VA Health Care
Nonprofit Corporations Enhance VA Research, but Would Benefit from Increased Oversight Gao ID: GAO-02-1103T September 19, 2002GAO reviewed the Department of Veterans Affairs' (VA) nonprofit research corporations, which receive funds primarily from non-VA sources to conduct medical research at VA facilities. Since VA's nonprofit corporations were first established, there has been limited oversight of their operations and contributions to VA research. Nonprofit corporations support VA's research environment by funding a portion of the department's research needs, such as laboratory equipment and improvements to infrastructure, and by providing flexible personnel and contracting arrangements to respond to investigators' needs. To detect conflict of interest, investigators on research projects administered by VA's nonprofit corporations are subject to federal statutes and regulations applicable to federal employees concerning conduct and conflicts of interest and may be required to disclose their financial interests. Institutional conflicts of interest are unlikely to occur in VA's nonprofit research corporations because they cannot own stock, have an equity interest in private companies, or obtain intellectual property rights. VA has delegated responsibility for monitoring and overseeing the activities of nonprofit corporations to the directors of VA medical centers; however, VA headquarters does not oversee and monitor corporations' financial activities and ensure that identified deficiencies are corrected.
GAO-02-1103T, VA Health Care: Nonprofit Corporations Enhance VA Research, but Would Benefit from Increased Oversight
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United States General Accounting Office:
GAO:
Testimony:
Before the Subcommittee on Oversight and Investigations, Committee on
Veterans‘ Affairs, House of Representatives:
For Release on Delivery:
Expected at 11:00 a.m.
Thursday, September 19, 2002:
VA Health Care:
Nonprofit Corporations Enhance VA Research, but Would Benefit from
Increased Oversight:
Statement of Cynthia A. Bascetta:
Director, Health Care”Veterans‘ Health and Benefits Issues:
GAO-02-1103T:
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss the Department of Veterans
Affairs‘ (VA) nonprofit research corporations, which receive funds
primarily from non-VA sources to conduct medical research at VA
facilities. In fiscal year 2000, these corporations administered funds
amounting to $174 million, or about 15 percent of VA‘s total medical
research dollars. The authority to establish private nonprofit research
corporations, contained in the Veterans‘ Benefits and Services Act of
1988, [Footnote 1] provides a flexible funding mechanism for, among
other things, hiring and contracting for goods and services for certain
medical center research.
Since VA‘s nonprofit corporations were first established, there has been
limited oversight of their operations and contributions to VA research.
For example, the VA Inspector General‘s last major review of the program
occurred in 1994, when VA was cited for failing to provide adequate
policies and guidance relating to budgeting, accounting, and oversight
of these corporations. On May 16, 2002, this subcommittee, along with
the Subcommittee on Health, conducted a hearing on VA‘s nonprofit
research corporations. In following up on that hearing, you asked that
we provide additional information on the corporations. My testimony
today will focus on (1) the benefits nonprofit research corporations
provide to VA, (2) processes to detect individual and institutional
conflicts of interest within nonprofit research corporations, and (3)
nonprofit research corporations‘ financial activities and how they are
monitored by VA.
To conduct our work, we visited 5 of the 88 nonprofit corporations based
on their dollar revenues for 2000. [Footnote 2] We compared and
analyzed data from each of the five nonprofit research corporations‘
audited financial statements to their Internal Revenue Service (IRS)
tax forms for 2000 and 2001, along with general ledger account balances
and supporting documentation for revenues and expenses. We also
reviewed VA‘s annual reports on nonprofit research corporations‘
activities for fiscal years 1998 through 2000, [Footnote 3] and
relevant legislation and regulations. We visited each of the nonprofit
corporations‘ affiliated VA medical centers and interviewed officials
from VA‘s Offices of Research and Development, General Counsel, and
Financial Management. We also spoke with principal investigators, who
are usually either part- or full-time VA employees. They design and
control research projects and frequently have dual appointments with
the VA medical centers‘ affiliated universities. [Footnote 4] We also
interviewed officials from federal agencies that provide funds to VA
nonprofit research corporations, including the National Institutes of
Health (NIH) and the Centers for Disease Control and Prevention (CDC)
within the Department of Health and Human Services (HHS), and the
Department of Defense (DOD). Our work was conducted from June 2002
through September 2002 in accordance with generally accepted
government auditing standards.
In summary, we found the following:
* Nonprofit corporations support VA‘s research environment by funding a
portion of the department‘s research needs, such as laboratory equipment
and improvements to infrastructure, and by providing flexible personnel
and contracting arrangements to respond to investigators‘ needs.
* To detect conflicts of interest, investigators on research projects
administered by VA nonprofit corporations are subject to federal
statutes and regulations applicable to federal employees concerning
conduct and conflicts of interest and may be required to disclose their
financial interests. Institutional conflicts of interest are unlikely
to occur in VA‘s nonprofit research corporations because they cannot
own stock, have an equity interest in private companies, or obtain
intellectual property rights.
* VA has delegated responsibility for monitoring and overseeing the
activities of nonprofit corporations to the directors of VA medical
centers, however, VA headquarters does not oversee and monitor
corporations‘ financial activities and ensure that identified
deficiencies are corrected.
Background:
In carrying out its mission, VA conducts medical research to find new
treatments for diseases and disabilities that affect veterans and the
nation‘s population as a whole. VA researchers have been involved in a
variety of important advances in medical research, including development
of the cardiac pacemaker, kidney transplant technology, prosthetic
devices, and drug treatments for high blood pressure and schizophrenia.
VA‘s research programs include nine high-priority areas: acute and
traumatic injuries, military and environmental exposures, special high-
risk or underserved populations, sensory disorders and loss, aging,
mental illness, substance abuse, chronic diseases, and health services
and outcomes research.
In fiscal year 2000, funding for VA research totaled almost $1.2
billion, supporting research projects conducted by more than 3,800
scientists at 115 VA medical centers across the country. These funds
finance research projects and their supporting infrastructure,
including capital expenditures for buildings, animal laboratories, and
equipment. Funding made available for medical research through annual
appropriations provided $666 million of VA‘s fiscal year 2000 research
dollars; the other $491 million was provided by other federal and
nonfederal sources (see fig. 1). [Footnote 5] Federal funding comes
from such sources as NIH and DOD, while nonfederal funding sources
include private organizations, such as drug or biotechnology companies,
or organizations such as the American Lung Association, the American
Heart Association, and the American Diabetes Association. Of the $491
million, $174 million was administered by the nonprofit corporations,
and the remaining $317 million was administered by VA medical centers
or their affiliated universities.
Figure 1: VA Research Funding for Fiscal Year 2000 (in millions):
[See PDF for image]
This figure is a pie-chart depicting the following data:
VA Research Funding for Fiscal Year 2000 (in millions):
VA appropriate funds: $666;
External funds: $491.
Source: VA‘s Office of Research and Development 2000 Annual Report:
Serving Veterans: Better Health Care Through Research.
[End of figure]
Nonprofit research corporations exist solely to support VA research and
education, using their funds to support local VA medical centers‘
research environments. [Footnote 6] They are collocated with VA
facilities and usually do not pay VA for services such as rent,
utilities, local telephone services, and janitorial services.
Currently, there are 88 chartered nonprofit research corporations, of
which 85 are actively conducting research.
In 2000, the most recent year for which revenue data are available, VA‘s
nonprofit research corporations received about $174 million in revenues”
almost a 140-percent increase over the last 5 years”and administered
4,651 VA-approved research projects. The largest source of funding for
VA‘s nonprofit research corporations has been private organizations,
averaging more than 40 percent from fiscal years 1996 through 2000 (see
table 1). NIH has been the largest government source of funding for the
corporations.
Table 1: Funds Administered by VA Nonprofit Research Corporation by
Source Types, 1996 to 2000 (in thousands):
Sources: Private;
1996: $36,685;
1997: $46,321;
1998: $57,903;
1999: $63,413;
2000: $64,492.
Sources: NIH;
1996: $4,553;
1997: $13,147;
1998: $14,961;
1999: $15,513;
2000: $28,081.
Sources: University[A];
1996: $3,398;
1997: $2,939;
1998: $4,063;
1999: $5,392;
2000: $7,958.
Sources: VA[B];
1996: $3,789;
1997: $5,556;
1998: $6,214;
1999: $4,714;
2000: $6,694.
Sources: DOD;
1996: $780;
1997: $473;
1998: $697;
1999: $1,628;
2000: $3,449.
Sources: VA/DOD[C];
1996: 0;
1997: $6,291;
1998: $457;
1999: $1,358;
2000: $1,734.
Sources: CDC;
1996: $1,151;
1997: $1,567;
1998: $3,597;
1999: $5,521;
2000: $229.
Sources: Other government;
1996: $578;
1997: $995;
1998: $1,474;
1999: $3,340;
2000: $3,532.
Sources: Other[D]:
1996: $22,356;
1997: $21,205;
1998: $32,498;
1999: $47,739;
2000: $57,564.
Sources: Total;
1996: $73,290;
1997: $98,494;
1998: $121,864;
1999: $148,618;
2000: $173,733.
[A] These funds include reimbursement for services that the nonprofit
corporation provided to the university. For example, the nonprofit
corporation charges the university a fee for running a test on a
piece of equipment the corporation owns.
[B] These funds are for intergovernmental personnel agreements, which
allow temporary reassignment of employees between VA and the nonprofit
corporations.
[C] Includes initiatives such as VA/DOD research on post traumatic
stress disorder.
[D] This includes interest from nonprofit corporations‘ investments and
donors who gave less than $25,000 to a nonprofit corporation in that
year. Donors can include private companies, other nonprofit
organizations, and individual donors.
Source: 2000 VA Non-Profit Research and Education Corporation Annual
Report.
[End of table]
VA treats all funds administered by VA medical centers as appropriated
funds, and medical centers are generally required to comply with
statutory and other restrictions on the use of those funds, as well as
with federal regulations governing procurement and the hiring of
employees. Prior to the establishment of nonprofit corporations, VA
administered research funding from external sources through special
accounts at local medical centers”known as general post funds”or
through its affiliated universities.
Flexibility Allows Nonprofit Corporations to Enhance VA Research:
Nonprofit corporations provide a flexible funding mechanism to support
the indirect cost of VA‘s research environment. For example, nonprofit
corporations‘ funds can be used to renovate laboratory space and support
start-up research to develop grant proposals. Nonprofit research
corporations also have more flexibility with respect to personnel and
procurement issues than VA medical centers because, as private
corporations, they are not subject to federal personnel or procurement
regulations.
The five nonprofit corporations we visited typically obtained donated
and grant funds of between 10 and 20 percent of direct project costs to
apply to indirect costs. [Footnote 7] According to the nonprofit
corporations‘ executive directors we interviewed, these indirect cost
rates are generally based on what other nonprofit organizations
normally charge and not based on their actual indirect costs. These
indirect costs include the costs for running the corporation, equipment
purchases, facility upgrades, subscriptions to scientific journals,
travel to research conferences, maintaining VA research libraries, and
renovating and maintaining VA animal laboratories. Further, nonprofit
corporations can use the funds they obtain for indirect costs to
support research. For example, at one VA medical center, the nonprofit
research corporation incurred $8,451,000 in expenses in 2001, with
$7,693,000 spent on the direct costs of research projects; $413,000
spent on corporation operating expenses, such as grant administration
and payroll processing for research staff; and $345,000 spent on
activities and improvements to the medical center‘s research
environment. Some of these activities and improvements included
maintaining a clinical studies center, paying the salaries of a
research science officer and assistant, and providing the ’seed“ or
project start-up money for scientists to perform initial research to
generate data necessary to apply for research grants.
According to VA‘s Office of Research and Development, the funds used by
the nonprofit corporations to purchase equipment and maintain and
upgrade VA‘s facilities allow VA to use more of its appropriated funds
for conducting research. For example, at one facility we visited, the
nonprofit corporation is renovating laboratory space necessary to
conduct a VA-funded research project. While grants to affiliated
universities can also be used to cover indirect costs of research
conducted at VA facilities, VA officials told us that universities
generally do not provide funding to help pay for VA‘s indirect costs;
instead, they use it to support the indirect costs of the universities
and their own research facilities. At another medical center, VA‘s
Office of Inspector General suggested security improvements be made in
research laboratories containing hazardous materials. About $56,000 was
needed from either VA‘s Office of Research and Development or the
medical center to make these improvements. Instead, the nonprofit
corporation provided the funding. This preserved the Office of Research
and Development‘s funds for research and the medical center‘s funds for
patient care.
In addition to the improvements in equipment, facilities, and research-
related services, nonprofit corporations bring other benefits to VA‘s
research environment. Because private nonprofit corporations are not
subject to the regulations that govern federal agency hiring practices,
they can hire and release employees more quickly than VA, which,
according to researchers, can be more responsive to their individual
project personnel and contracting needs. For example, at some of the VA
nonprofit corporations we visited, the principal investigators stated
that because funding for research is dependent on the number, length,
and timing of grants received, they prefer to quickly hire research
technicians and support staff after project funds are awarded and
release them from the projects as soon as their work is completed. The
principal investigators noted that if nonprofit corporations did not
exist, it would take longer to begin the research because they would
have to hire staff through VA. A medical center official reported that
it usually took 6 weeks or more to hire a research employee through VA
compared to less than a week through the nonprofit corporation.
Nonprofit corporations can also contract for goods and services more
quickly than VA can because they do not have to follow the federal
acquisition process. For example, two of the nonprofit corporations we
visited were able to quickly order highly specialized digital,
computerized microscopes needed by several research teams. Officials
told us that based on their past experiences, if those microscopes had
been purchased through VA‘s competitive process, it could have taken
months to award a contract.
Finally, VA‘s research environment is key to attracting and retaining
highly qualified physicians, according to officials at some of the
medical centers we visited and in VA‘s Office of Research and
Development. Investigators we interviewed said their research directly
related to and benefited the care they provided to their patients, such
as administering experimental research drugs for cancer. Some of the
researchers we interviewed also noted that the nonprofit corporation‘s
contribution to the local VA research facility was one of the main
reasons they came to or remained at the facility. For example, at one
nonprofit corporation we visited, the corporation renovated laboratory
space needed to attract an investigator, who is also a physician.
VA Has Processes in Place to Help Detect Conflicts of Interest:
Conflicts of interest can occur in connection with medical research when
an individual or an institution has financial interests in the research.
Conflicts of interest impair the conduct of objective, unbiased research
and create the risk that an investigator will compromise a study‘s
integrity to gain financial rewards or recognition. Investigators may
establish financial relationships with donors”for example as employees,
consultants, board members, or stockholders”as long as these
relationships do not compromise, or appear to compromise, their
professional judgment and the independence of the research. [Footnote
8] For example, an investigator‘s financial relationships must not bias
or appear to bias the development of the study to ensure certain
outcomes. A conflict of interest would also result if investigators
reported only favorable research results or withheld certain study
findings to maintain a competitive edge for the entities in which they
have financial interests. Conflicts of interest have the potential to
put study subjects and the general population at risk.
Investigators on research projects administered by VA nonprofit
corporations must follow federal statutes and regulations applicable to
federal employees concerning conduct and conflicts of interest. They
cover, for example, restrictions on gifts from outside sources, the use
of non-public information, and employees‘ financial interests.
[Footnote 9] Because investigators design and control the research,
they may also be subject to additional federal conflict of interest
regulations. For example, principal investigators conducting research
under NIH grants are subject to Public Health Service [Footnote 10]
regulations, and investigators conducting pharmaceutical trials are
subject to Food and Drug Administration regulations. These regulations
require investigators to disclose their financial interests.
There are other conflict of interest procedures that investigators in
some locations must follow. For example, investigators at three of the
five VA nonprofit corporations we visited were required by the VA
medical center or its affiliated university to disclose their financial
interests related to each research project they conducted. At one of
these locations, the corporation, the university, and VA formed a
conflicts of interest committee to review financial disclosures and
identify and manage conflicts of interest. The results of these reviews
are documented in the committee‘s meeting minutes and forwarded for
review to the VA medical center‘s institutional review board (IRB).
[Footnote 11]
Additionally, to guard against potential conflicts of interest,
nonprofit corporation board members, officers, and employees must sign a
certification that they comply with federal statutes and regulations on
conflicts of interest; however, they are not required to file financial
disclosure forms. Certain nonprofit corporation board members and
officers are required to file financial disclosure forms because of
their positions at the medical center. For example, a VA medical
center‘s director and chief of staff, who also serve on the nonprofit
corporation‘s board of directors, are required to file financial
disclosure statements because of the positions they hold at the medical
center. A VA official told us that there is no routine comparison of
these financial disclosure forms and ongoing research projects at a
particular facility.
While federal regulations govern the financial interests of
individuals, no similar regulations apply to the financial interests of
an institution. Institutional conflicts of interest occur when an
entity‘s financial interests conflict with its goals of conducting and
fostering objective, unbiased research. Financial interests may color
an entity‘s review, approval, or monitoring of research conducted under
its auspices or its allocation of equipment, facilities, and staff for
research. Some institutions, such as universities, may obtain financial
benefits from owning stock in a company that sponsors research or from
owning patents that result from research. In contrast, VA nonprofit
research corporations cannot own stock, have an equity interest in
private companies, or own patents. Consequently, these types of
institutional conflicts are unlikely to occur. VA nonprofit
corporations may only invest in government-backed securities such as
certificates of deposit or U.S. Treasury bonds. VA, not the nonprofit
corporations, controls the rights to patents arising from research
administered by nonprofit corporations. In addition, nonprofit
corporations cannot accept funds to administer a research project unless
the local VA medical center approves it.
VA Headquarters Does Not Monitor or Oversee Nonprofit Corporations‘
Financial Activities:
The Secretary of VA has delegated responsibility for overseeing and
evaluating nonprofit corporations to the directors at local medical
centers. This responsibility includes ensuring that deficiencies noted
in audited financial statements [Footnote 12] and management letters
[Footnote 13] are corrected. VA requires that nonprofit corporations
submit their audited financial statements and management letters; tax
forms; and supplemental information on donors, payees, and research
projects to the medical center‘s chief financial officer and the
nonprofit corporation‘s board of directors”which must, by statute,
include the medical center‘s director, chief of staff, and assistant
chief of staff for research”for review prior to the issuance of VA‘s
annual report to the Congress. At all five sites we visited, the
nonprofit corporations provided their 2000 and 2001 audited financial
statements as required, and all five received unqualified opinions on
their financial statements, indicating that none contained material
misstatements. [Footnote 14]
We also reviewed a sample of the five nonprofit corporations‘
expenditures from their most recent annual financial statements”
including those for travel, meetings, conferences, professional dues and
memberships, publications, and office supplies”and generally found that
the expenditures were related to research or to running the nonprofit
corporation and were consistent with its internal control procedures.
However, no standard body of rules exists that governs the type and
amount of expenditures made by nonprofit corporations, although specific
requirements may be established by the source of the funds. For example,
if the nonprofit corporations receive funds from a federal agency, then
the Office of Management and Budget Circular A-122 [Footnote 15]
applies, which does not allow certain expenses, such as for
entertainment or alcohol. Other donors may place specific restrictions
on the use of their funds.
We reviewed a sample of travel expenditures”including the travel of
members of the board of directors and executive directors”and found
that while nonprofit corporations are not eligible for government
rates, the rates they paid were comparable to the federal government‘s
rates for meals and lodging. Of the 66 travel vouchers we reviewed,
only one first-class airline rate was charged and for only one segment
of the trip because no economy seats were available.
In addition, we reviewed expenses related to meetings. They generally
covered food and beverages provided at staff meetings, team building
sessions, and dinners with potential recruits. The dollar amounts were
typically a small portion of the nonprofit corporation‘s total
expenditures. For example, one nonprofit corporation with annual
expenditures of almost $8.5 million spent $16,171 on these expenses.
Another nonprofit corporation with expenditures of about $25 million
spent $66,469 on these expenses.
Two of the five locations we visited received management letters from
their independent auditors in 2000 and 2001, citing areas for
improvement in internal controls. We found that these nonprofit
corporations had either corrected or were in the process of correcting
problems cited in the previous years‘ management letters. For example,
at one nonprofit corporation, the external audit of its year 2000
financial records found that it did not reconcile its general ledgers
at month end in accordance with generally accepted accounting
practices. Although the nonprofit corporation‘s 2001 management letter
still identified some problems with month-end reconciliations, the
auditor noted that improvements had been made. While each nonprofit
corporation submits its financial statements and management letters to
VA, VA headquarters does not use this information to oversee and
monitor the nonprofits‘ financial activities and ensure that identified
deficiencies are corrected.
According to VA, it relies in part on the VA Inspector General, IRS,
GAO, and state and local authorities to identify fraud, waste, and
abuse. However, officials at the five nonprofit corporations we visited
stated that, for the last 5 years, their corporations have not been the
subject of systematic review, although the VA Inspector General is
currently investigating specific matters related to nonprofit
corporations reported through its fraud hotline. The two largest
corporations we visited stated that their state labor departments
conducted reviews, but these reviews were limited to their personnel
practices and records.
Concluding Observations:
Nonprofit research corporations have become an integral component of
VA‘s research agenda. From 1996 through 2000, research funding through
the corporations at VA facilities increased by almost 140 percent and in
2000 stood at almost $174 million. Because research administered by the
nonprofit corporations can only support veteran-related research, such
funding growth can significantly benefit veterans. Furthermore, the
corporations have flexibility to use funding to initiate or continue VA-
approved research and for enhancing infrastructure and making other
improvements at VA medical centers. The ability to use funds this way
provides seed money for new research ideas and attracts researchers who
are also physicians involved in providing patient care to veterans.
Because of the large amount of funding that now flows through the
nonprofit corporations, the absence of central VA oversight is not
inconsequential. While the nonprofit corporations‘ financial statements
are audited by independent auditors, they have not been subject to
routine national oversight”such as through VA‘s Office of Research and
Development”to identify areas for improvement and to ensure that the
nonprofit corporations corrected the problems identified by independent
auditors. Moreover, VA headquarters has not evaluated nonprofit
corporations to measure their effectiveness or compare their operations.
This type of high-level oversight and evaluation is a critical element
of success. While medical center directors provide an essential and
important overview function locally, they are not at arm‘s length from
the nonprofits because of their close working relationships with them.
As a result, VA headquarters could provide additional review, for
example, by comparing financial disclosure forms and research projects
at medical centers. VA headquarters could consider other oversight to
better ensure that the benefits of nonprofit corporations are achieved
in ways that safeguard VA‘s interests.
Mr. Chairman, this concludes my prepared statement. I will be happy to
answer any questions you or other members of the subcommittee may have.
Contact and Acknowledgments:
For further information, please contact Cynthia A. Bascetta at (202)
512-7101. Individuals making key contributions to this testimony
include Michael T. Blair, Jr., Cherie‘ M. Starck, William R. Simerl,
Michael Tropauer, Mary W. Reich, and Karen M. Sloan.
[End of testimony]
Footnotes:
[1] Pub. L. No. 100-322 § 204, 102 Stat. 487, 510-512 (1988).
Provisions pertaining to nonprofit corporations are codified at 38
U.S.C. §§ 7361 et seq.
[2] Three were large nonprofit corporations with revenues greater than
$5 million, one was a medium corporation with revenue of about $3
million, and one was a small corporation with revenue less than $1
million.
[3] VA‘s annual report for 2001 will not be available until after
October 1, 2002.
[4] For the past 50 years, many VA medical centers have been affiliated
with medical schools for patient care, medical education, research, and
sharing of staff and other resources.
[5] Research grants and awards usually provide funds for direct and
indirect costs. Direct costs include expenses that can be specifically
linked to a project, such as the salaries of technicians who conduct
research. Indirect costs include overhead expenses for the
administration of projects, such as grant application preparation, as
well as for expenses incurred for shared resources that are not readily
allocated to the multiple projects using them, for example, digital
microscopes.
[6] The Congress expanded the authority of nonprofit research
corporations in 1999 to include funding for education to improve VA
employees‘ job performance and veterans‘ overall health care knowledge
in addition to research (Veterans Millennium Health Care and Benefits
Act, Pub. L. No. 106-117 § 204, 113 Stat. 1545, 1562 (1999)(codified at
38 U.S.C. §7361)). In 2000, revenue for educational purposes accounted
for 1 percent of nonprofit corporations‘ total revenue.
[7] One nonprofit corporation we visited, which administers grants from
NIH, had negotiated about a 40-percent indirect cost rate with HHS and
was reimbursed at this rate. These grants typically have higher
indirect cost rates to help the grantee meet additional reporting
requirements. Universities‘ indirect cost rates for these grants are
typically over 50 percent.
[8] U.S. General Accounting Office, Biomedical Research: HHS Direction
Needed to Address Financial Conflicts of Interest, GAO-02-89
(Washington, D.C.; Nov. 26, 2001).
[9] Applicable statutes and regulations include 18 USC §§ 202-209; 5
C.F.R. §§ 2634-2635.
[10] The Public Health Service, an operating division within HHS,
includes agencies such as NIH, the CDC, and the Food and Drug
Administration.
[11] IRBs are established to protect the rights and welfare of human
research subjects. As part of its responsibilities, the IRB takes steps
to manage, reduce, or eliminate potential or real individual and
institutional conflicts of interest.
[12] By statute, nonprofit corporations with more than $300,000 in
revenue in any year are required to obtain an independent audit of
their financial statements. Nonprofits with annual revenues between
$10,000 and $300,000 must obtain an independent audit at least once
every 3 years. In addition, audits of nonprofits that expend $300,000
or more in federal funding must follow generally accepted government
auditing standards, which include reports on internal controls and
compliance with applicable laws and regulations.
[13] Management letters identify needed improvements in internal
controls, even though these control weaknesses do not have a material
impact on the financial statements.
[14] The five nonprofit corporations‘ annual financial statements for
2000 and 2001 covered different time periods. Four used a calendar year
cycle and one used a fiscal year cycle.
[15] Office of Management and Budget Circular A-122: Cost Principles
for Non-Profit Organizations, June 1, 1998.
[End of section]
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