2.
VHA Handbook 1200.17 (http://www.navref.org/library/pdf/NPCAuthorizingStatute-May_5_2010.pdf).
This contains VA’s interpretation of the NPC authorizing statute and VA
guidance on a number of operational matters.
Please take the time to become familiar with these fundamental NPC
documents.
MCDs have one NPC-specific statutory responsibility as board
members. Section 7363(b) of the NPC statute provides that the Under
Secretary for Health must concur with the board’s appointment of the
executive director. The December 2010 version of Handbook 1200.17
delegates this requirement for concurrence to the medical center
director serving on the NPC board.
Otherwise, unless your NPC’s bylaws provide specific duties for
statutory VA directors, the responsibilities and powers of a statutory
VA director of an NPC are the same as those of any other member of the
NPC board or for that matter, any other nonprofit. That said, VA tends
to hold the MCD of an NPC accountable for any NPC missteps so it is
important that MCDs take an active interest in NPC governance and
activities, and make a particular effort to attend all board meetings
whether in person or by phone (if phone presence is allowed by your
NPC’s bylaws).
The term “ex officio” sometimes causes confusion. It simply
means “by office.” Statutory VA directors are ex officio NPC
directors because whoever serves in the designated VA positions serves
on the NPC board. Like other board members, ex officio directors
are expected to participate fully in the activities of the organization
and in board meetings, and will have one vote on matters before the
board. Board positions – including ex officio positions – may
not be delegated to anyone else.
Please Note:
1.
Each NPC is a state-chartered corporation legally distinct
from VA and exempt from taxation under section 501(c)(3) of the IRS
code. As such, except as required in the authorizing statute or
regulations or policies prescribed by VA, your NPC is required to comply
with federal, state and local laws and regulations applicable to
nonprofits generally.
2.
As a statutory VA director of an NPC, you serve on the NPC
board in your official VA capacity. As a result, you may use VA
resources, including your VA-duty time, to fulfill your NPC board
responsibilities. Also, you have a statutory waiver of 18 USC 208
pertaining to prohibitions against serving on the board of an outside
organization (for more details, see
http://www.navref.org/bestpractices/Board_Meetings_Involving_VA_Employees.htm).
3.
Because you serve on the board in your official VA capacity,
you may have certain legal protections for your NPC-related actions.
For example, subject to concurrence by the Office of the Attorney
General, you may be afforded protection under the Federal Tort Claims
Act to the extent it may be applicable to your board duties. However,
if the board were to be sued by an employee for discrimination or
wrongful termination, it is likely that the NPC will be responsible for
its own defense and any judgments in the event it loses the case.
Because not all risks are likely to be covered by VA, it is important
for your NPC to carry private insurance. See
http://www.navref.org/about/navref_insurance.htm for recommendations
and details of the NAVREF insurance program.
4.
Serving on the board of an NPC is not the same as serving on a
VAMC committee. The board is legally responsible for the decisions
and activities of the NPC. It is the corporate policy-setting and
decision-making body. A board position may not be delegated. As an NPC
board member once stated, “The buck stops with the board; we can’t kick
decisions up to the VISN or CO.”
The board has specific responsibilities that are separate and distinct
from the day-to-day management of the NPC. The fundamental board
responsibilities of care, loyalty and obedience (http://www.navref.org/bestpractices/gov_bod_responsibilities_duties.htm)
are codified in each state’s corporation statutes. To operationalize
these, according to BoardSource (a nonprofit devoted to high quality
nonprofit governance), all nonprofit boards should:
General:
1.
Why do NPCs exist? NPCs are authorized by Congress
to provide a flexible funding mechanism for the conduct of approved
research and education at VA medical centers. They may support only
VA research and/or education.
2.
What does it mean to “serve as a flexible funding
mechanism?” NPC revenues and expenditures are not subject to the
rules applicable to a federal agency spending appropriated funds. As
nonprofits, NPCs are subject to IRS rules and those applicable to the
sources of receipts (such as research funders), but these generally
allow more flexibility than rules applicable to federal entities.
3.
What funds may an NPC administer? NPCs may accept
and administer any funds other than those appropriated to VA. As a
result, NPCs may administer private sector funds (generally from other
nonprofits or medical drug and device manufacturers) and non-VA federal
funds (DoD, NIH, NASA, CDC, etc.) even if such federal funds are passed
through VA. NPCs may not accept funds that have been appropriated to
the VA. The only exception is VA reimbursements to an NPC pursuant to
an approved Intergovernmental Personnel Act (IPA) assignment.
4.
Who is responsible
for oversight of an NPC? The NPC board of directors is ultimately
responsible for oversight of the NPC. In addition to board oversight,
VA is responsible for ongoing oversight of the NPCs.
·
The Nonprofit Program Oversight Board (NPOB) is
VA’s senior management oversight body regarding NPCs. The NPOB is
responsible for reviewing NPC activities for consistency with VA policy
and interests, and for making recommendations to the Secretary regarding
VA policy pertaining to the NPCs.
·
The Nonprofit Program Office (NPPO), which is
located in the Office of Research and Development (ORD), is the liaison
between VHA and NPCs and provides oversight and guidance to ensure
compliance with applicable regulations and VA policies affecting the
operation and financial management of NPCs. This includes
responsibility for performing on- and off-site reviews, substantive
reviews of annual reports submitted by each NPC, and for compiling data
for VA’s annual report to Congress. Additionally, the NPPO institutes
measures to ensure that any deficiencies in the operation and management
of an NPC are corrected in an appropriate and timely manner. Finally,
the NPPO serves as the primary point-of-contact between VHA and NPCs,
and between VA and others on matters concerning NPCs.
·
The VHA Chief Financial Officer (CFO) exercises
financial oversight of NPCs through review of NPPO activities and review
of any audit of NPCs by independent auditors, as necessary. Results of
such CFO reviews are made available to the NPPO through the Chief
Research and Development Officer.
·
Upon request, NPC records must be made available to
the DVA Secretary. NPCs are subject to investigation by the VA
Inspector General and the General Accountability Office (GAO) in
addition to the IRS and other federal and state agency disclosure
requirements applicable to other nonprofits.
5.
What are the advantages of NPC administration of VA
research and education? There are multiple advantages of NPC
administration, but first and foremost is that NPCs are 100% dedicated
to supporting VA research and education. Others include the
flexibility discussed above; the reassurance of review of NPC activities
by VA R&D, IRB, animal, bio-safety and/or education committees; local,
on-site administration of projects by personnel familiar with VA
regulations and culture; dedicated support for VA PIs; the ability to
quickly hire new personnel or purchase equipment and supplies; and full
accounting of NPC research funds towards VERA funding (that is, NPCs are
considered to be “VA entities” for purposes of calculating each
facility’s annual VERA research allocation).
Governance (see
http://www.navref.org/bestpractices/Governance.htm for more
discussion of NPC governance):
6.
What does it mean to be a statutory VA director?
As a statutory VA director, you are on the board by virtue of the
position that you hold at your VA medical center or health care system.
Being a statutory VA director also allows you to use VA time and other
VA resources as necessary to fulfill your responsibilities as NPC board
members.
7.
How often should the board meet? State corporation
laws generally require that the board must meet at least one time per
year. However, good governance practices recommend holding at least
four board meetings a year.
8.
When should the board meet? If the board is
comprised of only statutory VA directors and non-federal statutory
directors, it may meet during VA duty hours. However, if other VA
employees are board members, board meetings must be held outside of duty
hours or such VA employees must take annual leave for the time of the
meeting. Non-statutory VA employees serving on the board must do so in
their personal capacities and may not use VA resources to fulfill their
board responsibilities. State laws generally allow board members to
call into board meetings; as long as everyone can hear and be heard by
all others, those calling in are considered to be “present” for purposes
of board meeting attendance. See:
http://www.navref.org/bestpractices/Governance.htm
9.
What are my responsibilities as an NPC board member?
Each member of the board of directors has the duty of care, loyalty and
obedience. Your active and engaged participation in the NPC’s
governance will be your most important role and is vital to the
well-being and future of the NPC. You should make every effort to
attend all NPC board meetings, either in person or by phone. Each board
member has just one vote and non-attendance at a board meeting does not
release you from liability for actions taken by the board. See:
http://www.navref.org/bestpractices/gov_bod_responsibilities_intro.htm
10.
Should I be concerned about conflicts of interest?
By statute, all NPC officers, directors and employees are subject to
a conflict of interest policy established by the NPC. It is common
for potential conflicts to arise. The important thing is for the
board to ensure that potential conflicts are managed properly through
disclosure, discussion and recusal. See
http://www.navref.org/bestpractices/gov_conflict_intro.htm for a
sample policy.
11.
With what certification, disclosure and training
requirements must I comply? The new version of Handbook 1200.17 discusses these requirements.
Matrices created by NAVREF to assist with compliance may be found at:
http://www.navref.org/newsletter/2011/update_02-10-2011.htm
12.
Why do we have to recruit “outside” (statutory
non-federal) board members? By statute, each NPC must have at least
two board members who are not employees of the federal government and
are not affiliated with, employed by, or have any other financial
relationship with any entity that is a source of funding for VA research
or organization, unless that source of funding is a governmental entity
or another nonprofit organization. Individuals holding these positions
are known as “statutory non-federal directors.” NPCs are encouraged to
use these positions to acquire for the board additional legal or
financial expertise. One caveat: It would be a conflict of interest for
a board member who is in business to use a position on the board to put
pressure on the NPC to use his or her business services; a position on
the board may not be used for actual or perceived personal gain.
13.
What is the difference between governance and
management? The board of directors of the NPC has only one
employee: the executive director. The board’s responsibility to
supervise the executive director is one component of its overall
governance responsibility. The executive director is responsible for
managing the NPC; that is, implementing the decisions of the board and
handling day-to-day operations including supervising other NPC
employees.
Financial Stewardship:
14.
What financial statements should I be getting at board meetings?
During the meetings of the board, you should receive a minimum of three
financial statements
(Click here for sample financial statements):
·
Statement of Financial Position – a snapshot of the NPC’s
financial position on a certain date; provides detail of assets,
liabilities and net assets.
·
Statement of Functional Expenses – shows revenue and
expenses over a period of time [1st, 2nd, 3rd
quarter or year end] and groups expenses by function (i.e., salaries,
telephone, travel, supplies, etc.)
·
Statement of Activities – shows revenues and expenses by
category (i.e., Revenue: federal, nonfederal, IPAs, interest, etc.;
Expense: research, education, administrative, etc.)
Each of these
statements should provide comparative information for the prior year so
that trends are apparent. This will help give the board the information
it needs to make informed decisions.
15.
Who is responsible for choosing the auditor?
Choosing the auditor is the responsibility of the board. The auditor
works for the board (not the executive director); the auditor will
review work done by management and must report the results to the board.
Management may help the board narrow down the auditor candidates, and
will respond to the auditor’s requests for documentation during the
audit. See:
http://www.navref.org/bestpractices/gov_bod_committees_audit.htm)
Operational Management:
16.
Who is responsible for oversight of the executive
director? By statute, the board is responsible for appointing an
executive director, with the delegated concurrence of the MCD. The
board is also responsible for hiring, coaching and supervising the
executive director as well as periodically evaluating the executive
director’s performance and setting the executive director’s
compensation. Care should be given to setting the executive director's
compensation to ensure compliance with IRS Intermediate Sanction rules.
See:
http://www.navref.org/bestpractices/hr_phiringterm_hiring_contract.htm
17.
Does an NPC need insurance? Yes, but the type of
insurance and the amount of coverage depend on the circumstances and
activities of the NPC as well as the risks it incurs and whether it owns
equipment. What will VA cover? VA may provide coverage under
the Federal Tort Claims Act for NPC officers, directors and employees
who 1) have a VA appointment (either with or without compensation); and
2) are directly or indirectly involved or engaged in approved research
or education; and 3) perform such duties under the supervision of VA
personnel. Actual FTCA coverage depends on concurrence by the Office of
the Attorney General. What may VA not cover? Because federal
coverage (FTCA or others) may apply only to NPC personnel directly or
indirectly related to approved VA research or education, NPCs are
advised to purchase insurance to protect directors, officers and
employees against liability for actions of the board and for employment
practices, as well as coverage for NPC property and other activities.
Therefore, at a minimum NPCs are encouraged to obtain Directors and
Officers liability insurance including employment liability. Other
insurance needs are driven by the activities and property of the NPC
(i.e., workers compensation insurance if the NPC has employees). See
http://www.navref.org/about/navref_insurance.htm for discussion of
insurance and the NAVREF program.
18.
Should I be concerned about NPC equipment on VA
property? NPCs may own equipment for use in supporting VA research
and education activities as well as for NPC administrative functions.
Due to VA’s strict IT regulations about equipment connected to VA
servers, many NPCs have decided to donate their computer equipment, when
allowable, to VA. Otherwise, equipment owned by an NPC must be
maintained, inventoried, and insured by the NPC. A VAMC may also
require NPC owned equipment to be approved and/or inventoried by the
VAMC.
19.
How do I know that the NPC’s
internal controls meet applicable standards and are effective?
Board members should pay careful attention to their auditor’s report and
to the accompanying management letter, if any. Assessment of a
nonprofit’s internal controls are a significant component of the
independent auditor’s review. The level of review that the auditor
conducts depends on the nature of the activities the NPC conducts and
funder requirements. For example, entities administering federal grants
with aggregate expenditures over $500,000 during the year are required
to undergo an audit under OMB Circular A-133. This includes extensive
assessment of internal controls. Regardless of the level of audit, if
the auditor identifies deficiencies, the auditor will provide a letter
to management detailing the shortcomings and recommending corrective
action. Board members should ensure that they, too, receive a copy of
the management letter, and should require management to report to the
board on implementation of management’s corrective actions. All
necessary corrections should be accomplished before the end of the
fiscal year so the same deficiencies will not appear in a second,
consecutive management letter. Other than the audit, it is incumbent on
the board (usually the treasurer) to ensure that the NPC has internal
control policies and procedures and is following them. Sample
policies and links to forms are available at
http://www.navref.org/newsletter/2012/update_01122012.htm
Grants/Contracts
Management:
20.
What is an administrative overhead rate and what is the
process to establish a rate? An administrative overhead rate is the
rate an NPC charges to administer a private sector grant or CRADA. The
rate is set by the board and should be high enough to cover the NPC’s
administrative costs (executive director salary, insurance, audit, etc.)
and to generate funds sufficient to accumulate a reserve over time as
well as funds to invest in the facility research program or to prepare
for taking on responsibility for federal grants. The amount charged
should be negotiated on top of the direct costs of the grant or CRADA,
not taken out of the direct grant funding. NPC administrative overhead
rates are typically around 25%.
21.
What is an indirect cost rate and what is the process
to establish a rate? An indirect cost (IDC) rate is a federally
negotiated rate applied to federal grants (NIH, DOD, etc.) to cover NPC
costs that cannot be readily and specifically identified with a
particular grant or other institutional activity (i.e., administrative
costs such accounting, HR management, insurance, audit, etc., as well as
IRB support, compliance personnel, etc.). IDC rates are negotiated
between the NPC and the appropriate office of the federal agency that
funds the NPC’s first federal award.
22.
What do I need to do to
ensure that the infrastructure and processes are in place to support
administration of federal funds?
An NPC considering administering federal grants should first make sure
that it is in sound financial condition. NIH awards are “cost
reimbursable” on a monthly basis meaning that the NPC must have funds
available to front expenses related to the award for at least a month.
(DOD handles funding differently and often provides the full grant
amount up front and the institution “spends it down” over time.)
Additionally, the NPC should be prepared to cover significantly higher
administrative costs (such as an audit conducted under the requirements
of OMB Circular A-133 vs. generally accepted auditing standards [GAAS]).
Second, the board should ensure that the NPC has staff familiar with the
requirements applicable to administration of federal awards. This can
be achieved by hiring already qualified staff or providing staff with
training in federal funds management. The NPC should also ensure that
it is adequately staffed to meet the burden of ensuring compliance with
the myriad requirements of managing a federal award as well as the
reporting requirements and providing pre-award and post-award assistance
to PIs.
23.
How and by whom (what entity
VA, NPC or affiliated university) should grants be handled?
Because VA PIs (both MD and PhD) are generally dually appointed by VA
and an affiliated university, issues may arise as to which entity
(university vs. NPC) should administer a grant. Therefore, careful
thought should be given to where the research will be performed (VA or
university) and what resources will be needed to conduct the research.
If a project will be conducted at VA or will use VA resources, the NPC
is likely to be the more appropriate administrative entity. If an
industry-sponsored clinical trial will enroll VA patients, there must be
a CRADA between VA, the sponsor and the administrative entity; VA model
CRADAs reflect NPCs as the administrative entity.
24.
May NPCs enter into sharing
agreements with VA? No, NPCs may
not enter into sharing agreements with the VA. However, they may
establish MOUs with VAMCs to establish mutual understandings. MOUs are
appropriate to describe the movement of funds from an NPC to VA,
particularly to reimburse VA for research related clinical services, VA
employee time spent working on NPC administered studies, etc. See:
http://www.navref.org/newsletter/2006/update_050806.htm#1._Memo_re:_VA/NPC_MOUs
25.
What are CRADAs and
how do they work? A CRADA is a cooperative research and development
agreement under 15 USC 3710a. It is one of the principal mechanisms
used by federal laboratories engage in collaborative efforts with
non-federal research partners. It is intended to be a flexible
mechanism that can be adapted to a variety of types of collaborative
research and development efforts between federal and non-federal
organizations and allows a federal agency to establish invention
ownership, licensing and marketing terms in advance of an invention
being made. In VA, CRADAs must be used for industry-sponsored studies
that use VA resources (including VA PI time) and for which the sponsor
wishes to establish invention terms prior to initiating the study.
Generally, VA CRADAs are three way agreements between VA, the sponsor
and an NPC which is identified as the administrative entity for the
CRADA funds. For more information about CRADAs, please go to the VA
Tech Transfer website:
http://www.research.va.gov/programs/tech_transfer/default.cfm
Human Resources:
26.
Why do NPC employees have to have a WOC appointment?
NPC employees who are directly or indirectly involved or engaged in
approved VA research or education and training activities must
have a VA WOC appointment in order for VA to accept their services in
support of VA research or education. VA employees who work for the NPC
on VA research or education during their non-VA duty hours must also
obtain a WOC appointment for their non-VA paid work. VA considers WOC appointees to be VA employees for most
purposes except pay and benefits. A WOC appointment is a key factor in
making an NPC employee eligible for FTCA protection. The MCD, delegated
to HR, must approve each WOC appointment.
It should be noted that NPC employees who work solely on NPC
administrative tasks should have not have a WOC appointment. They
should have a facility "affiliate" appointment and badge. This
allows NPC administrative staff to have regular access a VA facility,
to obtain a VA email address or to secure keys for a VA office.
27.
May an NPC hire VA employees to work on
NPC-administered studies? The answer depends on the facts of each
individual employment situation. For a number of reasons, including
concerns about the dual compensation prohibitions in 18 USC 209, NAVREF
recommends that NPCs generally should not hire VA employees to work on
NPC-administered projects. Instead, NPCs should reimburse VA for the
salary and fringes of VA employees for their proportionate work on
NPC-administered studies. See
http://www.navref.org/bestpractices/hr_compliance_joint.htm for
discussion of joint VA/NPC employment.
Established in 1992, the National Association of Veterans' Research and
Education Foundations (NAVREF), is the membership organization of the
VA-affiliated nonprofit research and education foundations. Our mission
is to
advance the success of the VA-affiliated research and
education corporations.
We encourage you to browse our website, attend our Annual
Conference and participate in conference call discussions. We invite
you to contact the NAVREF office when you begin your tenure as an NPC
board member and any time you have questions. For more about NAVREF
see:
http://www.navref.org/about/main.htm
Below, we have assembled links to documents and web pages that are of
primary importance as you settle into your new position and that provide
information unique to NPCs. We encourage you to familiarize yourself
with these at the earliest possible opportunity.
