Investigator Financial Disclosure Policy

NATIONAL SCIENCE FOUNDATION

Investigator Financial Disclosure Policy

AGENCY: National Science Foundation.

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

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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

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Hours per Total

No. of respondents response\1\ hours

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38,000.......................................... .5 19,000

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\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

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2,000.......................................... 8 16,000

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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\

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\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).

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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]

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