NPCs are often asked if an NPC can pay for gifts and bonuses (including year end bonuses) to NPC and VA Personnel.
Gifts between VA and NPC employees are governed by federal ethics regulations (5 CFR Part 2635). The Office of General Counsel (OGC) has determined that as a consequence of their WOC appointments, certain 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 page discussing "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. Click here for that page.
Another page, “Gifts from Outside Sources” on the same web site discusses the limits on what VA employees may accept from non-government sources. Click here for that page.
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.
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 here). 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.
Third Party Bonuses to NPC Personnel:
An IG inspection of a large NPC turned up just one deficiency: NPC management was unaware that a clinical trial sponsor was giving NPC employees bonuses for outstanding work.
The IG did not object to the NPC employees' receiving bonuses. The IG did, however, feel that it was inappropriate for the pharmaceutical company to pay the bonuses directly to the employees without the NPC executive director's knowledge and without giving the NPC the opportunity to deduct appropriate taxes, or the information necessary to issue an IRS Form 1099.
As a result, the NPC has modified its donation acknowledgment letter, stipulating that all payments pertaining to a specific research study will be made to the NPC. A sample paragraph to this effect follows:
The study will be performed as part of the investigator's official duties and there will be no personal compensation to the investigator. Additionally, the study was approved with the provision that all funding associated with the project will be administered by (NPC). Accordingly, payment for the conduct of the study may be made only to (NPC). Under no circumstances will payment in any form (cash, travel, gifts, bonuses) be made directly to the principal investigator, to any of the investigator's study employees, or to any other organization or party without prior written approval from (NPC).
Similarly, an NPC may add similar instructions to the clause in a clinical trial agreement that specifies the payment terms.