NAVREF UP TO DATE - OCTOBER 21, 2002

1. Legislative Updates
2. OMB Involved in VA Add On Discussions
3. NAVREF Responds to Oversight Subcommittee Questions
4. Guidestar Nonprofit Compensation Survey On NAVREF Web Site
5. Annual Reports to VA Compilation
6. Assistance Available for Preparing DHHS IDC Rate Proposal
7. VA Research Directory
8. National VA Research Week 2003

Both the House and the Senate recessed last week, leaving much of the 107th Congress’s legislative agenda in limbo until the lame duck session begins on November 12. Brief updates on the status of legislation of interest to NAVREF members follow:

FY 2003 Appropriations: On October 9, the House Appropriations Committee approved FY 2003 funding for VA medical and prosthetics research at $405 million. This is a $34 million (9%) increase over FY 2002. It is also $5 million more than previously approved by the Senate Appropriations Committee. Neither the full House nor the full Senate took up their respective bills before recessing last week.

The text of the Senate bill (S. 2797, S. Rept. 107-222) and the House bill (H.R. 5605, H. Rept. 107-740) is available on http://thomas.loc.gov. Report language in the House bill states that $5 million of the amount provided must be transferred to the medical care appropriation for ORCA expenses, but directs VA to request funding for this activity in the medical care account in FY 2004.

In report language regarding the FY 2003 minor construction appropriation, the House Appropriations Committee “directs that $25 million of the funds provided be used specifically to address quality and safety issues in VA research facilities.” This is a long awaited achievement for NAVREF and other members of FOVA who have advocated designated funding for improvements in VA research facilities. The urgent need for such funding was a major focus of NAVREF’s annual Capitol Hill day in March and the topic of compelling testimony presented by Chairman Tony Laracuente and the AAMC in April. The Senate appropriation for minor construction is $30 million less than the House provided so the final funding level for minor construction won’t be known until the bills are conferenced. However, the earmark should stand regardless.

Congress recessed this week having completed action only on the two FY 2003 Defense appropriations bills, leaving the 11 domestic discretionary bills “hopelessly snarled,” according to one analyst. What this may mean for the VA research appropriation is uncertain at this time. The good news is the House and Senate funding levels are very similar. The bad news is that in the rush to complete all the bills during the lame duck session, legislators may take a formulaic approach to FY 2003 increases that disregards the funding levels approved to date, rolling everything into one omnibus appropriations bill. Or, a real stalemate could result if control of either the House or the Senate changes parties as a result of the elections. Anything is possible in Washington these days.

HR 3253: Last week, both the House and the Senate passed the compromise version of HR 3253, the Department of Veterans Affairs Emergency Preparedness Act of 2002. Only the President’s signature is required for final enactment. The bill authorizes VA to establish up to four medical emergency research and training centers at a cost of $100 million over five years. (Go to http://www.thomas.loc.gov for the bill text. The final version passed by the House and Senate is the one marked ENR, EAH and EAS)

However, in the very last section of the VA portion of the VA-HUD FY 2003 spending bill House appropriators inserted language that prohibits VA from spending funds to implement the bill (see Title I, Section 117 of HR 5605). In an unusual admonishment, the appropriators stated, “The Committee feels the VA needs to focus its efforts on providing health care and services to veterans, an area clearly needing improvement, . . . The Committee believes that any efforts relating to homeland security and responsiveness is [sic] best handled by other agencies and departments charged specifically with that mission.” VA Committee Chairman Christopher Smith (R-NJ), whose district was affected by the Trenton anthrax cases, is confident the prohibition will be eliminated if the VA-HUD bill comes to the House floor as a stand-alone bill. Also, Senate VA Committee Chairman Jay Rockefeller (D-WV) is talking to Senate appropriators to ensure funding for the centers.

Contract and FTCA Provisions, New Accountability Requirements: As expected, Congress passed the conference version of HR 3253 without any of the NPC provisions. NAVREF members will recall that these were stripped out for later inclusion in an omnibus VA health bill. However, the House and Senate were unable to agree on a large number of other health related issues so there will be no omnibus VA health bill this year. As a result, the NPC contract and FTCA provisions are dead as far as the 107th Congress is concerned. While this outcome is disappointing, we came very close to solving the contract and FTCA problems and will build on the progress made this year to try again next year.

We are not disappointed to see the demise of the accountability bill that would have imposed a number of new reporting requirements on the NPCs. Although NAVREF had negotiated significant revisions, the final content was highly uncertain and the potential for unintended consequences was high. We hope to persuade the House VA Committee to start from scratch next year and to collaborate with NAVREF to craft a bill that provides increased accountability without imposing a significant new burden on the NPCs.

Pursuant to testimony during the September 19 hearing regarding NIH reimbursement for VA costs incurred as a result of NIH research conducted in VA facilities, the Office of Management and Budget (OMB) hosted an October 1 meeting involving both VA and NIH representatives. During this meeting, both sides finally agreed that reimbursements are legally permitted, but disagreed on the methodology for determining the amount of reimbursement. NIH prefers reimbursement of “incremental” costs, while VA supports a negotiated rate. (See responses to Oversight Subcommittee questions for a discussion of incremental costs as opposed to indirect cost rates http://navref.org/newsletter/main_update_091702.htm.)

All parties agreed to meet again in mid-October. However, it appears that in lieu of a meeting, NIH, DHHS, VA and OMB staff are communicating by phone and email with the objective of holding a second meeting on or about November 1. If OMB is able to broker an agreement between NIH and VA, it will be proposed to NIH institute and center directors (who in March 2001 denied approval of a VA add on rate) and to DHHS for a waiver of its current policy of not paying indirect costs on grants to other federal agencies.

Although it appears that an agreement will not be reached by the November 1 deadline established by Congressman Tom Udall (D-NM), there is significant pressure on VA and DHHS to reach a resolution in the near future. Congressman Udall anticipates that the reimbursements could generate as much as $35 million for VA. NAVREF has long promoted the “15% VA add on” for VA facilities where NPC administration of NIH grants - as opposed to university administration - is politically untenable. However, in many cases NPC administration of NIH grants provides the optimum benefit for VA facilities.

NAVREF received seven follow up questions pursuant to the September 19 hearing conducted by the VA Subcommittee on Oversight and Investigations. Many thanks to Eileen Lennon, PhD, and Ron Flink for reviewing drafts prepared by Chairman Tony Laracuente and Executive Director Barbara West. The NAVREF responses are posted at http://navref.org/newsletter/main_update_101702.htm NAVREF is currently working on a response to findings and recommendations contained in the GAO and IG testimonies presented during the September 19 hearing.

NAVREF has purchased a licensed version of the first national survey of nonprofit compensation based on information reported on IRS Form 990. A members only link to the document is posted on the NAVREF home page at http://www.navref.org. NAVREF is making this survey of 250 municipalities available to members in response to numerous questions about appropriate levels of executive director compensation, particularly for part-time personnel. The document is fairly comprehensive, so it is important to read about the methodology used to compile the data before going to state- or city-specific information. Focus on Health, Medical Research or Diseases to provide a framework for the category to use.

Final regulations regarding intermediate sanctions and excess benefits require nonprofits to justify executive compensation on the basis of local data for similar jobs. All nonprofits must document board approval of executive compensation. (See January 23, 2002 Federal Register, page 3076, and August 7, 2002 NAVREF Up to Date.) The Guidestar report is one useful tool that can assist NPCs in the regions covered by the report in complying with the IRS requirements, when used in conjunction with information assembled by state departments of labor and state nonprofit associations.

Selected data from the annual reports submitted to VA in June 2002 is posted on the NAVREF web site at http://www.navref.org/library/Annual_Reports.htm Please verify the information provided about your NPC on the Excel tables and report any errors to Janine.Hilliard@med.va.gov.

Former DHHS indirect cost negotiator Dave Vedder has offered to assist NAVREF members in preparing proposals for DHHS indirect costs rates. Previously, Mr. Vedder had agreed only to review draft proposals and advise on negotiations. However, he reports that he has enjoyed working with a number of NAVREF members since the workshop he conducted for NAVREF in November 2001 and, having gained more familiarity with the VA issues that impact NPC rates, he is willing to help NPCs develop proposals from scratch. Mr. Vedder’s expert assistance is available on an hourly basis at a rate of $175 per hour. Those who have researched similar services from accounting firms will recognize that this is a very reasonable rate. Contact Mr. Vedder by phone at 425-788-1922 or email: dpvedder@attbi.com.

The VA directory of phone numbers, mailing and email addresses for research personnel has gone on line. It can be accessed at http://www.va.gov/resdev/NDdefault.cfm Contact information for NPCs is also provided. Please take a moment to verify the listing for your NPC and use the email links to report any necessary updates.