How the VA-affiliated Non-Profit Corporations Came to Be
By Ron Flink
Founding Executive Director Chicago Association for Research and Education in Science
First NAVREF Board Chair
In the early eighties, Congress was struggling to get a grip on reducing expenditures. One of the cost control measures taken was to restrict the numbers of federal employees (FTEE) to be hired. Every VA Research Service was assigned a confining FTEE limit. Across the country, investigators and research administrators found themselves with both VA and non-VA research funding available to hire research staff but unable to do so due to FTEE restrictions.
Further, at that time, most non-VA research funding, from sources such as the NIH, pharmaceutical companies, DOD or other non-profits for VA investigators was administered by the affiliated university. Most often, the research was performed in VA facilities but the overhead intended to support essential research infrastructure accrued to the university.
In some instances, non-VA research funding was “donated” to the VA Research General Post Fund where it could be used to pay for supplies, services, equipment and travel but not salaries. The accepted work-around was for the local Research Service to request an exchange; the non-VA funding in the General Post Fund would be withdrawn by VA Headquarters and the funding would be returned as VA appropriated funding so that it could be used to pay salaries if FTEE were available; most often, it was not.
Another issue faced at that time included severe restrictions on the use of VA funds to purchase items like copiers, computers, fax machines and internet lines. In research, these were important items and had become nearly impossible to obtain requiring specific approval by VA Headquarters which often took months to years, if ever.
The question was how to resolve some of these crippling problems which eventually led to proposing the creation of a non-profit corporation to administer non-VA research funds for VA investigators. My immediate supervisor, Edward Paloyan, MD, ACOS for Research, listened to the idea, believed it had merit and suggested it be presented to upper management. I met with the Hines Hospital Director, John Fears, who was an attorney by education and, at the time, was the youngest Hospital Director in the VA system. He was innovative by nature and after I had explained the plan to establish a non-profit research corporation he asked what the regulations allowed. My review had shown no specific rules, regulations or laws either authorizing or prohibiting the establishment of such a nonprofit organization. Mr. Fears gave his blessing to proceed and to keep him informed.
When contacted for advice, the National Council of Nonprofits recommended a Chicago attorney, Mr. Marc Lane, who had literally written the book, “Legal Handbook for Nonprofit Organizations”. Upon meeting with him at his office on LaSalle Street in downtown Chicago, Mr. Lane provided tremendously useful and practical advice on how to set up a nonprofit corporation including writing articles of incorporation and by-laws, applying to the IRS for federal tax exemption and a huge variety of other essential tasks. When told that our proposed NPC had no funds he said, “don’t worry about it”; we were never billed for the superb legal guidance he provided to incorporate as a not-for-profit in the State of Illinois and achieve IRS 501(c)(3) tax exempt status for the newly established Chicago Association for Research and Education in Science (CARES). He has continued as the trusted legal advisor for CARES ever since---about 33 years.
Earlier In 1984, Dr. Richard Levine, the ACOS for Research at the Washington, DC, VAMC, with the assistance of his Administrative Officer for Research, Robert Potts, had also established an NPC, the Institute for Clinical Research (ICR). We began to collaborate (and commiserate) regularly. This relationship became more intense when a couple of years later the VA Office of the Inspector General investigated ICR and concluded federal agencies and their employees are not authorized under statute to establish or operate a nonprofit and ICR was to be closed.
Unintimidated, Dr. Levine approached Congressman Sonny Montgomery, Chairman of the House Veterans Affairs Committee, and Mack Fleming, Director of the HVAC, both of whom were tremendously supportive of Veteran’s issues and the Department of Veterans Affairs. They were quick to see the value of nonprofits to Veterans, the VA research program specifically and the Department of Veterans Affairs overall. Dr. Levine and I met and otherwise communicated with them regularly over the next few months and subsequently, in 1987, Dr. Levine was invited to testify on the subject before the House Veterans Affairs Committee. With great assistance from the professional staff of the HVAC and through Dr. Levine’s tireless efforts, a new law was written and then passed by Congress in 1988 authorizing the establishment of VA research and education nonprofit corporations.
Upon passage of the new authorization, additional VA Research Programs across the country became interested. Dr. Levine, Mr. Potts and I presented regularly at meetings and traveled to many VAMCs across the country to teach others how to set up and operate a VA Nonprofit. As the number of VA NPCs and their importance to the VA research enterprise grew, it became evident that it would be in the best self-interest of these new organizations to organize themselves to share experience, provide education, create best practices, productively communicate with VA Central Office and nurture the relationship with Congress including to lobby for revision and re-approval of the original NPC statute. Organizational meetings were held in New Orleans and Beaver Creek, Colorado resulting in the decision to create NAVREF. The initial Board of Directors and Officers were elected and the first newsletter follows:
From the first issue of the NAVREF Newsletter, August 1992
It is with a sense of honor and responsibility that I address you in the first issue of the NAVREF Newsletter. I am delighted to have been elected Chairman of the Board, but there are many others, especially Richard Levine, who have worked diligently to make NAVREF a reality.
In just over a year, the National Association of Veterans Research and Education Foundations has progressed from a vague idea to an operational organization. NAVREF has established an office, employed an outstanding staff, and most importantly, developed a very exciting agenda for the future.
The next and most pressing order of business is membership recruitment. About half of all the foundations have either already joined or plan to do so in the very near future. The current membership of 17 foundations represents more than 50% of the total $25 million received by all the foundations last year.
One of NAVREF’s primary objectives is to educate its members. The talent, expertise and experience found among our membership will be of inestimable value to all our foundations.
There is genuine concern that the deluge of regulations facing the foundations will threaten the flexibility and efficiency that encourage productive and meaningful research. By voluntarily joining together to constructively and cooperatively develop non-mandatory guidelines for ourselves, we can hope that the level of outside intervention and regulation will diminish.
NAVREF intends to represent the interests and concerns of all the foundations. To do this, we need 100% participation. Each of us has a great deal to offer to NAVREF and all of us will benefit.
This is not the time to sit on the sidelines. Thanks to all of you who have already joined NAVREF. To our valued colleagues who have not yet joined, we look forward to receiving your membership form soon.
Ron Flink, Chairman of the Board
The first dues-paying members of NAVREF were Tucson, Palo Alto, San Francisco, San Diego, Atlanta, Augusta, Chicago (Hines), Knoxville, Boston, Brockton/West Roxbury, Kansas City, Manchester, Syracuse, Oklahoma City, Seattle, Tacoma and Washington, DC. In nearly every case, each of the VA NPCs was set-up by a VA Administrative Officer for Research with support from the VA Associate Chief of Staff for Research and local investigators. Today, there is not a single active Administrative Officer also serving as the NPC Executive Director.
Aside from the establishment of NAVREF, the most consequential decision by NAVREF’s original Board was the hiring of Barbara West as NAVREF’s Executive Director. Over the twenty years she devoted to NAVREF, her professionalism, intelligence and tenacity drove NAVREF to become a premier organization. We owe Barbara a lot.
In FY16, the 83 VA NPCs reported research expenditures of approximately $271 million. By way of comparison, the VA appropriated research budget was about $568 million. And, importantly, under the VERA formula of 52% for FY15, the 83 VA Medical Centers which host VA NPCs should have collectively received an estimated $141 million in indirect support for their research efforts.
We’ve come a long way from those first 17 NPCs responsible for the creation of NAVREF. And there is much to be done requiring that NAVREF continue its role at the highest possible level of integrity and operational excellence. The work done being by the VA Nonprofits and NAVREF in support of VA’s physicians, nurses and other health care professionals to care for the nation’s Veterans is most honorable and deserving of our best efforts.