Report 2006-108 Summary - February 2007
California Institute for Regenerative Medicine:
It Has a Strategic Plan, but It Needs to Finish Developing Grant-Related Policies and Continue Strengthening Management Controls to Ensure Policy Compliance and Cost Containment
Our review of the California Institute for Regenerative Medicine (institute) revealed the following:
- The institute identified long-term research priorities and considered the industry's best practices to create its strategic plan, but it has yet to implement a process to assess annual progress toward attaining its strategic goals.
- A task force formulated draft policies for revenue sharing through a public deliberative process but, because of a lack of documentation, we could not independently evaluate any analyses of the information on which the task force members based their revenue-sharing policies.
- Although it has a grants administration policy for academic and nonprofit institutions, the institute is still developing a for-profit policy and is still implementing a monitoring process to ensure that grantees comply with the terms of their grants.
- The institute's recent policy revisions addressed our contracting concerns, but not all of our travel reimbursement concerns.
- The salary survey conducted by the institute and the compilation of the salary data collected contained enough errors, omissions, and inconsistencies that the institute cannot ensure that the salaries for certain positions comply with the requirements of the law.
RESULTS IN BRIEF
In 2004, voters approved the California Stem Cell Research and Cures Act (act), which authorized the issuance of $3 billion in bonds over 10 years to fund a stem cell research program and dedicated research facilities in California. The act established the California Institute for Regenerative Medicine (institute) as a state agency with the purpose of funding stem cell research activities. The goal of the research is to realize therapies, protocols, and medical procedures that, as soon as possible, will lead to curing or substantially mitigating diseases and injuries. The act directs the institute to give priority to research that has the greatest potential for therapies and cures and that cannot or is unlikely to receive timely or sufficient federal funding. The institute is responsible for supporting all stages of the process of developing cures and establishing appropriate regulatory standards and oversight bodies for research and facilities development.
To oversee the institute's operations, the act established the Independent Citizens Oversight Committee (committee). The act mandates that the committee develop annual and long term strategic research and financial plans for the institute. The committee adopted the institute's strategic plan during its December 2006 meeting. The plan outlines goals and objectives for spending $3 billion in general obligation bonds authorized by the act and provides a strategy that strives to meet the purpose and intent of the act.
To create the strategic plan, the institute followed a planning process that outlined organizational responsibilities and timelines. The planning process enabled the institute first to analyze pertinent information and then to identify long-term research priorities. To consider the best practices of the industry, the institute consulted various expert stakeholders through interviews, conferences, and focus groups. In addition, the institute reviewed the strategic plans and the strategic planning processes of other entities.
The strategic plan contains essential elements, including a mission statement and a set of goals for fulfilling the mission. The plan's goals depend on scientific discovery, so ensuring that they are achievable is challenging. However, the outlined goals are specific in nature and were adopted unanimously by the committee, along with the remainder of the institute's strategic plan, in December 2006. Our review concluded that the institute's approach to achieving its goals through specific initiatives is defined clearly. The plan contains an action plan for the first 1,000 days, as well as performance mechanisms and milestones to ensure accountability, assess performance, and gauge scientific progress at years three and seven of the 10-year strategic plan. However, the institute has not yet established a process to track management information from grantees to assess annual progress toward attaining its strategic goals.
The institute has developed several policies and procedures to advance implementation of the stem cell research program approved by voters, including policies that address intellectual property issues resulting from research funded by its grants to nonprofit and for-profit organizations. A particularly important concern for the institute is sharing revenues acquired from the commercialization of institute-funded discoveries. Under the act, the committee must establish standards that balance the State's opportunity to benefit from the patents, royalties, and licenses resulting from the activities funded by the institute with the need to ensure that essential research is not unreasonably hindered by intellectual property agreements. A task force established by the committee formulated draft policies for revenue sharing through a public deliberative process. The committee subsequently adopted the policies. The task force relied on the knowledge and judgment of its members and a broad assortment of information collected and summarized by the committee's vice chair (who served as the chair of the task force) and his deputy. Although we observed that the task force conducted extensive discussions of the information presented, neither the vice chair nor his deputy provided sufficient documentation to demonstrate how they evaluated the information they gathered and how they determined whether the information was appropriate for discussions that would lead to the formulation of the revenue-sharing policy. As a result, we could not independently evaluate any analyses they may have performed of the information on which the task force based its deliberations.
The committee's policies require that grantees provide a plan that ensures that uninsured Californians have access to all therapies developed as a result of the institute's grants. However, the committee has not yet adopted the appropriate language to define its expectations regarding access. Moreover, although the committee has identified standards for discount prices for drugs, it has not yet identified the appropriate benchmarks to use as a standard for establishing discount prices for nondrug therapies.
In addition, the institute needs to develop a policy for administering certain grants. Although it has developed a grants administration policy for academic and nonprofit institutions, the institute is still developing a policy for administering future grants to for-profit organizations. Moreover, it is still implementing a grants monitoring process that will contain the procedures used to ensure that grantees comply with the terms of their grants, including procedures for performing audits of grantees.
The committee has adopted conflict-of-interest policies to identify and prevent conflicts between the personal interests and the work duties of institute employees as well as members of the committee and the institute's working groups. However, the institute needs more effective policies and procedures. For example, its conflict-of-interest policy for the working group that evaluates applications for program grants does not include experts, known as specialists, who are invited to assist the working group.
The institute did not establish a contracting policy effectively ensuring that it received appropriate goods and services at reasonable prices. Based on language in the act, legal counsel for the institute concluded that it is governed by all the provisions of the Public Contract Code that affect the University of California (UC). Additionally, it is the institute's intent to model its policies substantially after those of UC. However, much of the institute's policy did not conform to UC policy. As a result, the institute awarded multiple contracts without a competitive-bidding process and did not maintain documents that demonstrated it received reasonable prices on the goods and services it purchased.
In addition, the institute's travel reimbursement policy did not provide sufficient control over travel expenses. The institute originally adopted the travel reimbursement policy of the Department of Personnel Administration, but then revised the policy several times to conform more closely to the UC policy. In general, the revisions allowed travelers greater flexibility and more liberal reimbursements. For example, the institute removed maximum reimbursable amounts for some expenses, such as meals for committee meetings. Moreover, the institute reimbursed costs for air travel and meals without sufficient documentation of travel expenses to ensure that its policies were followed. The revisions also made the policy confusing because they did not use consistent language, and some new provisions did not specify whether they replaced or supplemented existing policies. For instance, the policy contained multiple reimbursement rates for items such as meals but failed to provide clear guidance on when to use each rate.
In response to our concerns about contracting and travel reimbursements, the institute revised certain policies in December 2006. These policy revisions addressed our contracting concerns, but not all of our travel reimbursement concerns. For example, the institute has not revised the form that working group members use to claim travel reimbursement to include information specific enough to allow for a proper review of the claims, and its revised policy specifies that it applies only to institute staff and working group members, not to members of the committee. The institute has indicated to us that it is developing an internal procedures manual that will address additional contracting issues. In addition, the committee chair stated that the committee will consider amendments to the travel policy in the upcoming months.
Finally, the salary survey conducted by the institute and the compilation of the salary data collected contained enough errors, omissions, and inconsistencies that the committee and the institute cannot ensure that the salaries for certain positions comply with the requirements of the act. The institute plans corrective action.
The institute should develop a process to track management information reported annually by grantees, thereby providing accountability and enabling it to assess its annual progress in meeting its strategic goals.
The committee should ensure that it proceeds with its plan to identify the appropriate standard for providing uninsured Californians access to therapies developed with institute funds. Moreover, the committee should ensure that its intellectual property policies clearly convey to grantees its expectations for providing that access. In addition, the committee should identify practical benchmarks to use as a standard for discount prices for therapies and apply the standard to its policies for grants to nonprofit and for-profit organizations.
The institute should complete its grants administration policy targeted toward for-profit organizations.
To monitor the performance of grantees effectively, the institute should complete the implementation of a grants monitoring process and the development of related procedures.
The institute should amend its conflict-of-interest policies to include any specialists it may invite to participate in stem cell research program activities, such as grant application review.
The institute should strictly follow its newly revised contracting policy, which addresses the concerns raised in our audit. The institute also should amend its travel reimbursement practices for meal reimbursement to ensure its policies are followed. Further, the committee should consider amendments to its travel reimbursement policy that will result in the reimbursement of reasonable and necessary travel expenses, as stated in the act, and that address the concerns we raised in the report.
To ensure that the methodology to set salary ranges complies with the act, the institute should proceed with its plan to resurvey any positions with salary ranges affected by the errors, omissions, and inconsistencies in its initial salary survey and salary-setting activities.
The institute agrees with our recommendations and states that the report makes a useful and important contribution to the institute's effort to operate as effectively and efficiently as possible and in full compliance with the law.