that recent alumni saw too little University support for academic advisement of students, and too little recognition for successful advisors. Accordingly, this year's Harrison Awards went to faculty members who have excelled in advising undergraduate students.

As a result of a visit to the School of Medicine by the Liaison Committee on Medical Education (LCME), which is the accrediting body, Dr. Carey has assessed programmatic resources and activities in Medicine. This process identified comparatively low state support for undergraduate medical education as a core, recurring problem. We are using this information in presentations to the General Assembly and the state budget agencies.

Work on the physical site/facilities master plan is nearing its conclusion. Revised every 10 years, this plan subordinates the University's physical development to the long-range academic plan, which is the institutional master plan. The new plan, which the Buildings and Grounds Committee approved on June 15, 1999, is built on commonly understood core principles. These core principles will, in turn, inform more detailed precinct plans, which are developed in response to specific shorter-term priorities as they arise.

In addition to addressing academic and contemporary community issues, the new plan adheres to Jefferson's original conception of the Central Grounds. Implications of this commitment include sustaining a geometrically ordered community that does minimal violence to its natural setting; organizing the environment for collegial work around clearly defined paths and walkways, tying together the architectural and landscape components so that the North Grounds develop close physical links to the Central Grounds, and the East Grounds to the West Grounds; locating teaching and residential spaces in close proximity; organizing component spaces so that they belong to a greater whole; and making the physical design always reciprocal to its academic purpose. These purposes have been developed in consultation with community members, students, faculty, and the Board.

Decentralization and Codified Autonomy

Many of the pilot decentralization projects authorized by the General Assembly since 1994 have been codified. Several pilot projects, particularly in human resources, are in progress in the academic division. The codified autonomy granted to the Medical Center in 1995 has been fully implemented this year. Improvements have occurred in hospital purchasing and contracting, human resources management, including benefits and compensation for employees, and capital project review and construction. These changes enabled gain sharing to be implemented for faculty and staff for the first time in August 1997. A new Clinical Faculty Remuneration Plan links faculty remuneration to productivity. (A potential challenge to productivity-based compensation has been posed in recent weeks by federal officials.)

These changes define the new partnership that we have sought with the state. We remain accountable to the state in essential ways, but we are generally not constrained by state regulations devised for purposes not appropriate to our functions and structure.

The Capital Outlay pilot program initiated by the General Assembly in 1996 and implemented by the BOV in December 1996 has streamlined earlier processes and reduced the project timelines that apply to conventional General Fund capital projects. We presented an interim report in November 1997 on this pilot program's outcomes: significant savings for the University, its consultants, and contractors. We are seeking continuation and expansion of the delegations provided under the pilot program, and we anticipate receiving support from appropriate state entities.

UVIMCO

As a component of the larger institutional strategy to make the most of non-tax resources, the Board's Finance Committee established the University of Virginia Investment Management Company, effective July 1, 1998. At our request, the General Assembly passed legislation to permit the Board's assessment of managers' capability and performance records to replace the rule of accepting the lowest bid for investment management services. This innovation brings external expertise to the business of managing an endowment that exceeds $1.5 billion and that will continue growing rapidly because of Capital Campaign pledge payments. UVIMCO manages both the endowment and non-state investments. It retains investment managers directly. The structure shows promise both here and at other universities that have adopted it.

Programs to Improve Internal Management

Colette Sheehy is responsible for Process Simplification, which began as part of the restructuring/constant improvement program. This year, we have put all non-automated paper forms on the World Wide Web as a means of eliminating paper forms or making more efficient use of them, and have outsourced our mail operations to Pitney Bowes Mail Services. Over five years, the anticipated saving from mail outsourcing totals some $700,000. Work in progress includes analysis of the process for administering research grants and contracts.

The new strategies under consideration include locating the research services and technology transfer functions under the vice president for research and public service and creating a new position classification to assist departments when they prepare and submit non-standard grant proposals. Each of these strategies has to do with the larger institutional purpose of expanding research revenues and activities while making the support cost efficient.

The Integrated Systems Project is a multi-year upgrade of systems software for various business applications, including human resources, students services, and financial administration. By the end of the year, we will have selected both software and information services vendors. Bill Randolph became full-time project director this spring. He reports to Leonard Sandridge.

In 1997-98, we completed Phase I of the Year 2000 compliance program. Phase I included all central systems software. The student information system and the personnel/payroll system were identified in Phase I as areas of significant risk. The exposures in the student system have been addressed this year. Work is progressing on the personnel/payroll system. Phase II (department-based systems) was completed in December 1998, four months ahead of the state's compliance deadline.

The effort to expand partnerships with local business and government entities continues to produce good results. Facilities Management personnel now make regular visits to contractors and consultants in their home offices to foster better relations and to identify and resolve potential problems with claims and billing procedures. "Inforum '98," an open house for consultants interested in working with the University, occurred in July 1998. 150 architects and engineers, representing 60 firms, came to confer with our project managers about ongoing work and principles of engagement. Some 90% of the participating firms were from Virginia.

Public Relations

External review teams have evaluated University Relations' dealings with the press and the general public. The reports have been generally positive, but with recommendations for change or improvement. Some changes have already occurred; others are coming. Staff for science/technology (national and state media), public service/economic development (state media), the arts and other planning initiatives, special events, and major gifts has expanded. Each expansion has produced early benefits in the form of national coverage of the Nobel Peace prizewinners' conference, the conference on Sally Hemmings, and similar events.

Some changes are functional and ongoing: redesigned web sites; a web-based comprehensive calendar and news service for the media and the public; expansion of Inside UVA, which has become uncommonly successful as a medium for internal communication and has also attracted an external audience; incremental expansion of our low-power television station and other TV activities. Regular meetings of University personnel (including foundation and Alumni Association employees) with PR assignments began this year as a means to disseminate and exchange information.

The Summer Orientation Program for Incoming Undergraduates

Orientation for new undergraduates has been overhauled this summer. The need for changes was identified in the report of the task force on student use and abuse of alcohol. The changes also respond to the Faculty Senate's determination to strengthen intellectual community on the Grounds and to student complaints about the quality and availability of faculty advising. Summer orientation sessions now cover the basics of settling into life as a student, such as registering for classes and obtaining IDs. Parents come with their daughters and sons for two days, and a parallel program is offered for parents. Fall orientation will focus on academic work and on the University experience, with substantial emphasis on the Honor System. Eleanor Sparagana has become director of orientation.

Public Service and Outreach

We have developed new public service programs of several kinds, none with new state tax support. Because the ninth district (southwest Virginia) lacks adequate healthcare programs, University personnel continue to fill needs there. Using Virginia's Generalist Initiative to increase the number of generalist physicians in under-served areas, we have led in placing new practitioners in the region. In a related undertaking, we have developed a new MCAT preparatory course (to be offered at the Southwest Virginia Center for Higher Education in Abingdon) for southwest Virginia students who want to attend medical schools.

Two new Charlottesville programs are designed to meet identified needs in the state's workforce and population. Beginning fall 1999, the new Bachelor of Interdisciplinary Studies program will serve mature adult students who have completed the equivalent of two years of general education. This program, which is our first undergraduate degree program for part-time students, is built on existing courses and programs in business, information technology, and other concentrations. Also in the fall, the McIntire School's master's degree program in information systems will be offered in an executive format. Professionals who wish to obtain a master's degree while remaining on the job may do so over a 12-month period. Interest in both of these programs exists in other parts of the state. We are now beginning analysis of the feasibility of offering these programs through one or more of the existing regional centers.

Analysis of the proposal made by the Qatar Foundation continues. Should the project go forward in the format originally proposed, the new campus will be the first of its kind operated by an American university.

The Associates Program, a successful effort to extend the University's constituency by engaging thoughtful citizens in serious discussions with faculty members, is in its eighth year. In recent years, some 30 faculty members have traveled to Northern Virginia, Norfolk, Roanoke, and Richmond to speak and lead discussions with University alumni and friends. Recent topics have included: Challenges for Democracy in the United States; The New South: Myths and Realities; Societal Conflict, Change, and Continuity; Transcending National Boundaries: Challenges and Responses; The American Century; and Myths and Visions at the New Millennium. This program has generated substantial financial support from persons who have no other ties to the University. The planning commission looking at public service and outreach is assessing how we might expand this program or use it for other purposes.

Virginia Gateway, a joint venture with PVCC and the state's Center for Innovative Technology in Northern Virginia began in December 1997. Its purpose is to promote use of faculty expertise, research products, technology, and information in this region. Its office is on Charlottesville's downtown mall, near the Chamber of Commerce and several start-up technology companies. From all appearances, it is working.

Governmental Relations

Stuart Connock will retire next year after some 10 years as our state relations head. We are evaluating various models for managing state relations in the future with the purpose of making changes in conjunction with Mr. Connock's departure. We hope to have a replacement identified in 1999. We are also evaluating the effectiveness of the current federal relations consulting contract with the intention of determining whether this model or another is best suited to achieving the University's long-term federal relations goals.

Fund Raising

The Campaign for the University of Virginia continues to exceed targets. Recent months have shown particularly large increases over prior experience and over the campaign goals. Following Josh Darden's term as campaign chair after four years of selfless and dedicated service, Tom Saunders and Ed Mitchell became co-chairs in 1998.

In February 1998, the Board raised the campaign goal from $750 million to $1 billion. In January 1999, we passed the kickoff goal of $750 million in outright gifts and pledges, 17 months ahead of schedule. Although the Campaign is in its sixth year of active solicitation, Fiscal 1999 will be the best year in overall campaign performance, this during a period of the campaign when a plateau in giving or even a decline might have been expected. The campaign total at the end of May was $894.1 million ($795 million in gifts and pledges, $99.1 million in deferred giving). The June (year's end) numbers are not yet complete, but Mr. Sweeney's running tally shows that the June report total of more than $920 million. The year's end report will show that we are approximately 92% of the way to the goal, with 18 months remaining in the campaign. The year's average per month in outright giving will be $12.9 million, which is essentially the same as Fiscal 1996, the campaign kickoff year, which was our best year ever. If both outright and future support are counted, the projected total campaign growth during Fiscal 1999 will be $181.1 million. This exceeds by some $11 million the performance in Fiscal 1996, when $169.6 million was raised.

In addition, a bequest received in June will take the future support total above the campaign goal of $100 million in future support. Future support has now exceeded the "stretch" goal set in Fiscal 1992.The current projections call for $130-$140 million future support by campaign's end.

When all accounting is completed from the related foundations, philanthropic cash flow from all sources should reach $126 million for Fiscal 1999. This will be the second largest year ever, $3.6 million less than last year's record totals. Pledge payments continue to run ahead of schedule. Second and third-round gifts continue to be commonplace, and often large.

The $1 billion goal, to be met by the end of the year 2000, will allow us to address needs and priorities that have arisen since the campaign began. Among them is the match for Carl Smith's $23 million challenge gift for the expansion of Scott Stadium. Among the schools that have increased their goals as they have succeeded in the campaign and also succeeded in new planning ventures, are the College, the McIntire School, and the Nursing School.

In May 1998, the University met the $1 million challenge from the William R. Kenan Jr. Charitable Trust for the restoration of Pavilion VII. We are now completing the raising of matching gifts for the Kenan Trust's related $500,000 challenge for educational programs related to the Central Grounds.

A novel $1.5 million challenge gift from Tom Saunders and his family brought nine new endowed chairs in just over two weeks for Architecture, Education, and Nursing. The Saunders challenge created a sense of urgency by making $750,000 available on a first-come, first-served basis. We are exploring the possibility of similar challenge gifts from other donors.

John Kluge's gift of a collection of Aboriginal art and artifacts, considered the most significant and extensive of its kind outside of Australia, is valued at $5 million and contains 1,570 objects. This gift includes Mr. Kluge's library on aboriginal art and a detailed electronic catalog, which supports public and scholarly access to the collection. And it underwrites publication of an illustrated catalogue in both hardbound and softbound editions. Together, the components of this gift have made the new museum at Pantops uncommonly successful, and they have set standards for other forms of museum and archival planning within the University.

Other notable gifts include IBM's gifts of funds, equipment, and technical expertise for biomedical engineering, the McIntire and Darden schools, and the Institute for Advanced Technology in the Humanities; an anonymous gift of $13.5 million for the Darden School; $10 million from the Whitaker Foundation for a biomedical engineering building and program support; an anonymous $10 million challenge gift for the renovation of Clark Hall; $10 million from George David for the next phase of Darden's master plan, programmatic enhancement in entrepreneurial leadership, technology initiatives, and alumni career services; MCI WorldCom and Cisco Systems' gift of Internet routing equipment valued at more than $1 million for a national pilot project to train the next generation of Internet engineers; The W.M. Keck Foundation's gift of $1 million for the further development of a high-speed, high resolution microscope that will allow visual scrutiny of dynamic biological processes in living cells. The Keck gift merits special attention because it shows promise of leading to better understanding and treatment of human diseases and injuries such as the spread of tumors, origins of birth defects, and spinal cord trauma.

In a 48-hour period in June 1999, we received two anonymous pledges totaling $23.3 million. One of these gifts completed funding for the new Special Collections Library, enabling work to begin in summer 1999. Details of the other gift are not now available. We believe that the anonymous donor will also make additional gifts, perhaps after the campaign, to support the Scott Stadium expansion project.

In the same period, we received an additional anonymous commitment for $20 million contingent on timely commencement of construction on the concert hall proposed as part of the Carr's Hill Arts Precinct. Planning deficiencies mentioned previously prevented our meeting the condition of this gift. Accordingly, we are not including this figure in current campaign totals. Assuming that the additional planning now underway generates acceptable results, we will consider making a renewed approach to this donor.

As the campaign proceeds, we are cultivating the next generation of volunteer leaders and lead donors through Virginia 2020: A Century of New Leaders. Each semester, beginning in fall spring 1998 and continuing through fall 2000, approximately 20 different couples identified from graduation lists for classes post-1970, will gather to participate in focused exercises related to planning for the University's future and how to achieve it. Events have been held in Tucson, Martha's Vineyard, Kiawah Island, and Charlottesville. The first 1999 session will be held in Park City, Utah, at the beginning of the Brigham Young football weekend.

In addition to thoughtful, provocative, and constructively uncomfortable advice, we have received our first major gifts from this new generation of donors. John Griffin, a hedge fund manager who teaches a course in the McIntire School via distance-learning technology, has made a $1 million commitment for a new center to develop course curricula and support faculty research on creative approaches to investing. Jeffrey C. Walker has created a $3 million endowed professorship in the McIntire School dedicated to the study of growth enterprises. Mr. Walker's is the largest gift we have received for an endowed chair. These two gifts reflect Virginia 2020 planning concepts and reasoning about the necessary scale of future gifts.

One Virginia 2020 initiative merits special notice. A core group of alumni who lead Internet companies, including Yahoo!, Infoseek, MindSpring, and iXL, are working with us to organize a national Internet conference in Charlottesville in November. This conference will bring the extraordinary number of our alumni in high-technology companies to the Grounds to work with one another and with students and faculty on the commercial future of the Worldwide Web in the presence of a global audience.

The Health System passed several of its goals this year. It was the first component of the campaign to pass $100 million in total funds raised. It reached its campaign goal of $125 million two years ahead of schedule, accordingly we raised its goal to $160 million, which has now been achieved as of June 30. The Health System Campaign now projects a campaign success in the $180 -$200 million range. Some 75 percent of the medical faculty contributed $4.3 million to the campaign with 13 departments achieving 100% participation. Nursing reached its campaign goal of $5.85 million, and we have raised its goal to $10.2 million. Nursing now operates as part of the University of Virginia Health System development function. Its goal is incorporated into the overall Health System goal.

Reunion and general alumni giving remains strong. The Faculty/Staff Campaign has achieved over 50% participation, with many departments and Schools showing 75-100%, and total dollars raised reaching nearly $6 million. This component of the campaign has generated an endowment to support tuition grants for children of university employees attending the University. The first scholarship was awarded last year.

Research Parks and UVAF Property Acquisitions

A regional headquarters for Pharmaceutical Research Associates International, Inc., was completed at the North Fork Research Park in 1999, and infrastructure for the entire park will be completed this summer. The infrastructure work includes a one-mile-long internal road, a utility corridor, and an entrance off Route 29. The park's master plan and design code have won a major architectural award.

A new rehabilitation hospital, which was developed as a joint venture with HealthSouth, opened last summer at the Fontaine Research Park. It includes a 50-bed acute care rehabilitation hospital and inpatient rehabilitation services as well as an adjoining physicians' office building. In a separate project, a medical office building for the neurological sciences was opened. Construction on the new headquarters building for the Association for Investment Management and Research will be completed this fall.

The University of Virginia Foundation has completed several major property acquisitions, including the Cavalier Inn (purchased to secure the integrity of the University boundaries), the Cresap Apartments (purchased for future University expansion), Westover (a life estate actually acquired over a decade ago, but only recently transferred), Kenwood (transferred to be leased to the Thomas Jefferson Memorial Foundation under an existing long-term arrangement), the Worrell properties at Pantops (donated by Eugene and Ann Worrell for support of our academic mission), and the Currie Farm (to be held as a long-term investment for the University's benefit).

The Worrell and Westover houses have been renovated. The Pantops mansion houses the Kluge-Ruhe collection of aboriginal art, and Westover is currently being leased pending future University uses.

Transitions

Although large numbers of faculty who were hired during the University's rapid expansion in the 1960s and 1970s have already retired, the annual number of retirees remains high. The Board has recognized this year's retirees, who share the scholarly distinction that has characterized similar groups in recent years. In addition, 1998-99 saw the departures or retirements of several persons who have worked directly with the Board. These include Ray Bice, who retired after years of service as faculty member, Board secretary, and most recently, University history officer; Bob Canevari, dean of students for some 30 years; Polley McClure, the vice president and chief information officer who directed the development of one of the nation's premier information technology systems; Mike Halseth, director of the University Hospital; and Don Detmer, University professor and former vice president and provost for health sciences.

Newcomers working directly with the Board include Ted Snyder, dean of the Darden School, and Karen van Lengen, dean of Architecture. In addition, Dick Miksad was reappointed dean of Engineering and Applied Science, and Bob Scott was reappointed dean of Law. Penny Rue has become dean of students, replacing Bob Canevari. Ms. Rue was previously Georgetown University's associate dean of student affairs. Dr. Robert Reynolds has become interim vice president and chief information officer. Other new appointments include Marlene Bond, associate vice president for Health Sciences Nursing; and Nick Carter, chief operating officer of the University Hospital.

My Personal Report

Between July 1, 1997, and June 30, 1999, I traveled some 361 days, of which 231 involved overnight stays. Approximately one-third of my travel in this period was for the capital campaign. Approximately 44 percent was in furtherance of external relations at the national and state level, including state and federal relations, meetings of educational associations, and accreditation duties. Most of my travel involves more than one purpose. The numbers reported deal only with the primary purpose of each trip.

The current phase of the campaign is driven by a strategy that determines how certain of my travel days are committed. For example, we are making concerted efforts to build our alumni constituency outside the United States. Most of this work is done by other persons, most notably Darden School faculty and development officers. In 1997-98, I attended alumni events in three Asian countries, and in England, Switzerland, and France. In 1998-99, I did less of this kind of travel, but I continued to make cultivation and solicitation visits to a small group of large-gift prospects whom I had to reach in other countries. Mr. Sweeney and his staff are devising plans to expand our contacts with alumni overseas. I will need to pick up my share of this work in the coming year.

Formal contacts with alumni groups have been important in building support for the campaign. In the last year, I have spoken at alumni chapter or club and young alumni events in Tennessee, North Carolina, Washington, D.C., several locations in California, Boston, New York, Winchester, Charlotte, and in cities nearby regional kickoff sites. Gift flow from these areas has increased as planned. As part of its strategic plan, the Alumni Association is strengthening and expanding the chapter program by building on the success of the regional and small-city campaign events. The Alumni Association is working to increase the number of faculty speakers and other University leaders who make presentations to distant alumni groups.

In 1997-98, I hosted 174 events at Carr's Hill; in 1998-99, 175. The number of events held in October and February, April, and June continue to increase. The number held in September has decreased slightly. Thirty-six per cent of the events were for fund raising. Seventy-five per cent were for guests from outside the University. Dinners were the most frequent events, and receptions were the next most frequent. The visitor count for the house was 16,747 in 1997-98; in 1998-99, 16,530. Carr's Hill had 66 overnight University guests in 1998-99, up from 55 in 1997-98. (My file does not show how many nights these guests stayed. Most stay only a single night; a few stay for several days.)

I serve this year as president of the Southern Association of Colleges and Schools, which accredits all colleges and schools in the region, and I am a director and vice chair of the Council on Higher Education Accreditation, which is the cognizant national entity. My accreditation assignments since my last written report were Duke University, the University of California-San Diego, and the University of Vermont. I serve also on the Association of Governing Boards presidents' advisory council, on the board of the Nellie Mae Foundation, and on Association of American Universities' executive committee. I am a member of the NCAA's board of directors, and I serve on the executive committee. I co-chair the National Institute of Health panel preparing a report on alcohol abuse among young people, and I am a member of the joint American Association for Higher Education (AAHE-AGB) panel on governance of academic medical centers.

My current corporate boards are the Wachovia Corporation and Nellie Mae, Inc.

In February 1998, I was one of two university presidents identified in AAHE's listing national leaders in higher education. The other was Howard Shapiro of Princeton University. In 1998, I was named the University's outstanding alumnus of the year. In December 1998, I received the gold medal of the National Institute of Social Sciences. In May 1999, Transylvania University, which Thomas Jefferson identified as a model for higher education in Virginia, awarded me the honorary degree of Doctor of Humane Letters.

My major external speeches during the year were presented to the AGB forum on oversight of independent, related foundations, to the College Board's conference on institutional leadership, to an AAHE forum on governance and faculty tenure, and to various sessions sponsored by ACE, CHEA, SACS, and the National Association of Student Personnel Administrators. Several were keynote addresses. My publications in the last two years have had to do with governance issues and with ethics in the oversight of academic programs. My academic lectures this year have had to do with governance (University of Edinburgh, Scotland), with various aspects of American literature in this century, and with the ethnography of the European settlement of America.

Assessment of Progress toward Five-Year Goals

I am nearing the conclusion of the five-year cycle of goals to which the Board and I agreed in 1994. The following listing of the goals includes brief report on attainment.

1. Complete the preliminary phase of the capital campaign (1995): Done.
2. Carry out the campaign (1995-2000): Ahead of schedule.
3. Working with the Alumni Association, build a strong chapter network (1994-96): In progress; ahead of schedule.
4. Working with all fund-raising units, increase the number of annual donors and the total funds received through the annual fund. Done. We have restructured the annual giving program. For the first time, FY-99 saw a University-wide goal that will reach $18,000,000 projected through 6/30/99. There is coordination of direct mail, phonathon and leadership annual gift solicitations. The definition of annual giving has been standardized to include only current operating support. In FY-95, there was no policy about what might be included in "annual giving." The best estimate is in the range of $10-$11 Million for Fiscal95, a five year increase of approximately 60%. Total donors to the University increased by 29% from 43,107 in Fiscal95 to 55,515 projected for Fiscal99. Over 95% of these donors are moderate annual givers as opposed to major capital benefactors.
5. Working with the provosts and the deans, continue reorganizing the academic program, with emphasis on right-sizing the graduate schools, building assessment into all planning exercises, and developing new programs as we shed outmoded programs; implement the Board's policies on enrollment targets. Done.
6. Complete the restructuring plans and implement them; recycle the related savings into improvements in the academic programs. Done and continuing.
7. Complete the SACS reaccreditation and NCAA certification, and emerge from this effort with long-range academic plan II in place (1995). Done in 1996.
8. Complete compliance with relevant federal and state laws (Title IX in athletics, ADA, etc.). Done and continuing.
9. Reorganize the Health System, and incorporate appropriate control mechanisms into it; continue to emphasize its accountability to the Board of Visitors. Done and continuing.
10. Complete the construction projects now in progress; continue developing residential colleges as demand develops. Done; the current plan for residential colleges addresses the need for an international house.
11. Continue developing the research parks and the Boar's Head properties. Done and continuing.
12. Continue building the endowment with targets defined by the Board in its action on the capital campaign goal (summer 1995). Done and continuing.
13. Secure additional decentralization authority from the state; continue privatizing where appropriate. Done.
14. Continue building faculty equal to the opportunities and demands of a world-class university. Done and continuing.
15. Provide resources (including facilities, technology, financial aid for students, base salary and supplements) adequate to attract and retain a world-class faculty and outstanding student body. Done and continuing. Financial aid for students is a particular current concern. It is difficult to know at this time how well we are doing in the current marketplace for faculty salaries, but we have made the progress to which we committed.
16. Continue global initiatives in curriculum, and expand international exchange programs for students and faculty. Done and continuing.
17. Implement the long-range plans being developed for Clinch Valley College. Done.
18. Continue developing collaborative arrangements (viz. Northern Virginia and Southwest Virginia centers operated in tandem with Virginia Tech), with particular attention to needs in Virginia Beach. Done partly. We have not moved ahead in Virginia Beach.

Summary Comments

By any standard, this has been an extraordinary decade in the University's history. We have worked together to address (among other issues) a financial crisis of unprecedented size and duration, learned how to plan effectively and to raise private money on the basis of these plans, engaged a broad range of volunteer supporters in virtually every aspect of University life, and both set and achieved the most ambitious academic goals since Jefferson declared his own goals for the University of Virginia.

The people who have contributed to these successes have done so selflessly, intelligently, and with grace under fire. The vice presidents and key staff who have served the Board during this decade represent the best people working in American universities at this time. The faculty and staff who have stayed with us despite pay cuts, confusion as to the state's purposes, and even occasional insults have given the University and Virginia rare gifts of integrity, discipline, and commitment to purposes that transcend politics or economics. This is probably not the place to identify individual persons, but each and every one deserves appreciation and praise.

The challenges now are (among other things) to create stable and sound designs for raising new private money and managing investments as least as productively as our institutional competitors do. We need to continue building the culture of planning and continual improvement that we have begun. As we have done in these past 10 years, we will rise to the challenge of achieving excellence in every essential endeavor and assuring that students benefit by all that we do. These are good challenges because we know how to address them. If eventually state support returns to the levels now provided to competitor institutions in North Carolina, Michigan, California, Texas, and the handful of other states that have top-tier universities, the challenges will be easier to address. Regardless, however, this is not a time to complain or to be discouraged. Instead, it is a time to celebrate uncommon accomplishment and to pledge ourselves to continue "the diffusion of light and education" in the future.