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Submission For The Record of National Association of Veterans' Research and Education

The National Association of Veterans’ Research and Education Foundations (NAVREF) appreciates the opportunity to submit a statement for the record of the hearing being conducted on October 4, 2007, by the Health Subcommittee of the House Committee on Veterans Affairs regarding the Department of Veterans Affairs (VA) Medical and Prosthetic Research program.

NAVREF is the voluntary membership association of the VA-affiliated nonprofit research and education corporations (NPCs) established and operated in accordance with 38 U.S.C. §§73617368. NAVREF’s mission is to promote high quality management and communication among the NPCs, and to pursue issues at the government level that are of interest to its members. NAVREF accomplishes this mission through education, interactions with agency and congressional officials, and advocacy. Additional information about NAVREF is available on its web site at www.navref.org.

Background About the NPCs

In 1988, Congress allowed the secretary of the Department of Veterans Affairs to authorize “the establishment at any Department medical center of a nonprofit corporation to provide a flexible funding mechanism for the conduct of approved research and education at the medical center.” [38 U.S.C. §7361(a)] At this time, 85 facilities are taking advantage of this authority, providing each VAMC with a highly valued means for administering non-VA federal and private sector funds in support of VA research and education.

We encourage the Subcommittee to review the VA’s most recent report on the NPCs which VA submitted to Congress in accordance with requirements stated at 38 U.S.C. §7366(b) through (d). This compilation of information provided by NPCs presents a comprehensive overview of NPC revenues and expenditures, the activities they support and the oversight provided by VA through the VA NPC Program Office and the VA NPC Oversight Board as well as annual audits by independent auditors. This report demonstrates that NPCs have become an integral component of VA facility research programs, administering $227 in non-VA federal and private sector revenues and approximately 5000 projects at any one time during the last year.

NPCs are fully dedicated to serving the needs of VA research and VA investigators. In the course of administering research, they support a variety of project-related costs such as salaries for research personnel, supplies, equipment and travel for scientific conferences and training. Additionally, they support a number of activities that foster a vibrant research environment at VA medical centers across the nation. Such activities include supporting institutional review boards (IRB) and other compliance measures, core research equipment and services, seed and bridge funding and VA staff recruitment. NPCs also donate to VA the services of approximately 2500 NPC research employees who work under VA without compensation (WOC) appointments with the background, security and training requirements such appointments entail -side-by-side with VA-salaried employees.

Current Reviews of NPCs and Oversight

Internal control failures experienced by three NPCs in 2006 prompted the VHA Office of Finance and the Office of the Inspector General (IG) to undertake separate reviews of the NPCs that were performed during 2007. Although we believe that NPC boards and employees are for the most part conscientious stewards of NPC funds, NAVREF applauds VA for acting forthrightly to confront NPC management deficiencies that do come to light, and we consider the results of these reviews to be learning opportunities for NPCs. We have invited both the VHA and IG auditors to present their objectives, methodologies, findings and recommendations during the NAVREF 2007 Annual Conference in November so that all of the NPCs may learn from VA’s substantial investment in conducting the reviews. The IG report, which originally was scheduled for completion in August, is not yet complete, but we remain hopeful that it will be published in time for discussion during the conference. Additionally, eight hours of the NAVREF conference program will be devoted to internal controls training for both large and small organizations, and VA is planning separate training specifically for members of NPC boards. NAVREF anticipates using the IG’s recommendations to focus its own future educational programs on areas identified to be in need of improvement.  

To improve VA oversight of NPCs, we encourage the Subcommittee to support the Office of Research and Development’s plan to recruit as director of the VA Nonprofit Program Office a fully dedicated GS-15 with expertise in nonprofit management, accounting and governance. This office is tasked with providing NPC oversight and when staffed with the appropriate level of expertise will be a welcome partner in ensuring high standards of NPC management.

Proposal to Update and Clarify the NPC Authorizing Statute

Nearly two decades after enactment of Public Law 100-322, the success of the NPCs in supporting VA research and education demonstrates that the NPC authorizing statute has been effective in accomplishing Congress’s purpose of providing VA with flexible funding mechanisms for the conduct of VA-approved research and education. Its authors successfully crafted a unique private-public partnership that has served VA facility research programs and investigators well. However, during the intervening years, VA health care delivery systems, the VA research program and the NPCs have evolved. Prompted in part by the upcoming twentieth anniversary of the authority to establish NPCs, during the last twelve months the NAVREF board conducted a comprehensive review of the NPC authorizing statute in light of accumulated years of experience working within its terms.  

After much deliberation, and discussions with the Office of Research and Development and the VA Office of General Counsel as well as Paralyzed Veterans of America and staff of the House and Senate Committees on Veterans Affairs, NAVREF concluded that it would be of benefit to VA and the NPCs to update and clarify the NPC authorizing statute. This will also benefit veterans by helping NPCs meet their full potential in supporting VA research and education that ultimately results in improved treatments and high quality care for veterans. Guided by these discussions, early this year NAVREF began developing a statutory proposal that is nearing completion and that we expect to submit to Congress in December for consideration and enactment during the second session of the 110th Congress.

NAVREF’s primary objective in proposing statutory revisions is to allow “multi-site” NPCs. That is, voluntary sharing of one NPC among two or more VAMCs while still preserving their fundamental nature as medical facility-based organizations. We have two purposes for seeing this objective. First, it would allow VAMCs with small research programs to join with larger ones or for several small programs to join together to pool their resources for purposes of efficiency and ensuring sound management. Second, it would allow reasonable, but not overly burdensome, board composition by requiring the medical center director of each facility to serve on the board to ensure local accountability. Otherwise the board of a multi-site NPC would be required to have as VA members just one Chief of Staff, Associate Chief of Staff for Research and Associate Chief of Staff for Education. Beyond this proposed statutory minimum, our proposal would leave it up to each multi-site NPC board to determine the combination of VA and non-VA members best suited to its own needs. In our view, requiring all of these personnel from each facility to serve on the board is not a good use of their valuable time and results in an unnecessarily large and logistically cumbersome board.

This change in the NPC statute would benefit VA by reducing the number of NPCs that VA is required to oversee and would eliminate the need for duplicative local effort at the same time as it would increase the resources each NPC would have available for management. NAVREF anticipates that as many as twenty low-revenue VA research programs may welcome the opportunity to partner with other nearby facilities to share NPCs.

NAVREF’s other proposed revisions in the NPC authorizing statute are designed to clarify – not change – the legal status of the NPCs as independent organizations, exempt from taxation under section 501(c)(3) of the Internal Revenue Service (IRS) code and subject to VA oversight and regulation. Additionally, proposed revisions clarify the NPCs’ purposes as well as their funds acceptance and expenditure authorities. Our objective in making these changes is to resolve longstanding uncertainty and sometimes outright confusion and disagreement among VA officials, internal VA and external overseers, funding organizations and NPC personnel. NAVREF is also suggesting a general re-organization of the statute to pull together in separate sections the various provisions addressing status, purposes and powers.

As NAVREF considered statutory revisions, it also identified a number of issues that while not requiring legislation, could benefit from discussion in congressional report language or inclusion in an updated version of VHA Handbook 1200.17 which contains VA’s interpretation of the NPC statute and VA policy pertaining to NPCs. For example, NAVREF has included a recommendation for requiring VA to approve the establishment of a new NPC on the basis of an assessment of the ability of the facility’s research or education program to generate a revenue stream sufficient to support the NPC infrastructure, and assurance that qualified staff will be available to manage the NPC. The NPC statute already states, “The Secretary may authorize the establishment at any Department medical center of a nonprofit corporation . . .” Therefore, no explicit statutory language is needed to give VA the ability to determine which facilities may establish new NPCs. However, it may be useful to include in report language a sense that there should be some minimum expectations of research programs contemplating establishing an NPC and then more specific policy guidance regarding the process of applying for VA approval could be provided in the handbook. This and a number of other recommendations will be provided to Congress as an addendum to NAVREF’s statutory proposal. We would be pleased to work with the Subcommittee to determine which the Subcommittee may wish to address in report language.

Conclusion

The NPCs represent a unique means for VA to maximize the benefits of externally-funded research conducted in VA facilities. The NPCs are performing as Congress intended, serving as flexible funding mechanisms for the conduct of VA-approved research and education. NPCs facilitate research that benefits veterans, and they foster vibrant research environments at VA medical centers, enhancing VA’s ability to recruit and retain clinician-investigators and other staff who in turn apply their knowledge to state-of-the-art care for veterans. Some even contend that their NPCs and the contributions of services, personnel and equipment they provide in support of VA research have become an essential component of successful research programs.

 

However, NAVREF recommends that in 2008, twenty years after the VA-NPC public-private partnership was first authorized, and co-incident with expiration of authority to establish new NPCs, it is time to update and clarify the NPCs’ enabling legislation. Experience working within the statute has brought to light its many strengths, but also areas that could benefit from updating and clarification, particularly in light of continuing evolution of VA health care and the increasing complexity of both research and nonprofit compliance. NAVREF would be pleased to work with the Subcommittee toward revisions in the statute that will allow NPCs to meet their full potential in supporting VA research and education while ensuring VA and congressional confidence in their management.

Thank you for the opportunity to submit a statement for the record. If you have questions, please do not hesitate to contact NAVREF Executive Director Barbara West.