An Audit Report on Grant Management at the Cancer Prevention and Research Institute of Texas and Selected Grantees [TX] [Key Points]
An Audit Report on Grant Management at the Cancer Prevention and Research Institute of Texas and Selected Grantees
Report Number 13-018
The Cancer Prevention and Research Institute of Texas (CPRIT) should significantly improve the transparency and accountability of its grant management processes. Weaknesses in CPRIT's processes reduce its ability to properly award and effectively monitor its grants. Specifically, CPRIT should address deficiencies in the following areas:
- Making award decisions.
- Evaluating grant applications.
- Verifying compliance with matching funds requirements.
- Processing payments to grantees.
- Monitoring grantees' expenditures.
- Assessing and measuring research progress.
- Managing contract agreements with grantees.
Making Award Decisions
CPRIT should ensure that all award decisions are free from real or apparent conflicts of interest. The executive director discussed award recommendations with certain members of the oversight committee prior to presenting the recommendations to the full oversight committee. Also, CPRIT’s chief scientific officer, chief commercialization officer, and director of scientific review had office locations on the campuses of higher education institutions that received CPRIT awards. The chief scientific officer, the chief commercialization officer, and the director of scientific review are responsible for managing the peer review process for grant applications in their respective areas. In addition, auditors identified two members of CPRIT's commercialization review council with financial and personal interests in certain grantees. Specifically:
- One member of the commercialization review council was also a member of the board of directors for a grantee that received a $25.2 million research award from CPRIT. According to CPRIT's records, that individual did not participate in the review of the grant application for that grantee.
- Another member of the commercialization review council provided consulting services to two applicants applying for Texas life sciences incubator commercialization grants. That individual was not listed as participating in the review of grant applications for incubator grants, and neither applicant ultimately submitted a formal application for an incubator grant.
CPRIT also reported that it does not receive financial information about donors to the CPRIT Foundation or the amounts of the donations. Without that information, CPRIT has no assurances that it is not awarding grants to the CPRIT Foundation donors, which could create a conflict of interest. The General Appropriations Acts (81st and 82nd Legislatures) state that an individual; an organization; or an employee, officer, or director of an organization that makes a contribution to the CPRIT Foundation, or a person who has second-degree consanguinity or affinity to an employee of CPRIT, is not eligible to receive grants from CPRIT.
CPRIT's lack of controls for ensuring there are not any business and professional relationships between its peer reviewers and grantees impairs CPRIT's ability to assure the public that its award decisions are not improperly influenced.
Evaluating Grant Applications
CPRIT should ensure that its policies and procedures for evaluating grant applications are up to date and consistently followed. In addition, CPRIT should maintain records of all reviews that are performed.
Auditors could not verify that CPRIT consistently followed its process for withdrawing grant applications from the peer review process. CPRIT did not have reliable data to support grant applications that were withdrawn (see Chapter 1-B for more information).
Auditors identified the following significant issues for three grant applications tested:
- The Statewide Clinical Trials Network of Texas (CTNeT) received a $25.2 million research grant from CPRIT even though CTNeT did not exist at the time the grant was awarded. The CTNeT grant was the largest single grant that CPRIT had awarded as of June 2012. CPRIT originally awarded the grant to the University of Texas M.D. Anderson Cancer Center in June 2010. Subsequent to the award, CTNeT was formed and registered to become a Texas-based non-profit company in August 2010 and CPRIT executed a grant agreement with CTNeT in September 2010. It is unclear what allowed CPRIT to transfer the award from the University of Texas M.D. Anderson Cancer Center to CTNeT. CPRIT also did not have documentation to support that the scientific review council recommended the original application for a grant.
- CPRIT awarded a $20.0 million commercialization grant to the Houston-Area Translational Research Consortium (HATRC) and the Institute for Applied Cancer Science (IACS). Neither the HATRC grant application nor the IACS research proposal received scientific, due diligence, or intellectual property reviews. CPRIT reported that it rescinded the award in May 2012 after IACS requested to resubmit its research proposal for commercialization and scientific reviews.
- CPRIT awarded an $11.0 million commercialization grant to Peloton Therapeutics Inc. (Peloton, formerly Damascus Pharmaceuticals), whose application did not receive scientific, commercialization, due diligence, or intellectual property reviews.
Auditors reviewed the peer review scores for 218 (5.9 percent) of the 3,698 grant applications CPRIT reported receiving from September 2009 through June 2012 through the CPRIT Application Receipt System. Auditors identified four applications for which the peer review scores were not consistent with receiving a grant recommendation. CPRIT also did not have documentation to support the factors that peer reviewers used in making grant recommendations to CPRIT's executive director.
In addition, CPRIT did not document its review of recruitment grant applications or maintain records of those reviews in its Peer Review Management Information System. Recruitment grants are for the recruitment of investigators with the ability to make outstanding contributions to the field of cancer research, promote inquiry into new areas, foster collaboration, and stimulate growth in the field. Select scientific review council members manually review the recruitment grant applications; however, the only documentation maintained was a one-page summary statement that recommends the award of a recruitment grant. As of August 2012, CPRIT had awarded 60 recruitment grants totaling $184.9 million.
By not ensuring that all grant applications are properly evaluated and documented, CPRIT weakens its ability to ensure that its award decisions best align with the agency's mission.
Verifying Compliance with Matching Funds Requirements
CPRIT should verify the accuracy and availability of the matching funds its grantees report. The Texas Constitution, Article III, Section 67 (a)(3)(i), requires that before CPRIT awards a grant, the grantee must have funds equal to one-half the amount of the grant dedicated to the research that is the subject of the grant. CPRIT requires grantees to certify the amount of matching funds available for research at (1) the time of contract execution and (2) on an annual basis thereafter. However, CPRIT did not verify the accuracy and availability of the matching funds reported. In addition, during site visits to five grantees, auditors identified two methodologies, permitted by CPRIT, that allow a grantee to report funds that were not used on a CPRIT-funded research project as matching funds. Specifically:
- During interviews with auditors, staff at the University of Texas M.D. Anderson Cancer Center, the University of Texas Southwestern Medical Center, and the Baylor College of Medicine reported that the matching funds those institutions reported to CPRIT were based on the total amount of funding available to them for cancer research, excluding CPRIT funding. However, those reported matching funds were not dedicated to CPRIT-funded research projects. As of August 2012, those three institutions had received a combined 331 awards totaling $402.4 million.
- CTNeT, which received a $25.2 million research grant, did not dedicate $12.6 million in matching funds as required. Instead, CPRIT accepted certifications that the University of Texas M.D. Anderson Cancer Center and the Baylor College of Medicine would fulfill CTNeT's matching funds requirements for the first and second year of the grant agreement term, respectively. However, CTNeT did not receive those reported matching funds. For the first year of the CTNeT grant, CTNeT reported that the CPRIT grant accounted for 98.0 percent of its total revenue.
Processing Payments to Grantees
CPRIT should establish requirements to help ensure the appropriateness of advance payments and reimbursements it makes to grantees. Specifically:
- Advance payments. CPRIT's policies and procedures specify that CPRIT will distribute funds on a reimbursement basis. However, it made advance payments that totaled $40.2 million to 10 grantees from September 2008 through August 2012.
- Reimbursements. CPRIT relies on quarterly financial status reports and supporting documentation that grantees submit for reimbursement payments. However, CPRIT did not always obtain sufficient documentation from grantees to support the appropriateness of the reported expenditures. For 85 (84.1 percent) of the 101 reimbursements tested, or $9.4 million in reimbursements, CPRIT did not obtain documentation such as time sheets, invoices, contracts, and bill records to support the reimbursed expenditures. For those 85 reimbursements, grantees typically provided CPRIT with spreadsheets that summarized the expenditures.
Monitoring Grantees' Expenditures
CPRIT should improve its processes for monitoring grantee expenditures. CPRIT requires grantees to submit quarterly financial reports on research expenditures associated with awarded grants. In addition, CPRIT established a desk review process to assess grantees’ financial controls and reported expenditures. However, CPRIT did not ensure that all grantees submitted financial reports in a timely manner, did not maintain a complete record of all the financial reports it received from grantees, and had not performed any desk reviews of 487 grants totaling approximately $683 million as of June 2012.
Assessing and Measuring Research Progress and Compliance with Grant Milestones
CPRIT should ensure that grantees submit all required annual progress reports by required due dates, and it should review those reports and document those reviews. While CPRIT developed monitoring tools for tracking the due dates and submissions of annual progress reports, CPRIT lacked documentation to support that it followed up with grantees for past due reports. For a sample of 20 grant agreements that auditors reviewed, CPRIT had not received 12 (60 percent) of 20 annual progress reports that were due from September 2011 through June 2012. CPRIT's records indicated that it had started following up with grantees about past due reports beginning in May 2012. In addition, CPRIT has not developed review criteria for evaluating and measuring a grantee's reported progress. Although CPRIT used its peer reviewers to evaluate the eight annual progress reports it received, the peer reviewers did not document whether a grantee's reported progress met grant milestones or whether any problems had been identified that could affect the grantee's ability to complete the research project. CPRIT reported that it received emails from the peer reviewers indicating that a review was complete and that no issues had been reported by reviewers.
CPRIT should improve its management of the CTNeT research grant and other administrative practices.
Auditors identified significant weaknesses in CPRIT's award decision and management of the $25.2 million research grant to CTNeT (see Chapter 3 for more information about this grant). Specifically:
- CTNeT's grant application did not receive a favorable peer review score. CPRIT evaluated grant applications on a scale of 1 to 9, with 1 being the highest. The CTNeT grant application received a peer review score of 4.64. Auditors reviewed the peer review scores for 44 other applications and identified 9 applications that were not awarded grants that received peer review scores ranging from 3.93 to 4.40.
- CPRIT has a role in CTNeT's business operations. CPRIT’s oversight committee chair, vice-chair, and executive director interviewed and hired CTNeT's chief operating officer before the contract was executed. In addition, CPRIT's executive director, chief scientific officer, and a member of CPRIT's commercialization review council are members of CTNeT's board of directors.
- CPRIT made $6.8 million in advance payments to CTNeT even though its grant agreement with CTNeT allowed only reimbursement payments.
- CTNeT did not comply with matching funds requirements and annual progress reporting requirements.
CPRIT’s relationship with CTNeT and its lack of enforcing contract requirements impair CPRIT's ability to ensure that CTNeT is properly using grant funds and complying with grant requirements.
CPRIT also should improve certain procurement and payment practices for vendors and other professional services.
CPRIT should strengthen its vendor procurement and payment practices to ensure that the services and costs for grant management services and virtual management company services are reasonable and necessary. Specifically:
- The costs for a five-year contract for grant management services increased from $15.7 million to $21.2 million (35.2 percent) within the first three years of the contract. The cost increases were based on amendments to the contract that increased the workload of the grant management services contractor and the development of a grant management system.
- The costs for the first two years of a four-year contract for virtual management company services increased from $1.5 million to $4 million, approximately 166.7 percent. The cost increases were based on amendments to include services management, an entrepreneur-in-residence program, salaries for additional executive positions that were added to the contractor's staff, and other direct costs.
CPRIT also did not consistently obtain sufficient documentation to support the appropriateness of honorarium payments it made to its peer reviewers. From September 2009 through June 2012, honorarium payments to peer reviewers were approximately $6.7 million. In addition, CPRIT lacked documentation to justify increases in honorarium payments to officers of its peer review committees. Also, auditors identified honorarium payment amounts for certain peer reviewers that may be significantly higher than the payment amounts that the National Cancer Institute pays its peer reviewers.
Auditors communicated other, less significant issues to CPRIT's management separately in writing. Those issues were related to administrative reporting discrepancies, the forms grantees use for reporting, reporting practices for certain grantees' payment practices, performance feedback to grantees, executing grant agreements, and management of peer reviewer rosters.
The Legislature should consider amending statutory requirements to improve the transparency and accountability of CPRIT.
The Legislature should consider statutory requirements to:
- Allow peer reviewers to provide their grant recommendations to the executive director and members of the CPRIT oversight committee at the same time.
- Clarify what funds can be used and the intended use of matching funds reported by grantees.
- Clarify whether contributions made by non-profit foundations affiliated with grantees are appropriate.
- Prohibit an interlocking directorate between CPRIT and the CPRIT Foundation.
- Prohibit CPRIT employees from serving on a grantee's board of directors and related foundations.
- Clarify the positions of the oversight committee's presiding officer and other officers, including the responsibilities and specific term of service for those positions.
- Allow members of the oversight committee to affirmatively vote to approve the executive director's recommendations.
- Remove the Attorney General and the Comptroller of Public Accounts from CPRIT's oversight committee so that their statutory duties and responsibilities would not be impaired.
- Allow the executive director to provide CPRIT's oversight committee, along with grant recommendations, documentation of the other factors that the executive director considered when making grant recommendations.
- Require the CPRIT Foundation to make its records, books, and reports available to the public.
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