Many federal agencies fund research to serve their goals and objectives. For example, NIH, the largest source of federal support for nondefense research, is the federal focal point for medical and behavioral research to help extend healthy life and reduce illness and disability. Each of the 27 institutes and centers that constitute NIH has an explicit mission focused on a particular disease, organ system, stage of development, or a cross- cutting mission, such as developing research tools. Other agencies, such as EPA, FDA, and FAA, support research, in part, to further scientific understanding that may in the future better inform their regulatory decisions. Nineteen offices within EPA conduct and/or support research to help carry out the regulatory aspect of the agency’s mission to protect human health and the environment and to implement environmental laws. Similarly, FDA relies on research to help identify and assess risks and to serve as the basis for regulatory decisions about such issues as human and veterinary drugs, medical devices, and the nation’s food supply. Finally, FAA, which enforces regulations and standards for the manufacture, operation, and maintenance of aircraft, conducts research to help ensure a safe and efficient system of air navigation and air traffic control. Federal research can be conducted by scientists in government laboratories—called intramural research—or by scientists at universities, in industry, or at nonprofit organizations—called extramural research. In fiscal year 2002, NIH, EPA, FDA, and FAA devoted a total of about $23 billion to intramural and extramural research. (See fig. 1.) Together, these four agencies accounted for about 50 percent of the federal funds devoted to research. Federal laws have created an environment conducive to a full range of joint ventures between government and industry, or between industry and universities, as well as among companies. Specifically, through collaboration, federal and nonfederal partners attempt to share the costs, risks, facilities, and expertise needed for research and to promote the movement of ideas and technologies between the public and private sectors. This cooperation between federal and private sector researchers may take many forms. Through informal cooperation, for example, federal agencies and industry may coordinate and share research agendas to prevent duplication of effort, or agency and private sector scientists may consult one another. Through formal cooperation, federal and nonfederal partners use written agreements, such as contracts or memorandums of understanding, to define the roles and responsibilities of each party. However, each type of arrangement differs in the extent of federal involvement in the research conducted under the agreement. Generally, work conducted under contracts is directed and overseen by federal agencies that do not participate in the work. In contrast, memorandums of understanding allow great flexibility in terms of participation by federal agencies and may also allow for sharing of resources or the funding of research by nonfederal partners. Congress may provide federal agencies the authority to accept gifts from external sources. For example, under the Public Health Service Act, certain agencies, such as NIH, may accept funds or nonmonetary gifts to support their research efforts or other agency functions. Under the act, donors may stipulate how agencies may use their gifts, for example, to only support research on a specific disease or condition, or they may allow the agency to use the gift for the benefit of any effort without stipulations. An agency’s statutory authority to accept donations is called its “gift acceptance authority.” In 2001 and 2003, NIEHS and ORD, respectively, entered into research arrangements with ACC to solicit and fund extramural research proposals. These arrangements specified how research proposals would be solicited, reviewed, funded, and overseen. Specifically, under the NIEHS-ACC arrangement, ACC and NIEHS agreed to support a 3-year research program to study the effects on reproduction and development of exposure to chemicals in the environment. ACC provided a gift of $1.05 million to NIEHS to fund this research, and NIEHS contributed $3.75 million to the project. Using the combined funds, NIEHS awarded a total of 17 research proposals from among the 52 it received. The program ended in 2004. Under the ORD-ACC arrangement, ACC and ORD agreed to support and fund research, with the first solicitation for research proposals focusing on novel approaches to analyzing existing human exposure data. In response to this first announcement of funding availability, issued in July 2003, 36 research proposals were submitted. ORD funded four research proposals, for a total of about $1.7 million, and ACC funded two proposals, for a total of about $1 million. ORD and ACC separately funded the research proposals that each had selected under this arrangement because EPA does not have the authority to accept contributions from outside sources. Researchers could specify whether they wanted their proposals considered for funding solely by ORD or by either ORD or ACC. ACC is a nonprofit trade organization representing most major U.S. chemical companies. It represents the chemical industry on public policy issues, coordinates the industry’s research and testing programs, and leads the industry’s initiative to improve participating companies’ environmental, health, and safety performance. In 1999, ACC launched a $100 million research initiative to study the potential impacts of chemicals on human health and the environment and to help improve screening and testing methods. A primary goal of the initiative is to focus on projects or programs that might take advantage of work planned or conducted by EPA, NIEHS, and other laboratories to stimulate collaboration and/or to prevent unnecessary duplication. Individuals or organizations can have conflicts of interest that arise from their business or financial relationships. Typically, federal conflict-of- interest laws and regulations govern the actions of individual federal employees, including their financial interests in, and business or other relationships with, nonfederal organizations. Conflict-of-interest concerns about individual federal employees typically arise when employees receive compensation from outside organizations; such arrangements often require prior approval from the federal employer. When a federal agency enters into a relationship with, or accepts a gift from, a regulated company or industry, concerns may arise about the agency’s ability to fulfill its responsibilities impartially. The statutory provisions that NIEHS and ORD relied upon to enter into their arrangements with ACC grant the agencies broad authority to collaborate with external organizations in support of research. Nothing in these statutes appears to prohibit either agency from entering into research arrangements with nonprofit organizations such as ACC. NIEHS used the authorities granted to NIH’s institutes and centers under sections of the Public Health Service Act, as amended, to enter into its arrangement with ACC (sections 301 and 405). The act authorizes NIH and its institutes and centers to cooperate, assist, and promote the coordination of research into the causes, diagnosis, treatment, control, and prevention of physical and mental diseases. In its research arrangement with ACC, NIEHS cited sections of the act as the authority it relied on to enter into the arrangement. These sections enumerate the general powers and duties of the Secretary of Health and Human Services and the directors of the institutes and centers in broad terms, including the authority to encourage and support studies through grants, contracts, and cooperative agreements. Similarly, ORD relied on broad authorities granted to EPA under sections of the Clean Air Act, as amended; the Clean Water Act, as amended; and the Solid Waste Disposal Act, as amended, to enter into its research arrangement with ACC (sections 103, 104, and 8001, respectively). These sections authorize EPA to promote the coordination and acceleration of research relating to the causes, effects, extent, prevention, reduction, and elimination of pollution in the air and water, and from solid waste. These sections authorize the EPA Administrator and other EPA officials to cooperate with appropriate public and private agencies, institutions, organizations, and industry to conduct research and studies. NIEHS and ORD did not formally evaluate the possibility that organizational conflicts of interest could result from their research arrangements with ACC because neither agency had policies requiring such evaluations. However, officials at both agencies took steps to manage potential conflicts that might arise during implementation of the arrangements. In 2001 and 2003, when they entered into arrangements with ACC, neither NIH nor EPA had specific policies requiring officials to formally evaluate potential conflicts of interest that could result from entering into such collaborative arrangements. As a result, neither NIEHS nor ORD conducted such evaluations. During negotiations with ACC on their research arrangements, NIEHS and ORD officials recognized the potential for organizational conflicts of interest, or at least the appearance of such conflicts. However, in light of the lack of policies on this issue, neither agency formally evaluated the potential for conflicts before finalizing their arrangements with ACC. Instead, officials told us, they informally evaluated the potential for conflicts of interest and intended to manage potential conflicts that might arise during implementation. To date, neither agency has developed any such policy guidance. In implementing their arrangements with ACC, NIEHS and ORD used their general research management processes to help manage potential conflicts of interest. These processes are designed to help ensure the integrity of scientific research undertaken by these agencies. According to agency officials, these processes helped guard against undue influence of ACC by limiting ACC’s participation in the selection, review, and oversight of agency-funded research conducted under the arrangements. For example: Developing research topics. Research priorities at both NIEHS and ORD were identified through routine agency planning processes that involved significant input from a range of stakeholders before the arrangements with ACC were finalized. In addition, NIEHS included research topics suggested by the National Research Council, a congressionally chartered scientific advisory body. Both NIEHS and ORD then worked with ACC to select the specific scientific topics that would become the focus of the research conducted under the arrangements. According to NIEHS and ORD officials, their arrangements with ACC did not change or influence the agencies’ research priorities. Because the research conducted under these arrangements supported the agencies’ existing research agendas, officials believe that the ACC arrangements helped them effectively leverage federal research dollars. Advisory council consultation.