Academic medical centers and research universities are challenged with the evolving complexity of rules relating to research compliance. The U.S. Department of Health and Human Services (“DHHS”) Offi ce of Inspector General (“OIG”) is increasingly turning its focus to reviewing research compliance issues, as shown by the OIG’s Work Plan for Fiscal Year 2007 (the “Work Plan”), as well as its work plans for recent fi scal years. The Work Plan, which refl ects areas targeted by the OIG for audit, evaluation, and investigation during fi scal year 2007, highlights several research compliance issues, including disclosure of research investigators’ fi nancial interests as well as monitoring of grantee subrecipient costs.
In addition to being the subject of OIG scrutiny, confl ict of interest issues in research have also been the basis for claims in recent litigation and have been highlighted in recent news articles. For example, one prominent National Institutes of Health (“NIH”) Alzheimer’s researcher pleaded guilty to a criminal confl ict of interest charge stemming from his failure to report to NIH fees he received from a major drug company for consulting work that was directly related to his federal research. Similarly, an orthopedic surgeon and the academic medical center where he works drew criticism for his failure to disclose his fi nancial interests in a medical device company to his orthopedic patients, unless they asked, many of whom received treatment using devices manufactured by the company.
This Client Memorandum explains the OIG’s research compliance focus areas and provides suggested actions that may help academic medical centers and research institutions ensure compliance.
FOCUS AREA: Confl ict of Interest
The OIG plans to examine the effectiveness of NIH monitoring of grantees’ potential confl icts of interest, in order to determine whether confl icts of interest have affected federal and public interests.
In addition, the OIG plans to assess the nature of fi nancial interests disclosed by clinical investigators to the Food and Drug Administration (“FDA”). The Work Plan notes that confl icts of interest pose especially serious risks to clinical trial subjects and may have a negative impact on the integrity of the data gathered. To guard against these risks, NIH grantees must report to NIH the existence of any confl icts of interest and assure that each confl ict has been managed, reduced, or eliminated.
- Review confl ict of interest policies that apply to research activities and ensure that they address, at a minimum, the requirements applicable to research under Public Health Service (“PHS”) and FDA regulations.
- Consider crafting confl ict of interest policies that apply to all research projects, regardless of whether they are federally funded, and that cover both individual and institutional confl icts of interest.
- Take into account guidance on confl ict of interest issues issued by the Association of American Medical Colleges (available at www.aamc.org/research/coi/) and the Association of American Universities (available at www. aau.edu/research/confl ict.cfm).
- Consider establishing a Research Integrity Committee (separate from the IRB) to provide education, guidance, consultation, and monitoring of confl ict of interest issues.
FOCUS AREA: Time and Effort Reporting
Since researchers’ salaries and fringe benefi ts typically are a major cost of a research grant, and researchers often have a number of responsibilities in addition to research, it is critical to carefully measure and monitor time and effort devoted to grant-funded activities, so that PHS and other funding sources are properly charged for researchers’ activities. Failure to do so may result in overcharges to funding sources and could subject an institution to fraud charges.
Moreover, time and effort reporting issues arise not only in the context of ongoing allocation of a researcher’s time; such issues may also arise when a grant application is fi led, in that, if a researcher’s certifi cations in multiple grant applications total more than 100%, he or she may have has fi led an erroneous “commitment of effort.” The OIG suspects that the growing number of settlements under the False Claims Act regarding time and effort reporting signal that some major research institutions are overcharging NIH grants.
- Review policies and procedures regarding time and effort reporting in light of OMB Circular A-21 (Cost Principles for Educational Institutions, available at www. whitehouse.gov/omb/circulars/), Section J(10), which provides guidance regarding systems used to verify salary charges.
- Implement procedures to ensure that all time and effort reports are signed by an individual with fi rst-hand knowledge of the investigator’s activities and to ensure that this documentation is retained for appropriate time periods.
FOCUS AREA: Subrecipient Costs and Monitoring
Colleges, universities, and other entities that are recipients of federal grants and enter into subaward agreements should ensure that they are complying with applicable federal regulations pertaining to monitoring costs of the subrecipient institutions. The OIG’s recent review of three institutions revealed that grantees are not adequately complying with subrecipient monitoring requirements set forth in OMB Circular A-110 (Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profi t Organizations) and OMB Circular A-133 (Audits of States, Local Governments, and Non-Profi t Organizations) (available at www.whitehouse.gov/omb/circulars/). Specifi cally, the grantees failed to review subrecipients’ A-133 audits and failed to perform a risk analysis or a limited scope audit for subrecipients who were not required to submit A-133 audits. It should be noted that even foreign subrecipient institutions are subject to certain audit requirements.
- Ensure periodic review of Section _.51 of OMB Circular A-110 and Section __.400(d) of OMB Circular A-133, which pertain to subrecipient costs and monitoring.
- Develop and implement subrecipient monitoring guidelines that provide for monitoring at varying levels of scrutiny and frequency depending on the risks presented by a subrecipient’s characteristics and the particular research to be conducted.
- Ensure accountability by specifying, for each subrecipient award, individuals who will be responsible for conducting subrecipient monitoring, the schedule and format for such monitoring, and documentation of such monitoring.
FOCUS AREA: University Administrative and Clerical Salaries
The OIG will determine whether colleges and universities have appropriately charged administrative and clerical salaries to federally-sponsored grants and cooperative agreements. Such costs usually should be treated as indirect costs, but at times may be considered direct costs where a particular project requires extensive administrative or clerical support, in accordance with OMB Circular A-21 (Cost Principles for Educational Institutions).
- Ensure that administrative and supporting expenses incurred within academic departments are treated consistently in like circumstances.
- Adopt guidelines, based on OMB Circular A-21, Exhibit C, that address circumstances under which it may be appropriate to treat administrative and clerical staff salaries as direct costs.
FOCUS AREA: Cost Transfers
The OIG plans to examine the allowability of cost transfers by NIH grantees and assess whether the transfers are supported by documentation that fully explains how errors occurred and whether responsible offi cials have certifi ed the correctness of the new charges. The OIG has found that cost transfers may be unallowable and/or inappropriately documented and that grantees’ cost transfer policies, if any, are typically incorrect or confusing. The OIG is specifi cally focused on preventing clearly fraudulent practices, such as principal investigators on different projects banking or trading award funds among themselves (even if the grant funds are in the same department or being used for the same research purpose), and allocating federal research award funds from overspent accounts to underspent accounts in order to maximize federal reimbursement and avoid refunding unused grant funds from underspent accounts. The failure to correctly allocate charges, the OIG notes, whether because of poor record-keeping or as part of an intent to deceive, subverts the government’s ability to distribute its limited research funds to projects intended to receive funding.
- Review cost transfer policies and procedures and ensure that they require supporting documentation for cost transfers, including certifi cations that new charges are accurate.
- Ensure that accounting procedures and software adequately account for cost transfers and accommodate necessary supporting information.
- Consider periodic, focused audits of cost transfers.
FOCUS AREA: Reporting Financial Support from Other Sources
The OIG views reporting of fi nancial support from other sources, which is required in the PHS funding application, as critical to allow the awarding agency to (a) understand the commitment of a grantee to a particular project, and (b) determine the amount of funding to devote to a particular project. “Knowingly” fi ling an erroneous funding application—i.e., one that fails to report fi nancial support from other sources—could result in liability exposure under the False Claims Act.
- Examine recordkeeping systems to determine whether they accurately track funding sources for each project and investigator.
- Facilitate frequent communication between research administration personnel and billing personnel with regard to whether services provided in the course of a research project should be charged to award funds or health care insurers.
In addition to reviewing the above-described specifi c compliance areas, institutions should undertake a comprehensive review of their research compliance programs, keeping in mind the OIG’s Draft Compliance Program Guidance for Recipients of PHS Research Awards and, once published, additional voluntary guidelines to be developed by the National Science and Technology Council’s Committee on Science, which will apply to recipients of federal funding from all agencies, not just PHS.
Whether the research compliance program is operated separately or as a part of an institution’s general compliance program, it is imperative that the research compliance program provide for communication and coordination among the various offi ces and individuals involved in research activities, such as research administrators, billing and accounting personnel, IRBs and their staff, principal investigators, legal counsel, contracts managers, and technology management personnel. Developing a coordinated research compliance program positions an institution to be prepared to withstand scrutiny regardless of the OIG’s and other federal agencies’ specifi c focus areas in the future.