CONGRESSIONAL RECORD —- HOUSE July 25 NATIONAL INSTITUTES OF HEALTH (Mr. FOUNTAIN (at the request of Mr. Apert) was given permission to ex- tend his remarks at this point in the Recorp, and to include extraneous mat- ter.) Mr. FOUNTAIN. Mr. Speaker, the Senate has amended FLR. 10904 te in- erease the funds for the National In- stitutes of Health $60 million above the’ House allowance ang $120.4 million above the Fresident’s budget request.. It is my belief that this additional money would not be spent efficiently and, if agreed to by the House, would, in fact, impede the efforts of the Committee on Government Operations to secure much needed man- agement improvements in the NIH pro- grams, Mr. Speaker, in each of the past 5 years. we have witnessed the ‘curious phenomenon of the House authorizing substantially more money for NIH than the President has requested and the Sen-- ate voting an even larger increase over the House figure. This year, for ex- ample, the President requested $780.4 million for NIH, The House increased the amount to $840.8 million, and the Senate has added an additional $60 mil-— lion, for a total of more than $900 mil- lion. In addition, $50 million was re- quested and was allowed by both the House and Senate for health research facilities grants. There may have been a time when such congressional stimulation was jus- tified, but today we have an entirely dif- ferent situation. The present adminis- tration is surely liberal in matters in- volving health, education, and welfare, and the President, personally and through a family foundation, has dem- onstrated a deep interest in medical re- search. This is borne out by the fact that the President’s 1963 budget for NIH, including the health research. facilities program, provides for an increase of more than $62 million over last year’s appropriation and an inerease of ap- proximately $136 million over the amount actually spent in fiscal 1962. The President’s. recommendation represents an increase of almost 20 percent above the amount actually spent by NIH in 1962. This, I submit, would be a chal- enging rate of growth for even the best managed organization. I have prepared two tables comparing. the House and Senate inereases of the 1963 NIH budget with 1962 budget fig- ures, and showing the history of NIH appropriations since 1950. Under unan- imous consent,.I include these tables at this point in the Recorp. The first. of these tables shows, among other things, that $26.9 million was left unspent from NIH’s 1962. appropriations in addition to the $46.6 million held in reserve at the direction of the Secretary. of Health, Education, and Welfare: 1962 CONGRESSIONAL RECORD — HOUSE Tasty 1.—House and Senate increases of National Institutes of Health budget, by institute [in millions of dollars] 13817 JULY 18, 1962, Dr, LUTHER L. TERry, Surgeon General, Public Health Service, Department of Health, Education, and Welfare, Washington, D.C. 1962 1962 1962 1963 1963 1963 Dear De. Terry: I want to thank you for Institute or program appropria- ; operating actual ex-; President’s| House al-| Senate al- your letter of July 6 and the copy of the tions budget! pendi, budget / lowance | lowance July 3 internal report containing proposais ‘ures for changes in the Public Health Service re-~ | search grants prograins made to you by your Pehaapekan oe and service ..--2-2 2s eeene tase 125.5 He? 1.8 155.8 7h & fnterbureau Directing Committee. I appre~ ancer Institute._____ - Ie . 17, (39. . 58. 7 r : his i 7 ; : Mental Health... 2000077777777777777777 108. 9 107.8 | 4081 126.9] 1336] ugg late your sending me this information on Heart Institute, 132.9 113°3 110.7 126.9 143) 4 349.4 the measures presently under consideration Dental Research tr8 15.3 A543 ae 10.2 oes for improving administration .of the NIH Arthritis.and Metab 81.8 81. . 91. 98. 05.7 and other Public Health Service grant pro- Allergy and Infectious 56.1 55.9 54.6 59.3 62.1 68.1 y + * _ Nenrolozy and Blindn 70.8 65.8 621 7.3 775 96.6 srams. _ The specific recommendations con. tained in your Interbureau Committee re- Subtotal___ 738.3 691.7 664.8 780, 4 840.8 900.8 port are consistent in many respects with Health research f 30.0 380.0 380.0 50.0 50.0 50.0 recommendations made more than a year ago 768.3 721.7 604. 8 830. 4 890.8 950.8 by this committee. If put into effect, these . changes should greatly improve your present 1 Represents amount available after $46,600,000 was held in reserve at direction of Secretary of Health, Education, and Welfare. 2 Preliminary. TABLE 2.—History of appropriations, National Institutes of Health, 1960-68 4 Fiscal year Budget House Senate Appropriation estimate allowance allowance $41, 246, 000 $46, 371, 000 $60, 563, 000 $52, 146, 000 62, 570, 000 61, 970, 000 66, 326, 000 60, 059, 750 59, 034, 000 57, 301, 885 58, 431, 058 57, 675, 291 55, 005, 000 53, 883, 500 58, 982, 000 59, 030, 750 56, 340, 000 61, 586, 200 72, 153, 006 71, 183, 000 71, 128, 000 77, 393, 000 83, 143, 000 8L, 268, 600 90, 314, 800 89, 773, 000 118, 416, 800 98, 458, 000 126, 525, 000 135, 525, 000 183, 007, 000 183, 607, 000 190, 183, 000 190, 183,000 |; 226, 783, 000 211, 183, 000 211, 183, 000 219, 383, 000 320, 577, 000 204, 383, 000 294, 279, 000 344, 279, 000 480, 604, 000 400, 600, 000 400, 000, 000 455, 000, 000 864, 600, 000 560, 000, 600 583, 000, 000 641, 000, 000 835, 670, 000 738, 335, 000 780, 400, 000 840, 800, 000 900, 800, 000 |... 1 Excludes funds for NIH construction and health research facilities grants, I would remind my colleagues of the tremendous increases of appropriations for the National Institutes of Health in recent years. Between 1950 and 1962, appropriations for NIH have increased by approximately 15 times, while the appropriations for research and training srants to nongovernmental scientists alone have increased by more than 26 times, Few public programs have grown at such a rapid rate. Consequently, it is not surprising that officials of the agency have. experienced organizational and management problems in administering these programs. In a letter dated July 6, 1962, the Surgeon General of the Pub- lic Health Service wrote me in this con- nection: The rapid expansion of the Federal support programs for medical research, to which the report calls attention, has, indeed, created new organizational and management prob- lems, and has made progressively more dif- ficult the complex task of their administra- tion. The difficulties incident to this expan-~ sion have for some time been a matter of growing concern, . Mr. Speaker, the Committee on Gov- ernment Operations, through the sub- committee of which I am chairman, has intensively studied the NIH erant pro- grams for the past 3 years. In April, 1961, the committee issued a comprehen- sive report—“Health Research and Training ; the Administration of Grants and Awards by the National Institutes of Health,” House Report No. 321, April 28, 1961—on the administration of these programs based on more than 2 years of investigation. In brief, the committee found that NIH is not adequately organ- ized to administer the grant programs with maximum effectiveness. Among other weaknesses, NIH has failed to pre- vide for a meaningful review of the fi- nancial requirements of research projects and NIH does not maintain sufficient direct and continuous contact with grantees for the purpose cf determining appropriate levels of continuation sup- port in relation to project accomplish- ments and needs, ; I will not take the time of the House to describe in detail the deficiencies that exist in NIH management. ‘These are spelled out and documented in our com- mittee’s two reports and two sets of hearings on the NIH grant programs. In the first of these reports, referred to above, the Committee made 13 specific recommendations for the improvement of these programs. The Surgeon Gen- eral and the Director of NIH have ex- pressed agreement with most of the Committee’s. recommendations and have stated their intentions to take correc~ tive action. Unfortunately, NIH has taken relatively little action thus far to back up its intentions. As T wrote the Surgeon General on July 13, in re- sponse to his letter of July € informing ime of measures presently under consid- eration for improving the NIH programs, it is my hope that the administrative im- provements being considered by NIH will . not result in just another case of an- nounced intentions without effective im- plementation. I will insert the text of. ’. my letter at this point in the Recorn for the information of the House: operations. However, I believe I speak for our entire committee when IT express the hope that this will not become just another ease of announced intentions without ef- fective implementation. Your letter details a number. of changes in NIH policies and procedures, many of which you say have resulted from the recom- mendations and observations of this commit- - tee. Items 1 and 2, relating to serious man- agement deficiencies to which the commit- tee has calied attention, refer to improved procedures for securing a more thorough examination of the budget requests of grant- ees, including provision for staff negotiation of the actual amounts required for research projects. I should like to remind you that the subcommittee’s recent hearings showed these procedures to be essentially paper changes, rather than actual accomplish- ments. As a result of these and other ad-~ ministrative inadequacies found by the sub- committee, the full Committee on Govern« ment Operations, in a unanimous report is- sued June 30, expressed dissatisfaction with the slow progress being made by NIE to strengthen the management of its grant programs. Item 7 in your letter refers to the new Public Health Service policy of using con- tracts in place of grants for the support of research in profitmaking firms. As the committee reported last month, substitu- tion of one type of financial instrument for another does not in itself assure. the effec- tive and careful use of research funds. The committee took the position also that puk- lic funds intended to assist fundamental and other nondirected research, as distin- guished from research performed at the re- quest of a Government agency, should he made available to profitmaking companies only in exceptional circumstances. ‘ i sincerely hope that you and your asso- ciates will act expeditiously to put the man- agement of these very important health re- Search grant programs on a sound footing. As you have stated so well in your letter, the rapid expansion of Federal support for medical research has indeed created new or- ganizational and management problems, and has made progressively more difficult the complex task of administering these pro- grams. Our committee also recognized this problem when it concluded last month that it “is inescapable, from a study of NIH’s loose administrative practices, that the pres- sure for spending increasingly large appro- priations has kept NIH from giving adequate attention to basie. management problems.” I sincerely believe it would be a disserv- ice to your agency, to the cause of medical research, and to the taxpaying public if ap- propriations for the National Institutes of Health were increased beyond the amount the President has recommended before you have developed the ability to manage effec- tively these large and complex programs. I greatly appreciate your desire to Keep me 13818 fully informed of the steps that are taken to achieve this objective. With all good wishes, IT am, Sincerely, : L, H. Founrain, Chairman, Intergovernmental Relations Subcommittee. Mr, Speaker, the Committee on Gov- ernment’ Operations, in a unanimous report issued June 30, 1962—‘Adminis- tration of Grants by the National Insti- tutes of Health, Reexamination of Man- agement Deficiencies,” House Report No. 1958, June 30, 1962—expressed dis- satisfaction with the slew progress be-~ ing made by NIH to strengthen the management of its research grant pro- grams. While NIM has acted in several areas in response to the Committee’s recommendations, relatively little effort has been made to improve the overall management of these important health programs. In particular, the Commit- tee found no significant improvement in the inadequate fiscal review of project requirements on which it reported last year. The adequacy of NIH policies and pro~ cedures for insuring the appropriate ex- penditure of research funds was tested earlier this year by means of a detailed audit of the grants awarded to Public Service Research, Inc., a company which has received about $400,000 in NIH sup- port for seven separate projects. The audit disclosed that the company mis- used and profited from grant funds and, in general, the company used the very broad discretion which NIH allows erantees in expending research money for its own advantage. The audit findings, which I will sum- marize, demonstrate the extent to which NIH grants may be wastefully expended without NIH’s knowledge or apparent concern. The audit showed specifically : First. Grant funds were used to finance capital. and other costs associ- - ated with establishing a new corpora- tion, During the first year and a half of its existence, Public Service Research, Ine., acquired practically all of its office equipment and furnishings from Fed- eral research grants and contracts. Second. The corporation, according to its records, claimed a depreciation allow-~ ance in its Federal income tax returns for equipment purchased from NIH grants. . : Third. The corporation’s rent, main- tenance, and moving expenses, and the expense of remodeling its rented quar- ters, were charged as direct costs to in- dividual Federal grants and contracts. Fourth. The corporation derived a profit in excess of its actual indirect costs from the overhead allowance—i5 per- cent of total direct costs—paid by NI to cover indirect costs. Fifth, Fees paid by the corporation to its affiliate, Clark, Chamnnell, Inc., for hiring expenses included a profit toe the affiliate. Such fees were improperly billed as direct costs to particular NIH projects; the persons for whom hiring fees were paid worked on several proj- ects and, in one case, the employee per-~ formed no research on the project to which his fee was charged. CONGRESSIONAL RECORD -- HOUSE Sixth. Salary costs were improperly charged to NIH grants for (a) time spent by corporate officers in meetings of directors or stockholders and in the administration of corporation business; (b) time spent by a corporate officer as a consultant to NIH, for which he was also. paid $50 a day plus travel expenses; and (ce) an employee who was hired to staff the company’s Washington office and performed no research on the project to which his salary was charged. Seventh. Various expense items were incorrectly classified as direct costs of particular grant projects, and in several instances. entertainment expenses were improperly charged to NIH grants. Kighth, Travel expenses were incurred in some instances for purposes which do not. appear to have a direct relationship to the projects charged. The audit also disclosed poor coordi- nation between NIH and the Public Health Service, of which NIH is a part. NIH continued to pay Public Service Re- search, Inc., a 15-percent indirect cost allowance on grants after the Public Health Service had established an in- direct cost rate of 6.66 percent for the same company in connection with a re- search contract. Following completion of the contract, the Public Health Serv- ice permitted the company to retain Gov- ernment-owned equipment for use in connection with an NIH grant but made no effort.to ascertain that the equipment was necessary for the NIH project. Shortly thereafter, NIH awarded a new grant to the company which included funds for the purchase of equipment similar to that which the company al~ ready had in its possession from the com- pleted Public Health Service contract. The suggestion has been made that the findings of this audit are not applicable to most NIH grants, since the grantee in this instance is a company operating for profit while most NIH grants are made to nonprofit institutions. This reason-~- ing misses the essential point that under its present inadequate administrative ar- rangements NIH does not know whether or not grant funds are expended pru- dently and for the intended purposes and, consequently, NTH cannot provide rea- sonable assurance that the misuse of erants is not widespread. While it is true that the bulk of NIH erants are made to investigators in edu-~ cational institutions, this does not in it- self assure that. funds are spent pru- dently and for their intended purposes. In this connection, NIE says it relies upon the educational institutions for the effective management of grant funds, but NIE has conceded that adequate ad-~ ministrative machinery does not pres- ently exist, either within NIH or in the grantee institutions, to insure that this responsibility is being met. Mr. Speaker, it is apparent from the hearings held recently by our subcom-~ mittee that weaknesses in the NIH grant programs are due to causes more funda- mental than staff inadequacies and faulty administrative procedures. It is the conclusion of the Committee on Gov~ ernment Operations that these weak~ nesses are due in large measure to the failure of NIH officials to understand the Tuly 25 nature of their responsibility for the management of public funds. This lack of understanding is reflected in the state- ment of the Director of NIH that in mak- ing grants: Selection of good men and good ideas-—and rejection of the inferior—is the key. AN subsequent administrative actions having to do with the adjustment of budgets, and so forth, are essentially trivial in relation to this basic selection process. . Our committee has, of course, strongly rejected this irresponsible view that ad- ministrative actions for the effective and economical expenditure of grant funds are “trivial” or are matters of little im- portance. Mr. Speaker, I want to point out that the Committee on Government Opera- tions stressed in its recent report that it is completely committed to the principle of allowing scientific investigators the greatest possible freedom of action im carrying out their research. The history of science clearly demonstrates that sci- entific achievement and progress have generally occurred under conditions which allow. maximum freedom of in- quiry for the investigator. The committee concluded, however, that freedom for the scientist should not pe confused with license or fiscal irre- sponsibility. One cannot condone waste and extravagance wherever it exists as being either in the public interest or in the interest of science. Grant money that is uneconomically or inefficiently spent deprives other scientists of sup- port for their. work. Moreover, the in- judicious use of research funds is grossly unfair to the American public which is required to support this activity through taxation. What we must achieve is a harmonizing of freedom for the investi- gator with responsibility to the public in the expenditure of Government funds. NIH has the obligation to develop ade- quate policies and procedures for as-~ suring that grant funds are prudently spent within this context. Mr. Speaker, I want to make a brief corament on the matter of indirect costs. I note that the Senate has again this year struck: the 15-percent limitation on the indirect expenses of research grants voted by the House. I hope the House conferees will stand firm en this item. The Committee on Government Opera- tions has studied this problem and favors the adoption of a uniform Government- wide policy for indirect costs which will take inte account the nature of the re- search supported and the benefits to the grantee institution. It should be kept in mind that under an NIH grant the scien- tist does not perform work for the Gov- ernment; he undertakes a research proj- ect of his own choice with the assistance of Federal funds. Consequently, the Government’s financial obligation is not the same in this case as it would be for purchased research. It should be noted, however, that in certain instances re- search projects and facilities may possess a special national character which justi- fies their being supported wholly by Fed-~ eral funds. But as a general rule, it is undesirable that the Federal Govern- ment assume the total cost of health re- 1962 search conducted in educational and other non-Federal institutions. Even under the present 15-percent lim- itation, our committee has found it to be NIH’s practice to pay the maximum rate for projects where indirect costs are nominal or nonexistent. For example, our audit of Public Service Research, Inc., disclosed that NIH paid the com- pany a 15-percent indirect cost allow- ance, although the company’s actual in- direct costs were only 6.66 percent of direct costs—the rate negotiated by the Public Health Service for work pur- chased through a contract. Mr, Speaker, when the House acted on May 27 to increase the NIH appro- priation by $60.4 million above the Presi- dent’s budget request, our subcommittee had not yet completed its review of the management of these programs. The subcommittee’s hearings were held on March 28, 29, and 30. If the informa- tion obtained in those hearings had been available to me on March 27, I could not in good conscience have supported the sizable increase recommended by the Appropriations Committee. Iam not an authority on how much money is needed to adequately support medical research. But it is obvious that to increase sub- stantially the appropriations for these programs in the absence of effective management can only result in waste and inefficiency. It is also obvious that the funds which are not spent unneces- sarily as a result of the inadequate re- view of the budgetary requirements of projects would go a long way toward fi- nancing those new projects which are found to merit support during the fiscal year 1963. Surely, with the additional $60.4 million already voted by the House, there will be more than enough money available for NIH support of all meri- torious health research and training projects. I can see no possible justifica- tion for increasing the NIH appropri- ation still: another $60 million as pro- posed by the other body. Last Friday, 32 of the 80 Members of the Senate present and voting supported the Proxmire amendment, which would have reduced the NIH appropriation to the level of the President’s budget, or $60.4 million below the House-approved amount. The Saltonstall amendment, which would have limited the NIH ap- propriation to the level approved by the House; failed to pass by only six votes. The closeness of the 36-to-41 vote on the Saltonstall amendment clearly demon-~ strates the reluctance with which the other body supported the recommenda~ tional Institutes of Health $60.4 million increase the appropriation for the Na- tional Institutes of Health $60.4 million over the House amount and $120.4 mil- lion above the liberal amounts recom- mended by the President. Mr. Speaker, it tcok courage for those 36 Members of the other body to vote against the recommendation of their Appropriations Committee. It is. po- litically unpopular to give the appear- ance of not favoring better health for the American people, but better health is not the issue here. The real issue be- fore us, shorn of emotional and irrele- vant appeals to the need for eliminating No. 127 23 CONGRESSIONAL RECORD — HOUSE dread diseases and increasing our life span, is the question of whether Federal support. programs for health research shall be prudently administered so as to maximize the return from public funds, or whether these programs shall con- tinue to be treated as a sacred cow, with officials of the National Institutes of Health exempt from the normal prac~ tices of sound public administration. It appears, Mr. Speaker, that the NIE offi- cials have become so accustomed to a privileged position and to receiving ap~- propriations far in excess of those the President requests that they are no longer responsive to congressional criti- cism. TF.would remind the House that the NIH Director has referred to admin- istrative actions for the effective and economical expenditure of grant funds as essentially trivial considerations. In all fairness, however, I must add that we in the Congress have compounded NIH’s management problems by our in- sistence on voting more money each year than the agency has programed for careful and effective expenditure. it is the conclusion of the Commiitee on Government Operations that the pressure for spending increasingly large appropriations has kept NIH from giv- ing adequate attention to basic manage- ment problems. I sincerely believe ii would be a-disservice to NIH, to the cause of medical research, and to the taxpaying public if these appropriations were increased beyond the amount ap- proved by the House before NIM has developed the. ability to effectively man~- age these large and complex programs. I, therefore, urge the House to firmly resist any effort to further Increase these appropriations which the House has al- ready increased $60.4 million above the President’s budget and $196 million over WNIEH’s actual expenditures for last year. On Monday I-asked the Director of the Bureau of the Budget whether there have been any developments since the transmittal of the budget iast January which would cause the President to re- vise his recommendations today con- cerning the 1963 appropriations for the National Institutes of Health. Mr. Bell has written me that “the estimates con- tained in the President’s budget for 1963 continue to represent his judgment of the funds needed to sustain the forward movement in the very important pro- grams of the National Institutes of Health.” I will place the Budget Direc- tor’s letter in the Recorp here for the information of the House: EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BuDGET, Washington, D.C., July 24, 1962. Hon, L. H. FouNTAIN, Chairman, Intergovernmental Relations Subcommittee, Committee on Govern- ment Operations, House of Representa-« tives, Washington, D.C. Dear Mr. Fountain: This is in response to your telephone inquiry of July 23, 1962, as to whether there have been developments subsequent to the transmittal of the budget last. January which would cause the Presi- dent to revise his recommendations concern- ing the 1963 appropriations for the National Institutes of Health. I would like to emphasize that the budget estimates: for the National Institutes were . before the Congress. 13819 considered very carefully last fall by the Bureau of the Budget and the President. The amounts which were recommended by the President in the budget were based on. his belief that the support of medical re- search through NIH should continue to grow at an orderly rate consistent with the prudent and effective use of funds and trained man- power, and with due regard to other de-. mands on the budget. On the basis of these considerations, the President recom-~- mended appropriations of $830.4 million for 1968. In the light of recent data indicating that 1962 obligations amounted to $694 mil- lion, the President’s recommendation con- stitutes an increase of about 20 percent over 1962 obligations. Since the submission of the budget in January, the President has sent additional messages to the Congress relating to health and education. However, the budget esti-~ mate anticipated these messages to the extent that the programs of the NIH were concerned. In addition, the NIH has com~ pleted its study of medical research man- power, which raises a number of important questions relating to the future manpower needs in this field. This report, however, has not been viewed by the President as requiring a revision of the estimates now Accordingly, the esti- mates contained in the President’s budget for 1963 continue to represent his judgment of the funds needed to sustain the forward movement in. the very important programs of the National Institutes of Health. Sincerely yours, Davin E. Bau, Director. Mr. Speaker, I want to inform the Fiouse that our Committee will closely watch the administration of the NIH grant programs, and that it is my in- tention to propose a reduction in the NIH appropriations for next year if the agency does not act vigorously to correct its management deficiencies and strengthen its capacity for the efficient and economical operation of these vitai programs.