Frequently Asked Questions Concerning the Department of Health and Human Services Objectivity in Research Regulations and the National Science Foundation Investigator Financial Disclosure Policy

DEPARTMENT OF HEALTH AND HUMAN SERVICES

National Science Foundation

Frequently Asked Questions Concerning the Department of Health

and Human Services Objectivity in Research Regulations and the National

Science Foundation Investigator Financial Disclosure Policy

AGENCIES: Public Health Service, and Office of the Secretary, HHS;

National Science Foundation.

ACTION: Responses to questions.

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SUMMARY: This document responds to frequently asked questions regarding

PHS' and NSF's recently-issued rules on investigator conflicts of

interest. This guidance document is intended to help institutions

implement conflict of interest policies that comply with both PHS and

NSF requirements.

FOR FURTHER INFORMATION CONTACT: For PHS: Geoffrey Grant, Acting

Director, Office of Policy for Extramural Research Administration,

National Institutes of Health, Room 2192, 6701 Rockledge Drive, MSC

7730, Bethesda MD 20817, (301) 435-0949. For NSF: Christopher L.

Ashley, Assistant General Counsel, National Science Foundation, 4201

Wilson Boulevard, Room 1265, Arlington, VA 22230, (703) 306-1060.

SUPPLEMENTARY INFORMATION: On July 11, 1995, the Public Health Service

(PHS) and the Office of the Secretary of the Department of Health and

Human Services (HHS) and the National Science Foundation (NSF) issued

rules regarding investigator conflict of interest. As explained in the

preambles to those rules, PHS and NSF have been working together to

ensure that the rules impose consistent obligations on institutions

receiving PHS and NSF funding. To that end, PHS and NSF announced that

the agencies would be developing a set of questions and answers (Q&As)

to help institutions implement conflict of interest policies that

comply with both PHS and NSF requirements. This set of Q&As provides

answers to frequently asked questions received by both agencies. Where

there are minor differences between the PHS and NSF rules, they are

clearly noted.

Q1: Does NSF or PHS have a suggested format for investigator

disclosures?

A1: No. The rules are designed to defer to the expertise of grantee

institutions in developing policies and supporting documentation.

Q2: May an institution have different conflict of interest policies

that vary among departments or professional schools?

A2: Yes, as long as all policies meet the minimum requirements of

the NSF and PHS rules.

Q3: Which offices within an institution should be involved in

administering the conflict of interest rules?

A3: An institution is free to administer its policy through

whatever office or structure it wishes, as long as the policy reaches

all investigators on NSF- and PHS-funded projects and the requirements

of the PHS and NSF rules are met.

Q4: Must institutions routinely require financial disclosures from

graduate students working on NSF- or PHS-sponsored research?

A4: The term ``investigator'' is defined to encompass individuals

``responsible for the design, conduct or reporting'' of NSF- or PHS-

funded research. It is up to the institution to decide whether graduate

student co-authors are ``responsible for reporting'' the research.

Q5: Will a proposal be processed if it does not contain the new

certification required by the NSF and PHS rules?

A5: NSF will not process a proposal in the absence of the new

certification, but in most cases the institution will not be required

to re-submit the entire proposal. An addendum page to the Cover Sheet

to the National Science Foundation (NSF Form 1207) has been developed

that contains the required certification. The NSF administrative

officer typically will forward a new certification page to the

institution, and will process the proposal upon receipt of a completed

and executed new page. The PHS would process the application without

the proper certification but no award would be made until the awarding

component received the certification in the form of a signed, revised

application face page.

Q6: Do the PHS and NSF conflict of interest rules apply to all

researchers and faculty members at institutions that receive NSF or PHS

support?

A6. No. The NSF policy applies only to grantee institutions that

employ more than fifty persons and the PHS rule exempts Small Business

Innovation Research (SBIR) and Small Business Technology Transfer

(STTR) Phase I applications. In those institutions subject to the NSF

policy and/or the PHS rule, only persons involved in PHS- or NSF-funded

research are subject to the rules. However, institutions may choose to

cover other researchers or faculty members under their policies for

institution-specific reasons.

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Q7: Do the PHS or NSF rules apply to subgrantees of PHS or NSF

grantees?

A7: Consistent with current regulations and policies, the PHS rule

applies to subgrants; the NSF Policy does not. Accordingly,

institutions conducting PHS-funded research through subgrantees,

contractors, or collaborators must take reasonable steps to ensure that

investigators working for such entities comply with the regulations (42

C.F.R. Sec. 50.604(a)) either by requiring the investigators to comply

with the grantee institution's policy or by requiring the entities to

provide appropriate assurances to the grantee institution. An

institution conducting NSF-funded research through subgrantees must

certify that the institution itself has in place a written, enforced

policy on investigator conflicts of interest, but is not required to

ensure that subgrantees comply with the NSF Policy. However, the Policy

may apply to a subgrantee employing investigators who collaborate on

NSF-sponsored research (see Q&A 14).

Q8: Do the NSF or PHS rules apply to post-doctoral fellowships?

A8: Not in most cases. The NSF policy applies only to grantee

institutions that employ more than 50 persons and therefore would not

apply to post-doctoral fellowships awarded to individuals. The PHS rule

applies to PHS-funded research and to any person who is responsible for

the design, conduct or reporting of research funded by the PHS. Thus,

if a post-doctoral fellow served in such a capacity in PHS-funded

research he or she would be subject to the rule. The PHS rule would

apply to a postdoctoral fellowship application to the PHS only if the

funding would be used for research and the fellow served in one of the

research capacities described above.

Q9: Are investigators required to disclose interests in mutual

funds?

A9: An interest in a pooled fund such as a diversified mutual fund

may be sufficiently remote that it would not reasonably be expected to

create a conflict of interest for a NSF- or PHS-funded investigator.

For example, an investigator may own an interest in a diversified

mutual fund which has assets placed in many securities. It is possible

that certain of the securities held by the mutual fund were issued by

an entity whose interests would reasonably appear to be affected by

activities proposed for funding by NSF or PHS. However, because it is

likely that an investigator's interest in a mutual fund is only a small

portion of the fund's total assets and because only a limited portion

of the fund's assets are placed in the securities of a single issuer,

it is unlikely that an investigator's activities on an NSF or PHS award

would affect his or her interest in the mutual fund. Institutions

therefore may determine that certain interests in a diversified mutual

fund could never directly and significantly affect the design, conduct

or reporting of PHS- or NSF-funded research and exempt such interests

from disclosure by the investigator on that basis.

The federal government's Office of Government Ethics has detailed

regulations regarding the treatment of diversified mutual funds under

the government's conflict of interest rules. 5 C.F.R. Sec. 2634.310(c);

see also 60 Fed. Reg. 47,208 (Sept. 11, 1995) (proposed rule).

Institutions may consult these regulations for guidance on how they

might wish to treat interests in mutual funds under their policies.

Q10: Are investigators required to disclose interests in ``blind

trusts''?

A10: Institutions may determine that the research will not be

affected by qualified blind trust assets not known to the investigator

that are managed by an independent fiduciary. Because such assets would

not be known to an investigator, they could not directly and

significantly affect the design, conduct or reporting of the research.

Of course, an investigator is aware of the assets originally placed in

the trust at the time of its formation and would be required to

disclose any such assets that would reasonably appear to be affected by

NSF- or PHS-funded research. Only new assets purchased with the

proceeds from the original assets would be unknown to the investigator.

As with diversified mutual funds, the Office of Government Ethics

has detailed regulations describing the type of trusts that qualify for

the ``blind trust'' exception to the government's conflict of interest

rules. 5 C.F.R. Part 2634 Subpart D. Institutions may consult these

guidelines in determining how they wish to treat certain trusts under

their policies.

Q11: Are foreign investments (e.g., shares in a foreign

corporation) covered by the financial disclosure requirement.

A11: Yes, if they would reasonably appear to be affected by NSF- or

PHS- funded research and do not fall within one of the exceptions to

the definition of ``significant financial interest.''

Q12: Which conflicts of interest must be reported to the federal

government?

A12: Neither the PHS nor NSF rules require any institution to

report to the federal government the details of any conflict of

interest that has been resolved pursuant to the institution's Policy.

Consistent with the statute authorizing its conflict of interest rule,

the PHS requires institutions, prior to the institution's expenditure

of any funds under an award, to report to the PHS Awarding Component

the existence of any conflicting interests and assure that the interest

has been managed, reduced or eliminated in accordance with PHS

regulations. NSF requires that only conflicts that have not been

managed, reduced or eliminated prior to the expenditure of funds under

an award be reported to NSF.

Q13: Will investigator financial records be subject to public

disclosure?

A13: No. Normally, neither PHS nor NSF would possess records of the

financial interests of investigators, because institutions are not

required to submit those records. However, in the event NSF or PHS had

such information either as a result of an audit or compliance review or

in connection with a conflict of interest that cannot be managed

satisfactorily under the institution's policy, it would not be

disclosed to the public. Where a member of the public submits a request

under the federal Freedom of Information Act (FOIA) for financial

information in the possession of NSF or PHS, the agencies would assert

all applicable FOIA exemptions in response to such a request.

Q14: Is the applicant institution required to obtain financial

disclosures from investigators who are not employed by the applicant

institution?

A14: The PHS rule provides that if the institution carries out the

PHS-funded research through a collaborator, the institution must take

reasonable steps to ensure that investigators working for the

collaborator comply with the rule, either by requiring those

investigators to comply with the applicant institution's policy or by

requiring an assurance from the collaborating institution which will

enable the applicant institution to comply with the rule. NSF would

expect that where an investigator does not work for the applicant

institution, the applicant institution would obtain an assurance from

the institution employing the investigator indicating that the

investigator has complied with the requirements of the policy at that

institution.

Q15: Are all ``senior personnel'' listed in NSF proposals and ``key

personnel'' listed in PHS proposals subject to the financial disclosure

requirements of the conflict of interest rules?

A15: As explained in Q&A 4, the term ``investigator'' is defined

functionally rather than categorically. Although the agencies believe

that senior and key personnel will be ``responsible for the design,

conduct or reporting of research'' under the rules in almost all

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cases, it is possible to conceive situations in which senior or key

personnel might not meet the definition of ``investigator.''

Institutions are also responsible for obtaining financial disclosures

from persons other than senior or key personnel who meet the definition

of ``investigator.''

Q16: How should institutions with fewer than 50 employees complete

the certification page for NSF proposals?

A16: Such institutions should annotate NSF Form 1207 or the

addendum page (See Q&A1 above) to indicate that they have fewer than 50

employees and are therefore exempt from the Investigator Financial

Disclosure Policy. These institutions are not exempt from the PHS

regulations.

Q17: Salary, royalties and other payments that ``are not expected

to exceed $10,000 over the next twelve month period'' are excluded from

the definition of ``significant financial interest.'' How should an

investigator estimate expected income over the next twelve months?

A17: The agencies have no preferred estimation method.

Investigators must make their best reasonable estimates of expected

income in determining whether salary, royalties or other payments

constitute ``significant financial interests.'' This issue is separate

from an investigator's ongoing duty to update financial disclosures

either annually or as new significant financial interests are obtained

throughout the period of the award.

Q18: How can an institution determine that all required disclosures

have been made before submitting a proposal to NSF or PHS?

A18: As part of the institution's routine proposal preparation

procedures institutions should require investigators to ensure that

they have made all required financial disclosures in accord with the

regulations prior to the time the organizational representative makes

the certification in an NSF or PHS proposal. NSF and PHS staff,

auditors and others concerned with the proper implementation of these

regulations would expect such an arrangement at any institution that

certifies to the maintenance of an appropriate written, enforced policy

on conflict of interest.

Q19: Must an investigator report to the institution a single share

of stock?

A19: A single share of stock would have to be reported only if (i)

it is valued at more than $10,000 or represents more than a five

percent ownership interest in the corporation; and (ii) it would

reasonably appear that the value of the stock could be affected by the

research for which funding is sought or that the financial interest of

the corporation would be so affected.

The rules define a significant financial interest as anything of

monetary value including equity interests (e.g., stocks, stock options,

or other ownership interests) but the definition excludes an equity

interest that does not exceed $10,000 in value and represents no more

than a 5% ownership interest in any single entity. This means that,

under the rules, an investigator would never have to report an equity

interest of $10,000 or less which represents 5% or less ownership

interest in any single entity because that combination of value and

ownership is excluded by definition from the term ``significant

financial interest.'' On the other hand, under the rules, an

investigator would always have to report an equity interest exceeding

$10,000 or an ownership interest exceeding 5% in any single entity,

regardless of value, if that equity interest or ownership interest was

held in an entity whose financial interests would reasonably appear to

be affected by the specified activities for which funding is sought.

Q20: When and how will the NSF and PHS rules be reviewed and

revised?

A20: The agencies anticipate that after two or three years of

experience with the rules, they will solicit public comments regarding

whether changes are necessary or appropriate.

Dated: June 13, 1996.

Dr. Harold Varmus, M.D.,

Director, National Institutes of Health.

Lawrence Rudolph,

General Counsel, National Science Foundation.

[FR Doc. 96-16974 Filed 7-2-96; 8:45 am]

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