NAVREF UPDATES – November 24, 2004

TO:  NAVREF Members
FROM:  Barbara West, Executive Director

1. End of Year Grinch Reminders

2. Nonprofit Code of Ethics

3. Professional Liability Insurance for Federal Employees

4. IRS Raises IRS Mileage Reimbursement to 40.5 Cents

5. New ORD Web Site

6. Happy Thanksgiving!

As we approach the end of 2004 and the holiday season, the NAVREF office is receiving questions about the appropriateness of NPCs paying for gifts and end of year performance bonuses.  Sorry to sound like the Grinch, but . . .

Regarding gifts: Gifts between VA and NPC employees are governed by federal ethics regulations (5 CFR Part 2635 http://www.usoge.gov/pages/laws_regs_fedreg_stats/oge_regs/5cfr2635.html). General Counsel has determined that as a consequence of their WOC appointments, NPC employees are bound by federal ethics regulations pertaining to conduct as well as conflicts of interest so the same rules apply to gifts among NPC employees.

The pamphlet "Gifts Between Employees" on the Office of Government Ethics web site does a good job of explaining that federal employees generally may give each other gifts with a value of less than $10 on traditional gift giving occasions. Go to http://www.usoge.gov/pages/forms_pubs_otherdocs/forms_pubs_other.html and click on ”Pamphlets.”  OGC guidance on holiday gift giving is available at http://www.navref.org/newsletter/word/OGC_Gift_Guidance.doc

Another pamphlet, “Gifts from Outside Sources” on the same web site discusses the limits on what VA employees may accept from non-government sources.

However . . . Regardless of whether the cost is below the $10 threshold or falls within the $20/50 exception, and despite the OGC’s position that NPCs are not prohibited sources, NAVREF strongly advises against using NPC funds to pay for gifts, or to reimburse PIs for gifts for their VA, NPC or university employees/colleagues or for vendors. Even if the giver and the recipient are research employees, discretionary holiday gift giving is not consistent with the purpose of the NPCs.  Nor does NPC payment for the gifts (whether directly or through reimbursement) negate the applicability of the federal gift rules.  If VA or NPC employees want to give gifts, they must follow the federal gift rules and should pay for them personally.

Regarding bonuses:  As private sector organizations, NPCs may provide performance bonuses to their own employees when such awards are part of an organization-wide program consistently applied to all employees, subject to relevant tax withholding.  However, NPC bonuses become problematic when the potential recipient is also a VA employee.

The applicable federal statute is found at 18 U.S.C. § 209 (see http://www.usoge.gov/pages/laws_regs_fedreg_stats/comp_fed_ethics_laws.pdf page 20).  This law prohibits federal employees from receiving anything other than their federal salary as compensation for services as a government employee.  Violations may subject both the payer and the payee to criminal penalties amounting to as much as five years in prison and $50,000.

Under no circumstance may an NPC make any form of payment to federal employees for services that relate to their official positions.  Further, NAVREF strongly advises against paying any form of bonuses to dual VA/NPC employees. The risk of failing to adequately distinguish a joint employee's exemplary performance in his VA job from his NPC responsibilities is simply too high.  Even the perception that a bonus was paid for VA - as opposed to NPC - performance could trigger the criminal statute.

NAVREF encourages NPCs to think of creative, non-monetary ways to acknowledge exemplary performance by dedicated VA and NPC personnel.

During the recently completed governance training conducted eight times around the country, presenter Gerry Zack encouraged each NPC to develop a code of ethics.  Mr. Zack declined to provide a model out of a belief that there is value in a board and staff working together to develop a code that meets the organization's unique needs.  In response to requests for assistance in getting started, NAVREF offers the following:

- By statute, NPC officers, directors and employees are subject to federal statutes and regulations regarding conflicts of interest.  Comprehensive information about federal ethics regulations may be found at http://www.usoge.gov, including helpful booklets and pamphlets.

- The Independent Sector, a national membership organization of nonprofit and philanthropic organizations, has focused considerable effort on assisting nonprofits in developing codes of ethics.  Comprehensive information, including a sample code and a detailed checklist for developing your own, is provided at http://www.independentsector.org/members/code_main.html  Go to the end of the checklist for a link to a compendium of codes of ethics.

- The Henry Jackson Foundation is a congressionally authorized nonprofit established to serve a purpose similar to the NPCs and works closely with federal employees.  As a result, its detailed code of ethics and "quick reference" guide for employees may serve as a useful starting point for NPCs to develop their own.  Home page: http://www.hjf.org  Click “About Us" and look for the link to “Ethics” at the end of the list on the left.

During several of the governance training sessions, there was discussion of the VA position that medical center directors can be held accountable to VA for NPC acts, and it was pointed out that broad, reasonably priced personal liability insurance coverage is available to federal employees from Wright & Co.  Such a “Professional Federal Liability” policy provides coverage for suits arising from acts, errors or omissions by federal employees and would include NPC-related acts by statutory VA board members because serving on an NPC board is within the scope of their federal employment.  NAVREF is not aware of any such suits, and an NPC’s D&O/Professional Liability policy covers all board members so such an individual policy may be duplicative.  However, those who are interested in individual protection for the full range of their federal official duties may go to http://www.wrightandco.com/index.htm  Click “Liability” for details of the cost and coverage.

Last week, the Internal Revenue Service (IRS) announced a 3-cent increase in the standard mileage rate for businesses to use for 2005 in deducting and reimbursing automobile costs. Beginning on January 1, the standard mileage rates will be 40.5 cents per mile for all business miles driven, up from 37.5 cents a mile in 2004. The 3-cent increase is the largest one-year rise ever. According to the IRS, the primary reasons were higher prices for vehicles and gas.  NPCs reimbursing mileage under an IRS accountable plan should adjust their rates accordingly.  For details of an IRS accountable plan go to http://www.navref.org/library/fund_automatic_travel_reimbursement.htm

The VHA Office of Research and Development has launched a new web site located at http://www1.va.gov/resdev/  Comprehensive information about VA research and development can be found on the web site, including links to the national phone directory of research personnel, VHA handbooks pertaining to research, and highlights of research advances.

The web site pertaining to the VA-affiliated nonprofits remains at http://www.vanpc.org/  The primary purpose of this site is to provide a mechanism for electronic submission of the NPCs’ annual reports to VA.  Any NPC in need of login information should contact Kawan.Taylor@va.gov  The 2003 annual report compilation (based on June 1, 2004 reports) is undergoing the VA concurrence process and will be available on line shortly after final approval.

The NAVREF staff wishes everyone associated with the NPCs a Happy Thanksgiving and Holiday Season.