NIH is a Public Health Service (PHS) agency within HHS. It consists of a director’s office and 14 staff offices that oversee the operations of 24 separate units. These units include 17 institutes, each focused on specific health or medical issues, such as cancer or aging; six research centers; and the National Library of Medicine. Each unit separately awards funds for the research it sponsors. NIH’s Office of Extramural Research is responsible for agencywide activities concerning oversight of Phase III clinical trials, such as developing policy on the review, funding, and management of extramural grants. NIH’s extramural research units (generally referred to in this report as “institutes”) used various methods to fund the 470 Phase III clinical trials they sponsored in fiscal year 1994. As figure 1 shows, the largest number of trials (180) were funded through cooperative agreements. Regardless of the method used to fund the trials, the institutions that are awarded the funds are referred to as “grantee institutions” or “grantees.” Most Phase III clinical trials involving multiple sites are funded through contracts and cooperative agreements. Trials funded through contracts are typically planned, initiated, and controlled by the sponsoring NIH institute. The institute details the trial’s objectives, protocols, and controls. Under cooperative agreements, however, the grantees and principal investigators have more flexibility in planning, managing, and conducting the trial. Although the sponsoring institute is expected to make substantial contributions to the trial, such as providing technical assistance, coordinating the trial’s activities, and helping to manage the trial, operational control of the trial rests with the grantee. The institutes and research centers at NIH along with the grantee institutions directly oversee and monitor Phase III clinical trials. These entities are to ensure that controls are in place to prevent or detect the misuse of federal funds and the falsification of data in conducting extramural clinical research. According to NIH, these institutes and grantee institutions know the nature and objectives of the trials and are therefore in the best position to develop monitoring procedures to ensure safety and data integrity. At the sites we visited, controls that safeguard against fiscal misconduct are consistently applied among institutes and trials. Some controls that safeguard against scientific misconduct, however, are not always consistently used for various reasons, including the type of trial and the sponsoring institute’s management philosophy. Although each institute independently oversees the clinical trials it sponsors, the controls established to prevent and detect fiscal misconduct were consistent among the institutes in our review. The control procedures must conform with federal requirements and policies on the expenditure of federal funds. Grantee institutions are responsible for ensuring that their research scientists and other employees comply with all applicable federal rules, regulations, and policies on the use of federal funds. Independent auditors review grantee compliance annually in a required financial audit. Most grantee institutions receive federal funds from several federal agencies. The grantees must adhere to a uniform series of regulations laid out by the Office of Management and Budget (OMB). Chief among these policies are cost principles that grantees must adhere to as specified in OMB Circulars A-21, A-87, or A-122. These principles provide guidance on what expenses a grantee may incur and charge against an NIH grant award. Grantees must also follow a uniform set of administrative requirements in OMB Circulars A-102 or A-110, detailing how grant funds should be managed. Foremost among these requirements are standards for such areas as fiscal reporting, accounting records, internal controls, and cash management. Other administrative requirements cover procurement and property standards. Independent auditors annually audit grantees’ fiscal management of federal funds as required by OMB Circulars A-128 and A-133. It was such an audit that detected the embezzlement of more than $700,000 of NIH grant funds in the early 1990s. This case of fiscal misconduct by a manager of grants accounting occurred at the New York Medical College—the grantee. Because the grantee institution is responsible for ensuring that federal grant funds are properly used, the college was required to fully refund these funds to NIH. At the five grantee institutions we visited, we reviewed the annual financial audits. The audits included a review of internal controls established by the grantees to safeguard federal funds. In each case, the audits disclosed that grantees had complied with federal guidelines and no material weaknesses were detected in the internal controls. When grantee institutions fail to establish and maintain adequate internal controls and proper accounting procedures to safeguard federal funds, NIH can impose requirements that the grantee must comply with to continue receiving and managing grant awards. In 1995, NIH designated the University of Minnesota, a grantee, an “exceptional organization” because of its failed internal controls and poor accounting procedures. This designation enabled NIH more oversight of its funds than would be feasible under the administrative procedures normally associated with its grant programs. NIH increased the conditions and restrictions attached to the University’s grant award. It also required the University to develop and successfully implement a corrective action program to address the deficiencies before NIH would consider removing the exceptional organization designation. Each institute assigns grants management officers to clinical trials to oversee the use of federal funds awarded to grantee institutions. One method used by the grants management officers to reduce the agency’s risk is to limit the amount of funds readily available to the grantees. For instance, because a cooperative agreement usually covers more than 1 year, the initial award specifies how much funding will be provided each year for the life of the agreement. However, funding is provided on a year-to-year basis only. The grantee must apply each year for a continuation award for additional funding even though the total grant amount is committed. Institutes release funds on the basis of satisfactory performance as detailed in the annual progress reports that principal investigators must submit. If a grantee’s progress is not satisfactory, a grants management officer may reserve all or some of the funding until grantee progress improves. Institutes awarding funds for clinical trial research issue award notices that include a section indicating whether any of the funding is restricted and what must be done to lift the restriction. If a grantee’s funds are restricted, the grants management officer might release the funds but restrict their use until the grantee has completed certain tasks. For example, in one trial we reviewed, the officer restricted administrative funds until the sites developed a contractual agreement indicating how they would work together. In addition to annual progress reports, the grantee must include a summary of annual expenditures in its Financial Status Report to the grants management officer. This allows the officer to compare the reported overall expenditure totals with the original budget and progress reports. If the officer finds any significant differences, the grantee is expected to explain them. For Phase III clinical trials funded through contracts or cooperative agreements, according to NIH, when grantees do not spend funds as budgeted, grants management officers must approve all requests to rebudget funds as well as requests to carry over funds from one year to the next. Institutes’ oversight monitoring of clinical trials has some consistent safeguards against scientific misconduct and protections for the safety of trial participants. Each institute usually requires specific monitoring methods. For example, an NIH program officer is assigned by the sponsoring institute to monitor each Phase III trial. Program officers are research scientists with expertise in the area being studied. Each institute trains and develops its own program officers in monitoring and managing clinical trials. Therefore, program officers’ training can vary by institute.Also, their responsibilities often vary by the institute’s management philosophy, the type of trial, and the funding method—contracts or cooperative agreements. Typically, program officers, at a minimum, rely on basic oversight controls in monitoring clinical trials, including annual progress and budget reports and trial participants’ recruitment and retention statistics. Oversight boards also monitor trials. For example, most clinical trials that pose a potential hazard to human trial participants must be monitored by a Data and Safety Monitoring Board or an equivalent. This board, composed of scientists not connected with the trial, monitors a trial’s clinical data and progress. The board also focuses on reported adverse events—adverse changes in the health status of a human research subject in a clinical trial. In addition to a Data and Safety Monitoring Board, each grantee institution must establish an Institutional Review Board to approve and monitor all research involving human subjects. An important function of this board is to review and approve informed consent forms, making sure they have been signed. All prospective research subjects must sign consent forms that explain the objectives, risks, and benefits of the proposed research before they can participate in a trial. In our review of clinical records at the five sites we visited, we did not find any cases in which a consent form had not been signed by a trial participant. However, according to a report on the NCI-sponsored breast cancer trial, only about 71 percent of trial participants gave written informed consent before surgery; consent forms were missing or not available or data were insufficient for 7 percent of the participants. Clinical trials have controls that safeguard against scientific misconduct, including direct data verification to ensure data integrity. Because institutes and grantees, however, have flexibility in deciding how these controls are used, the application of the controls often varies by institute and type of trial. One control designed to safeguard trials against scientific misconduct is the use of clinical monitors to review trial data. These monitors visit clinical trial sites to verify that the established protocols are being followed and that the data being reported match the data in the clinical records. In one trial sponsored by the National Eye Institute, clinical monitors found that clinical test results were being entered on data collection sheets and not in the patients’ medical records. Clinical research policy states that medical records are the acceptable source documents for clinical test results so monitors required that the site also enter reported data in the patients’ medical records. Because clinical monitors add both expense and time to a trial, institutes tend to use them only in the large and more complex trials.