Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

 

 

HOW GRANTEES MANAGE 

FINANCIAL CONFLICTS OF 

INTEREST IN RESEARCH FUNDED 

BY THE NATIONAL INSTITUTES 

OF HEALTH 

 

Daniel R. Levinson 

Inspector General 

November 2009 

OEI-03-07-00700 
Office of Inspector General 

http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452,

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

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Audits examine the performance of HHS programs and/or its grantees and contractors 

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Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on 

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abuse and promoting economy, efficiency, and effectiveness in departmental programs. 

To promote impact, the reports also present practical recommendations for improving 

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The Office of Investigations (OI) conducts criminal, civil, and administrative 

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Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. OCIG imposes program exclusions and civil 

monetary penalties on health care providers and litigates those actions within HHS. 

OCIG also represents OIG in the global settlement of cases arising under the Civil False 

Claims Act, develops and monitors corporate integrity agreements, develops compliance 

program guidances, renders advisory opinions on OIG sanctions to the health care 

community, and issues fraud alerts and other industry guidance. 
 

 EXECUTIVE SUMMARY 

OBJECTIVES

1. To determine the nature of financial conflicts of interest reported by 

grantee institutions to the National Institutes of Health (NIH) in 

fiscal year (FY) 2006. 

2. To determine how grantee institutions managed, reduced, or 

eliminated these financial conflicts of interest. 

3. To determine whether vulnerabilities exist in grantee institutions’ 

oversight of the identification and management of financial conflicts 

of interest. 

BACKGROUND 

NIH receives billions of dollars annually to support its mission of 

conducting and supporting medical research. In FY 2008, the total NIH 

appropriation was $29.5 billion, 80 percent of which was distributed 

through almost 50,000 competitive grants to more than 325,000 

investigators (hereinafter referred to as researchers) at over 3,000 

universities, medical schools, and other research institutions across the 

country and around the world. 

Pursuant to Federal regulation, each grantee institution receiving NIH 

funds must have a written policy for identifying financial conflicts of 

interest (hereinafter referred to as conflicts) and ensuring that conflicts 

are managed, reduced, or eliminated. Grantee institutions must certify 

that they have written and enforced administrative processes to identify 

and manage, reduce, or eliminate conflicting interests. They must also 

certify: 

 that existing conflicts (but not the nature of the interest or 

other details) will be reported to NIH prior to the expenditure 

of any funds under that award; 

 that these conflicts have been managed, reduced, or 

eliminated; and 

 that any subsequently identified conflicts will be reported and 

will be managed, reduced, or eliminated, at least on an interim 

basis, within 60 days of identification. 

We collected information from each of the 41 grantee institutions that 

reported conflicts to NIH in FY 2006. We also requested supporting 

documentation, including researchers’ financial disclosure forms, 

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EXECUTIVE SUMMARY 

conflict management plans, and conflict-of-interest committee meeting 

notes related to 184 conflicts reported to NIH in FY 2006. 

FINDINGS 

The most common type of financial conflict of interest among 

NIH-funded researchers is equity ownership. Financial conflicts of 

interest may provide researchers with incentives to improperly influence 

the results of grant research. The most common type of conflict among 

researchers (111 out of 165 researchers with reported conflicts) was 

equity ownership (including stock and stock options) in companies in 

which the researchers’ financial interests could significantly affect the 

grant research. Grantee institutions provided specific equity amounts for 

56 researchers. Six of these researchers had equity valued at greater 

than $100,000, and 13 researchers had equity ownership of 50 percent or 

more. 

Other conflicts involved researchers inventing technology, consulting, or 

holding positions with outside companies. For these conflicts, grantee 

institutions that could provide specific compensation amounts indicated 

that seven researchers received at least $50,000 in royalty payments or 

compensation for their services. 

To manage financial conflicts of interest, grantee institutions often 

require researchers to disclose their conflicts in research 

publications; however, grantee institutions rarely reduce or 

eliminate financial conflicts of interest. Grantee institutions reported 

that they managed 136 researchers’ conflicts, reduced 6 researchers’ 

conflicts, and eliminated 6 researchers’ conflicts. Another 17 researchers’ 

conflicts were handled using a combination of management, reduction, 

and elimination. 

Grantee institutions frequently used disclosure to manage researchers’ 

conflicts. This includes disclosing the conflict in publications and/or 

presentations in which research results are presented. Some of the other 

methods used by grantee institutions to manage conflicts did not seem to 

directly address the specific conflicts. Examples of these methods include 

researchers’ certifying that their primary commitment is to the grantee 

institution and agreeing to abide by institutional financial 

conflict-of-interest policies and procedures. 

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EXECUTIVE SUMMARY 

Vulnerabilities exist in grantee institutions’ identification, 

management, and oversight of financial conflicts of interest. 

 Ninety percent of the grantee institutions rely solely on 

researchers’ discretion to determine which of their significant 

financial interests are related to their research and are 

therefore required to be reported. 

 Because nearly half of the grantee institutions do not require 

researchers to provide specific amounts of equity or compensation 

on their financial disclosure forms, the specific financial interests 

of NIH-funded researchers are often unknown. 

 Grantee institutions do not routinely verify information 

submitted by researchers. 

 Conflicts were not uniformly reported by grantee institutions. 

 The majority of grantee institutions do not have policies and 

procedures to address subgrantee compliance with Federal 

regulations regarding conflicts. 

 Grantee institutions lack documentation to support their 

oversight of conflicts. 

 Grantee institutions are not required to report to NIH any 

financial interests that they have with outside companies. 

RECOMMENDATIONS 

Eighty percent of NIH’s budget is used to fund research grants at 

grantee institutions. Given the complex nature of researchers’ conflicts 

and the vulnerabilities that exist regarding their identification and 

management, there is a need for more transparency about and oversight 

of grantee institutions. Increased oversight is needed to ensure that 

(1) these conflicts are managed appropriately, (2) the research 

conducted using Federal funds is not biased by any conflicting financial 

interests of researchers, and (3) human subjects are not subjected to 

unnecessary risks. 

We continue to recommend, as we did in a previous report, that NIH: 

Request grantee institutions to provide details to NIH regarding the 

nature of all reported financial conflicts of interest and how they are 

managed, reduced, or eliminated. 

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EXECUTIVE SUMMARY 

We also recommend that NIH: 

Require grantee institutions to collect information on all significant 

financial interests held by researchers and not just those deemed by 

researchers to be reasonably affected by the research. 

Require grantee institutions to collect information on specific 

amounts of equity and compensation from researchers. 

Develop and disseminate guidance on methods to verify 

researchers’ financial interests. 

Ensure that grantee institutions are providing adequate oversight of 

subgrantee compliance with Federal financial conflict-of-interest 

regulations. 

Ensure that grantee institutions are maintaining proper 

documentation as outlined in the Federal financial 

conflict-of-interest regulations. 

Ensure that grantee institutions take appropriate actions against 

researchers who do not follow grantee institutions’ 

financial conflict-of-interest policies and procedures. 

Increase oversight of grantee institutions to ensure that financial 

conflicts of interest are reported and managed appropriately. 

Develop regulations that address institutional financial conflicts of 

interest. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

Overall, NIH did not state whether it concurs or does not concur with 

our recommendations. We ask that in its final management decision, 

NIH more clearly indicate whether it concurs or does not concur with 

our recommendations and what steps, if any, it will take to implement 

them. 

NIH stated that it takes its compliance oversight responsibilities very 

seriously and is committed to preserving the public trust in objective 

scientific research. 

NIH also stated that many of the report findings were not made within 

the context of the current financial conflict-of-interest regulation and 

therefore, many of the recommendations are difficult to assess and/or 

cannot be implemented because NIH is bound by the requirements of 

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EXECUTIVE SUMMARY 

the current regulation. OIG believes that the current regulation allows 

NIH to take a more proactive role in overseeing grantee institutions. 

Moreover, OIG has recommended that, where necessary, NIH amend its 

regulations to enhance its oversight of financial conflicts of interest. 

Regarding OIG’s first recommendation, that NIH collect the details 

about conflicts and how they were managed, reduced, or eliminated, 

NIH stated that it could be argued that requesting this information 

from grantees with frequency would constitute a rule, which would need 

to be issued consistent with notice and comment procedures. OIG 

believes that the current regulation does not prohibit NIH from 

requesting follow-up information from grantee institutions with respect 

to reported conflicts. The regulation specifies that the grantee 

institutions agree to produce such information on “all” conflicting 

interests. To address NIH’s concern, we have modified our 

recommendation slightly to parallel the language of the regulation at 

42 CFR § 50.604(g)(3). OIG continues to recommend that NIH work 

with the Secretary of Department of Health and Human Services (HHS) 

to amend the current regulation to request details regarding the nature 

and management of conflicts at grantee institutions. 

Regarding OIG’s recommendation that NIH increase its oversight of 

grantee institutions, NIH highlighted a number of initiatives designed 

to enhance its oversight of and promote grantee compliance with 

Federal regulation. However, despite these efforts, vulnerabilities 

continue to exist at grantee institutions in their identification, 

management, and oversight of conflicts. Therefore, OIG maintains its 

position that increased oversight of grantee institutions is needed to 

ensure that conflicts are reported and managed appropriately. 

NIH will consider OIG’s recommendation on developing and 

disseminating guidance on methods to verify researchers’ conflicts. 

With respect to OIG’s recommendation that grantee institutions 

maintain proper documentation, NIH will continue to emphasize 

grantee institution compliance with documentation requirements 

established by Federal regulation. 

In response to the remaining five OIG recommendations, NIH referred 

to the recently developed Advanced Notice of Proposed Rulemaking 

(ANPRM). NIH stated that many of the observations made by OIG are 

addressed in the ANPRM and will be considered by NIH and HHS 

during the formal rulemaking process. OIG understands that NIH is 

engaged in rulemaking regarding some of the very vulnerabilities we 

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EXECUTIVE SUMMARY 

identified in our report. OIG will review the proposed rule and provide 

comments or clearance during the Department’s internal review 

process. 
 TABLE OF CONTENTS 

EXECUTIVE SUMMARY .....................................i

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 

The most common type of financial conflict of interest among 

NIH-funded researchers is equity ownership . . . . . . . . . . . . . . . . . 8 

To manage financial conflicts of interest, grantee institutions 

often require researchers to disclose their conflicts in research 

publications; however, grantee institutions rarely reduce or 

eliminate financial conflicts of interest . . . . . . . . . . . . . . . . . . . . . 11 

Vulnerabilities exist in grantee institutions’ identification, 

management, and oversight of financial conflicts of interest . . . . 12 

 

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 

Agency Comments and Office of Inspector General Response . . . 22 

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 

A: Financial Conflict-of-Interest Regulations . . . . . . . . . . . . . . . . 25 

B: Methods Employed by Grantee Institutions To Manage, 

Reduce, or Eliminate Conflicts Reported to NIH From 

October 1, 2005, Through September 30, 2006 . . . . . . . . . . . . . . . 27 

C: Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 

 

ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
 

 INTRODUCTION 

OBJECTIVES 

1. To determine the nature of financial conflicts of interest reported by 

grantee institutions to the National Institutes of Health (NIH) in 

fiscal year (FY) 2006. 

2. To determine how grantee institutions managed, reduced, or 

eliminated financial conflicts of interest. 

3. To determine whether vulnerabilities exist in grantee institutions’ 

oversight of the identification and management of financial conflicts 

of interest. 

BACKGROUND 

Pursuant to Federal regulation, each grantee institution receiving NIH 

funds must have a written policy for identifying financial conflicts of 

interest (hereinafter referred to as conflicts) and ensuring that conflicts 

are managed, reduced, or eliminated. Conflicts occur when designated 

official(s) of grantee institutions reasonably determine that a significant 

financial interest could directly and significantly affect the design, 

conduct, or reporting of the research funded by NIH. With 80 percent of 

NIH funding allocated for extramural research grants, it is critical that 

any existing or potential conflicts be reported and managed, reduced, or 

eliminated by grantee institutions. 

This study was conducted in response to a congressional request. 

National Institutes of Health Grants 

NIH is the primary Federal agency responsible for conducting and 

supporting medical research. Organized into 27 Institutes and Centers 

(Institutes), NIH receives billions of dollars annually to support its 

mission. In FY 2008, the total NIH appropriation was $29.5 billion, 

80 percent of which was distributed through almost 50,000 competitive 

grants to more than 325,000 investigators (hereinafter referred to as 

researchers) at over 3,000 universities, medical schools, and other 

research institutions across the country and around the world.1 

Twenty-four of the 27 Institutes have grant-making authority. Each of 

these 24 Institutes is responsible for managing and overseeing its 

1 NIH, “NIH budget information.” Available online at 

http://www.nih.gov/about/budget.htm. Accessed on November 10, 2008. 

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INTRODUCTION 

grants, and each has its own grants management staff that handles 

these functions. 

Responsibility of Grantee Institutions 

Federal regulation at 42 CFR pt. 50, subpart F, establishes standards to 

ensure that the design, conduct, or reporting of research funded under 

NIH grants will not be biased by researchers’2 conflicts. Pursuant to 

42 CFR § 50.604, each grantee institution receiving NIH funds must 

have a written policy for identifying conflicts and must ensure that 

conflicts are managed, reduced, or eliminated. Additional text from 

42 CFR § 50.604 is presented in Appendix A. 

Grantee institutions must also certify that they have written and 

enforced administrative processes to identify and manage, reduce, or 

eliminate conflicts. As part of this process, grantee institutions must 

collect from each researcher a listing of his/her known significant 

financial interests (and those of his/her spouse and dependent children) 

that would reasonably appear to be affected by the research and in 

entities whose financial interests would reasonably appear to be 

affected by the research. Pursuant to 42 CFR § 50.603, a significant 

financial interest includes: salaries, royalties, or other payments from 

sources other than the grantee institution exceeding $10,000 in a 

12-month period; as well as equity interests exceeding $10,000 in fair 

market value and/or representing more than 5 percent ownership in any 

single entity (hereinafter referred to as a company). Additional text 

from 42 CFR § 50.603 is presented in Appendix A. 

The regulations at 42 CFR § 50.605(a) provide that a conflict exists 

when the designated official at the grantee institution reasonably 

determines that a significant financial interest could directly and 

significantly affect the design, conduct, or reporting of NIH-funded 

research. Regulations also require that the grantee institution certify 

that existing conflicts (but not the nature of the interests or other 

details) be reported to NIH prior to the expenditure of any grant funds 

and that these conflicts have been managed, reduced, or eliminated. 

The grantee institution must also certify that any subsequently 

identified conflicts will be reported and the conflicts will be managed, 

reduced, or eliminated, at least on an interim basis, within 60 days of 

identification. 

2 

2 The term “researcher” includes the principal researcher or any other person who is 

responsible for the design, conduct, or reporting of research funded by NIH. 

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INTRODUCTION 

The NIH Grants Policy Statement and the NIH grant application 

explain the financial disclosure responsibilities of grantee institutions. 

By signing a grant application, the designated representative of the 

grantee institution is certifying that the applicant organization will 

comply with all applicable assurances and certifications referenced in 

the application, including those related to conflicts. 

On May 8, 2009, NIH issued an Advance Notice of Proposed 

Rulemaking to gain public input on whether modifications are needed to 

42 CFR pt. 50, subpart F. NIH invited public comments on all aspects 

of potential regulation in this area, and particularly on the following 

issues: (1) expanding the scope of the regulation and disclosure of 

interests, (2) changing the definition of “significant financial interest,” 

(3) identifying and managing of conflicts by grantee institutions, 

(4) assuring grantee institution compliance, (5) requiring grantee 

institutions to provide additional information to NIH, and 

(6) broadening the regulations to address institutional conflicts of 

interest.3

NIH Oversight of Grantee Institutions 

NIH’s oversight responsibilities include ensuring that (1) grantee 

institutions are fully and correctly implementing the financial 

conflict-of-interest regulation at 42 CFR pt. 50, subpart F, and 

(2) reporting requirements are being met. In FY 2006, NIH conducted 

targeted site reviews of 18 grantee institutions as part of its oversight 

responsibilities. The 18 grantee institutions reviewed represented 

approximately $4 billion in research grant awards for FY 2005.4 NIH 

reported that the $4 billion represented approximately 25 percent of 

total research grant awards for FY 2005. 

NIH found no instances of intentional noncompliance by grantee 

institutions but found that more emphasis is needed on the appropriate 

definition of “investigator” as listed at 42 CFR § 50.603. NIH observed 

that grantee institutions have the most difficulty identifying and 

reporting conflicts that arise after the start of the research project and 

obtaining disclosures from researchers who join the project after its 

3 

3 NIH Guide Notice NOT-OD-09-099. Available online at 

http://grants.nih.gov/grants/guide/notice-files/NOT-OD-09-099.html. Accessed on 

May 12, 2009. 

4 “Observations from NIH’s FY 2006 Targeted Site Reviews on Financial Conflict of 

Interest.” Available online at http://grants1.nih.gov/grants/policy/coi/index.htm. Accessed 

on November 21, 2008. 

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INTRODUCTION 

inception.5 Other compliance issues included (1) not having provisions 

in place to ensure that identified conflicts are reported to NIH by 

subgrantees through the prime grantee, (2) not having a consistent 

reporting process in place, (3) submitting grant applications prior to 

collecting significant financial interest information from researchers, 

and (4) expending grant funds prior to reporting identified conflicts to 

NIH.6 

Inquiries of Researchers’ Conflicts 

Recent inquiries by the Senate Finance Committee (Committee) into 

payments from drug and device companies to researchers and 

physicians has led to a number of high-profile investigations into the 

financial conflicts of interest among NIH-funded researchers. To date, 

nine cases that involve NIH-funded researchers have been made public 

by Committee staff. Among these cases, five include researchers who 

allegedly failed to report that they received payments (or own stock) of 

$1 million or more from drug and device companies. One of these 

researchers, from Emory University, failed to disclose that he received a 

total of $2.4 million over a 7-year period. Subsequently, NIH suspended 

a $9 million grant to Emory and the researcher stepped down from 

research and as department chair. 

Related Study by the Office of Inspector General 

In a January 2008 report, the Office of Inspector General (OIG) 

reviewed 438 financial conflict-of-interest reports that were received by 

NIH from grantee institutions during FY 2004 through FY 2006.7 Of 

these 438 reports, 93 percent did not state the nature of the conflicts 

and 89 percent did not state how conflicts would be managed, reduced, 

or eliminated because regulations do not require grantee institutions to 

report the nature or other details of the conflicts. Regulations only 

require grantee institutions to report the existence of a conflict and 

assure that the conflict has been managed, reduced, or eliminated. The 

report concluded that it would be difficult for NIH to determine whether 

followup with grantee institutions is warranted if the details regarding 

the nature and management of conflicts are not collected. 

4 

5 Ibid. 

6 Ibid. 

7 HHS, OIG, “National Institutes of Health: Conflicts of Interest in Extramural 

Research,” OEI-03-06-00460, January 2008. 

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INTRODUCTION 

One of OIG’s recommendations to NIH was to require grantee 

institutions to provide details regarding the nature of conflicts and how 

they are managed, reduced, or eliminated. In response to OIG’s final 

report, NIH did not concur with this recommendation. NIH stated that 

the responsibility for identifying and managing conflicts must remain 

with grantee institutions and that collecting such information would 

effectively transfer the responsibility to the Federal Government. NIH 

also stated that it had taken a series of actions to improve its 

administration of financial conflict-of-interest policies and procedures. 

METHODOLOGY 

Scope 

We focused our review on the 41 grantee institutions that submitted 

225 financial conflict-of-interest reports to NIH in FY 2006. These 

reports, provided by NIH, were originally identified in OIG’s 

January 2008 study. An additional grantee institution sent a report to 

NIH that was a notification of potential research misconduct and not of 

a conflict. This grantee institution and its researcher are not included 

in our data analysis. 

In OIG’s prior study, we found that NIH could not provide an accurate 

count of the financial conflict-of-interest reports received from grantees 

during FY 2004 through FY 2006, and therefore the 225 reports 

reviewed for this study are not a complete count of all conflicts reported 

to NIH in FY 2006. During data collection for this study, 24 of the 41 

grantee institutions reported sending to NIH an additional 235 financial 

conflict-of-interest reports for FY 2006 that NIH had not originally 

provided to us. These additional reports are not included in our data 

analysis. 

Data Collection 

We collected data from each of the 41 grantee institutions that reported 

conflicts to NIH in FY 2006. Officials from all 41 grantee institutions 

responded to our request for information regarding the following: their 

policies and procedures describing the reporting and management of 

conflicts; the nature of each conflict reported to NIH in FY 2006; how 

each conflict was managed, reduced, or eliminated; the decision process 

for determining how each conflict was managed, reduced, or eliminated; 

and how grantee institutions ensure researchers’ compliance with 

Federal regulations and conflict management plans. All 41 grantee 

institutions had policies and procedures related to conflicts. 

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INTRODUCTION 

We requested documentation that outlined how grantee institutions 

identify and manage, reduce, or eliminate conflicts. This documentation 

included: 

 written policies and procedures that meet the requirements in 

Federal regulations at 42 CFR pt. 50, subpart F, and any 

additional written policies and procedures; 

 written information or guidance that the grantee institution 

provides to researchers regarding conflicts; 

 institutional forms or checklists that researchers use to disclose 

their significant financial interests and those used to certify 

compliance with conflict management plans; and 

 other institutional forms or checklists used by designated 

officials, committee members, or other staff to review and/or 

verify financial disclosure information and determine whether 

conflicts exist. 

We also requested supporting documentation for each of the financial 

conflict-of-interest reports submitted to NIH in FY 2006. Supporting 

documentation included: 

 the researcher’s financial disclosure forms; conflict management 

plans; proof that the conflicts were managed, reduced, or 

eliminated; meeting notes; and records of contact; 

 correspondence to/from the researcher, conflict-of-interest 

committee, designated officials, and other grantee institution 

staff regarding the conflicts; and 

 any additional documentation that provides information 

regarding how the conflicts were identified and managed, 

reduced, or eliminated. 

Data Analysis 

Of the 225 financial conflict-of-interest reports submitted to NIH in 

FY 2006 by the 41 grantee institutions, we included only 184 in our 

analysis. We excluded 41 financial conflict-of-interest reports from 

five different grantee institutions for various reasons. Thirty-three of 

these 41 reports were from one grantee institution. Upon receipt of our 

survey, that grantee institution determined that the 33 reports had 

been mistakenly sent to NIH. According to the grantee institution, the 

financial interests were not significant financial interests as defined by 

Federal regulation. The grantee institution stated that these conflicts 

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INTRODUCTION 

were, therefore, not required to be reported to NIH. The remaining 

eight reports were excluded because they were either duplicates or 

erroneous reports (e.g., the report was for an incorrect grant number). 

We used a standard protocol to extract information from the 

documentation. We analyzed the grantee institutions’ policies and 

procedures regarding conflicts. We determined whether these documents 

demonstrated that each grantee institution was meeting requirements in 

the Federal regulation at 42 CFR § 50.604. We also determined whether 

grantee institutions followed their own policies and procedures to identify 

and manage, reduce, or eliminate conflicts. This includes identifying the 

methods that were implemented to manage, reduce, or eliminate conflicts. 

We also determined whether grantee institutions verified information 

submitted by researchers. Verification was defined as any attempt made 

by the grantee institution to validate, certify, or clarify the conflict 

information provided by the researcher. 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” approved by the Council of the Inspectors General on 

Integrity and Efficiency. 

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The most common type of financial conflict of 

interest among NIH-funded researchers is equity 

ownership 

 FINDINGS 

Federal regulation requires that 

grantee institutions report 

significant financial interests to 

NIH if they determine that the financial interests could directly and 

significantly affect the design, conduct, or reporting of the research. 

These financial interests may provide researchers with incentives to 

improperly influence the results of grant research. This review includes 

the 184 financial conflict-of-interest reports sent to NIH in FY 2006; 

these reports involved 165 researchers. 

The majority of researchers’ conflicts were related to equity ownership in 

outside companies 

Financial conflicts of interest may provide researchers with incentives 

to improperly influence the results of grant research. The most common 

type of conflict among researchers was equity ownership (including 

stocks and stock options) in companies in which the researchers’ 

financial interests could significantly affect the grant research. Onehundred eleven researchers owned equity in companies ranging from 

publicly traded companies to small, privately held companies. Of these 

111 researchers, 44 (39 percent) were founding members of the 

companies. 

Table 1 shows the nature of conflicts that were reported by grantee 

institutions in FY 2006, the number of researchers who had each type of 

conflict, and the number of reports that were related to each type. 

Table 1: Nature and Number of Conflicts Reported by Grantee Institutions 

Between October 1, 2005, and September 30, 2006

Nature of Conflicts Number of Researchers1 Number of Reports2

Owning equity 111 127 

Inventing or developing 

technology/intellectual property 95 101 

Consulting for an outside company 66 74 

Holding a position at an outside company 65 78 

Receiving royalties 27 32 

Speaking or writing for an outside company 7 7 

Serving as an expert witness 1 1 

Other3 3 3 

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Source: OIG analysis of grantee institution survey responses. 

1

 The total number of researchers equals 165. The number of researchers in this column does not equal 165 because some 

researchers had more than one type of conflict. 

2

 The number of reports in this column does not equal 184 because some reports were about more than one type of conflict. 

3

 These three researchers are one researcher who was the daughter of the NIH program officer on the grant, one researcher 

whose spouse who was an employee of a related outside company, and one researcher whose paid staff on the grant included 

his son and an employee of his private company.
 

FINDINGS 

Grantee institutions provided specific equity amounts for 56 researchers; 

6 researchers had equity valued at more than $100,000, and 

13 researchers had equity ownership amounts of 50 percent or more. 

For 56 of the 111 researchers with equity ownership, grantee 

institutions provided specific amounts of equity that were reported as 

dollar values and/or ownership percentages. Grantee institutions 

submitted equity values for 28 of these researchers, which ranged from 

$0 to $4 million. Six of these 28 researchers (21 percent) had equity 

values greater than $100,000. The average equity value for researchers 

was $232,464 and the median was $22,500. For equity interests that 

were valued at $0, the researchers owned a percentage of a company 

that was above the Federal threshold (5 percent). For example, a 

researcher could hold a percentage of equity ownership in a company for 

which the equity had no current dollar value yet. Although the equity 

may have no value at present, it may have great future value if the 

research leads to the eventual commercialization of a product. 

The researcher with equity valued at $4 million disclosed that he was 

president and director of a company related to the research. This 

researcher owned 400,000 shares and 300,000 stock options of the 

company, valued at a total of $4 million. The researcher also received 

an annual salary of $325,000. 

For 41 of the 56 researchers with specific amounts of equity, grantee 

institutions also submitted equity ownership percentages that ranged from 

2 percent to 100 percent. For these 41 researchers, the average equity 

percentage was 38 percent and the median equity percentage was 

33 percent. Thirteen of these 41 researchers (32 percent) had equity 

ownership amounts that were 50 percent or more. 

Other common conflicts of researchers included inventing technology, 

consulting, holding positions with outside companies, or receiving royalties 

The second most common type of conflict among researchers was 

inventing or developing technology/intellectual property related to or 

used as part of the grant research. Grantee institutions reported that 

95 researchers had this type of conflict. Nearly 70 percent of these 

95 researchers had their technology/intellectual property licensed by the 

grantee institution to a private company with which they had a 

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FINDINGS 

relationship.8 Examples of relationships that researchers had with 

these companies include holding equity in the companies and consulting 

with the companies. 

Another common type of conflict among researchers was consulting with 

companies whose financial interests would reasonably appear to be 

affected by the grant research. Sixty-six researchers had consulting 

agreements with outside companies, creating conflicts. The majority of 

researchers consulted with just one company. However, one researcher 

consulted with five companies. 

Sixty-five researchers held some type of position at outside companies, 

such as serving in an executive role, serving on a company’s board of 

directors, and/or serving on a company’s advisory board or medical 

review board. 

Twenty-seven researchers received royalties (either from the grantee 

institutions or other entities) from the licensing of 

technology/intellectual property.9 This technology/intellectual property 

was often licensed to the companies by the grantee institutions. 

Grantee institutions provided specific compensation amounts for 

31 researchers; 7 of these received at least $50,000 in payments. 

One-hundred thirty-nine researchers invented technology/intellectual 

property, consulted with outside companies, served on advisory boards, 

and/or provided other types of services. Of these 139 researchers, 

113 were compensated for their services, received royalty payments, or 

had the potential to receive royalty payments.10 

Grantee institutions provided specific dollar amounts for 31 of the 

113 researchers; seven of these 31 researchers (23 percent) received at 

least $50,000 from royalty payments or for their services. Instead of 

receiving a dollar payment for consulting, one additional researcher 

received a specific percentage of equity for his services. 

8 The Bayh-Dole Act, passed in 1980, facilitated the transfer of inventions developed by 

federally funded research institutions to private industry. Private industry could then 

develop the inventions into commercial products that would benefit the public. This 

transfer of technology is often done through licensing agreements between grantee 

institutions and private entities. 

9 Federal regulations exclude from the definition of a significant financial interest 

royalties received from the grantee institution; however, grantee institutions sometimes 

identified these royalties as conflicts. 

10 Twenty-six researchers provided services to outside companies but were not 

compensated (i.e., they served on advisory boards without compensation). 

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FINDING S 

Specific dollar amounts for compensation ranged from $1,500 to 

$1.075 million. The researcher who reported $1.075 million received 

$1 million in royalties and $75,000 in consulting fees. The average 

dollar amount of the compensation for all researchers was $79,248 and 

the median was $23,000. 

To manage financial conflicts of interest, 

grantee institutions often require researchers to 

disclose their conflicts in research publications; 

however, grantee institutions rarely reduce or 

eliminate financial conflicts of interest 

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Grantee institutions reported that 

136 researchers’ conflicts were 

managed, 6 researchers’ conflicts 

were reduced, and 6 researchers’ 

conflicts were eliminated. 

Another 17 researchers’ conflicts 

were handled using a combination 

of management, reduction, and elimination. However, grantee 

institutions were not consistent in how they used these terms. For 

example, grantee institutions would describe a similar management 

method; yet one grantee institution would report the method as 

management, whereas another would report it as reduction. Appendix 

B provides the methods grantee institutions used to manage, reduce, or 

eliminate researchers’ conflicts reported to NIH in FY 2006. 

The most common method for managing conflicts was disclosure. 

One-hundred forty-two researchers were required to disclose their 

conflicts in the following ways: 

 in publications and/or presentations in which the research 

results are circulated, 

 to other staff working on the grants, 

 to human research subjects participating in the grant 

research (this information is usually provided in patient 

consent forms), and/or 

 to the grantee institutions’ Institutional Review Boards 

(these boards ensure the rights and safety of people 

participating in clinical trials). 

The second most common method for managing conflicts was to ensure 

that protections were in place to prevent the exertion of inappropriate 

pressure on other staff working on the grant. Sixty-two researchers had 

their conflicts managed using this method. This method included: 
 

FINDINGS

 ensuring that staff who work on the grant knew where to bring 

any concerns about the impact of the conflict on them or the 

research, 

 ensuring that students and trainees were not involved with the 

company with which the researcher had a relationship, and/or 

 gaining prior approval before allowing students and trainees to 

conduct research related to the company. 

Other common methods to manage conflicts included: 

 requiring researchers to notify the grantee institution when 

and how relationships with the outside companies changed 

(this included changes in equity amounts, changes in the 

nature of the researchers’ relationship with the outside 

companies, changes in any funding of the research provided 

by the outside companies, and accrual of royalties), 

 requiring researchers to ensure that an open exchange of 

research results would take place, 

 monitoring or oversight of the grant research by grantee 

institution staff not related to the grant research, and 

 limiting or prohibiting researchers from research involving 

human subjects. 

Some of the other methods used by grantee institutions to manage 

conflicts did not seem to directly address the specific conflicts. 

Examples of these methods include researchers’ certifying that their 

primary commitment is to the grantee institution and agreeing to abide 

by institutional financial conflict-of-interest policies and procedures. 

Vulnerabilities exist in grantee institutions’ 

identification, management, and oversight of 

financial conflicts of interest 

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Vulnerabilities exist at grantee 

institutions regarding conflicts. 

For example, grantee institutions 

do not require researchers to 

provide specific amounts of equity or compensation on financial 

disclosure forms. Grantee institutions also do not routinely verify all 

researchers’ identified financial interests. Moreover, some grantee 

institutions lacked documentation related to the reporting and/or 

management of these conflicts. These vulnerabilities may affect the 

identification, management, and oversight of conflicts by grantee 

institutions. 
 

FINDINGS 

Ninety percent of the grantee institutions rely solely on the researchers’ 

discretion to determine which of their significant financial interests are 

related to their research and are therefore required to be reported 

Federal regulation requires grantee institutions to obtain a listing of 

researchers’ significant financial interests that would reasonably appear 

to be affected by their research. All 41 grantee institutions require 

researchers to disclose only significant financial interests that relate to, 

or could possibly relate to, the research. It is left up to each researcher’s 

discretion to determine which significant financial interests would 

reasonably appear to be affected by research. None of the grantee 

institutions maintains a policy of full disclosure of all significant 

financial interests. Full and complete disclosure ensures that the 

determination of whether a significant financial interest relates to the 

research rests with the grantee institution and not with the researcher. 

However, three grantee institutions also require researchers to disclose 

all of their consulting agreements and positions held at outside 

companies. One grantee institution has additional disclosure 

requirements for its faculty physicians. 

Because nearly half of the grantee institutions do not require researchers to 

provide specific amounts of equity or compensation on their financial 

disclosure forms, the specific financial interests of NIH-funded researchers 

are often unknown 

Disclosure requirements for equity and compensation related to 

conflicts are not consistent across grantee institutions. Of the 

41 grantee institutions, 23 specifically instruct researchers to disclose 

actual dollar amounts of compensation and/or equity on financial 

disclosure forms or in supplemental forms. The remaining 18 grantee 

institutions do not specifically instruct researchers to disclose actual 

amounts. These grantee institutions require researchers to disclose 

only that they received monetary compensation or equity above a 

certain threshold (e.g., over $10,000) or as a range (e.g., $20,001 to 

$100,000). However, 7 of these 18 grantee institutions instruct 

researchers to provide details of their financial interests, which could 

include actual dollar amounts. If specific amounts of equity and 

compensation are not reported, grantee institutions may not be able to 

assess the true nature of the conflict or determine the most appropriate 

management strategy. 

Grantee institutions did not provide specific equity amounts for 50 percent 

of researchers who received equity. Grantee institutions did not provide 

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FINDINGS 

specific amounts for 55 of 111 researchers who received equity. For 

48 of these 55 researchers, grantee institutions provided only a 

minimum value or a range for researchers’ equity. For the majority of 

these equity amounts, grantee institutions provided a minimum value, 

such as greater than 5 percent or greater than $10,000. For the 

remaining 7 researchers, grantee institutions provided no information 

on the amount of equity held by researchers. 

Grantee institutions did not provide specific amounts of compensation for 

72 percent of researchers who received compensation from an outside 

company. Grantee institutions did not provide specific amounts of 

compensation for 81 of the 113 researchers (72 percent) who were 

compensated for their services, received royalty payments, or had the 

potential to receive royalty payments. For 63 of these researchers, 

grantee institutions provided only a minimum value or ranges. For 

15 of the 81 researchers, grantee institutions did not provide potential 

royalty amounts. For another 3 of the 81 researchers, the compensation 

amount could not be found within any information that was submitted 

by the grantee institution. 

Grantee institutions do not routinely verify information submitted by 

researchers 

Thirty of the 41 grantee institutions reported that they verify the 

information disclosed by researchers. However, only 19 of these grantee 

institutions submitted documentation to show how they verified 

information reported by researchers in FY 2006. Only seven of these 

grantee institutions verified information for all of their financial 

conflict-of-interest reports. Because grantee institutions do not 

routinely verify information submitted by researchers, they rely on the 

researchers to submit accurate and complete information. 

According to the documentation, 19 grantee institutions verified 

information for conflicts related to 59 of their 135 reports (44 percent). 

For conflicts related to 48 reports, grantee institutions used only one 

method to verify information. For conflicts related to 11 reports, 

grantee institutions used multiple methods of verification. 

For 31 of the 59 verified reports, the submitted documentation showed 

that information was verified by reviewing licensing agreements and/or 

patents involving the researchers. For 21 of the 59 reports, the 

documentation showed that researchers’ involvement with outside 

companies was confirmed through Internet searches. For 15 of the 59 

reports, evidence showed that consulting agreements or contracts 

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FINDINGS 

between the researchers and the outside companies were reviewed for 

verification. Documentation for 3 of the 59 reports showed that the 

grantee institution contacted the outside company to confirm the nature 

of the relationship with the researcher. 

Conflicts were not uniformly reported by grantee institutions 

Because there was no standard format for reporting researchers’ 

conflicts to NIH during the time of our review, these conflicts were not 

reported in a consistent format across grantee institutions. Some 

grantee institutions sent one financial conflict-of-interest report that 

related to one grant, but pertained to multiple researchers. Conversely, 

other grantee institutions sent a separate report for each researcher 

with a conflict who worked on the same grant. One grantee institution 

sent separate reports for a researcher’s conflicts that were related to 

several different projects associated with one grant. Because of the lack 

of a consistent format, a one-to-one relationship did not exist between 

the number of reports sent to NIH by grantee institutions and the 

number of researchers who have conflicts. Without an accurate count of 

the number of conflicts among researchers, NIH may encounter 

difficulties with the tracking and oversight of conflicts. 

Beginning in July 2009, NIH requires grantee institutions to utilize 

their Electronic Research Administration (eRA) Commons Web-based 

system to report researchers’ conflicts.11 The financial 

conflict-of-interest module in eRA Commons will allow grantee 

institutions to prepare an initial financial conflict-of-interest report, as 

well as edit or rescind the report for each identified conflict. For each 

report submitted, the following data will be collected: 

 grant number; 

 principal researcher; 

 name of the researcher with the conflict; 

 whether the conflict has been (1) managed, (2) reduced, or 

(3) eliminated; 

 whether the report is for a subgrantee; and 

15 

11 NIH, “Financial Conflict of Interest (FCOI): User Guide, Commons System Version 

2.19.1.4.” Available online at http://era.nih.gov/files/fcoi_user_guide.pdf. Accessed on 

June 19, 2009. 

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FINDINGS 

 the name of subgrantee if the report is for a subgrantee 

recipient. 

The majority of grantee institutions do not have policies and procedures in 

place to address subgrantee compliance with Federal regulations regarding 

conflicts 

Federal regulations require grantee institutions to take reasonable 

steps to ensure that their subgrantees comply with the regulations. 

However, only 17 out of 41 grantee institutions sent documentation 

showing that they address subgrantee compliance with institutional 

policies and procedures. Furthermore, documentation for only 2 of 

these 17 grantee institutions provided specific information regarding 

the process subgrantees should follow in disclosing conflicts to the 

grantee institutions. 

In addition, 2 of the 184 financial conflict-of-interest reports reviewed 

for this study were subgrantee notifications to the grantee institutions. 

When one of these grantee institutions was asked to provide details 

regarding the nature and management of the researcher’s conflict for 

the purpose of this study, the grantee institution could not do so and 

had to contact the subgrantee for such details. 

Grantee institutions lack documentation to support their oversight of 

conflicts 

Some conflicts lacked documentation regarding researchers’ financial 

interests. Conflicts related to 18 reports at six grantee institutions did 

not have documentation to show that grantee institutions’ reporting 

policies and procedures were followed. For conflicts related to 15 of the 

18 reports, grantee institutions did not submit specific forms that 

researchers are required by policies and procedures to complete. 

For conflicts related to 2 of the 18 reports, documentation indicated that 

conflicts were reported inaccurately. Discrepancies were found between 

the initial financial disclosure forms submitted by the researcher and 

subsequent information discovered by the grantee institution. For 

example, one researcher failed to disclose that he held 386,250 stock 

options in the company in which he had a conflict. Another researcher 

failed to disclose the fact that an employee of the researcher’s company 

and the researcher’s son were paid as staff on the grant. In these two 

instances, although the grantee institutions discovered the conflicts, the 

researchers did not initially report them. 

For the remaining financial conflict of interest report, no supporting 

documentation was submitted. 

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FINDINGS 

For conflicts related to another nine financial conflict-of-interest reports 

at four grantee institutions, the grantee institutions submitted only 

financial disclosure forms dated several years before or 1 year after the 

date of the report to NIH. For example, one grantee institution 

submitted financial disclosure forms from FY 2001 even though the 

grantee institution’s policy requires researchers to submit annual 

disclosures. Another grantee institution submitted financial disclosure 

forms from FY 2007. 

Some conflicts lacked documentation to show that they were managed, 

reduced, or eliminated. For conflicts related to nine reports at five 

grantee institutions, no supporting documentation was submitted to 

show that the conflicts were managed, reduced, or eliminated. 

For 60 out of 184 reports, no evidence could be found in the submitted

documentation to show that management methods were followed. 

Submitted documentation showed that researchers followed 

management methods in 124 of the 184 reports. For the remaining 

60 reports, no evidence could be found in the documentation to show 

that management methods were followed. 

Grantee institutions submitted various types of documentation to show 

that researchers’ conflicts were managed. For 67 reports, grantee 

institutions submitted evidence that a periodic review of the conflicts 

was conducted.12 Documentation submitted for 53 reports provided 

evidence to show that the conflicts were disclosed in publications, 

during presentations, on consent forms, and to researchers’ staff 

members or students. For 14 reports, submitted documentation showed 

that a data-monitoring committee or an independent reviewer was 

assigned to monitor the research projects. 

Finally, documentation submitted for 15 reports contained evidence that 

the institution obtained only a certification signature from the 

researcher stating that management methods had been followed. 

12 Periodic review includes written progress reports or annual updates from researchers 

regarding their conflicts and/or reports supporting that the conflicts were managed, 

reduced, or eliminated. Periodic review also includes reviews by a conflict-of-interest 

committee. 

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FINDINGS 

Grantee institutions are not required to report to NIH any financial interests 

that they have with outside companies 

Although this study focuses on researchers’ conflicts, license agreements 

can also pose conflicts for the grantee institutions themselves. Grantee 

institutions provided documentation that showed they held the same 

types of financial interests as their researchers. The financial interests 

held by these researchers were determined to be conflicts by the grantee 

institutions. NIH does not have any policies or procedures in place for 

grantee institutions to report institutional conflicts. The potential for 

financial gain can pose an institutional conflict when a grantee 

institution licenses technology/intellectual property for the purposes of 

commercialization. 

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FINDINGS RECOMMENDATIONS RECOMMENDATIONS 

NIH is the primary Federal agency responsible for conducting and 

supporting medical research. Eighty percent of NIH’s $29 billion budget 

is used to fund research grants at research institutions across the 

country and around the world. With so much funding at stake, the 

question of research integrity becomes crucial because of the 

appearance or existence of conflicts by recipients of these grants. It is 

vital to public health and safety that this research not be biased by 

researchers’ conflicts. 

Federal regulations establish standards to ensure that the design, 

conduct, and reporting of federally funded research will not be biased by 

any conflicting financial interest of a researcher. The regulations 

require that grantee institutions only report to NIH the existence of a 

conflict and assure that the conflict has been managed, reduced, or 

eliminated. As found in OIG’s previous study, “National Institutes of 

Health: Conflicts of Interest in Extramural Research,” 

OEI-03-06-00460, NIH’s primary method of oversight is reliance on the 

assurances that the grantee institutions have followed Federal 

regulations and managed, reduced, or eliminated the conflicts. 

Given the complex nature of researchers’ conflicts and the 

vulnerabilities that exist regarding their identification and 

management, there is a need for more transparency about and oversight 

of grantee institutions. Increased oversight is needed to ensure that 

(1) these conflicts are managed appropriately, (2) the research 

conducted using Federal funds is not biased by any conflicting financial 

interests of researchers, and (3) human subjects are not subjected to 

unnecessary risks. 

Therefore, we continue to recommend, as we did in the previous report, 

that NIH: 

Request Grantee Institutions To Provide Details to NIH Regarding the Nature 

of All Reported Financial Conflicts of Interest and How They Are Managed, 

Reduced, or Eliminated 

In view of the findings of this report, OIG continues to believe that NIH 

has cause and current authority to collect basic details regarding the 

nature of conflicts and how they are managed as a followup to financial 

conflict-of-interest reports filed by grantee institutions. This would 

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RECOMMENDATIONS 

enable NIH to question whether certain conflicts could affect the 

research being conducted. 

We recommend that after a grantee submits a report identifying the 

existence of a conflict, NIH use the current authority at 

42 CFR § 50.604(g)(3) to request details about the conflict and how it 

was managed, reduced, or eliminated. We further recommend that NIH 

request that 45 CFR § 50.604(g)(2) be amended to provide it with the 

authority to require grantee institutions to report certain details to NIH 

about the nature and management of conflicts at the time grant funds 

are issued to the grantee institutions or for any conflicts that the 

grantee institutions identify after the initial report. 

We also recommend that NIH: 

Require Grantee Institutions To Collect Information on All Significant 

Financial Interests Held by Researchers and Not Just Those Deemed by 

Researchers To Be Reasonably Affected by the Research 

Federal regulation requires grantee institutions to collect a listing of 

researchers’ known significant financial interests that would reasonably 

appear to be affected by the research and in companies whose financial 

interests would reasonably appear to be affected by the research. We 

believe the term “reasonably affected by the research” is left open to 

interpretation. In addition, in the absence of any guidelines, 

researchers within the same grantee institution may interpret 

“reasonably affected by the research” in different ways. Full and 

complete disclosure ensures that the determination of whether a 

significant financial interest relates to the research rests with the 

grantee institution and not with the researcher. 

To maintain consistency across grantee institutions and researchers, we 

recommend that NIH amend 45 CFR § 50.604(c)(1) to require 

researchers to report all significant financial interests to the grantee 

institutions. 

Require Grantee Institutions To Collect Information on Specific Amounts of 

Equity and Compensation From Researchers 

Without knowing the exact amounts of researchers’ equity and 

compensation, grantee institutions may not know the true nature of 

researchers’ conflicts. Collecting this information might enable grantee 

institutions to more appropriately manage conflicts. 

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RECOMMENDATIONS 

Develop and Disseminate Guidance on Methods To Verify Researchers’ 

Financial Interests 

Although the majority of grantee institutions reported that they verify 

the information provided by researchers regarding their conflicts, few 

grantee institutions submitted documentation to show that verification 

was actually performed. To assist grantee institutions in fulfilling their 

responsibilities under 42 § CFR 50.604(d), NIH should provide grantee 

institutions with guidance on when and how to verify information 

provided by researchers. 

Ensure That Grantee Institutions Are Providing Adequate Oversight of 

Subgrantee Compliance With Federal Financial Conflict-of-Interest 

Regulations 

NIH should make certain that grantee institutions are ensuring that 

subgrantees are in compliance with Federal regulations. NIH should 

also suggest to grantee institutions that they outline subgrantee 

procedures for reporting conflicts to both the grantee institutions and 

NIH. 

Ensure That Grantee Institutions Are Maintaining Proper Documentation as 

Outlined in the Federal Financial Conflict-of-Interest Regulations 

Because we found cases in which grantee institutions lacked 

documentation to show that conflicts were reported, managed, reduced, 

or eliminated according to grantee institutions’ policies and procedures, 

NIH should ensure that grantee institutions are maintaining proper 

documentation as outlined in 42 CFR § 50.604(e). 

Ensure That Grantee Institutions Take Appropriate Actions Against 

Researchers Who Do Not Follow Grantee Institutions’ Financial 

Conflict-of-Interest Policies and Procedures 

NIH should ensure that grantee institutions are taking appropriate 

actions against researchers who do not follow institutional financial 

conflict-of-interest policies and procedures. This is consistent with 

NIH’s important oversight responsibilities under 42 CFR § 50.606. NIH 

may want to consider collecting information regarding noncompliant 

researchers and any sanctions taken against them to determine 

whether grantee institutions are appropriately handling researcher 

noncompliance. 

Increase Oversight of Grantee Institutions To Ensure That Financial 

Conflicts of Interest Are Reported and Managed Appropriately 

NIH should take a more proactive approach in overseeing grantee 

institutions because of the varying ways grantee institutions report, 

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RECOMMENDATIONS 

manage, and oversee conflicts. Although grantee institutions can 

provide guidelines to researchers indicating what constitutes a 

reportable significant financial interest, not all grantee institutions may 

define a significant financial interest that would reasonably be affected 

by the research in the same manner. Therefore, NIH would need to 

provide oversight to ensure that grantee institutions are applying 

consistent standards. NIH should also provide guidance regarding how 

financial conflicts should be managed so that management methods are 

used consistently across grantee institutions. 

Develop Regulations That Address Institutional Financial Conflicts of 

Interest 

Institutional financial conflicts of interest are not addressed by Federal 

regulations. Because there is the potential for grantee institutions to 

have financial conflicts of interest related to grant research, NIH should 

develop regulations that address these interests. In developing 

regulations NIH should address: the definition of an institutional 

financial conflict of interest; the elements required in a grantee 

institution’s s policy regarding institutional financial conflicts of 

interest; how institutional financial conflicts of interest are reported to 

NIH; and how institutional financial conflicts of interest are managed, 

reduced, or eliminated. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

Overall, NIH did not state whether it concurs or does not concur with 

our recommendations. We ask that in its final management decision, 

NIH more clearly indicate whether it concurs or nonconcurs with our 

recommendations and what steps, if any, it will take to implement 

them. 

NIH stated that it takes its compliance oversight responsibilities very 

seriously and is committed to preserving the public trust in objective 

scientific research. NIH strongly believes that all research should be 

conducted with the highest scientific and ethical standards. 

Furthermore, NIH stated that it has demonstrated its commitment to 

oversight activities and continues to make them an agency priority. 

NIH also stated that many of the report findings were not made within 

the context of the current financial conflict-of-interest regulation and, 

therefore, many of the recommendations are difficult to assess and/or 

cannot be implemented because NIH is bound by the requirements of 

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RECOMMENDATIONS 

the current regulation. The current regulation permits NIH to rely on 

grantee institutions to monitor and enforce researcher compliance with 

the regulation. However, without knowing the nature of conflicts, NIH 

cannot properly oversee conflicts among its funded researchers. OIG 

believes that the current regulation allows NIH to take a more proactive 

role in overseeing grantee institutions. Moreover, OIG has 

recommended that, where necessary, NIH amend its regulations to 

enhance its oversight of financial conflicts of interest. 

NIH requested that OIG consider incorporating more direct references 

to the regulatory framework within the report’s analysis, particularly 

within the findings. Specifically, NIH requested that statements 

exceeding the requirements of the regulation be characterized as 

observations or suggested modifications to the current regulation. A 

discussion of both NIH’s and grantee institutions’ responsibilities is 

presented in the background of the report. 

Regarding OIG’s first recommendation that NIH collect the details 

about conflicts and how they were managed, reduced, or eliminated, 

NIH continues to maintain that the responsibility for identifying and 

managing conflicts belongs with grantee institutions, as assigned by the 

current regulations. In comments on OIG’s previous study, NIH did not 

concur with this recommendation and stated that the collection of 

specific details of the nature and management of conflicts would 

effectively transfer the responsibility for managing conflicts from the 

grantee institutions to the Federal Government. 

NIH now states that “it could be argued that” requesting this 

information from grantees with frequency could constitute a rule, which 

would need to be issued consistent with notice and comment procedures. 

OIG believes that the current regulation does not prohibit NIH from 

requesting follow-up information from grantee institutions with respect 

to reported conflicts. The regulation specifies that the grantee 

institutions agree to produce such information on “all” conflicting 

interests. Further, we believe that the findings of this and related 

reports warrant NIH’s requesting follow-up information on all reported 

conflicts. To address NIH’s concern, we have modified our 

recommendation slightly to parallel the language of the regulation at 

42 CFR § 50.604(g)(3). OIG also continues to recommend that NIH 

work with the Department of Health and Human Services (HHS) to 

amend the current regulation to request details regarding the nature 

and management of conflicts at grantee institutions. 

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RECOMMENDATIONS 

Regarding OIG’s recommendation that NIH increase its oversight of 

grantee institutions, NIH highlighted a number of initiatives designed 

to enhance its oversight of and promote grantee compliance with 

Federal regulation. OIG recognizes NIH’s continued efforts in 

increasing oversight of grantee institutions. However, despite these 

efforts, vulnerabilities continue to exist at grantee institutions in their 

identification, management, and oversight of conflicts. Therefore, OIG 

maintains its position that increased oversight of grantee institutions is 

needed to ensure that conflicts are reported and managed appropriately. 

NIH provided a summary of its oversight activities over the last decade 

and asked that we incorporate the information in the report. The 

summary is included in the full text of NIH’s comments presented in 

Appendix C. 

NIH will consider OIG’s recommendation on developing and 

disseminating guidance on methods to verify researchers’ conflicts. 

With respect to OIG’s recommendation that grantee institutions 

maintain proper documentation, NIH will continue to emphasize 

grantee institution compliance with documentation requirements 

established by Federal regulation. 

In response to the remaining five OIG recommendations, NIH referred 

to the recently developed Advanced Notice of Proposed Rulemaking 

(ANPRM). It stated that many of the observations made by OIG are 

addressed in the ANPRM and will be considered by NIH and HHS 

during the formal rulemaking process. OIG understands that NIH is 

engaged in rulemaking regarding some of the very vulnerabilities we 

identified in our report. OIG will review the proposed rule and provide 

comments or clearance during the Department’s internal review 

process. 

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 APPENDIX ~ A 

Financial Conflict-of-Interest Regulations 

Text taken directly from 42 CFR § 50.603 

A Significant Financial Interest means: 

Anything of monetary value, including but not limited to, salary or other payments for services 

(e.g., consulting fees or honoraria); equity interests (e.g., stocks, stock options or other 

ownership interests); and intellectual property rights (e.g., patents, copyrights and royalties 

from such rights). The term does not include: 

(1) Salary, royalties, or other remuneration from the applicant institution; 

(2) Any ownership interests in the institution, if the institution is an applicant under the SBIR 

Program; 

(3) Income from seminars, lectures, or teaching engagements sponsored by public or nonprofit 

entities; 

(4) Income from service on advisory committees or review panels for public or nonprofit entities; 

(5) An equity interest that when aggregated for the Investigator and the Investigator's spouse 

and dependent children, meets both of the following tests: Does not exceed $10,000 in value as 

determined through reference to public prices or other reasonable measures of fair market 

value, and does not represent more than a five percent ownership interest in any single entity; 

or 

(6) Salary, royalties or other payments that when aggregated for the Investigator and the 

Investigator's spouse and dependent children over the next twelve months, are not expected to 

exceed $10,000. 

Small Business Innovation Research (SBIR) Program means the extramural research program 

for small business that is established by the Awarding Components of the Public Health Service 

[PHS] and certain other Federal agencies under Pub. L. 97-219, the Small Business Innovation 

Development Act, as amended. For purposes of this subpart, the term SBIR Program includes 

the Small Business Technology Transfer (STTR) Program, which was established by 

Pub. L. 102-564. 

Text taken directly from 42 CFR § 50.604 

Each institution must: 

(a) Maintain an appropriate written, enforced policy on conflict of interest . . . and inform each 

investigator of that policy, the Investigator’s reporting responsibilities, and of these regulations. 

If the Institution carries out the PHS-funded research through subgrantees, contractors, or 

collaborators, the Institution must take reasonable steps to ensure that Investigators working 

for such entities comply with this subpart, either by requiring those Investigators to comply 

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APPENDIX ~ A 

with the Institution’s policy or by requiring the entities to provide assurances to the Institution 

that will enable the Institution to comply with this subpart. 

(b) Designate an institutional official(s) to solicit and review financial disclosure statements 

from each investigator who is planning to participate in PHS-funded research. 

(c) (1) Require that by the time an application is submitted to PHS each Investigator who is 

planning to participate in the PHS-funded research has submitted to the designated official(s) a 

listing of his/her known Significant Financial Interests (and those of his/her spouse and 

dependent children): (i) That would reasonably appear to be affected by the research for which 

PHS funding is sought; and (ii) In entities whose financial interests would reasonably appear to 

be affected by the research. (2) All financial disclosures must be updated during the period of 

the award, either on an annual basis or as new reportable Significant Financial Interests are 

obtained. 

(d) Provide guidelines . . . for the designated official(s) to identify conflicting interests and take 

such actions as necessary to ensure that such conflicting interests will be managed, reduced, or 

eliminated. 

(e) Maintain records of all financial disclosures and all actions taken by the Institution with 

respect to each conflicting interest for at least 3 years from the date of submission of the final 

expenditures report. . . . 

(f) Establish adequate enforcement mechanisms and provide for sanctions where appropriate. 

(g) Certify, in each application for the funding to which this subpart applies, that: (1) There is 

[in] effect at that Institution a written and enforced administrative process to identify and 

manage, reduce or eliminate conflicting interests with respect to all research projects for which 

funding is sought from PHS, (2) Prior to the Institution’s expenditure of any funds . . . the 

Institution will report to the PHS Awarding Component 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 . . . and, for any interest that the Institution 

identifies as conflicting subsequent to the Institution’s initial report under the 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; (3) the Institution agrees to make information 

available, upon request, to the HHS regarding all conflicting interests identified by the 

Institution and how those interests have been managed, reduced, or eliminated to protect the 

research from bias; and (4) The Institution will otherwise comply with this subpart. 

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continued on next page 

 APPENDIX ~ B 

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Table B-1: Methods Employed by Grantee Institutions To Manage, Reduce, or 

Eliminate Conflicts Reported to NIH From October 1, 2005, Through 

September 30, 2006

 Methods Number of 1 Researchers

2 Number of Reports

Disclosing conflict in publications, in presentations, to human research 

subjects, to other staff working on grant, and to Institutional Review 142 164

Boards 

Protecting other staff working on grant from inappropriate pressure 62 75 

Notifying grantee institution of relationship changes with outside 

company 

46 56 

Ensuring open exchange of research results through publication and/or 

presentations 35 45 

Monitoring/overseeing grant research or other activity related to the 

grant research 35 39 

Limiting or prohibiting research involving human subjects 35 33 

Updating grantee institution regarding research and/or technology 

developed as a result of research 30 35

Prohibiting outside company related to conflict from sponsoring 

research; requiring approval for outside company to sponsor research 25 30

Preapproving/overseeing purchases of goods/services from affected

company by grantee institution 22 25

Ensuring that no technology/intellectual property is inappropriately 

shared with outside company 21 27

Limiting/prohibiting role in decisions affecting outside company; 

prohibiting service in specific roles at outside company 

20 26

Monitoring use of institution facilities; prohibiting use of institution 

facilities/resources to further the interests of affected company 20 23

Modifying or limiting researcher's role in the research (e.g., allowing no 

role in subject selection or role in data analysis) 16 14

Certifying that primary commitment is to grantee institution 12 14 

Agreeing to abide by financial conflict-of-interest policies and 

procedures 11 14

Facilitating financial conflict-of-interest training in research lab 9 12 

Prohibiting the designation of the researcher as having management 

responsibilities on outside company’s Web site or in publications 9 12

Submitting a report of compliance regarding management plan 9 10

Ensuring that an adequate level of peer review on research is 

performed by grantee institution 7 10

Prohibiting the alteration of scope of research; informing institution of 

changes to research 7 7

Restricting the sale of stocks; notifying grantee institution before stocks 

are sold; placing stocks in escrow 5 7

Assuring that Federal funds are used for grant research 5 4

Limiting amount of time spent on conflicting activity 4 5

Prohibiting use of grantee institution name in connection with outside 

company without prior approval 4 5
 

APPENDIX ~ B 

Table B-1: Methods Employed by Grantee Institutions To Manage, Reduce, or 

Eliminate Conflicts Reported to NIH From October 1, 2005, Through 

September 30, 2006 (Continued)

Methods Number of 

Researchers1 Number of Reports2

Prohibiting outside company from competing for grants and/or research 

contracts that the grantee institution would otherwise accept 4 5 

Management of conflict not needed because conflict had already been 

eliminated by researcher 4 5 

Divestiture 4 4 

Removing research staff from research or from role as study chair/primary 

researcher 4 4 

Requiring that if other faculty/staff have financial interest in company, it be 

disclosed to grantee institution for approval 4 3 

Prohibiting clinical trials without approval from grantee institution 3 5 

Prohibiting clinical trials at grantee institution 3 4 

Meeting with grantee institution to monitor management plan 3 3 

Communicating with NIH regarding outside relationship 2 4 

Notifying grantee institution of any decisions outside company makes that 

could affect financial interest in company 2 4 

Monitoring use of Federal funds by grantee institution 3 3 

Disclosing management plan to outside company 3 2 

Clarifying whether acting on behalf of grantee institution or outside 

company when dealing with third parties 3 2 

Prohibiting activities for the outside company that may appear to duplicate 

grant work 3 2 

Requiring royalties associated with grant to be placed in a nonprofit 

organization; having researcher’s company sell technology to grantee 

institution at cost so no profits accrue to company or researcher 

3 2 

Providing NIH with updates regarding technology/inventions via grant 

progress reports 

2 2 

Limiting compensation for conflicting activity 2 2 

Filing a Request for Exemption that allows researcher to conduct 

conflicting activity 2 2 

Prohibiting subcontract work for outside company 2 2 

Requiring sole-source justification3 2 2 

Requiring researcher to gain approval of the grantee institution’s MedicalIndustry committee in order to consult 1 3 

Requiring review of contracts between outside company and grantee 

institution 1 3 

Terminating conflicting activity 1 1 

Other methods 15 15 

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Source: Office of Inspector General analysis of grantee institution survey responses. 

1

Although the total number of researchers with conflicts equals 165, the number of researchers in this column does not equal 165 because a 

researcher could have more than one type of conflict. 

2

Although the total number of reports equals 184, the number of reports in this column does not equal 184 because one report could be related to 

more than one type of conflict. 

3

In these instances, sole source is used to indicate that only one supplier exists that is capable of providing a particular product or service. 
APPENDIX c 

Agency Comments 

t.""~'f.. ....'~ Public Health Service DEPARTMENT OF HEALTH &. HUMAN SERVICES 

National Institutes of Health 

Bethesda, Maryland 20892 

AUG 2 4 2009 

TO: Stuart Wright 


Deputy Inspector General 


for Evaluations and Inspections, HHS 


FROM: 	 Director, NIH 

SUBJECT: 	 Comments on the Office of Inspector General's Draft Report: 

How Grantees Manage Financial Conflicts of Interest in 

Research Funded by the National Institutes of Health," 

OEI-03-07 -00700 

Attached are the National Institutes of Health's cor:nments on the Office of 

Inspector General's draft report entitled "How Grantees Manage Financial 

Conflicts of Interest in Research Funded by the National Institutes of Health" 

(OEI-03-07 -00700). 

We appreciate the opportunity to review and comment on this important 

topic. Should you have questions or concerns regarding our comments, 

please contact Meredith Stein in the NIH Office of Management Assessment 

at 301-496-2461. 

Francis S. Collins, M.D., Ph.D. 

Attachment 

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 ACKNOWLEDGMENTS 

This report was prepared under the direction of Robert A. Vito, Regional 

Inspector General for Evaluation and Inspections in the Philadelphia 

regional office, and Linda M. Ragone, Deputy Regional Inspector 

General. 

Tanaz Dutia served as the team leader for this study. Other principal 

Office of Evaluation and Inspections staff from the Philadelphia 

regional office who contributed to the report include Maria Johnson and 

Chetra Yean; central office staff who contributed include Rita Wurm.