[Federal Register Volume 61, Number 129 (Wednesday, July 3, 1996)]
[Notices]
[Pages 34839-34841]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16974]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

National Science Foundation


Frequently Asked Questions Concerning the Department of Health 
and Human Services Objectivity in Research Regulations and the National 
Science Foundation Investigator Financial Disclosure Policy

AGENCIES: Public Health Service, and Office of the Secretary, HHS; 
National Science Foundation.

ACTION: Responses to questions.

-----------------------------------------------------------------------

SUMMARY: This document responds to frequently asked questions regarding 
PHS' and NSF's recently-issued rules on investigator conflicts of 
interest. This guidance document is intended to help institutions 
implement conflict of interest policies that comply with both PHS and 
NSF requirements.

FOR FURTHER INFORMATION CONTACT: For PHS: Geoffrey Grant, Acting 
Director, Office of Policy for Extramural Research Administration, 
National Institutes of Health, Room 2192, 6701 Rockledge Drive, MSC 
7730, Bethesda MD 20817, (301) 435-0949. For NSF: Christopher L. 
Ashley, Assistant General Counsel, National Science Foundation, 4201 
Wilson Boulevard, Room 1265, Arlington, VA 22230, (703) 306-1060.

SUPPLEMENTARY INFORMATION: On July 11, 1995, the Public Health Service 
(PHS) and the Office of the Secretary of the Department of Health and 
Human Services (HHS) and the National Science Foundation (NSF) issued 
rules regarding investigator conflict of interest. As explained in the 
preambles to those rules, PHS and NSF have been working together to 
ensure that the rules impose consistent obligations on institutions 
receiving PHS and NSF funding. To that end, PHS and NSF announced that 
the agencies would be developing a set of questions and answers (Q&As) 
to help institutions implement conflict of interest policies that 
comply with both PHS and NSF requirements. This set of Q&As provides 
answers to frequently asked questions received by both agencies. Where 
there are minor differences between the PHS and NSF rules, they are 
clearly noted.
    Q1: Does NSF or PHS have a suggested format for investigator 
disclosures?
    A1: No. The rules are designed to defer to the expertise of grantee 
institutions in developing policies and supporting documentation.
    Q2: May an institution have different conflict of interest policies 
that vary among departments or professional schools?
    A2: Yes, as long as all policies meet the minimum requirements of 
the NSF and PHS rules.
    Q3: Which offices within an institution should be involved in 
administering the conflict of interest rules?
    A3: An institution is free to administer its policy through 
whatever office or structure it wishes, as long as the policy reaches 
all investigators on NSF- and PHS-funded projects and the requirements 
of the PHS and NSF rules are met.
    Q4: Must institutions routinely require financial disclosures from 
graduate students working on NSF- or PHS-sponsored research?
    A4: The term ``investigator'' is defined to encompass individuals 
``responsible for the design, conduct or reporting'' of NSF- or PHS-
funded research. It is up to the institution to decide whether graduate 
student co-authors are ``responsible for reporting'' the research.
    Q5: Will a proposal be processed if it does not contain the new 
certification required by the NSF and PHS rules?
    A5: NSF will not process a proposal in the absence of the new 
certification, but in most cases the institution will not be required 
to re-submit the entire proposal. An addendum page to the Cover Sheet 
to the National Science Foundation (NSF Form 1207) has been developed 
that contains the required certification. The NSF administrative 
officer typically will forward a new certification page to the 
institution, and will process the proposal upon receipt of a completed 
and executed new page. The PHS would process the application without 
the proper certification but no award would be made until the awarding 
component received the certification in the form of a signed, revised 
application face page.
    Q6: Do the PHS and NSF conflict of interest rules apply to all 
researchers and faculty members at institutions that receive NSF or PHS 
support?
    A6. No. The NSF policy applies only to grantee institutions that 
employ more than fifty persons and the PHS rule exempts Small Business 
Innovation Research (SBIR) and Small Business Technology Transfer 
(STTR) Phase I applications. In those institutions subject to the NSF 
policy and/or the PHS rule, only persons involved in PHS- or NSF-funded 
research are subject to the rules. However, institutions may choose to 
cover other researchers or faculty members under their policies for 
institution-specific reasons.

[[Page 34840]]

    Q7: Do the PHS or NSF rules apply to subgrantees of PHS or NSF 
grantees?
    A7: Consistent with current regulations and policies, the PHS rule 
applies to subgrants; the NSF Policy does not. Accordingly, 
institutions conducting PHS-funded research through subgrantees, 
contractors, or collaborators must take reasonable steps to ensure that 
investigators working for such entities comply with the regulations (42 
C.F.R. Sec. 50.604(a)) either by requiring the investigators to comply 
with the grantee institution's policy or by requiring the entities to 
provide appropriate assurances to the grantee institution. An 
institution conducting NSF-funded research through subgrantees must 
certify that the institution itself has in place a written, enforced 
policy on investigator conflicts of interest, but is not required to 
ensure that subgrantees comply with the NSF Policy. However, the Policy 
may apply to a subgrantee employing investigators who collaborate on 
NSF-sponsored research (see Q&A 14).
    Q8: Do the NSF or PHS rules apply to post-doctoral fellowships?
    A8: Not in most cases. The NSF policy applies only to grantee 
institutions that employ more than 50 persons and therefore would not 
apply to post-doctoral fellowships awarded to individuals. The PHS rule 
applies to PHS-funded research and to any person who is responsible for 
the design, conduct or reporting of research funded by the PHS. Thus, 
if a post-doctoral fellow served in such a capacity in PHS-funded 
research he or she would be subject to the rule. The PHS rule would 
apply to a postdoctoral fellowship application to the PHS only if the 
funding would be used for research and the fellow served in one of the 
research capacities described above.
    Q9: Are investigators required to disclose interests in mutual 
funds?
    A9: An interest in a pooled fund such as a diversified mutual fund 
may be sufficiently remote that it would not reasonably be expected to 
create a conflict of interest for a NSF- or PHS-funded investigator. 
For example, an investigator may own an interest in a diversified 
mutual fund which has assets placed in many securities. It is possible 
that certain of the securities held by the mutual fund were issued by 
an entity whose interests would reasonably appear to be affected by 
activities proposed for funding by NSF or PHS. However, because it is 
likely that an investigator's interest in a mutual fund is only a small 
portion of the fund's total assets and because only a limited portion 
of the fund's assets are placed in the securities of a single issuer, 
it is unlikely that an investigator's activities on an NSF or PHS award 
would affect his or her interest in the mutual fund. Institutions 
therefore may determine that certain interests in a diversified mutual 
fund could never directly and significantly affect the design, conduct 
or reporting of PHS- or NSF-funded research and exempt such interests 
from disclosure by the investigator on that basis.
    The federal government's Office of Government Ethics has detailed 
regulations regarding the treatment of diversified mutual funds under 
the government's conflict of interest rules. 5 C.F.R. Sec. 2634.310(c); 
see also 60 Fed. Reg. 47,208 (Sept. 11, 1995) (proposed rule). 
Institutions may consult these regulations for guidance on how they 
might wish to treat interests in mutual funds under their policies.
    Q10: Are investigators required to disclose interests in ``blind 
trusts''?
    A10: Institutions may determine that the research will not be 
affected by qualified blind trust assets not known to the investigator 
that are managed by an independent fiduciary. Because such assets would 
not be known to an investigator, they could not directly and 
significantly affect the design, conduct or reporting of the research. 
Of course, an investigator is aware of the assets originally placed in 
the trust at the time of its formation and would be required to 
disclose any such assets that would reasonably appear to be affected by 
NSF- or PHS-funded research. Only new assets purchased with the 
proceeds from the original assets would be unknown to the investigator.
    As with diversified mutual funds, the Office of Government Ethics 
has detailed regulations describing the type of trusts that qualify for 
the ``blind trust'' exception to the government's conflict of interest 
rules. 5 C.F.R. Part 2634 Subpart D. Institutions may consult these 
guidelines in determining how they wish to treat certain trusts under 
their policies.
    Q11: Are foreign investments (e.g., shares in a foreign 
corporation) covered by the financial disclosure requirement.
    A11: Yes, if they would reasonably appear to be affected by NSF- or 
PHS- funded research and do not fall within one of the exceptions to 
the definition of ``significant financial interest.''
    Q12: Which conflicts of interest must be reported to the federal 
government?
    A12: Neither the PHS nor NSF rules require any institution to 
report to the federal government the details of any conflict of 
interest that has been resolved pursuant to the institution's Policy. 
Consistent with the statute authorizing its conflict of interest rule, 
the PHS requires institutions, prior to the institution's expenditure 
of any funds under an award, to report to the PHS Awarding Component 
the existence of any conflicting interests and assure that the interest 
has been managed, reduced or eliminated in accordance with PHS 
regulations. NSF requires that only conflicts that have not been 
managed, reduced or eliminated prior to the expenditure of funds under 
an award be reported to NSF.
    Q13: Will investigator financial records be subject to public 
disclosure?
    A13: No. Normally, neither PHS nor NSF would possess records of the 
financial interests of investigators, because institutions are not 
required to submit those records. However, in the event NSF or PHS had 
such information either as a result of an audit or compliance review or 
in connection with a conflict of interest that cannot be managed 
satisfactorily under the institution's policy, it would not be 
disclosed to the public. Where a member of the public submits a request 
under the federal Freedom of Information Act (FOIA) for financial 
information in the possession of NSF or PHS, the agencies would assert 
all applicable FOIA exemptions in response to such a request.
    Q14: Is the applicant institution required to obtain financial 
disclosures from investigators who are not employed by the applicant 
institution?
    A14: The PHS rule provides that if the institution carries out the 
PHS-funded research through a collaborator, the institution must take 
reasonable steps to ensure that investigators working for the 
collaborator comply with the rule, either by requiring those 
investigators to comply with the applicant institution's policy or by 
requiring an assurance from the collaborating institution which will 
enable the applicant institution to comply with the rule. NSF would 
expect that where an investigator does not work for the applicant 
institution, the applicant institution would obtain an assurance from 
the institution employing the investigator indicating that the 
investigator has complied with the requirements of the policy at that 
institution.
    Q15: Are all ``senior personnel'' listed in NSF proposals and ``key 
personnel'' listed in PHS proposals subject to the financial disclosure 
requirements of the conflict of interest rules?
    A15: As explained in Q&A 4, the term ``investigator'' is defined 
functionally rather than categorically. Although the agencies believe 
that senior and key personnel will be ``responsible for the design, 
conduct or reporting of research'' under the rules in almost all

[[Page 34841]]

cases, it is possible to conceive situations in which senior or key 
personnel might not meet the definition of ``investigator.'' 
Institutions are also responsible for obtaining financial disclosures 
from persons other than senior or key personnel who meet the definition 
of ``investigator.''
    Q16: How should institutions with fewer than 50 employees complete 
the certification page for NSF proposals?
    A16: Such institutions should annotate NSF Form 1207 or the 
addendum page (See Q&A1 above) to indicate that they have fewer than 50 
employees and are therefore exempt from the Investigator Financial 
Disclosure Policy. These institutions are not exempt from the PHS 
regulations.
    Q17: Salary, royalties and other payments that ``are not expected 
to exceed $10,000 over the next twelve month period'' are excluded from 
the definition of ``significant financial interest.'' How should an 
investigator estimate expected income over the next twelve months?
    A17: The agencies have no preferred estimation method. 
Investigators must make their best reasonable estimates of expected 
income in determining whether salary, royalties or other payments 
constitute ``significant financial interests.'' This issue is separate 
from an investigator's ongoing duty to update financial disclosures 
either annually or as new significant financial interests are obtained 
throughout the period of the award.
    Q18: How can an institution determine that all required disclosures 
have been made before submitting a proposal to NSF or PHS?
    A18: As part of the institution's routine proposal preparation 
procedures institutions should require investigators to ensure that 
they have made all required financial disclosures in accord with the 
regulations prior to the time the organizational representative makes 
the certification in an NSF or PHS proposal. NSF and PHS staff, 
auditors and others concerned with the proper implementation of these 
regulations would expect such an arrangement at any institution that 
certifies to the maintenance of an appropriate written, enforced policy 
on conflict of interest.
    Q19: Must an investigator report to the institution a single share 
of stock?
    A19: A single share of stock would have to be reported only if (i) 
it is valued at more than $10,000 or represents more than a five 
percent ownership interest in the corporation; and (ii) it would 
reasonably appear that the value of the stock could be affected by the 
research for which funding is sought or that the financial interest of 
the corporation would be so affected.
    The rules define a significant financial interest as anything of 
monetary value including equity interests (e.g., stocks, stock options, 
or other ownership interests) but the definition excludes an equity 
interest that does not exceed $10,000 in value and represents no more 
than a 5% ownership interest in any single entity. This means that, 
under the rules, an investigator would never have to report an equity 
interest of $10,000 or less which represents 5% or less ownership 
interest in any single entity because that combination of value and 
ownership is excluded by definition from the term ``significant 
financial interest.'' On the other hand, under the rules, an 
investigator would always have to report an equity interest exceeding 
$10,000 or an ownership interest exceeding 5% in any single entity, 
regardless of value, if that equity interest or ownership interest was 
held in an entity whose financial interests would reasonably appear to 
be affected by the specified activities for which funding is sought.
    Q20: When and how will the NSF and PHS rules be reviewed and 
revised?
    A20: The agencies anticipate that after two or three years of 
experience with the rules, they will solicit public comments regarding 
whether changes are necessary or appropriate.

    Dated: June 13, 1996.
Dr. Harold Varmus, M.D.,
Director, National Institutes of Health.
Lawrence Rudolph,
General Counsel, National Science Foundation.
[FR Doc. 96-16974 Filed 7-2-96; 8:45 am]
BILLING CODE 7555-01-P, 4140-01-P