President’s Report
Board of Trustees, May 16, 2008

Chairman Boyce, Vice-Chair Cioffi, trustees, faculty, students, staff, alumni, and friends, let me begin with congratulations to Ian Boyce and with sincere thanks to Frank Cioffi for his service as Interim Chair of the Board this spring. I want to express admiration as well as gratitude for the wisdom and steadiness with which Frank has guided and counseled me personally as well as for his leadership of the Board through a period of unexpected challenges. I want to add, with gratitude, that I have also been supported in addressing these challenges by every member of this Board in conversations and consultations that—with Ian and Frank, and with Debbie McAneny, Rob Cioffi, and Bob Young, the chair and the two vice-chairs of the Budget, Finance, and Investment Committee—have been frequent and at times almost daily.

Before we turn to my perspective on the disquieting events we have discovered in the office of the Treasurer of the University and the challenges and opportunities ahead, I ask that we take a moment to recognize and celebrate the achievements of the thousands of students who graduate this weekend, and the support—emotional and financial—of their families. Steeped as we are in the plans and operations on which leadership and management necessarily must focus, it is important to acknowledge the precious mission of a university – To create, evaluate, share, and apply knowledge and to prepare students to be accountable leaders who will bring to their work dedication to the global community, a grasp of complexity, effective problem-solving and communication skills, and an enduring commitment to learning and ethical conduct. This is our mission, this is our charge, and this is our labor of love.

As you know, this spring we learned of significant financial commitments having been made in a manner that requires us to examine with focused due diligence the efficacy of our internal controls, intra-institutional checks-and-balances, organizational culture, and the vigilance of our continuing oversight. We will be assisted in that critical work by independent examiners who will report to the Audit Committee of this Board.

As we await the findings and recommendations of the independent examination, I want you to know you that, as President, I unequivocally accept responsibility for what occurred and occurs on my watch. I pledge to this Board that I will extend my utmost efforts, in close consultation with you, to meet this challenge and to take full advantage of the opportunity that it presents: the opportunity to develop a strong, more effectively managed organization through which our objective of building academic quality for the benefit of our faculty and staff, our students and alumni, and the people of Vermont will be best achieved.

Pending the results of the independent examination, I have taken the following actions:

First, we are expediting completion of a comprehensive process designed to identify all financial obligations incurred relative to project budgets during the past five years. This process includes obligations associated with projects properly approved but for which some or all of the funding sources may not have been identified, and as to which not all costs have been properly retired in the University’s internal budget accounts. Three points are particularly important with respect to this process: first, I believe that all external obligations have been satisfied and that the audited financial statements for the fiscal years in which the expenditures we are examining occurred will be found to be correct and will not require restatement (and thus that these internal accounting issues have no bearing on expendable net assets or on our debt ratios); second, I fully appreciate and intend to honor the Board’s understandable interest in these matters. The internal accounting issues I am addressing here are essentially ones for management to resolve and then of course to demonstrate to the Board that such matters are well under our control; and third, I will keep the Board fully informed through the Audit Committee on the outcomes of this process, with special attention to developments that may bear on compliance, internal controls, and other issues with which the Audit Committee and the Board are rightly concerned as a fiduciary matter. With these parallel actions under way—one under the auspices of management and the other under the auspices of the Board through the Audit Committee, under Trustee Amidon’s judicious leadership—we can be assured that there will be no recurrence of the missteps of the past. I would add, moreover, that I as President would fully endorse a decision by the Board that the Internal Audit function going forward should report directly to the Audit Committee.

Second, I will shortly issue a directive to all administrators with respect to authority for approval of financial commitments and the processing of payment requests. Although we expect that the independent examination of internal controls will yield new recommendations, administrators will be held strictly accountable for compliance with this directive until those recommendations emerge.

Third, I have expedited the appointment of a highly qualified person to the position of Interim Vice President for Finance and Administration. Through a process of wide consultation, I built a small, diverse and exceptionally qualified pool and worked with a screening committee to narrow the field. I want to thank the colleagues who served on that committee: Professors Jim Burgmeier (Faculty Senate President-Elect) and Judy Cohen (Faculty Senate Vice-President), Executive Director of Affirmative Action and Equal Opportunity Kathryn Friedman, Assistant to the Provost Jane Knodell, Associate Vice President Ted Winfield, Vice Presidents Tom Gustafson and Karen Meyer, and Provost John Hughes. In addition, I have drawn on the expertise of the Board and have kept governance leaders and senior management officials apprised as I moved toward extending an offer, which I am pleased to announce has been accepted by Vermont State Commissioner of Education Richard Cate, who will begin work here on an expedited basis. Richard is a seventh-generation Vermonter who comes to us with a stellar reputation for clear and direct communication, effective organizational leadership, and the highest ethical standards. His professional life is rich with relevant experience, from his work as Chief Financial Officer and later as Chief Operating Officer for the New York State Department of Education (with a budget of $19 billion) to his Vermont-based work, including his time as Barre City Manager. Richard has dealt with numerous complex and difficult challenges throughout his career, and I believe he is exactly what UVM needs at this important time. We are deeply pleased that Richard has agreed to join the UVM community, and I know you will welcome him with warmth and enthusiasm. Richard, please stand. I will also be seeking the advice of the Board with respect to plans to address leadership and management of the functions of the Vice President for Finance and Administration on a permanent basis.

Fourth, as you know, John Evans, former Dean of the College of Medicine, is on special assignment, charged by me with determining the status of the PeopleSoft implementation and, most urgently, the work and cost remaining to ensure that the administration of grants and contracts is current by the start of the new fiscal year and remains current thereafter. I am grateful to John and confident that his work will produce the optimal roadmap for the University to operate our administrative information systems, to take full advantage over time of their capabilities, and to optimize the business processes of the University.

In short, we are responding swiftly and comprehensively, with the wise counsel of this Board, to developments that, though clearly regrettable, create an important opportunity to improve internal controls, business practices, and our organizational culture. We will, going forward, develop the fullest understanding we can of the recent history of operations within the Division of Finance and Enterprise Services so that we may in short order implement best practices in this critically important sector of University operations.

Finally, before leaving this complex set of issues, it is important to note that we must recognize the unbudgeted expenditures that the PeopleSoft implementation has entailed to date and that it will incur going forward, the costs of the independent examinations that will be conducted under the auspices of the Audit Committee, and in addition all other hitherto unrecorded charges that our ongoing examinations will fully identify. It would be ill-advised to identify a precise total of these items while our work is still under way—including, importantly, the identification of currently available funding sources that may be applied to reconciliation of some portion of the pertinent accounts immediately even as we formulate a strategy to retire the balance of the obligations in a graduated way over the course of time—but I am certain of two things: first, the sum will be very significant; and, second, the obligations carried forward will be significantly less than the obligations-to-be-retired-over-time that the University was carrying when I started my work here in the 2003 fiscal year, when the total of deficits in Continuing Education accounts and of forward obligations under the terms of the faculty buy-out known as the Voluntary Separation Agreement came to some $20 million. The reconciliation of those accounts was fully completed over the course of five fiscal years ending in FY 2006, and lest anyone here fear that we will not be able to take the unbudgeted expenditures that are now coming to light in stride let me assure you of the complete confidence I have, in concert with the leadership of this Board, that we can readily do so: consider this—that it is not too early to say that the as-yet-to-be-precisely-determined balance of forward obligations will be less in absolute dollars and far, far less as a percentage of both the current General Fund and Total Enterprise Budgets than the $20 million represented in 2003. In the Budget, Finance, and Investment Committee meeting today, we will show you how the recognition of the estimated charges of which we have recently become aware will produce place-holder deficits in the FY 2008 budget and in the FY 2009 budget that the Board will approve tomorrow, and we will bring to the Board through the Executive Committee this summer and then to the full Board in September a plan for addressing all of these obligations over time. That plan will require clarity, resolve, and discipline but I am confident that it will not impede the advance of the University or the continuing honing of UVM’s competitive advantage.

Turning now to other matters, we continue to pursue the imperatives laid out in the essay I circulated to the campus five weeks ago, “Continuing UVM’s Advance: Contexts for a Refocused Strategic Plan.” As you will recall, that essay explained what I see as UVM’s current programmatic and operational imperatives in recognition of significant demographic and economic challenges. Those imperatives include enhancement of the student experience, intensified investment in faculty research and scholarship, and focusing of resources on a limited number of doctoral programs in order to build national distinction. They also include reduction of spending in areas less important to educational quality and student priorities along with intensified cost reduction and cost avoidance efforts in every domain. In line with that increasingly pressing imperative, I have put in place new position control protocols, effective July 1, 2008, to bring rigorous discipline to the processes by which vacancies are filled, by which new positions are created, and by which the funds from temporarily vacant positions are allocated. These protocols will lead in turn to a better understanding of our costs and of how to manage them.

Meanwhile, as I also said in “Continuing UVM’s Advance,” The University of Vermont is well-positioned. Even recognizing, as you will hear in the meeting of the Budget, Finance, and Investment Committee, a decrease for the coming fiscal year in projected earnings on short-term assets of $2.25 million, we expect the General Fund Budget of the University to grow in FY 2009 by 7.2% at a time when many other public flagships are taking material hits below the waterline, including, in many instances, substantial cuts in public funding offset by massive hikes in tuition. We are very grateful to the political leadership of Vermont—most especially our legislative trustees and Governor Douglas—that in some measure our comparatively strong position among public research universities derives from their successful effort in the Session of the Generally Assembly concluded two weeks ago to keep higher education funding in Vermont whole. Our commitment to Vermont, in turn, is expressed in a myriad of a ways, including our efforts in technology transfer and enterprise creation (of 12 licenses of UVM intellectual property in the last year, 9 went to Vermont firms), our significant investment in the Land Grant mission to support Vermont agriculture and rural communities (of which the ground-breaking this afternoon for James M. Jeffords Hall serves as a powerful emblem), and—to cite just one more example with which I am especially pleased—our new scholarship program closing the gaps to cover the full cost of tuition and fees for all Vermont Pell-eligible students.

And our successes mount in many other domains: the increasing recognition of the academic quality of the University, as reflected in measures like the ranking by U.S. News & World Report of our College of Medicine as fifth in the nation in Primary Care; the recent listing of two of our alumnae on the Wall Street Journal list of “Fifty Women to Watch”; faculty recognitions like John Todd’s recent receipt of the $100,000 Buckminster Fuller Award and NSF Career Awards this winter to Matthias Brewer in Chemistry and to Frederic Sansoz in Engineering; student recognitions like the Goldwater Scholarship garnered this year by Dan Koenemann (the second consecutive year that UVM students have netted one of these prestigious national fellowships); strong national press for the University, including, on March 9th, the latest in a string of front-page New York Times stories associating UVM with the nation’s elite independent colleges and universities; the recovery, this year, of our grant and contract awards to bring them back into the record zone achieved in 2004; and our rise from 153rd in 2003 out of 920 colleges and universities that received direct federal appropriations to 20th this year.

Our academic initiatives are proceeding apace, with good reports on the first problem-based learning communities this spring, rapid progress in developing an inter-disciplinary Ph.D. program in Public Policy, and the approval by the Faculty Senate Executive Council of a new matrix center that will come before the full Senate next fall and thereafter before the Board, assuming Senate approval. The new matrix center —a Center for Sustainable Solutions—is an outgrowth of the work we did last year with Amory Lovins and the Rocky Mountain Institute, the work of the Leading by Design Task Force during the current academic year, and the vision John Hughes and I have had of a College of Planetary Health. Among program initiatives, none has had more notable success than the Honors College, which will see its first full class graduate on Sunday. I want to congratulate Dean Abu Rizvi on his appointment as the second Dean of the UVM Honors College and on the energized yield on Honors College offers of admission, which as of May 2 registered a 39% increase in enrollment deposits over last year, from 133 to 185. That is a great tribute to the public perception of the quality and value of the Honors College; to the work of Dean Rizvi and his colleagues; and above all to the faculty, staff, and students who have made participation in the Honors College community such an enriching and rewarding opportunity.

Kudos are due, too, to the enrollment management team led by Chris Lucier and by Sue Wertheimer and, again, to faculty, staff, students, alumni, parents and friends whose collective efforts are bringing us, this fall, the most highly qualified and diverse class in our history, on track with overall enrollment deposits at 101% of our target, ALANA deposits up 34%, from 162 to a record high of 217, and every quality indicator up significantly as well, as you will hear in more detail at the EPIR meeting. The record of over 21,000 applicants has been converted to a class of 2012 that is ample proof that our efforts in building the quality and reputation of this great University are being recognized where it counts most—among students and their families.

Accountability and assessment are keys to the success of our ongoing efforts to build quality at UVM. Under the leadership of Jill Tarule and Mara Saule and the Provost’s oversight, we are far along in developing the Self-Study for our Ten-Year accreditation by the New England Association of Colleges and Schools, a process that culminates in the arrival on campus next spring of a Visiting Team. The NEASC process entails institutional reflection and self-assessment that I am confident will serve us well. At the same time, John Hughes, with the skilled assistance of Dale Jaffe and the participation of the dedicated members of the University Planning Council, has developed a revised strategic plan that the Senate approved yesterday. The revised strategic plan will come to the Board for review and approval in the fall, prefaced by Dale’s presentation to EPIR later today. I offer heartfelt thanks to John Hughes, to Dale Jaffe, and to all University Planning Council members for the wonderful job they have done in developing this latest iteration of the UVM Strategic Plan.

Going forward, Provost Hughes has asked Dr. Jaffe to concentrate this summer on developing, in collaboration with the Faculty Senate, a significant revision of the Program Review process to provide a mechanism for focusing extraordinary resources on those programs of highest priority and quality. I believe that the faculty, the administration, and the Board will find the new assessment tools and metrics a revised Academic Program Review will provide to be invaluable in assisting us in making sound decisions to focus investments in programs that have academic distinction and that are strategically aligned with our mission.

In closing, I wish to say this: I believe with all my intellect and heart that we, collectively, are at least in good part responsible for the present success and vibrancy of this University. We have together transformed challenges into opportunities that we have converted into fine outcomes. On the not-distant horizon, new challenges—most faced by our peer institutions, some of special consequence to Vermont—are visible and understood; there are also challenges yet to be identified. I have complete confidence that, with your continuing dedication, good will, and the attention of each of us to the tasks before us, we will succeed.

Thus, I thank you—the Board, our faculty, students, staff, my colleagues in administration, our alums and donors, and my beloved wife—for support past, present, and future as we advance together on the next stage of this journey.