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General FAQs

  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. 
  1. 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 Research and Development (R&D), Institutional Review Board (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 Principal Investigators (PIs); the ability to quickly hire new personnel or purchase equipment and supplies; and full accounting of NPC research funds towards VA's Veterans Equitable Resource Allocation (VERA) funding (that is, NPCs are considered to be “VA entities” for purposes of calculating each facility’s annual VERA research allocation).
  2. Does the statute that authorizes the NPCs or the VHA Handbook 1200.17 have specific training requirements?  Yes, VHA Handbook 1200.17 requires NPC personnel complete certain training and disclosure requirements.  The following will provide you with information on those requirements:
  1. 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.

Governance FAQs

Click here to find more information on NPC Governance.

What does it mean to be a statutory VA director?  A statutory VA director holds a position on the NPC board of directors by virtue of the position that they hold at the VA medical center or health care system.  These positions are the medical center Director, Chief of Staff, Associate Chief of Staff for Research and/or the Association Chief of Staff for Education.  Being a statutory VA director also allows these individuals to use their VA time and other VA resources as necessary to fulfill their responsibilities as NPC board members.

  1. How often should the board meet?  State nonprofit 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. 
  2. When should the board meet?  If the board is comprised of only statutory VA directors and statutory non-federal 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.  Click here fore more information on board member conduct. 
  3. What are the responsibilities of an NPC board member?   Each member of the board of directors has the duty of care, loyalty and obedience.  A board member's active and engaged participation in the NPC’s governance will be their most important role and is vital to the well-being and future of the NPC.  Board members 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 them from liability for actions taken by the board.  Also, a board member may not delegate their responsibilities to a non-board member.  Click here fore more information on board member responsibilities.  
  4. 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.
  5. 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 FAQs

  1. What financial statements should I be getting at board meetings?  During the meetings of the board, board members 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.2
  1. Who is responsible for choosing the auditor?  Choosing the auditor is the responsibility of the board.  The auditors 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.  Click here fore more information on audits and audit committees. 

Operational Management FAQs

  1. Who is responsible for oversight of the executive director?  By statute, the board is responsible for appointing an executive director,  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 directors’ compensation to ensure compliance with IRS Intermediate Sanction rules.  Click here fore more information on executive director hiring and evaluation. 
  2. 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).  Click here fore more information on NAVREF's insurance program. 
  3. 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.
  4. 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.

Grants/Contracts Management FAQs

  1. 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 and administrative personnel salaries, 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%.
  2. 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.
  3. 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.
  4. 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 used 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.
  5. 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.  Click here for more information and sample MOUs for NPC reimbursements to VA. 
  6. 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 FAQs

  1. Why do NPC employees engaged in research and/or education have to have a Without Compensation (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.  A WOC appointment is also generally required for regular access to work in a VA facility, in order to obtain a VA email address or to secure keys for a VA office.  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.  Click here fore more information on WOC appointments.
  2. Should NPC administrative employees have a WOC appointment?  In 2010, VA's Office of General Counsel determined that certain NPC employees (i.e., administrative) who were not performing VA duties (i.e., VA research or education, under VA supervision) were being issued "improper" without compensation (WOC) appointments.  Instead NPC employees doing strictly NPC administrative work should be given "affiliate"appointments.  Click here for more information on affiliate badges. 
  3.  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.  Click here fore more information on joint employment by VA and NPCs. 
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