Conflict-of-Interest Failings Reported in Application Reviews at California Stem Cell Agency

Conflict-of-interest issues have dogged the $3 billion California stem cell agency since its inception, and they are surfacing once again this week in a report commissioned by the agency itself.

This time the matter is being brought up by Moss-Adams, LLP, of Seattle, a business consulting firm that is being paid $230,000 by the agency to conduct a "performance audit."

In a report to be discussed at a CIRM governing board meeting on Thursday, the firm said it discovered serious problems dealing with the reporting of the interests of the agency's blue-ribbon reviewers.

The reviewers make the de facto decisions on the applications from researchers for millions of dollars from California taxpayers.  Their reviews are conducted behind closed doors. The identities of the specific reviewers and applicants are not publicly disclosed.

The California Institute for Regenerative Medicine (CIRM), as the agency is formally known, requires the reviewers to fill out forms about their financial and professional interests as part of the review process.

However, those disclosures are withheld from the public and from applicants whose proposals are being assessed.  The agency's basic position has been to say "trust us" to monitor the conflicts.

Moss-Adams said, however, it "found that CIRM did not fully meet its compliance requirements regarding financial disclosures" during 2013-14. It also said that it could not verify that CIRM staff had actually checked for unreported conflicts.

Moss-Adams examined 40 applications and pre-applications and did not mention specific instances, such as the 2013 case involving a reknown scientist from Washington state, Lee Hood, and Stanford researcher Irv Weissman.  The matter was first reported by the California Stem Cell Report.

The audit said,

"Specifically, we found that of the 25 pre-applications we tested, three reviewers were missing Financial Interest Disclosure Forms in connection with the review of applications submitted in response to a particular RFA. These three reviewers participated in the review of four of the 25 pre-applications. Similarly, for the 15 applications we tested, which related to five different RFAs, we found that Financial Disclosure Forms were missing for eight different reviewers. For each of the 15 applications, we found that CIRM was missing a Financial Disclosure form for one or more reviewers who participated in the application review process for a particular RFA. In each of these cases, however, the reviewers completed their Conflict of Interest Form for that review."

The audit, which is required by state law, continued,

"Unlike the Conflict of Interest Form, which had already become an integrated element in the GMS (grant management system) in fiscal year 2013-14, no system restrictions were in place to prevent participation in reviews prior to the receipt of Financial Interest Disclosure Forms. Without these system restrictions, compliance with this requirement lapsed and reviewers with missing Financial Interest Disclosure Forms were allowed to review and score pre-applications and applications."

Moss-Adams said the agency took steps to correct the situation in July of last year. However, it told CIRM that  it should continue those procedures to ensure compliance on conflict of interest matters.

The audit also said it could not verify that CIRM had actually followed its process for determining whether unreported conflict of interests existed on the part of reviewers.

The audit said,

"Currently, there are no written policies or procedures outlining this process. While CIRM regulations define what constitutes a financial conflict of interest, the Grants Review Staff does
not have additional written guidance to follow when performing these reviews. Moreover, because the Grants Review Staff does not document the performance of these reviews, we could
not verify that these reviews were performed or assess the manner in which they were performed. Without procedures that formalize this process or internal records that document
the performance of these reviews, CIRM cannot fully demonstrate its performance of due diligence to ensure the financial independence of reviewers."

Moss-Adams told the agency that it should develop detailed procedures for examining the disclosure forms and document the work via the automated grants management system.

The agency's response to the concerns raised in the audit, which covered a wide range of issues beyond conflicts, did not specifically mention the disclosure and conflict matters.

The California Stem Cell Report will have more on the findings of the audit during the next few days. Specifically excluded from the audit is the performance of the agency's scientific portfolio.