INVESTIGATION OF VETERANS NONPROFIT RESEARCH CORPORATIONS FINDS NEED FOR STRONGER OVERSIGHT

WASHINGTON, D.C. - Today Senator Daniel K. Akaka (D-HI), Chairman of the Veterans' Affairs Committee, called attention to the need to improve oversight of the nonprofit research corporations (NPCs) associated with the Department of Veterans Affairs.  An investigation by VA's Inspector General (IG) uncovered a number of weak points in VA's oversight of the NPCs.

Senator Akaka said: "The nonprofit research corporations play an important role in supporting VA research, and the IG report makes valuable recommendations for improvement."  

Akaka introduced S. 2926, the proposed Veterans Nonprofit Research and Education Corporations Enhancement Act of 2008 last week. "My legislation will strengthen oversight and accountability to ensure that NPCs continue to advance VA research," he said.  

The Inspector General found that NPCs do not have adequate controls to manage funds, safeguard equipment, or guard against conflicts of interest.  The Veterans Benefits and Services Act of 1988 authorized the establishment NPCs to support research activities at affiliated VA medical facilities.  Educational support was later added to the authorization.  There are 86 NPCs located in 41 states, as well as Puerto Rico and Washington, DC. 

S. 2926 would make adjustments to the statute governing NPCs to better meet the needs of VA, and to reinforce oversight of these entities.  The bill would:

• Expand and clarify VA's oversight tools and obligations
• Facilitate multi-medical center research corporations to improve capacity and administrative efficiency
• Modify the required composition of NPC governance boards to allow individuals with a wider range of expertise to serve

Below is the text of Sen. Akaka's introductory statement on the bill, introduced on April 28, 2008:

Today I am introducing legislation concerning the nonprofit research and education corporations--NPCs--that serve the Department of Veterans Affairs. These organizations provide essential support to research and education at VA facilities around the country. My legislation will amend the law which authorizes NPCs so as to better reflect their mission and the needs of VA, as well as strengthen control and oversight of these entities.

   The legislation which authorizes NPCs was enacted in 1988 to allow the establishment of these entities as flexible funding mechanisms for the conduct of research and education at VA medical centers. In 2006, 85 NPCs expended $227 million in support of over 5,000 VA research and education programs. NPCs give VA the opportunity to access and manage research funds from sources outside of VA, while maintaining VA oversight.

   Twenty years have passed since the inception of NPCs, and it is time to update the law governing their operation. VA's research needs have shifted and the function of NPCs has evolved. I will highlight a few of the corrections this legislation would make.

   NPCs are nonprofit 501(c)(3) organizations that are entirely dedicated to serving VA research. They efficiently administer VA research funds, and provide access to some funds that VA would otherwise be unable to access. Unfortunately, given their close affiliation with VA, and due in part to various state laws, NPC nonprofit status is in some situations unclear. My legislation would explicitly identify the nonprofit status of NPCs under IRS code. It would also make clear that NPCs are not owned or controlled by the U.S. Government, and are not agencies or instrumentalities of the U.S.

   As the utility and appeal of NPCs have grown, their numbers have expanded. While this growth is positive, it is not always efficient or feasible for a medical center to establish and manage its own NPC. The legislation would create authority for multi-medical center NPCs to be shared among a number of medical centers. Condensing numerous NPCs into one would retain the local affiliations that make them valuable and effective, but would achieve greater efficiency and economy of scale by combining administrative resources.

  The legislation would make additional adjustments in other areas. It would expand VA's oversight capability. It would clarify existing authority for NPCs to transfer funds among medical centers, and it would clarify reimbursement processes. It would also modify the required composition of NPC governance boards, to allow individuals with a wider range of expertise to serve.

   I believe these proposed changes would facilitate better working relationships between NPCs and VA, thereby achieving better support of VA research and education. I am confident that these provisions will make an effective source of support for VA even stronger.

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