[Federal Register Volume 59, Number 123 (Tuesday, June 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15551]


[Federal Register: June 28, 1994]


=======================================================================
-----------------------------------------------------------------------

NATIONAL SCIENCE FOUNDATION


Investigator Financial Disclosure Policy

AGENCY: National Science Foundation.

ACTION: Notice of changes to award conditions and proposal content.

-----------------------------------------------------------------------

SUMMARY: The National Science Foundation (NSF) is issuing revised award 
conditions and revised requirements for proposal submission in order to 
require that institutions maintain written and enforced policies on 
investigator conflicts of interest.
EFFECTIVE DATE: June 28, 1995.

FOR FURTHER INFORMATION CONTACT: Miriam Leder, Assistant General 
Counsel, National Science Foundation, 4201 Wilson Boulevard, Room 1265, 
Arlington, VA 22230, (703)306-1060.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act Control Number 3145-0149

    NSF favors and has actively encouraged increased involvement of 
academic researchers and educators with industry and with private 
entrepreneurial ventures. However, such involvements create an 
increased risk of conflict between the private interests of 
individuals, or of the companies with which they are involved, and the 
public interest that NSF funding should serve. These risks have aroused 
concern in the scientific and engineering communities, in the public 
media, in Congress, and at NSF.
    In response to this concern, NSF developed a proposed Investigator 
Financial Disclosure Policy requiring financial disclosure by 
investigators and professional employees at grantee institutions who 
are involved in NSF-funded research and educational activities. On July 
16, 1992, NSF published its proposed Policy in the Federal Register, 
and invited public comment. 57 FR 31540 (July 16, 1992). NSF received 
seventy-two written comments from universities, research institutions 
and various associations. The primary issues raised by commenters, and 
NSF's responses, are described below.

Comments

Uniform Federal Policy

    Most commenters recommended either that the Federal Government 
adopt a uniform, government-wide investigator conflicts policy with a 
single point of contact for conflict of interest and financial 
disclosure issues, or that NSF coordinate with other agencies to ensure 
that agency policies are consistent.
    NSF agrees that a uniform, government-wide approach to the 
conflicts issue is advisable--it would eliminate the possibility of 
inconsistent agency policies, and reduce the bureaucratic burdens 
associated with compliance with different conflicts policies. NSF has 
been working closely with the Department of Health and Human Services 
(HHS) to ensure that this Policy and the proposed rule issued by HHS in 
this edition of the Federal Register will be consistent, and will 
impose the same obligations on grantees. In addition, NSF has been 
working with the Office of Science and Technology Policy, the Office of 
Management and Budget, HHS and other interested agencies to develop and 
propose a common Federal policy on investigator conflicts of interest. 
It is expected that this policy, when completed, will ensure consistent 
treatment of investigator conflicts issues at all Federal funding 
agencies.

Financial Disclosure to NSF

    The proposed Investigator Financial Disclosure Policy required 
grant applicants to disclose to NSF the significant financial ties 
their investigators have with parties whose financial interests might 
be affected by the work to be funded. It also required applicants to 
describe the measures, if any, that would be taken to minimize the 
risks associated with actual or potential conflicts of interest.
    Most commenters felt that universities and research institutions, 
and not NSF, should have primary responsibility for collecting and 
reviewing investigator financial information, and for managing 
conflicts. They objected to the requirement that each grant proposal be 
accompanied by financial disclosures, and offered a variety of reasons 
for doing so. These included privacy concerns; a belief that NSF's 
review of financial disclosures would be inconsistent with an emphasis 
on institutional responsibility; a belief that the requirement imposed 
an unjustified paperwork and staff burden on institutions; and a 
concern that this disclosure requirement could have a chilling effect 
on university-industry collaborations and on the submission of grant 
proposals.
    As an alternative, some commenters suggested that NSF require 
institutional certifications that appropriate policies and procedures 
had been implemented, and that actual or potential conflicts were 
resolved to the satisfaction of the institution. NSF could then conduct 
periodic reviews of grantee financial disclosure/conflict of interest 
records to assure itself that institutions had complied with NSF's 
minimum requirements. Some commenters also suggested that financial 
disclosure to NSF would be appropriate if institutions are unable to 
satisfactorily resolve conflicts issues that they identify.
    NSF recognizes the fact that many institutions and investigators 
are concerned about the possible ramifications of providing financial 
information to NSF. While NSF does not necessarily agree with all of 
the conclusions reached by those institutions and investigators, the 
final Policy has been revised so that disclosure to NSF is not required 
unless institutions find that they are unable to satisfactorily resolve 
a conflict issue. Instead, NSF's final Policy requires an institutional 
representative to certify with each grant proposal that the required 
conflict of interest policy has been implemented; that, to the best of 
his or her knowledge, all required financial disclosures were made; and 
that there are no actual or potential conflicts of interest, or, if 
such conflicts exist, they were, or prior to funding of the award, they 
will be managed in a manner satisfactory to the institution or 
disclosed to NSF. Individual investigators also must certify that each 
has read and understood the institution's conflict of interest policy; 
to the best of his/her knowledge, all financial disclosures required by 
the institution's policy were made; and he/she will comply with any 
conditions or restrictions imposed by the institution to manage actual 
or potential conflicts of interest.
    The final Policy also requires that institutions maintain records 
of financial disclosures, and records relating to the management of 
actual and potential conflicts of interest, until three years after the 
later of the termination or completion of the award to which they 
relate, or the resolution of any government action involving the 
records. NSF may undertake periodic reviews of the records in order to 
assess the reliability of institutional and investigator 
certifications, and to determine whether institutional safeguards do, 
in fact, protect the integrity of NSF-funded research. In undertaking 
any such reviews, NSF will coordinate with HHS, to the extent feasible, 
to ensure that institutions are not unnecessarily subjected to multi-
agency reviews.

Timing of Disclosure

    Several commenters questioned the proposed Policy's timing for 
required financial disclosures. Seven believed the required 
certifications and/or disclosures should be made at the time of an 
award, not when the proposal is submitted, and one suggested that 
institutional review take place within 90 days of submission of the 
grant proposal to NSF. Two commenters believed the proposed Policy 
required grantee institutions to collect financial disclosures on a 
periodic basis, and also prior to the submission of each grant 
proposal. These commenters felt the two requirements might be 
inconsistent.
    In order to provide the required certifications, institutions will 
have to collect all required disclosures and resolve actual or 
potential conflicts prior to the time an award is funded. In addition, 
the final Policy requires that, during the pendency of any NSF award, 
institutions either solicit financial disclosures on an annual basis or 
require updates as investigators obtain new reportable financial 
interests.

Overly General and/or Ambiguous Terms

    Some commenters were troubled by the proposed Policy's lack of 
definitions for various terms, including ``entrepreneurial venture'', 
``significant financial ties'', ``significant conflict of interest'', 
``routine small holdings'', ``direct relevance'', ``directly and 
significantly'', ``immediate family'', ``close business associate'', 
``adequate enforcement mechanisms'', ``professional employee'' and 
``relevant consulting arrangements''.
    These terms were left undefined in the proposed Policy so that 
institutions would be able to tailor definitions and conflicts policies 
to the particular conditions existing on their campuses. This remains 
NSF's basic philosophy, but the final Policy provides more guidance on 
the types of financial interests that must be disclosed, the types that 
need not be disclosed, and the individuals who must make financial 
disclosures.

Contents of Institutional Conflict of Interest Policies

    A few commenters believe institutions should establish conflict of 
interest policies, but that NSF should not prescribe the details of 
those policies. Three suggested that NSF establish ``outcome'' or 
``performance'' criteria for institutional disclosure policies, rather 
than requiring disclosure of specific categories of financial 
interests.
    NSF agrees that institutions should have some latitude to develop 
policies that fit local circumstances. For this reason, NSF's Policy 
requires institutions to solicit financial disclosures, but does not 
prohibit any particular financial interest or mandate specific rules 
for managing conflicts of interest. NSF believes that its system, in 
which institutions will have primary responsibility for collecting and 
reviewing financial disclosures, establishes the minimum requirements 
necessary to protect the integrity of NSF-funded research.

Scope of Required Disclosure

    Most commenters agree that limited and targeted financial 
disclosure is a cornerstone of an effective conflict of interest 
policy. However, many believe the proposed Policy required more 
information than was necessary to effectively manage actual and 
potential conflicts of interest, and some suggested that disclosure be 
required only where financial ties are directly related to NSF-
supported research. Two commenters from state institutions in 
Connecticut believe that their local Freedom of Information Act will 
essentially make these disclosures public information.
    NSF has narrowed the Policy's disclosure requirements so that they 
now apply only to those individuals who are responsible for the design, 
conduct or reporting of research or educational activities funded or 
proposed for funding by NSF. In addition, the categories of disclosable 
financial interests have been limited to so that they now must relate 
to research funded or proposed for funding by NSF.

Disclosure of Ties of Immediate Family and Close Business Associates

    Five commenters believe the Policy should not require disclosure of 
the financial interests of an investigator's immediate family, and 
nineteen thought it should not require disclosure of the financial 
interests of close business associates. These commenters cited privacy 
concerns, and, for close business associates, argued that it is 
inappropriate to require confidential information from these 
individuals, it might not be possible to elicit it in any event, and it 
is too difficult to determine what constitutes a close business 
associate.
    NSF's Policy is meant to ensure that institutions have enough 
information to determine whether conflicts exist, and to impose 
appropriate safeguards. Clearly, financial interests of individuals 
other than the investigators themselves can, under certain 
circumstances, affect the objectivity with which the investigators 
conduct their research. This is particularly true where there is a 
close personal or business relationship between the investigator and 
another individual. However, NSF recognizes that requiring financial 
disclosure from all such persons presents certain difficulties and 
raises privacy concerns. NSF believes it reasonable to require 
disclosure of the relevant financial ties of an investigator's spouse 
and dependent children, but the relationship between an investigator 
and his or her ``close business associate'' is more attenuated. As a 
result, in light of concerns raised by commenters, the final Policy 
does not require that their financial interests be disclosed.

Miscellaneous Comments

    One state institution pointed out that its institutional conflict 
of interest rules must be part of the state's administrative code, and 
this would require new legislation. The effective date for NSF's Policy 
will be one year following the date of its publication in the Federal 
Register. NSF hopes that this will provide institutions with sufficient 
time to implement required policies.
    Two commenters believe institutions do not have sufficient 
expertise to conduct the types of investigations necessary to assure 
the reliability of investigator financial disclosure. NSF does not 
expect institutions to undertake herculean efforts to verify the 
accuracy of all disclosures. However, institutional policies should 
include viable and reasonable methods for enforcing those policies.
    Two commenters asked whether NSF's Policy applies to subrecipients 
of grant funds. It does not.
    One commenter asked whether the disclosure requirements apply to 
current financial ties, or to those which existed over some period of 
time. The requirements apply to current ties, but institutions must 
maintain records of disclosures until three years after the later of 
the termination or completion of the award to which they relate, or the 
resolution of any government action involving the records.
    One commenter suggested that the disclosure requirements might 
conflict with consulting arrangements that prevent investigators from 
disclosing the name of companies for whom they consult. In such cases, 
in order to receive Federal funds, investigators would have to obtain 
permission to make the required disclosures, or discontinue the 
consulting arrangements. Investigators who enter into consulting 
arrangements that prevent disclosure could seek agreements with their 
institutions to maintain the confidentiality of arrangements they 
disclose to those institutions.
    One commenter felt the guidelines for product evaluations should 
differ from those for basic research. NSF's Policy allows institutions 
to develop differing guidelines if they believe it appropriate.
    Many comments specifically related to the proposed Policy's 
requirement of financial disclosure to NSF. Because this disclosure is 
not required by the final Policy, these comments are not discussed 
individually.

Paperwork and Recordkeeping Burden

    In the proposed Policy, NSF estimated that it would take each 
investigator listed on a grant proposal 20 minutes to prepare the 
required financial disclosures. Many commenters believed this seriously 
underestimated the actual paperwork burden associated with Policy, and 
several pointed out that it did not take into account the institutional 
burden associated with reviewing the disclosures. Few commenters 
provided suggestions for formulating a more accurate estimate. However, 
NSF has revised its estimate of the annual reporting and recordkeeping 
burden to take into account changes from the proposed Policy. NSF's 
revised estimates are as follows:

                    Financial Disclosure Requirement                    
------------------------------------------------------------------------
                                                   Hours per     Total  
               No. of respondents                 response\1\    hours  
------------------------------------------------------------------------
38,000..........................................          .5     19,000 
------------------------------------------------------------------------
\1\NSF estimates that 23% of all respondents will have financial        
  interests to disclose, and 77% will not. The estimate assumes that it 
  will take an hour to provide required financial disclosures when      
  reportable ties exist, and twenty minutes when they do not.           


                        Recordkeeping Requirement                       
------------------------------------------------------------------------
                                                   Hours per            
              No. of recordkeepers               recordkeeper    Total  
                                                                 hours  
------------------------------------------------------------------------
2,000..........................................            8      16,000
------------------------------------------------------------------------

Total hours for disclsoure and recordkeeping
35,000

    Organizations and individuals who wish to submit comments on the 
estimated burden should send them to:

Herman G. Fleming, Reports Clearance Officer, National Science 
Foundation, Washington, DC 20550
    and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, New Executive Office Building, Washington, DC 20503

The Investigator Financial Disclosure Policy

    NSF's Investigator Financial Disclosure Policy has the following 
primary features:
    A. A requirement that any NSF grantee employing more than fifty 
persons maintain ``an appropriate written and enforced policy on 
conflict of interests''.
    B. Minimum requirements for what must be in an institution's 
policy. These include (a) limited and targeted financial disclosure, 
(b) designation of a person(s) to review the disclosures and resolve 
actual or potential problems revealed, (c) enforcement mechanisms, and 
(d) arrangements for informing NSF of conflicts issues that are not 
resolved to the satisfaction of the institution.
    Changes made to NSF issuances to establish and communicate the 
Policy are described below. Copies of the NSF Grant General Conditions 
and the NSF publication Grant Proposal Guide may be obtained from the 
contact listed above. Copies of the NSF Grant Policy Manual may be 
obtained from the Government Printing Office.
WHAT WOULD BE REQUIRED IN INSTITUTIONAL POLICIES

Grant General Conditions

Insert a new subparagraph 23(b):

    Records of investigator financial disclosures and of actions taken 
to manage actual or potential conflicts of interest (see Grant Policy 
Manual Section 310), shall be retained until 3 years after the later of 
the termination or completion of the award to which they relate, or the 
resolution of any government action involving those records.
    Renumber subsequent subparagraphs accordingly.

Insert a new paragraph 33:

    If the grantee employs more than fifty persons, the grantee shall 
maintain an appropriate written and enforced policy on conflict of 
interest consistent with the provisions of Grant Policy Manual Section 
310.
    Renumber subsequent paragraphs accordingly.

Grant Policy Manual

    In GPM 516.3 ``Consulting and Other Outside Activities of Principal 
Investigators Under NSF Awards'', add to subparagraph ``a.'':
    However, see GPM 310 on Conflict of Interest Policies.
    Strike all after subparagraph ``a.'', including Exhibits V-1 and V-
2.

    Add a new GPM 310 ``Conflict of Interest Policies'':

    a. NSF requires each grantee institution employing more than fifty 
persons to maintain an appropriate written and enforced policy on 
conflict of interest. Guidance for such policies has been issued by 
university associations and scientific societies.\1\
---------------------------------------------------------------------------

    \1\See On Preventing Conflicts of Interests in Government-
Sponsored Research at Universities, a Joint Statement of the Council 
of the American Association of University Professors and the 
American Council on Education (1964); Managing Externally Funded 
Programs at Colleges and Universities, especially ``Principle X. 
Research Ethics and Conflicts'', issued by the Council on Government 
Relations (1989); Guidelines for Dealing with Faculty Conflicts of 
Commitment and Conflicts of Interest in Research, issued by the 
Association of American Medical Colleges (1990); and Framework 
Document for Managing Financial Conflicts of Interest, issued by the 
Association of American Universities (1993).
---------------------------------------------------------------------------

    b. An institutional conflict-of-interest policy should require that 
each investigator disclose to a responsible representative of the 
institution all significant financial interests of the investigator 
(including those of the investigator's spouse and dependent children) 
(i) that would reasonably appear to be directly and significantly 
affected by the research or educational activities funded or proposed 
for funding by NSF; or (ii) in entities whose financial interests would 
reasonably appear to be directly and significantly affected by such 
activities.
    The term `investigator' means the principal investigator, co-
principal investigators, and any other person at the institution who is 
responsible for the design, conduct, or reporting of research or 
educational activities funded or proposed for funding by NSF.
    The term `significant financial interest' means anything of 
monetary value, including, but not limited to, salary or other payments 
for services (e.g., consulting fees or honoraria); equity interests 
(e.g., stocks, stock options or other ownership interests); and 
intellectual property rights (e.g., patents, copyrights and royalties 
from such rights).
    The term does not include:
     salary, royalties or other remuneration from the 
institution; or any ownership interests in the institution, if the 
institution is an applicant under the Small Business Innovation 
Research Program or Small Business Technology Transfer Program;
     income from seminars, lectures, or teaching engagements 
sponsored by public or nonprofit entities;
     income from service on advisory committees or review 
panels for public or nonprofit entities; or
     financial interests in business enterprises or entities if 
the value of such interests do not exceed $5,000 or represent more than 
a 5% ownership interest for any one enterprise or entity when 
aggregated for the investigator and the investigator's spouse and 
dependent children.
    c. An institutional policy must ensure that investigators have 
provided all required financial disclosures at the time the proposal is 
submitted to NSF. It must also require that those financial disclosures 
are updated during the pendency of the award, either on an annual 
basis, or as new reportable significant financial interests are 
obtained.
    d. An institutional policy must designate one or more persons to 
review financial disclosures, determine whether an actual or potential 
conflict of interest exists, and determine what conditions or 
restrictions, if any, should be imposed by the institution to manage, 
reduce or eliminate such conflict of interest. An actual or potential 
conflict of interest exists when the reviewer(s) reasonably determine 
that a significant financial interest could affect the design, conduct, 
or reporting of the research or educational activities funded or 
proposed for funding by NSF.
    Examples of conditions or restrictions that might be imposed to 
manage, reduce or eliminate actual or potential conflicts of interest 
include:
     public disclosure of significant financial interests;
     monitoring of research by independent reviewers;
     modification of the research plan;
     disqualification from participation in the portion of the 
NSF-funded research that would be affected by the significant financial 
interests;
     divestiture of significant financial interests; or
     severance of relationships that create actual or potential 
conflicts.
    If the reviewer(s) determines that imposing conditions or 
restrictions would be either ineffective or inequitable, and that the 
potential negative impacts that may arise from a significant financial 
interest are outweighed by interests of scientific progress, technology 
transfer, or the public health and welfare, then the reviewer(s) may 
allow the research to go forward without imposing such conditions or 
restrictions.
    e. The institutional policy must include adequate enforcement 
mechanisms, and provide for sanctions where appropriate.
    f. The institutional policy must include arrangements for keeping 
NSF appropriately informed if the institution finds that it is unable 
to satisfactorily manage an actual or potential conflict of interest.
    g. Institutions must maintain records of all financial disclosures 
and of all actions taken to resolve actual or potential conflicts of 
interest until at least 3 years after the later of the termination or 
completion of the award to which they relate, or the resolution of any 
government action involving those records.
    Renumber GPM Sections 310-40 accordingly.
WHAT WOULD BE REQUIRED IN PROPOSALS

Grant Proposal Guide (Formerly Grants for Research and Education in 
Science and Engineering)

    In Section C-1 of Part II, INSTRUCTIONS FOR PROPOSAL PREPARATION, 
at the end of the Certification for Principal Investigators and Co-
Principal Investigators, add:
    A new certification has been added that requires Principal 
Investigators and Co-Principal Investigators to certify that they have 
read and understood the institution's conflict of interest policy; to 
the best of their knowledge, all required financial disclosures were 
made; and they will comply with any conditions or restrictions imposed 
by the institution to manage, reduce or eliminate actual or potential 
conflicts of interest.
    In Section C-1 of Part II, INSTRUCTIONS FOR PROPOSAL PREPARATION, 
at the end of the Certification for Authorized Institutional 
Representative or Individual Applicant, add:
    A new certification has been added that requires an institutional 
representative to certify that the institution has implemented and is 
enforcing a written policy on conflicts of interest consistent with the 
provisions of Grant Policy Manual Section 310; that, to the best of 
his/her knowledge, all financial disclosures required by the conflict 
of interest policy were made; and that actual or potential conflicts of 
interests, if any, were, or prior to funding the award, will be 
satisfactorily managed, reduced or eliminated in accordance with the 
institution's conflict of interest policy or disclosed to NSF.
    In Appendix E on the Certification Page, add the following new 
certification to the Certification for Principal Investigators and Co-
Principal Investigators:
    (3) I have read and understand the institution's conflict of 
interest policy, if any; have made all financial disclosures required 
by it, if any; and will comply with any conditions or restrictions 
imposed by the institution to manage, reduce or eliminate actual or 
potential conflicts of interest.
    In Appendix E on the Certification Page, add the following to the 
end of the section on Certification for Authorized Institutional 
Representative or Individual Applicant:
    In addition, if the applicant institution employs more than fifty 
persons, the authorized official of the applicant institution is 
certifying that the institution has implemented a written and enforced 
conflict of interests policy that is consistent with the provisions of 
Grant Policy Manual Section 310; to the best of his/her knowledge, all 
financial disclosures required by that conflict of interests policy 
have been made; and all identified conflict of interests have been, or, 
prior to funding an award, will be either satisfactorily managed, 
reduced or eliminated in accordance with the institutions policies, or 
disclosed to NSF.
Lawrence Rudolph,
Acting General Counsel.
[FR Doc. 94-15551 Filed 6-27-94; 8:45 am]
BILLING CODE 7555-01-P