CONFLICT OF INTEREST and Internal Audits URAC Annual Compliance Training November 2, 2010 Geri Gail, Former (retired !!!) UCSC Conflict of Interest Coordinator and UCSC Director of Internal Audit

Agenda 1.Personal Conflict of Interest…….. 2. Organizational Conflict of Interest 3. (short) Internal Audit and Advisory Services

Purpose of This Training The Goal: To expose you to Conflict of Interest Regulations To alert you to potential conflict-of- interest situations You don’t have to be an expert!

A Potential Conflict of Interest Situation Available Resources At the End of this Session you should be able to Identify:

Conflict of Interest Regulation Is a Mixture of regulations, codes, case history The “Political Reform Act” of 1972 –Amended several times Established State Law: Government Code § “No public official at any level of state or local government shall make, participate in making or in any way attempt to use his official position to influence a governmental decision in which he knows or has reason to know he has a financial interest”

Conflict of Interest Regulations Fair Political Practices Commission (FPPC) sets up Regulations FPPC advisory letters Case history University Conflict of Interest Code Special Laws relating to the University of California: California Contract Code Sections

Who to ask about the Code? University of California Conflict of Interest Code: –Administered at the Office of the General Counsel –UC Conflict of Interest Coordinator- Stella Ngai UCSC Conflict of Interest Coordinator – Casey Hemard (831) or –Special Asst. to the EVC

Does the Law applies to all UC employees and contractors? YES ! Anyone who makes a financial decision on behalf of the University of California including UC officers, employees and contractors

What is a Conflict of Interest? Applies only to financial conflicts This is State Law No waivers granted by UC officials!!

When Does It Apply? Making –Hire someone –Approve a purchase Participating in making –Advises or recommends to a decision maker who hires or approves a purchase Influencing –Communicating with a decision maker regarding a financial decision such as hiring a child Making, Participating or influencing a governmental decision

1. What Are Economic Interests? 1. Business ownerships 2. Real Property interest 3. Sources of Income 4. Gifts

You have an Economic Interest In a Business Entities If: You have Direct or indirect investment of $2,000 or more (stock holding) You are a Director, Officer, Partner, Trustee of a business (position as science officer on a co. board??) Employee (receive wages of more $2,000 in a year) Hold Any position of management

Indirect Interests in Business Entities Investments of the official's –Spouse –Registered domestic partner –Dependent children –Anyone acting on the official's behalf (trust)

Economic Interests in Real Property You have Equity or a near relative have an interest valued at $2,000 or more in property Example of a conflict of interest: Offering to rent a building to UARC that you own.

Economic Interests in Sources of Income provides or promises $500 or more in income within 12 months prior A person or entity that: to a decision maker making a decision. either directly or indirectly source of income to the Official Example of conflict of Interest: You are offered a job with a contractor. You are manager of a task that this contractor is performing work on.

Other Sources of Income ($500) Commissions Income from investments Gross income from any sale Income from rentals Prizes or awards not disclosed as gifts Loan payments received (Ok if ordinary business of a bank or credit union) Travel payments from private entities

Economic Interests in Sources of Gifts A Person or entity providing a total of $420 or more –Within 12 months prior to the governmental decision-in-question Gifts Include rebates or discounts –Unless it is made in the regular course of business to members of the public

Indirect Gift? Gifts to a spouse or dependent child may be treated as a gift to the official –If the gift is used by the official –Example: car or television for the home

Loan Ban Totaling more than $250 from a UC official, employee, consultant or anyone who contracts with UC.

Special Rules for Gifts of Travel Considered to be gifts from a non-governmental entity –Transportation, lodging and accommodations –Meals –Travel payments –Example: equipment vendor offers to cover your travel expenses to their location to evaluate their equipment for potential purchase.

Let’s Review Conflicts of interest may arise from Economic Interests 1.Business interests $2,000 +, direct & indirect 2.Real property ownership $2,000+, direct & indirect 3.Income received $500+, direct & indirect 4.Gifts received $420+ during last 12 mo.

Appearance of Conflict of Interest We are a Public Entity If it appears wrong, don’t do it

3. Leaving Office Conflicts Restrictions While Seeking Employment Law Prohibits using your official position to influence university decisions with whom you are negotiating employment

One Year Ban On Former Officials From accepting compensation to act as representative of another person for purposes of influencing their former governmental employer

Two Year Ban May not enter into a contract in which –You were engaged in any of the negotiations, transactions, planning, arrangements –Any part of the decision making process relevant to the contract while employed Begins on the date the person leaves university employment

Summary-Potential COI Situtations: Hiring Near Relatives Use of University resources for private purposes: SUCH AS LAB SPACE OR EQUIPMENT Employee-Vendor Relationships (or buying from a relative) Receiving or giving Gifts Travel Provided by Private Entities Outside employment

If in doubt When considering outside employment, please contact either the UARC Director or Research Task Administrator for preliminary discussions.

Conflict of Interest Academic Decisions: do not NORMALLY create a conflict of interest such : Teaching Decisions: (Example: Selection of books) Research Decisions:(Example: Decision to apply for funds to finance research) EXCEPTION FOR Organizational CONFLICT OF INTEREST ISSUES. TO BE DISCUSSED

Organizational Conflict of Interest: “OCI” (OCI) definition (FAR ) Because of other activities or relationships with other persons: 1. a person is unable or potentially unable to render impartial assistance or advice to the Government 2. or the person's objectivity in performing the contract work is or might be impaired, 3. or a person (organization) has an unfair competitive advantage.

OCI By virtue of access to non-public Government information regarding NASA program, plans, and actual or anticipated resources, relationships, or situations could exist whereby the contractor, or his subcontractors or consultants: has past, present, or currently planned personal or financial interests that either directly or indirectly may diminish the ability to give impartial, objective assistance, or result in the contractor being given an unfair competitive advantage

OCI An example is when: …. a contractor is asked to develop requirements that are later used in a competitive solicitation for a subsequent contract. …If the same contractor bids for the subsequent contract, they may have an unfair advantage.

What this means to you! 1.It is your responsibility to inform the Research Task Administrator that work you are performing is contributing to a statement of work that will be used a competitive procurement. 2.If there is any question that the work you are doing for NASA could in any way be construed as creating a situation in which UCSC might not be able to participate in a follow-on competitive procurement that was directly or indirectly influenced by that work, please first make your concerns known to your immediate supervisor, and then contact the Research Task Administrator.

OCI-Data Handling: "Government Sensitive Data," UARC contract, Section H.4(c), specifies that: during the performance of the UARC contract, and for 3 years afterward, UC and UARC personnel are required not to participate in procurement competitions based upon data obtained because of unique access by UARC personnel, or if the UARC or its personnel have participated in defining the requirements for the procurement competition. Prior consent of the Contracting Officer is required for any release of Government-sensitive data or third party data not already released or otherwise made available to the public by NASA or the owner of the data, in the case of third-party proprietary data.

What this means to you! 1.It is your responsibility to inform the Research Task Administrator that work you are performing includes access to Government- sensitive of third-party proprietary data 2.If, in the course of your work, you receive Government Sensitive or Third Party data that has not been released or otherwise made available to the public, you may not use that data for any purpose other than performance of the contract unless prior written approval is received from the contracting officer. 3.This means you cannot share it with your colleagues or other employees 4.You cannot present it at a conference, and 5.You cannot use it in a publication, unless those actions are necessary for the performance of the contract. 6.The process for getting prior written approval is to first speak with your supervisor to verify the need, and then submit a request to the Research Task Administrator who will coordinate with the Contracting Officer.

B. Unsolicited proposals FAR defines an Unsolicited Proposal as follows: “Unsolicited proposal" means a written proposal for a new or innovative idea that is submitted to an agency on the initiative of the offer or for the purpose of obtaining a contract with the Government, and that is not in response to a request for proposals, Broad Agency Announcement, Small Business Innovation Research topic, Small Business Technology Transfer Research topic, Program Research and Development Announcement, or any other Government-initiated solicitation or program.

The UARC contract, Section H.4(c)(2), specifies that the UARC shall not submit to the Government an unsolicited proposal: 1. based on Government-sensitive data 2.or third-party data that has not been released or otherwise made public 3. until one year after such data is made available to the public. 4.To submit an unsolicited proposal prior to the one year limitation would constitute an OCI since the proposal would be based on information not generally available to the public, giving the offer or an unfair advantage. Unsolicited proposals

What this means to you! Any unsolicited proposals generated by UARC employees need to be processed through the UCSC Office of Sponsored Projects Initiation of that process is through the Research Task Administrator The review process should result in the identification of any data to be used that would constitute an organizational conflict of interest.

SUMMARY All conflicts of interest : 1.weaken the public perception of research integrity, 2.compromise the objectivity of professional advice, 3.undermine confidence in the handling of confidential& third party information, and 4.reduce equitable access to opportunities to participate in future contract work

Under the terms of the UARC contract: UC is bound by the restrictive legends applied to government or third party data, or by restrictions specified in writing by the Contracting Officer, UARC employees can disclose such data only to the extent necessary to perform the work required under the contract. SUMMARY

Points of Contact Questions regarding OCI or PCI can be directed to any of the following individuals: UARC Research Task Administrator– Jay Nuez –(650) 604 – 2638 UARC Project Specialist-Jennifer Victor- (650) Executive Director – Khalid Al-Ali

Director: Barry Long staff auditors They are here to help you. Main # Website: audit.ucsc.edu Additional Information on other policies and regulations-Internal Audit and Advisory Services