Performance Audit of California Stem Cell Agency: Improvements Needed in $200 Million Fund-Raising Program, Staff Retention and Use of Board Members

A performance audit of California's $3 billion stem cell agency says that more needs to be done to retain the agency's staff as well as exploiting the talents of  board members as the research effort nears what could be its demise.

"There is a significant potential for staff attrition as CIRM plans for a potential wind-down," the $230,000 study by Moss Adams declared. CIRM is the abbreviation for the agency's official name,nthe California Institute for Regenerative Medicine.

The 38-page report also said that expertise of  the 29 board members "could be more effectively leveraged, especially since strong board engagement will be particularly important during organizational transition."

CIRM has estimated it will run out of cash for new awards in 2019 unless ambitious fund-raising plans are successful.  Its ultimate hope is that California voters will approve another multi-billion dollar bond measure in November 2020. To bridge the financial gap between 2019 and the end of 2020, the agency is seeking to raise more than $200 million.

Loss of employees has long been a concern of the agency as it confronts the expiration of the bond funding provided by the ballot initiative that created the program in 2004.

The performance audit said the agency should be "building on efforts to date, continue to regularly communicate transition plans to staff and consider strategies to retain employees, including implementing staff development programs, recognition and reward opportunities, work-life balance initiatives, and cross-functional initiatives."

Beyond its recommendations, the audit had praise for the agency. One example involved its "culture." The report said,

"CIRM has a collaborative, engaged, and performance-oriented culture. Managers, board members, and staff report improved morale and a more collaborative culture since CIRM 2.0 implementation. CIRM appointed a new president in 2014 and again in 2016. Turnover is often elevated during times of leadership transitions, as noted in 2014 and 2015. However, CIRM’s turnover rate dropped to 10 percent in 2016, suggesting stability in the organization’s leadership and culture."

Moss Adams, however, also said more can be done. It said the agency should "develop succession plans for the chair and vice chair, document knowledge of individuals serving in leadership roles, and continue to identify potential highly qualified prospective (board) members."

The audit recommended improvements in the agency's fund-raising efforts. It said the agency has not "formalized its ($200 million) fund development plan." The audit recommended creation of "a formal development plan that identifies roles and responsibilities and the timing of fundraising activities to meet CIRM’s programmatic and administrative funding needs."

Moss Adams additionally recommended improvements in measuring the performance of the agency's public relations program. It said,

"CIRM does not have metrics associated with the effectiveness of the agency’s communication and public education strategy. Recommendation: Develop communications and public education metrics that are integrated into CIRM’s quarterly reporting."

The study, which is required by state law, is the third conducted by Moss Adams. It will be discussed at Tuesday's meeting of the agency's board. The agenda for that meeting said the agency will have a response to the audit findings, but that document is not yet available on the CIRM web site.

The audit, which is required by state law, is the agency's third. Links and excerpts from items involving the previous two can be found here. 

Interested parties can participate in the meeting at 16 different locations throughout California. The  locations can be found on the agenda, but more specifics may be necessary for those who want to attend. They can be had by sending an email to info@cirm.ca.gov.

California Stem Cell Performance Audits and More: Public Has 16 Golden Opportunities to Weigh In

Californians throughout the state next week will have what appears to be a record number of opportunities to participate -- albeit remotely -- in one of the more important, regular public meetings involving the $3 billion state stem cell agency.

The occasion is the March 13 meeting of the governing board of what is known formally as the California Institute for Regenerative Medicine or CIRM. The meetings of the CIRM governing board are the single most important public events that the agency holds.

The board has 29 members. Fifteen of those members will be participating remotely in next week's session, which means that the public can participate as well from those locations in addition to the physical site of the meeting at CIRM HQ in Oakland. The remote locations range from Fresno to La Jolla  and from Riverside to Elk Grove.

And if you are in New York City, you can weigh in from there as well. One of the agency directors will be hooked up from the Big Apple.

During the meeting, the board solicits public comment on each item under consideration plus general comments as well.

The top item on the agenda is the triennial performance audit of the agency, which in the past has

Graphic by Shopify

reported checkered but improving results in the last two reports. Conflict of interest issues surfaced in the last audit(see below).  In 2012, the audit, required by state law, identified 27 areas where improvements were needed.

The actual audit for this year has not yet been posted on the CIRM web site but is likely to pop up any day now.  The audit, which is required by state law, cost the agency $230,000, bringing to $694,944 the total that the agency has spent on its three performance audits.

If you are interested in attending at the remote locations, check the addresses in advance. Sometimes not enough specificity is provided. But an email to info@cirm.ca.gov will provide full directions.

Here is a link to the 2017 CIRM request for a proposal to conduct the performance audit.

Below are excerpts and links to previous items on the two earlier performance reports. At the end is a comparison of performance audit findings to results from other studies of the agency.

SUNDAY, MAY 17, 2015

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.

TUESDAY, MAY 19, 2015

California Stem Cell Audit: Praise for Mills but More Work Needed on IP, Conflicts of Interest

The California stem cell agency this week received good marks for changes made by its new president, but it is also being told that it needs to improve how it tracks potential royalties and how it prevents grant reviewer conflicts of interest.

SUNDAY, MAY 17, 2015

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.

THURSDAY, MAY 24, 2012

CIRM Directors Pleased with Performance Audit Findings

The $3 billion California stem cell agency received a "very favorable" performance audit report compared to other government agencies, CIRM directors were told today.

Representatives of Moss Adams, which was paid $234,944 by CIRM for the study, made the comments during a presentation today to the agency's 29 directors. During their comments, CIRM executives and directors focused on the favorable aspects of the findings of the six-month study.

TUESDAY, MAY 15, 2012

IP to Grant Oversight: Study Calls for Host of Improvements at California Stem Cell Agency

The $3 billion California stem cell agency is laboring under a range of problems that include protection of its intellectual property and management of its nearly 500 grants plus an inadequate ability to track its own performance, a seven-month study said yesterday.

The performance audit by the Moss Adams accounting firm of Seattle, Wash., made 27 recommendations for improvements, including more effort to ease strain connected to the agency's controversial dual executive arrangement. The study said that the nearly eight-year-old agency has many "opportunities" to "enhance performance reporting and decision making, strengthen effectiveness and efficiency, retain essential human resources and leverage technology."

In response to the report, the stem cell agency said, "(M)anagement concurs with the findings and recommendations....The recommendations are focused and constructive. CIRM is already implementing many of these recommendations, and we will be investigating the others in the coming months."

--

Here is a link to the California state controller's comparison of the findings of the 2012 performance audit to previous findings from a number of enterprises ranging from the National Academy of Sciences to the state's Little Hoover Commission. 

Aussie Bioethics Web Site Negative on California Stem Cell Royalties

The California stem cell agency and its royalty news drew attention today from down under in an article that did not exactly view the research effort with warm regards.

The piece appeared on the bioethics blog called Bioedge and was written by Michael Cook, who publishes the web site. He picked up on American news about the royalty matter, largely from the California Stem Cell Report, but also from the $3 billion agency itself.

Cook described the critics as scathing. He concluded,

"During the campaign for Proposition 71, supporters strongly argued that destructive research on human embryos was absolutely necessary for the science to proceed and that cures would certainly come. Almost 14 years later, there have been no cures. The royalty cheque was for a potential therapy for glioblastoma, a deadly brain tumour – but even this not on the market yet. Thus far, it has only passed Stage I clinical trials and been written up in glowing terms in O, The Oprah Magazine."

Full Text of Comments Summarized in Sacramento Bee Royalty Article

Below is the full text of the California stem cell agency response to questions from the California Stem Cell Report in connection with today's article in The Sacramento Bee concerning stem cell agency royalties. The full text of comments from Marcy Darnovsky and Bernard Munos were carried earlier in this piece on the California Stem Cell Report. The quote from Jean Loring of Scripps is verbatim from a comment she made on this item on the California Stem Cell Report. 

Comments from Maria Millan, CIRM CEO
"We view this initial payment as a 'mile marker' and not the destination. It is a good sign that we are going the right direction to a worthwhile destination - treatment and cures for patients with unmet medical needs. The royalty payment is only a piece of the intended return to California. The true return is in treatments & cures and the alleviation of human suffering and the mitigation of the financial burden of the multitude of diseases that CIRM is targeting."

Are there any other royalty possibilities in the pipeline for the next 12 months?

"Once there has been a cheque it means the grantee licensor has exceeded the $500,000 exemption so any subsequent payments to them trigger additional payments to the state. As regards future payments we have already identified another potential payee and are working with the grantee on the calculations involved in determining payment."

What time period does that royalty cover? In other words how long has the licensing been in effect, if that is the proper way to look at it?  

"For this particular payment from City of Hope this covers 4 license agreements over the last 2 years."

Is there anything else that CIRM wants to add to shed more light on this subject? 

"It wasn’t anticipated that revenue sharing would repay the $3b given to us to fund stem cell research in California. The only way that would have been possible is to demand such a high return from any funding we offered that very few companies would be willing to take the money. It would have completely undermined our mission of accelerating stem cell therapies to patients with unmet medical needs. It's also worth noting that an independent Economic Impact Report prepared in 2008 predicted that these kinds of payments would take many years to appear, even saying: “For example, tax receipts were modeled to commence shortly after funding under the proposition began, while improvements in health were modeled as becoming possible in as few as five or as many as 15 years, and receipts from intellectual property only beginning in the latter half of year 14. So, we are on track for where experts predicted we would be."

Sacramento Bee, Royalties and California Stem Cell Payoff

The Sacramento Bee this morning carried an article by this writer on the California stem cell agency and its first $190,345.87, royalty check. The article is aimed at a more general audience including policy makers in the state Capitol. Here is a link to the piece, which carries this headline on The Bee web site:

 "Will California's $3 billion in stem cell spending pay off? First royalty check arrives"

The full text of comments summarized in the piece will be carried later today on the California Stem Cell Report.