In the first decade of the 21st century, the Nation faces critical challenges in health care. A combination of unprecedented advances in health care treatments and rapidly increasing health care costs requires the use of scientific evidence to assure that those most likely to benefit receive effective services and that the return on our investment in health care results in improved health. Research on these and other pressing issues is at the center of the mission of the Agency for Healthcare Research and Quality. Our goal at AHRQ is to support and conduct research that addresses and anticipates health care challenges facing policymakers, health system leaders, clinicians, patients, and families. These challenges include quality of care, patient safety, access to effective care, and the costs of care. The first section of this report presents information on the programs and activities undertaken by AHRQ in FY 2001 and provides examples of some recent accomplishments. The second section of the report presents financial statements and detailed information about AHRQ's resources and expenditures. To set the stage for this discussion, this report presents information about the state of health care in America today and describes the role AHRQ can play in addressing some of the most important challenges and questions facing the Nation's health care system in these first few years of a new century. The report also presents AHRQ's organizational structure and key responsibilities of functional components, describes the Agency's National Advisory Council, and identifies the various audiences and customers who use the findings from Agency supported research.