Costing Policy & Analysis

Research Administration Office

University of California

Memo
Operating Guidance

No. 95-11

November 20, 1995

VICE CHANCELLORS--BUSINESS AND FINANCE ADMINISTRATION
CONTRACT AND GRANT OFFICERS

Subject: Interim Policy and Procedures on Disclosure of Financial Interests Related to Sponsored Projects

Enclosed is a copy of the Interim Policy and Procedures on Disclosure of Financial Interests Related to Sponsored Projects issued September 28, 1995 by President Peltason. (Enclosure 1) This policy conforms with the Public Health Service regulations, 45 CFR Part 50, Subpart F and 45 CFR Part 94, and with the National Science Foundation regulation. (Enclosure 2 -- not scanned)

The Public Health Service regulations, "Objectivity in Research," have two procedural requirements not included in the National Science Foundation regulations: 1 ) notification to the PHS, and 2) responsibility for Investigators at other institutions. The following provides guidance on these two requirements.

Notification to the Public Health Service:

Until the Public Health Service issues standard forms for the purpose of complying with Sections 50.604 (g)(2) and 94.4(g)(2), the following standard text should be used in letters to the PHS awarding component notifying PHS in cases where the University has determined that a significant financial interest could affect the design, conduct, or reporting of a PHS funded project: "In accordance with PHS regulations on Objectivity in Research, this is to notify you that the University of California has identified the existence of a conflicting interest under award number: (insert award number). The conflicting interest will be managed, reduced or eliminated in accordance with PHS regulations prior to the expenditure of funds under the award." It is recommended that you do not indicate the name of the Investigator for whom there is a conflicting interest or provide any information about the nature of the interest or our management actions, unless notification to the sponsor is one of the steps being taken to manage the conflict of interest. It is also recommended that you provide only the award number, and not the Principal Investigator's name, because of the possible inference that the conflicting interest exists for the Principal Investigator instead of another Investigator on the project.

Responsibility Under PHS Awards for Investigators at Other Institutions

The University is required to assure compliance with the PHS regulations by Investigators at other institutions in cases where the Investigators at the other institution will be responsible for the independent conduct of a substantial and significant portion of the research activity. Sub-agreements for support services, such as laboratory testing of biological materials, clinical services, data processing, equipment fabrication or repair, patient care, or analytical testing services do not require assurance of compliance with the PHS regulations on Objectivity in Research. As a general guideline, in cases where the University will enter into a Consortium agreement under the NIH Guidelines for Establishing and Operating Consortium Grants, or an equivalent situation under a PHS contract, the University must insure that Investigators from the other institution have complied with the PHS regulations.

Under the PHS regulations, the University must make reasonable efforts to ensure compliance either by including Investigators from other institutions in the University's policy or by receiving appropriate assurances from the other institution. It is not advisable for Investigators from other institutions to file disclosures and have conflict of interests reviewed under the University policy. In cases where the other institution has not already developed a disclosure and review process in compliance with the PHS regulations, it is recommended that the University either find another contractor or assist the other institution in assuming responsibility for reviewing disclosures and managing any conflicts for their Investigators.

Consistent with this approach, it is recommended that the following provision be included in research sub-agreements under PHS awards: "The Institution hereby assures University that it has implemented a policy on conflict of interest that complies with the PHS regulations on Objectivity in Research, 42 CFR 50, Subpart F. Further, the Institution's policy will be made applicable to activities under this award. Prior to the Institution's expenditure of any funds under this award, the Institution will report to the University the existence of a conflicting interest (but not the nature of the interest or other details) found by the Institution and assure that the interest has been managed, reduced or eliminated in accordance with the PHS regulations. For any interest the Institution identifies as conflicting subsequent to the Institution's initial report under this award, the report will be made and the conflicting interest managed, reduced, or eliminated, at least on an interim basis, within sixty days of that identification. The University will forward the report(s) to the PHS Awarding Component."

Because the National Science Foundation regulations do not require the University to seek such assurance or compliance by Investigators at other institutions under their awards, it is not required that such a provision be included in research sub-agreements under NSF funding.

Refer:
Barbara Yoder
(510) 987-9848
Barbara.Yoder@ucop.edu

Subject Index: 01
Organization Index: F-350, F-7111, U-115

David F. Mears
Director, Research Administration Office

Enclosures

cc:
Vice Chancellors--Research
Conflict of Interest Coordinators
Director Stowsky


Enclosure 1

UNIVERSITY OF CALIFORNIA
OFFICE OF THE PRESIDENT
300 Lakeside Drive
Oakland, California 94612-3550

September 28, 1995

CHANCELLORS
LABORATORY DIRECTORS
SENIOR VICE PRESIDENT-BUSINESS AND FINANCE
VICE PRESIDENT-AGRICULTURE AND NATURAL RESOURCES

Interim Policy and Procedures on Disclosure of Financial Interests Related to Sponsored Projects

The enclosed Interim Policy and Procedures on Disclosure of Financial Interests Related to Sponsored Projects is effective October 1, 1995.

This Interim Policy responds to new requirements of the Public Health Service (PHS) and the National Science Foundation (NSF) that institutions provide for the disclosure and review of interests of investigators that are related to their research. This Policy ultimately will apply to all extramurally sponsored projects, research, and non-research alike. However, the Policy is being issued initially as an interim policy because of the plan to phase it in over time. For the period October 1, 1995 through June 1997, the Policy will apply only to projects submitted for support from the Public Health Service and the National Science Foundation; beginning July 1, 1997, the Policy will apply to all projects submitted for support from any Federal agency. After an assessment of the implementation of the Policy for all Federally supported projects, the President will issue a schedule for phasing in the application of the Policy to projects submitted for support from private and other governmental sponsors and intramural programs.

This Interim Policy was developed by an intercampus working group with campus review, and it has the endorsement of the Council on Research. The Office of the President will work closely with the campuses and Laboratories in evaluating the workings of the Interim Policy and will be open to making reasonable changes as needed, as long as they are consistent with other relevant University policies and Federal requirements.

Thank you for your advice and cooperation in developing this Policy.

Cordially,

J.W. Peltason

Enclosure

cc:
Members, President's Cabinet
Academic Council Chair Leiman
Director Stowsky
Special Assistant Gardner
Members, Council on Research
Principal Officers of The Regents


University of California
Office of the President
October 1, 1995

INTERIM POLICY AND PROCEDURES ON DISCLOSURE OF FINANCIAL INTERESTS RELATED TO SPONSORED PROJECTS

I. Policy

It is the policy of the University of California that any University employee responsible for the design, conduct, or reporting of a sponsored project at the University must disclose significant personal financial interests related to that project. When the University determines that such an interest might reasonably appear to be directly and significantly affected by the sponsored project, the University will take steps either to manage or to eliminate the conflict of interest, pursuant to Section VI. of this Policy.

II. Purpose and Scope of Policy

The purpose of this Policy is to establish a process of open disclosure and review, to identify any conflicts of interest between an Investigator's sponsored project obligations and personal financial interests or obligations, and to establish a process to eliminate or manage such conflicts so that financial interests of Investigators do not compromise the objectivity with which projects are designed, conducted, or reported. This Policy applies to all research supported through extramural and intramural funds and to all other activities supported under extramurally sponsored agreements. Initially, however, for the period October 1, 1995 through June 1997, the Policy will apply only to projects submitted for support from the Public Health Service and the National Science Foundation; beginning July 1, 1997, the Policy will apply to all projects submitted for support from any Federal agency. After an assessment of the implementation of the Policy for all Federally supported projects, the President will issue a schedule for phasing in the application of the Policy to projects submitted for support from private and other governmental sponsors and intramural programs.

This Policy is consistent with the Public Health Service (PHS) regulations, "Objectivity in Research," 42 CFR Pan 50 and 45 CFR Pan 94, and with the National Science Foundation (NSF) regulations, "Investigator Financial Disclosure Policy," effective October 1, 1995. This Policy supplements, but does not supplant, the University Policy on Disclosure of Financial Interest in Private Sponsors of Research (April 26, 1984) and the Guidelines for Disclosure and Review of Principal Investigator's Financial Interest in Private Sponsors of Research (April 27, 1984). The University Policy on Disclosure of Financial Interest in Private Sponsors of Research requires Principal Investigators to disclose any financial interests in non-governmental sponsors of contracts, grants, or gifts. This Interim Policy on Disclosure of Financial Interests Related to Sponsored Projects is not directed toward disclosure of financial interest of the Investigator in the individual sponsor; rather, it is directed toward disclosure of any financial interests that would reasonably appear to be affected by the work performed under a sponsored project.

III. Definitions

University Reviewing Official

An Official designated by the campus or Laboratory to review completed Disclosure of Financial Interests forms and to determine whether any reported financial interest would reasonably appear to be directly and significantly affected by the sponsored project.

Disclosure of Financial Interests (Disclosure)

Statement to be completed by Investigators listing financial interests related to a project or projects. Each campus and Laboratory may design its own form as long as it meets minimum requirements established in Section V. of this Policy.

Financial Interest

Anything of monetary value, including:

a. Income from a single business entity during the prior twelve months, including salary, consulting payments, honoraria, royalty payments, dividends, loans from the entity, or any other payments or consideration with value, including payments made to the University Health Sciences Compensation Plans, exceeding $10,000 when aggregated for an Investigator and the Investigator's spouse and dependent children;

b. Income from a single public or nonprofit entity during the prior twelve months, including salary, consulting payments, honoraria, royalty payments, dividends, loans from the entity, or any other payments or consideration with value, including payments made to the University Health Sciences Compensation Plans, exceeding $10,000 when aggregated for an Investigator and the Investigator's spouse and dependent children, excluding income from seminars, lectures, teaching engagements, or service on advisory committees or review panels;

c. Equity in the form of stock, stock options, loans to the entity, real estate, or any other investment or ownership interest exceeding either $10,000 (current market value if publicly traded; internal estimate of value if not publicly traded; otherwise, amount of investment) or a 5% ownership interest, for any one enterprise when aggregated for an Investigator and the Investigator's spouse and dependent children;

d. A management position such as board member, director, officer, partner, or trustee, held by the Investigator; or

e. Intellectual property interest held by the Investigator, or Investigator's spouse or dependent children on a patent, patent application, or a copyright of software assigned or to be assigned to a party other than The Regents.

A financial interest does not include payments made by The Regents, including salary, stipends, royalty payments, honoraria, reimbursement of expenses, or any other remuneration.

Investigator

Any individual responsible for the design, conduct, or reporting of the results of work performed or to be performed under the sponsored project. This includes the Principal Investigator, Co-Investigators, and any other individual who has independent responsibility for accomplishing project objectives.

Independent Substantive Review Committee

A Committee appointed by the Chancellor or Laboratory Director (or designee) to review Disclosures and relevant features of the sponsored project(s) and, on the basis of the review, to recommend to the Chancellor or Laboratory Director (or designee) whether funding for the project(s) should be accepted and, if so, whether any modifications or conditions are needed.

Related Financial Interest

When the work to be performed under the sponsored project and the results of the undertaking would reasonably appear to affect the financial interest, the financial interest is "related" to the sponsored project and must be disclosed. The following are financial interests "related" to a sponsored project:

a. The Investigator is carrying out a project whose results would be relevant to the development, manufacturing, or improvement of the products or services of the entity in which there is a financial interest;

b. The Investigator has a financial interest in an entity which might manufacture or commercialize a drug, device, procedure, or any other product used in the project, or that will predictably result from the project;

c. The Investigator has consulting income in his or her professional field. (Consulting activities in the professional field of the Investigator are considered 'related' interests and all income must be disclosed if it meets the threshold for a financial interest;)

d. The Investigator has a financial interest in an entity and the sponsored project proposes to subcontract a portion of the work, or lease property, or to make referral of participants w, or make purchases from the entity; or

e. The Investigator has a financial interest in an entity that is part of a consortium or that will otherwise participate in the sponsored project.

Financial interests which are not "related" to the sponsored project do not need to be disclosed.

Update of Disclosure of Financial Interests (Update)

Statement to be completed by Investigators either annually or whenever they acquire new financial interests that were not listed in the original Disclosure of Financial Interests form and that are related to their projects.

IV. Disclosure Requirement

For each sponsored project application, the Principal Investigator must fully disclose all Related Financial Interests and must insure that all other Investigators on the project have also completed such Disclosures prior to University acceptance of the award. All Investigators must also file an Update of Disclosure of Financial Interests either when they acquire new financial interests related to active projects, or on an annual basis, as determined by the campus or Laboratory.

Alternatively, campuses and Laboratories have the option of requiring a single, annual Disclosure from an Investigator in lieu of a separate Disclosure with each award, provided that a Designated University Official and, if necessary, an Independent Substantive Review Committee (ISRC), can assure that each specific sponsored project and the related financial interests were examined in the scope of the annual review.

Disclosures and Updates are open to public inspection.

V. Disclosure and Update Form(s)

Each campus and Laboratory may design its own Disclosure and Update form(s) and determine the appropriate level of detail necessary for review, as long as the following minimum standards are incorporated into the procedure. The Disclosure and Update form(s) must:

a. Indicate whether or not the Investigator has any financial interests related to the work to be conducted under the sponsored project{s);

b. Provide the name of each entity in which the Investigator has a Related Financial Interest and the type of the financial interest (income, equity, management position, or intellectual property);

c. Indicate, for income interests in each entity, whether the aggregate value exceeds $10,000 but did not exceed $20,000, whether it was in excess of $20,000 but did not exceed $50,000, or whether it was greater than $50,000;

d. Indicate, for equity interests in each entity, whether the value exceeds $10,000 but does not exceed $100,000, whether it exceeds $100,000 but does not exceed $1,000,000, or whether it exceeds $1,000,000;

e. Indicate, for equity interests in each entity, whether the percentage of ownership is from 5% to 20%, from 21% to 50%, or above 50%;

f. Indicate whether the entity in which the Investigator has a financial interest is a proposed subcontractor, consortium member, supplier of goods, lessor, or otherwise involved with the sponsored project(s);

g. Indicate whether the entity in which the Investigator has a financial interest might manufacture or commercialize any drug, vaccine, device, procedure or any other product involved in or that will predictably result from the sponsored project(s); and

h. Provide notice to the Investigator that the disclosure will be open to public inspection and include a Privacy Act Notice substantially as follows: The principal purpose for requesting the information on this form is to comply with University policy and Federal regulations regarding disclosure of any financial interests that would reasonably appear to be affected by the conduct of a sponsored project. Provision of the information is mandatory if you want to submit a proposal for support of a project. This information will be used to implement the University Policy on Disclosure of Financial Interests Related to Sponsored Projects. The information may be released or transmitted to the sponsor, including Federal agency representatives, and, according to State law, may also be released to the public upon request. For further information about the Policy and use of the information, you may contact: (provide name and telephone number of campus or Laboratory contact).

The Disclosure and Update form(s) may provide the Investigator the opportunity to indicate whether he or she believes the project(s) could directly and significantly affect the Related Financial Interest(s).

VI. Review of Disclosures

The Disclosure shall be reviewed by a University Reviewing Official to determine whether any related financial interest is one which would reasonably appear to be directly and significantly affected by the proposed sponsored project. A direct impact occurs when the project results would be directly relevant to the development, manufacturing, or improvement of the products or services of the organization in which the employee has a financial interest, or when the organization is a proposed subcontractor or participant in the project. A significant impact on the financial interest is one which will materially affect the value of the organization, its earnings, or the sales of its products, or the organization is a proposed subcontractor or participant in the project. Based on information provided in the Disclosure, the University Reviewing Official may determine that there is no reasonable basis on which to conclude that a project could directly and significantly affect the financial interest and that the financial interest is not likely to affect the design, conduct, or reporting of the project. In this case, a record should be made of the Reviewing Official's action and the project can proceed without further review. In the event that either the Investigator or the University Reviewing Official concludes that a project might have a direct and significant impact on the financial interest and that the financial interest could affect the design, conduct or reporting of the project, the Disclosure and appropriate documentation shall be forwarded to the campus or Laboratory ISRC for consideration. The ISRC makes a final recommendation to the Chancellor or Laboratory Director (or designee) about whether the project should proceed and whether any conditions or restrictions should be placed on the project to manage the conflict of interest. The same review process takes place when an Investigator files an Update form reporting a new, related financial interest.

VII. Management or Elimination of Conflicts of Interest

When an Investigator has financial interests that would reasonably appear to be directly and significantly affected by the sponsored project, the ISRC may recommend to the Chancellor or Laboratory Director (or designee) that the project may not proceed. Alternatively, under certain circumstances, the ISRC may recommend that the campus or Laboratory impose special conditions or restrictions to manage the conflict of interest to minimize the effect of the Related Financial Interest(s) on the design, conduct, or reporting of the sponsored project(s). Investigators may also be asked to make recommendations about how to manage the conflict of interest. Examples of conditions or restrictions that may be imposed to manage or eliminate conflicts of interest include:

a. Public disclosure of the Related Financial Interest(s);

b. Monitoring of the project by independent reviewers;

c. Modification of the research or project plan;

d. Disqualification from participation in all or a portion of the project;

e. Divestiture of the Related Financial Interest(s); or

f. Severance of relationships that create actual or potential conflicts.

The review of the Disclosure(s) and adoption of conditions or restrictions to manage or eliminate the conflict of interest must be completed within 90 days of receipt of the award, unless the sponsor requires action by an earlier date. Some sponsors may also require a report of the existence of a conflict of interest and assurance that it has been managed, reduced, or eliminated.

VIII. Sanctions

Failure to file a complete Disclosure of Financial Interests or Update or to comply with any conditions or restrictions imposed on the conduct of the project under this Policy will be grounds for discipline pursuant to the Policy on Faculty Conduct and the Administration of Discipline and other applicable University policies. In addition, Federal regulations may require reports to the Federal sponsor of any violations of University policy. Sponsors may suspend or terminate the award and/or debar an Investigator from receiving future awards in the event of failure to comply with applicable Federal regulations on disclosure, review, and management of significant financial interests related to Federally sponsored projects.

IX. Responsibilities and Administration

Chancellors, Laboratory Directors, the Senior Vice President--Business and Finance, and the Vice President-Agriculture and Natural Resources, within their areas of responsibility, shall implement this Policy. In addition, they are authorized to issue local guidelines, implementing procedures, and supplementary forms, as appropriate, consistent with this Policy and applicable sponsor regulations. Records regarding Disclosures, Reviewing Official's determinations, ISRC recommendations, and University actions regarding management of a conflict of interest must be retained for three years beyond the termination or completion of an award, or until resolution of any action by the sponsor involving the records, whichever is longer. Records relating to unfunded projects need not be retained. Implementation of this Policy shall include compliance with applicable sponsor regulations governing institutional responsibilities, certification of compliance, reporting requirements, and other duties required under the specific sponsor's regulations. Department of Energy Laboratory implementation of this Policy will be integrated with the requirements of each prime contract and other legal constraints. Each Laboratory will examine local conditions and obligations to determine what additional actions and procedures need to be implemented to bring local practices into conformance with this Policy. Copies Of guidelines, procedures, and forms developed by each campus and Laboratory shall be sent for information to the Vice Provost for Research in the Office of the President.