Research Administration Office

University of California

Memo Operating Guidance

No. 83-15

APRIL 20, 1983

Subject: American Cancer Society Grant Cancellation Policy

The American Cancer Society is currently including an objectionable "cancellation" provision in its research grant awards.

The Society's booklet entitled "Policies on research and Clinical Investigation Grants, Effective July 1, 1979," includes a notice stapled inside the back cover which reads,

!6. Cancellation: In the event of cancellation of a grant, the Society cannot assume responsibility for expenditures in excess of payments already made to the grantee institution prior to the effective date of cancellation, and all unexpended funds must be returned to the Society.

Enclosure 1 is our March 24, 1983 letter to the Society objecting to the cancellation policy. In that letter, we asserted that the threat of cancellation by the Society along with the resulting non-payment of expenditures in excess of payments already received would place the University at financial risk. In order to protect itself, the University would have to alter its expenditure schedule, perhaps to the detriment of the research effort.

In an April I1, 1983 response (Enclosure 2) Robert J. Task, Director of Corporate and Legal Affairs for the Society, acknowledged the potential problem (though he saw the risk as minimal) and stated, "It would consequently appear that some modification of policy to account for those situations, however infrequent, in which the Society, unilaterally, cancelled a grant would be appropriate and serve to allay any concerns of .-grant recipients. Until such a change is made we contemplate that the current policy will only be applied to grants that are canceled by a principal investigator and any grants that are terminated by the Society shall be in accordance with the legal rights and liabilities of the parties."

CAMPUS ACTION

In light of this interim policy interpretation by the Society, it is critical that Contract and Grant Officers assure that all University financial obligations are adequately met by the Society before a principal investigator cancels any Society grant.

Secondly, in accepting a grant from the American Cancer Society, campuses should express an understanding as follows:

This grant is accepted with the understanding pursuant to Mr. Robert J. Task's April 11, 1983 letter, that Clause 16, "Cancellation" applies to a cancellation by the principal investigator. Should the Society cancel this grant, the termination settlement shall be in accordance with the legal rights and liabilities of the parties.

We will attempt to work with the Society to develop mutually acceptable new language in this area. Once a new Society policy is developed, we will bring it to your attention.

Refer: Joe Acanfora

ATSS 8-582-1638

(415) 642-1638

Subject Index: 02, 06

Organization Index: P-010

David F. Mears

University Contracts and Grants Coordinator


ENCLOSURE 1 to C& G MEMO 83-15

Office of the Assistant Vice President--Business Management

March 24, 1983

Dr. Vivona

Vice President for Research

American Cancer Society, Inc.

777 Third Avenue

New York, N.Y. 10017

Dear Dr. Vivona:

It was recently brought to my attention that the American Cancer Society. booklet entitled, "Policies on Research and Clinical Investigation Grants, Effective July 1, 1979," includes a notice stapled inside the back cover which

16. Cancellation: In the event of cancellation of a grant, the Society cannot assume responsibility for expenditures in excess of payments already made to the grantee institution prior to the effective date of cancellation, and all unexpended funds must be returned to the Society.

After discussions between you and Dr. Vegotsky, and Joe Acanfora of this office, we were asked to submit our concerns in writing.

We understand the subject clause was developed in response to a particular situation where a Principal Investigator incurred costs to the full amount of his grant, then canceled the project before completing the research or delivering research results. We know no other details of this case.

In response, the Society now wants to protect itself by establishing a policy which refuses to pay costs incurred prior to cancellation which had not yet been paid. While we understand the Society's need to protect itself from abuse or actions taken in bad faith by the grantee, we believe the subject "Cancellation" clause has been written much too broadly and puts grantees at such risk that it would negatively impact the research effort.

Our primary concern is that the clause is not limited to cancellation by the grantee, but also applies to cancellation by the Society. If, because of budgetary problems, disagreements over research or for any other reasons, the Society decides to cancel a research project, the University. could not under the new clause expect to be reimbursed for legitimate costs incurred in good faith prior to cancellation. This is a highly undesirable condition on accepting funding from the Society. To protect their own interests, grantees would be likely to expend funds only after receipt of payment at the Society's rate of 1/12 per month. This could seriously hamper the research effort by mandating an expenditure schedule unrelated to the actual expenditure needs of the research effort. It is common that "start-up" costs of a research project, "bulk-order" discounts and other project related judgments call for expenditures that exceed the 1/12 per month rule in the early stages of the project. Yet because of the financial risk carried with the subject "Cancellation" clause, recipients may not advance their own funds, and instead force the research effort to conform to the Society's payment schedule. This would be to the detriment of the efficient and productive handling of the research effort.

Therefore, we propose that the Society consider "cancellation" coverage as provided below:

Termination for Cause--The Society reserves the right to terminate any grant in whole or in part at any time before the date of completion, whenever it is determined that the recipient has failed to comply with the conditions of the agreement. The Society shall promptly notify the recipient in writing of the determination and the reasons for the. termination, together with the effective date. Payments made to recipients or recoveries by the Society under grants terminated for cause shall be in accordance with the legal rights and liabilities of the parties.

Termination for Convenience--The Society or recipient may terminate grants in whole or in part when both parties agree that the continuation of the project would not produce beneficial results commensurate with the further expenditure of funds. The two parties shall agree .upon the termination conditions, including the effective date and, in the case of partial terminations, the portion to be terminated. The recipient shall not incur new obligations for the terminated portion after the effective date, and shall cancel as many outstanding obligations as possible. The Society shall allow full credit to the recipient for the Society's share of the non-cancelable obligations property incurred by the recipient prior to termination.

After your consideration of these alternative "cancellation" policies, if you would like to discuss this matter further, please contact Joe Acanfora at (415) 642-1638.

David F. Mears

University Contract and Grant Coordinator

491 University Avenue

University of California

Berkeley, CA 94720


Enclosure 2

April 11, 1983

Mr. David F. Mears

University Contract and Grant Coordinator

491 University Avenue

University of California

Berkeley, California 94720

Re: Research grant cancellation policy

Stefano Vivona, the Society's Vice President for Research, has referred your March 24, 1983 letter to me.

The letter expresses a concern that the Society's current policy may interfere with research conducted under Society grants.

The necessary expenditures that should be made by an institution or principal investigator during the early stages of a research grant would, presumably, be inhibited by the concern that there would not be adequate reimbursement by the Society should the grant subsequently be canceled.

This fails to recognize that, under appropriate circumstances, when an investigator wishes to devote extra funds in the early stages of a grant to the purchase of equipment, it is highly likely that permission will be given. Furthermore the Society ordinarily does not cancel grants and the necessity for higher expenditures during the early stages of a research project has, most often, worked to its detriment when there has been a cancellation.

In fact when cancellations occur they are usually initiated by the principal investigators for whose use the grants have been awarded. The Society then finds it may have advanced money in excess of the amount to which the investigator was entitled with a concomitant windfall to the investigator or institution that retains title to any equipment and has benefited from more than the pro-ratable share of the grant for the actual time the research was conducted.

Nevertheless, the Society's current policy may be too broad and serve to discourage grant applications and acceptances by those who are not familiar with the realities of the situation. It would consequently appear that some modification of policy to account for those situations, however infrequent, in which the Society, unilaterally, canceled a grant would be appropriate and serve to allay any concerns of grant recipients. Until such a change is made we contemplate that the current policy will only be applied to grants that are canceled by a principal investigator and any grants that are terminated by the Society shall be in accordance with the legal rights and liabilities of the parties.

Sincerely yours,

Robert J. Task

Director of Corporate & Legal Affairs

cc: Stefano Vivona, M.D.