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Department of Veterans Affairs
Office of General Counsel
Washington DC 20420
O.G.C. Advisory 57-89
In Reply Refer To: 023
VA District Counsel (327/02)
600 Federal Place, Room 479
Louisville, KY 40202
SUBJ: Sharing Agreement between VA Research Corporation and VA
QUESTION PRESENTED: Whether a research corporation, established
pursuant to 38 U.S.C.4161 to 4168, may enter into sharing agreements
with the VA.
COMMENTS:
1. A draft sharing agreement has been proposed under which the VA
Medical Center, Louisville and the Clinical Research Foundation,
Inc., a research corporation established under Subchapter IV of
chapter 73 of title 38, United States Code (38 U.S.C. 4161 to 4168),
would furnish certain services to one another. We previously
furnished technical comments on the draft agreement without having
been aware that the corporation was established by VA. Under the
draft agreement, the Foundation would provide the Medical Center with
technical and clerical support in exchange for the medical center's
providing photocopying, animal care, laboratory work, pharmacy and
related services. As discussed below, the contract is not authorized
by law.
2. Established pursuant to sections 4161 to 4168, the Foundation
can exercise only those powers provided by law. Section 4164
describes those general powers: "(a) A corporation established under
this sub-chapter may (1) accept gifts and grants from, and enter into
contracts with, individuals and public and private entities solely to
carry out the purposes of this sub-chapter." Id. section 4164(a).
Clearly, the law only provides authority to enter into contracts with
"public or private entities."
3. The law cannot, however, reasonably be interpreted to include
VA facilities within the meaning of "public or private entities" for
several reasons. Sub-chapter IV does not, of course, specifically
mention VA facilities as "entities" for purposes of section 4164.
Rather, the law clearly distinguishes the role of the VA from that of
"entities" which may serve as funding sources for corporations
established pursuant to sections 4161 to 4168. See 38 U.S.C. 4163(c)
("An individual appointed... to the board of directors of a
corporation established under this subchapter may not... have any...
financial relationship with any entity that is a source of funding
for research by the Veterans' Administration..."). These corporations
were established to obtain and administer gifts, grants and other
than VA appropriated monies to facilitate the conduct of research at
VA medical centers. Id. 4161(a), 4162. The law specifically provides
that "any funds received by the [Secretary] for the conduct of
research at the medical center other than funds appropriated to the
Veterans' Administration may be transferred to and administered by
the corporation for that purpose. Id. section 4162. This clear
distinction in the statutory scheme regarding the use of VA and
non-VA funds in the operation of the corporation (as opposed to its
initial establishment) demonstrates that Congress did not anticipate
or provide that VA would be executing contracts with those
corporations. Indeed, such contracts would defeat that statutory
scheme because they would require the use of appropriated funds.
4. In light of our comments above, we believe the proposed
agreement would have the effect of distorting the corporation's
purposes. Rather than functioning as a funding mechanism to
facilitate the Medical Center's conduct of approved research, see 38 U.S.C. 4161(a), the corporation would be procuring research support
and related services from the Medical Center (as though it is the
Foundation's rather than VA's role to conduct research). And rather
than providing the Medical Center the means to carry out the center's
research program -- through the employment of technicians, for
example, to work at the VA as without compensation employees -- it
proposes to charge VA for such support services. While we cannot
discern from the agreement precisely how it was intended to operate
or why it was so structured, we cannot concur in the proposal for the
reasons outlined above.
5. We note that the Foundation received a corporate charter under
State law. And State law may permit non-profit corporations to engage
in a wide-range of activities. Nonetheless, Federal law clearly
limits the nonprofit corporations authorized by sections 4161 to 4168
to the powers provided by Federal law. Id. section 4165.
Consequently, State law would not operate to provide authority to the
foundation to enter into the draft sharing agreement, given that
contracting with VA is beyond its general powers, as provided in
section 4164.
6. Moreover, the draft agreement would not be authorized by
Federal law on sharing agreements. Sharing agreements for specialized
medical resources may only be executed "between [VA] hospitals and
other hospitals (or other medical installations having hospital
facilities or organ banks, blood banks, or similar institutions) or
medical schools or clinics." Id. section 8153(a). As an entity
created solely for research, the Foundation would not fall within the
category of hospital, medical school or similar institution with
which VA could execute a sharing agreement.
HELD:
Nonprofit research corporations established pursuant to 38
U.S.C.
4161 to 4168 are not authorized to enter into sharing agreements with
VA medical facilities and VA medical facilities having no authority
to execute such agreements.
Donald L. Ivers
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