TITLE: B-303689, National Institute of Environmental Health Sciences--American Chemistry Council Donation, September 30, 2005
BNUMBER: B-303689
DATE: September 30, 2005
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B-303689, National Institute of Environmental Health Sciences--American Chemistry Council Donation, September 30, 2005

   B-303689

   September 30, 2005

   The Honorable Bart Gordon

   Ranking Minority Member

   Committee on Science

   House of Representatives

   The Honorable Mark Udall

   House of Representatives

   The Honorable Eddie Bernice Johnson

   House of Representatives

   Subject: National Institute of Environmental Health Sciences--American
   Chemistry Council Donation

   This responds to your request for our opinion regarding the authority of
   the National Institute of Environmental Health Sciences (NIEHS)[1] to
   accept a conditional gift from the American Chemistry Council (ACC), a
   nonprofit organization that represents the United States chemical
   industry. In July 2001, ACC donated funds to NIEHS to use to award grants
   for research projects studying environmental developmental toxicants.
   Memorandum of Understanding Between the American Chemistry Council and the
   National Institute of Environmental Health Sciences, July 26, 2001
   (hereinafter MOU).

   Under 42 U.S.C. sect. 328, the Secretary of the Department of Health and
   Human Services (HHS) and his delegates may accept gifts, including
   conditional gifts. Our review of the MOU, the Request for Applications
   (RFA) that NIEHS issued in conjunction with the MOU, and applicable law
   does not establish that NIEHS agreed to any conditions that would be
   inconsistent with its responsibility to make final determinations on grant
   awards. To effectuate the overall collaborative NIEHS/ACC objective to
   stimulate mutually desired research, NIEHS, in the MOU, agreed to provide
   ACC the opportunity to review grant applications for responsiveness to the
   RFA, provide input to NIEHS in the negotiation and award of the grant
   applications, and monitor the progress of the awarded grant projects. We
   do not read the provisions of the MOU to provide ACC with anything more
   than the opportunity to provide advice and input to NIEHS as NIEHS
   implements its statutory authority consistent with the mutually agreed
   upon research objectives.

   To ensure transparency in the grants process, and to avoid any appearance
   of a conflict of interest between future donors and NIEHS's statutory
   responsibilities, we suggest that NIEHS develop formal policies and
   procedures regarding the level of participation a donor may have in the
   grants process and articulate these policies and procedures clearly in the
   RFA and MOU. We also suggest that NIEHS work with donors to ensure that
   before making a donation, the donor has adequate knowledge of the grants
   process and how NIEHS may use its donation, so that the donor can consider
   all of the restrictions and other conditions it might wish to place on its
   donation before it provides the donation to NIEHS.

   BACKGROUND

   NIH's mission is to improve human health by increasing scientific
   knowledge related to disease and health. NIH Grants Policy Statement, Dec.
   1, 2003, at 16.[2] It accomplishes this primarily through the conduct and
   support of biomedical and behavioral research and research training. NIH
   funds research conducted at NIH (intramural research) and research
   conducted by scientists at universities, nonprofit research organizations,
   for-profit organizations, and state and local governments (extramural
   research). As explained in the recent GAO report Federal Research: NIH And
   EPA Need to Improve Conflict of Interest Reviews for Research Arrangements
   with Private Sector Entities, GAO-05-191 (Washington, D.C.: Feb. 25,
   2005), federal and nonfederal partners, through collaboration, attempt to
   share the costs, risks, facilities, and expertise needed for research and
   to promote the movement of ideas and technologies between the public and
   private sectors.

   In July 2001, ACC, a nonprofit trade organization that represents most
   major United States chemical companies,[3] entered into a MOU with NIEHS
   to finance a 3-year research initiative studying environmental
   developmental toxicants of potential importance to public health
   intervention and/or prevention strategies.[4] MOU  at 1. Pursuant to the
   MOU, ACC agreed to donate $1.5 million to NIEHS. MOU at 3. The agreement
   explained that "[t]he condition on the [gift] is that all the funds
   provided by the ACC will be used solely for the agreed upon RFA [Request
   for Application] initiative(s) to directly fund in part the total cost
   budget of the RFA for each year of support provided to the funded grant
   applications." Id.

   The RFA for Developmental Toxicology Exploratory Research Grants, NIEHS
   RFA-ES-01-006, June 14, 2001, states that the overall objective of the
   research initiative to study environmental developmental toxicants is "to
   stimulate research on the mechanism of action of developmental toxicants
   using the state of the art tools of genomics, proteomics and model
   organisms including transgenic and gene knock out genetic animal models."
   RFA at 1. "The new information obtained . . . will be used to accelerate
   research in developmental toxicology, advance new approaches in molecular
   epidemiology and improve qualitative and quantitative risk assessment
   processes for evaluating the potential for exposure induced developmental
   defects." Id. at 1. The RFA also states that

   "[t]he present initiative RFA addresses the mutual research goals of the
   NIEHS and the ACC to improve the quantity, quality, and timeliness of data
   from investigations on the mechanisms of developmental toxicants. Thus,
   this jointly sponsored RFA represents a unique collaboration of Government
   and Industry to support novel, high potential research that will
   contribute to the improvement of the health of the American people by
   improving the quantity and quality of the data on developmental toxicants
   that is available for use in the risk assessment process."

   Id. at 3.

   Pursuant to NIH/NIEHS policy, after grant applicants submit applications
   in response to the RFA, NIEHS staff review all submitted grant research
   applications to determine whether they are complete, conform to
   administrative requirements, and contain the information necessary for a
   detailed review. NIH Grants Policy Statement, Dec. 1, 2003, at 27.[5]
   Applications that are in compliance are accepted for further review. Id.
   NIEHS is required by statute and policy to conduct scientific and
   technical peer review of all grant applications that meet the
   administrative requirements and whose direct cost does not exceed $50,000.
   42 U.S.C. sect. 284(b)(2)(B). In addition to review by the peer review
   panel, if the direct cost exceeds $50,000, the grant must be recommended
   by the advisory council for the national research institute involved. Id.
   NIEHS may make a grant award only if the grant proposal has been
   recommended by the peer review panel, and if applicable, the advisory
   council. Id.; NIH Grants Policy Statement, Dec. 1, 2003, at 26.[6] The
   Public Service Health Act authorizes only the Secretary of HHS, acting
   through the director of each national research institute, to make grants
   for research. 42 U.S.C. sect. 284(b)(2)(B); NIH Grants Policy Statement,
   Dec. 1, 2003, at 32.[7]

   The MOU states that both ACC and NIEHS "will review all [grant]
   applications received for responsiveness to the purpose and intent of the
   RFA" prior to the acceptance of the application, and that "[t]hose
   applications judged responsive will be accepted by the NIH/NIEHS for
   peer-review evaluation." MOU  at  3. The MOU also provided ACC "the
   opportunity . . . to provide input to the NIEHS in the negotiation and
   award of the grant applications, and to assist in the monitoring of
   progress of the awarded grant projects." MOU at 4. According to the Deputy
   NIH Legal Advisor, ACC, in fact, did not exercise its opportunity to
   review applications prior to acceptance to determine if they were
   responsive to the purpose and intent of the RFA. Letter from Patricia A.
   Kvochak, Deputy NIH Legal Advisor, to Susan A. Poling, Managing Associate
   General Counsel, GAO, Nov. 15, 2004 (Kvochak letter). NIEHS, pursuant to
   its policy, conducted a review of the research applications prior to their
   acceptance to determine compliance with administrative requirements and
   then informed ACC that the applications met the administrative
   requirements. Id.

   ACC, however, did review the grant proposals subsequent to review and
   recommendation by an independent peer review panel. Kvochak letter. After
   review by the peer review panel, NIEHS presented to ACC a funding plan and
   a copy of each grant proposal. At that point, ACC requested that NIEHS not
   use its donation to fund two of the research proposals. NIEHS agreed to
   ACC's request and chose to use its fiscal year appropriations to cover the
   full cost of the two proposals.[8] Kvochak letter.

   ANALYSIS

   ACC provided a gift to NIEHS that was conditioned on joint review by NIEHS
   and ACC of grant applications for responsiveness and that was conditioned
   on providing ACC both the opportunity for input in the award of grants and
   the opportunity to assist in monitoring the progress of grant proposals.

   Without statutory authority, an agency may not accept gifts of goods or
   services for its own use (i.e., for retention by the agency or credit to
   its own appropriations). B-286182, Jan. 11, 2001; B-255474, Apr. 3, 1995;
   16 Comp. Gen. 911 (1937). In addition, an agency may not accept a
   conditioned gift, except pursuant to express authority provided by
   Congress. Story v. Snyder, 184 F.2d 454 (D.C Cir.), cert. denied, 340 U.S.
   866 (1950).

   Congress provided the Secretary of HHS the authority to accept conditional
   gifts. 42 U.S.C. sect. 238(a). The statute provides that "[t]he Secretary
   of Health and Human Services is authorized to accept on behalf of the
   United States gifts made unconditionally by will or otherwise for the
   benefit of the [Public Health] Service or for the carrying out of any of
   its functions. Conditional gifts may be so accepted if recommended by the
   Surgeon General, and the principal of and income from any such conditional
   gift shall be . . . used in accordance with its conditions." 42 U.S.C.
   sect. 238.[9] The Secretary delegated to the Assistant Secretary for
   Health the authorities to accept gifts vested in the Secretary. See
   Memorandum from the Assistant Secretary for Health, NIH, to the Public
   Health Service Agency Heads, July 10, 1995. Subsequently, the Assistant
   Secretary for Health delegated to the Public Health Service Agency heads,
   for their respective agencies, the authority under 42 U.S.C. sect. 238(a)
   to accept conditional gifts. Id. This included the Director of the
   National Institutes of Health, id. at 2, who subsequently delegated the
   authority to research institute directors and deputy directors. NIH Policy
   Manual 1135: Gifts Administration, Dec. 19, 2001 at 7.

   The research initiative on environmental developmental toxicants was a
   collaborative project between ACC and NIEHS. The gift instrument--the
   MOU--placed certain conditions on the gift ACC made to NIEHS to ensure
   that the gift was used consistently with the aims and goals that ACC and
   NIEHS jointly developed:

   .        Both ACC and NIEHS "will review all [grant] applications received
   for responsiveness to the purpose and intent of the RFA" prior to the
   acceptance of the application, and that "[t]hose applications judged
   responsive will be accepted by the NIH/NIEHS for peer-review evaluation."
   MOU at 3.

   .        ACC will have "the opportunity . . . to provide input to the
   NIEHS in the negotiation and award of the grant applications, and to
   assist in the monitoring of progress of the awarded grant projects." MOU
   at 4.

   NIEHS is responsible for awarding grants and administering them per
   statutory requirements and may not delegate its grant award authority to
   nongovernmental entities. We read the conditions in the MOU as providing
   ACC only with the opportunity to provide advice and input to NIEHS as
   NIEHS implements its statutory grant award authority and not as delegating
   decision authority to ACC.

   As explained in the background section above, pursuant to NIH/NIEHS grants
   policy, after grant applicants submit applications in response to the RFA,
   NIEHS staff review all submitted grant research applications to determine
   whether they are complete, conform to administrative requirements, and
   contain the information necessary for a detailed review. NIH Grants Policy
   Statement, Dec. 1, 2003, at 27.[10] While the MOU provides ACC the
   opportunity to provide input and advice regarding the responsiveness of
   the applications to the RFA, there is nothing in the MOU that delegates to
   ACC NIEHS's determination that an application is or is not responsive. NIH
   officials stated, however, that ACC, in fact, did not review the research
   applications at this point in the process.

   If the research application is complete, the next step in the process is
   peer review. NIEHS is required by statute and policy to conduct scientific
   and technical peer review of all grant applications. 42 U.S.C. sect.
   284(b)(2)(B). The purpose of the peer review panel is to provide a fair
   and objective review process in the overall interest of science. NIH
   Grants Policy Statement, Dec. 1, 2003, at 26.[11] NIEHS may make a grant
   award only if the grant proposal has been recommended by the peer review
   panel, and if applicable, the advisory council. 42 U.S.C. sect.
   284(b)(2)(B); NIH Grants Policy Statement, Dec. 1, 2003, at 26.[12]

   After the peer review process, ACC requested that NIEHS not use its
   donation to fund two grant proposals recommended by the peer review panel.
   ACC requested that NIEHS not use its donation for the first project
   because it involved research on primates. It requested that NIEHS not use
   its donation for the second project because it involved a chemical related
   to the ACC industry, and ACC was concerned that funding this research
   might look like a conflict of interest. Kvochak letter, and subsequent
   conversation with the Deputy NIH Legal Advisor, Dec. 7, 2004. NIEHS
   acceded to ACC's request and funded the two grant proposals through its
   own appropriation. Id. All of the applications recommended by the peer
   review panel were funded.

   The MOU and NIEHS only permitted ACC to advise and provide input to NIEHS
   in its grants award process, not to overrule NIEHS's grant award
   decisions. However, to ensure transparency in the grants process, and to
   avoid any appearance of a conflict of interest between future potential
   donors and NIEHS's statutory responsibilities, we suggest that NIEHS
   develop formal policies and procedures regarding the level of
   participation a donor may have in the grants process and articulate these
   policies and procedures clearly in the RFA and MOU. We also suggest that
   NIEHS work with donors to ensure that before making a donation, the donor
   has adequate knowledge of the grants process and how NIEHS may use its
   donation, so that the donor can consider all of the restrictions and other
   conditions it might wish to place on its donation before it provides the
   donation to NIEHS.

   CONCLUSION

   The Secretary of HHS and his delegates have authority to accept gifts,
   including conditional gifts. The conditions articulated in the MOU did not
   delegate to ACC any of NIEHS's statutory grant award authority but only
   provided ACC with the opportunity to provide advice and input to NIEHS in
   the review and award of grant applications. In order to avoid any
   appearance of a conflict of interest in the future, we suggest that NIEHS
   develop formal policies and procedures regarding donor participation in
   the grants process, and that it work with donors to ensure they consider
   all of the conditions they might wish to place on their donation before
   they provide the donation to NIEHS.

   Anthony H. Gamboa

   General Counsel

   DIGEST

   The Secretary of the Department of Health and Human Services and his
   delegates have authority to accept gifts, including conditional gifts, so
   long as they do not offend existing statutory or regulatory provisions.
   NIEHS may not delegate its grants award authority to nongovernmental
   entities. While the MOU provides ACC the opportunity to advise and provide
   input, it does not delegate to ACC any decision authority. To avoid any
   appearance of a conflict of interest, we suggest that NIEHS develop grants
   policies and procedures regarding the level of participation a donor may
   have in the grants process and work with donors to ensure that they
   consider all of the restrictions and other conditions they might wish to
   place on their donation before providing the donation to NIEHS.

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

   [1] NIEHS is a research institute within the National Institutes of
   Health, Department of Health and Human Services.

   [2] See also NIH Grants Policy Statement, March 2001, at 36. The NIH
   Grants Policy Statement that  was in effect when ACC donated funds to
   NIEHS for the research projects studying environmental developmental
   toxicants was dated March 2001. The policy statement was revised in
   December 2003.

   [3] ACC "is committed to improved environmental, health and safety
   performance through Responsible Care [the industry's initiative to improve
   participating companies' environmental health and safety performance],
   common sense advocacy designed to address major public policy issues, and
   health and environmental research and product testing."
   http://www.americanchemistry.com (last visited June 10, 2005).

   [4] The general purpose of NIEHS is the conduct and support of research,
   training, health information dissemination, and other programs with
   respect to factors in the environment that affect human health, directly
   or indirectly. 42 U.S.C. sect. 2851. The Applied Toxicological Research
   and Testing Program, a program within NIEHS, conducts applied research and
   testing regarding toxicology. 42 U.S.C. sect. 2851-1. The directors of the
   national research institutes, acting on behalf of the Secretary of NIH,
   have the authority to enter into grants, contracts, and cooperative
   agreements to encourage and support research, investigations, experiments,
   demonstrations, and studies in the health sciences relating to causes,
   diagnosis, treatment, control, and prevention of physical and mental
   diseases. 42 U.S.C. sections 241, 284(b)(1).

   [5] See also NIH Grants Policy Statement, March 2001, at 35.

   [6] See also NIH Grants Policy Statement, March 2001, at 34.

   [7] See also NIH Grants Policy Statement, March 2001, at 38.

   [8] In total, NIEHS obligated $3.7 million from its annual appropriations
   for the research initiative studying environmental developmental
   toxicants. Of this amount, NIEHS used $2.5 million for these two grant
   awards. Kvochak letter, p.3.

   [9] In 1966, the functions of Surgeon General of the Public Health Service
   were transferred to the Secretary of Health, Education, and Welfare.
   Reorg. Plan No. 3 of 1966 sections 1, 3; 42 U.S.C. sect. 202 note. In
   1979, the Department of Education Reorganization Act, Pub. L. No. 96-88,
   93 Stat. 668 (Oct. 17, 1979), redesignated the Department of Health,
   Education, and Welfare as the Department of Health and Human Services. 20
   U.S.C. sect. 3508.

   [10] See also NIH Grants Policy Statement, March 2001, at 35.

   [11] See also NIH Grants Policy Statement, March 2001, at 34.

   [12] See also NIH Grants Policy Statement, March 2001, at 34.