Background
On November 28, 2005 the Office of Inspector General ("OIG") of the Department of Health and Human Services published the Draft Compliance Program Guidance for Recipients of PHS Research awards ("Guidance"). The Guidance includes the seven elements common to previously issued OIG compliance program guidance directed at clinical laboratories, hospitals and other healthcare providers and, in addition, an eighth element specific to research institutions.
The seven common elements are:
- Implementing written policies and procedures
- Designating a compliance officer and compliance committee
- Conducting effective training and education
- Developing effective lines of communication
- Conducting internal monitoring and auditing
- Enforcing standards through well-publicized disciplinary guidelines
- Responding promptly to detected problems and undertaking corrective action
- Defining roles and responsibilities and assigning oversight responsibility
The additional eighth element specific to research institutions, which OIG identifies as especially important, is:
The OIG’s stated purpose in promulgating the Guidance is to encourage the use of internal controls to effectively monitor adherence to legal regulatory and program requirements in light of the OIG’s concern that recipients of research awards have misused program funds. As with all other Guidance promulgated by the OIG, compliance with the guidelines is suggested, but not mandatory, and facilities are urged to develop individual compliance programs specific to their institutional needs.
OIG Focus
The OIG’s Guidance identifies three areas of specific concern with regard to research award compliance. These areas of concern are (1) time and effort reporting; (2) properly allocating charges to award projects; and (3) reporting of financial support from other sources.
Time and Effort Reporting
With regard to time and effort reporting, the OIG views this as a critical concern, stating "teaching, research, and clinical work . . . must be accurately measured and monitored . . . [T]he separation between these areas of activity can sometimes be hard to discern . . . [and] institutions need to be especially vigilant in accurately reporting the percentage of time devoted to projects. . . . The failure to maintain accurate time and effort reporting may . . . subject an institution to civil or criminal fraud investigations." The OIG states that it is aware of situations where researchers falsely reported time. A second concern raised by the OIG with regard to time and effort reporting is the accurate and consistent treatment of "institutional base salary."
Properly Allocating Charges to Award Projects
Because institutions often receive multiple awards for one research area, properly allocating charges to award projects is the second risk area identified by the OIG. The Guidance identifies proper separation of funding from each funding source as an essential element of an accounting system and identifies banking or trading award funds as "clearly fraudulent." The Guidance describes a recent civil fraud action settled by an institution where the institution made end-of-year transfers of direct costs on various federally funded research awards from overspent accounts to underspent accounts to maximize reimbursement and avoid refunding unused grant proceeds.
Reporting of Financial Support from Other Sources
The reporting of financial support from sources other than a PHS grant is the third risk area identified because failure to report can mislead the awarding agency. The Guidance specifically cites charging the research fund or other third-party payors for performing the same services as a fraudulent act that can be avoided by proper reporting of financial support from other sources.
Conclusion
While this Guidance is considered a draft, the final Guidance will likely be substantially similar, if not identical, to the draft Guidance. Therefore, recipients of federal research grants should take steps promptly to develop an effective compliance plan using the draft Guidance as a template. Hospitals and other healthcare facilities receiving federal grants may already have a compliance plan in place which can be amended to incorporate the specific elements of the Guidance for research facilities. Education of grant recipients and their support staff and the establishment of effective internal controls to monitor compliance with the legal and contractual obligations associated with the receipt of research grants are key components to the success of a compliance plan for grant recipients.
If you would like additional information regarding this topic, please contact Patricia S. Hofstra or Neville M. Bilimoria or any of the Health Law Practice Group attorneys with whom you have regular contact. |
This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.
Duane Morris LLP, among the 100 largest law firms in the United States, is a full-service firm of more than 600 lawyers. In addition to legal services, Duane Morris has independent affiliates employing approximately 100 professionals engaged in other disciplines. With offices in major markets, and as part of an international network of independent law firms, Duane Morris represents clients across the nation and around the world.
