Performance audit and sunset review, Arizona Biomedical Research Commission

              Debra K. Davenport
Auditor General
Performance Audit and Sunset Review
Arizona Biomedical
Research Commission
Performance Audit Division
September • 2008
REPORT NO. 08-05
A REPORT
TO THE
ARIZONA LEGISLATURE
The is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators
and five representatives. Her mission is to provide independent and impartial information and specific recommendations to
improve the operations of state and local government entities. To this end, she provides financial audits and accounting services
to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of
school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Audit Staff
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov
Representative John Nelson, Chair Senator Robert Blendu, Vice Chair
Representative Tom Boone Senator Carolyn Allen
Representative Jack Brown Senator Pamela Gorman
Representative Peter Rios Senator Richard Miranda
Representative Steve Yarbrough Senator Rebecca Rios
Representative Jim Weiers (ex-officio) Senator Tim Bee (ex-officio)
Melanie M. Chesney, Director
Dot Reinhard, Manager and Contact Person
Lori Babbitt
Cheya Wilson
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
September 15, 2008
Members of the Arizona Legislature
The Honorable Janet Napolitano, Governor
Dr. Dawn Schroeder, Executive Director
Arizona Biomedical Research Commission
Transmitted herewith is a report of the Auditor General, A Performance Audit and Sunset
Review of the Arizona Biomedical Research Commission (Commission). This report is in
response to an October 5, 2006, resolution of the Joint Legislative Audit Committee. The
performance audit was conducted as part of the sunset review process prescribed in
Arizona Revised Statutes §41-2951 et seq. I am also transmitting with this report a copy of
the Report Highlights for this audit to provide a quick summary for your convenience.
As outlined in its response, the Commission agrees with all of the findings and plans to
implement all of the recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on September 16, 2008.
Sincerely,
Debbie Davenport
Auditor General
Attachment
The Office of the Auditor General has conducted a performance audit and sunset
review of the Arizona Biomedical Research Commission (Commission) pursuant to
an October 5, 2006, resolution of the Joint Legislative Audit Committee. This audit
was conducted as part of the sunset review process prescribed in Arizona Revised
Statutes (A.R.S.) §41-2951 et seq.
The Commission was created in 1984 to provide monies to individuals,
organizations, corporations, and institutions, public or private, in this state that
conduct research on the causes and cures, medically accepted treatments, or
prevention of diseases, including new drug discovery and development. It does this
in two primary ways:
 The Commission provides about $6.6 million annually through a competitive
contract process to various Arizona medical research institutions employing
biomedical researchers. The Commission's contracts vary in size, with smaller
projects receiving up to $50,000 per year and larger projects receiving between
$150,000 and $250,000 per year. The Commission's contracts generally last up
to 3 years, and its larger projects are designated for collaborative projects
involving multiple researchers and institutions. Awarded contracts have included
projects related to Alzheimer's Disease, cancer, cerebral palsy, Parkinson's
Disease, and the West Nile Virus.
 The Commission provides $5.5 million annually to a nonprofit biomedical
research organization known as the Translational Genomics Research Institute
(TGen) headquartered in Phoenix. TGen is a private nonprofit research institute
performing research on a variety of diseases such as prostate cancer, renal
(kidney) disease, and Amyotrophic Lateral Sclerosis (Lou Gehrig's Disease).
The Commission does not receive General Fund monies. Rather, it receives funding
primarily from two non-General Fund sources, tobacco tax revenues and lottery fund
monies, which are used to cover its personal services and related benefits and
operating expenses, the research project contracts, and the TGen contract.
Office of the Auditor General
SUMMARY
page i
Commission-funded projects appear to have positive
impacts, but impacts could be better documented and
reported (see pages 11 through 20)
Biomedical research funded by the Commission appears to benefit the State in
several ways. However, the Commission can take steps to better demonstrate and
report those impacts. Auditors found that the Commission could collect more
complete information about what these projects accomplish and make more
information available to the public.
 Impact of projects can be better documented and reported—To help identify
impacts, auditors compiled and reviewed information about 27 competitive
contract projects that received funding between fiscal years 2001 and 2007.
Impacts included more than 100 published articles about the research
conducted, numerous collaborations among researchers and institutions, and
direct application to needs that are relevant to Arizona, such as research about
Valley Fever. The Commission is collecting and reporting information about
some of these impacts, such as number of publications. However, other impact
information, such as the number of patents or number and amount of additional
research grants resulting from commission-funded projects, is only partially
collected and is not included in the Commission's annual report. Collecting and
reporting more complete impact information in the Commission's annual report,
as well as making the annual report available on its Web site, would further help
show how the Commission's funding of biomedical research projects has
positive impacts.
 Commission should require and report impact information on TGen—The
Commission annually provides $5.5 million to TGen for operating expenses
such as personnel, professional and outside services, equipment, supplies,
travel, and other administrative costs. According to TGen, national entities do
not offer grants that provide funding solely for these operating costs. The
Commission's contract requires TGen to provide to the Commission an annual
report that contains a summary of TGen's activities and includes such impacts
as grants obtained and patents applied for and granted. According to
commission and TGen officials, the Commission receives information on TGen's
activities through the contractually required annual report as well as through one
commission member's participation on TGen's Board, and periodic meetings
and tours. However, auditors' review of TGen's annual reports found that
although TGen is providing a summary of its activities, these reports did not
always contain all of the contractually required information, and that the
Commission does not include TGen's impact information in its annual report. For
example, auditors found that the TGen reports submitted for fiscal years 2003
through 2007 did not contain information on patents. A commission official
State of Arizona
page ii
indicated that it is satisfied with the information it is receiving about TGen and
according to TGen, all required information is requested and reported to the
Commission through a variety of means. However, the Commission should
ensure that TGen includes all contractually required information in its annual
report. In addition, the Commission should require TGen to include other
measures, such as the number and types of jobs created and the relevance of
TGen’s activities to Arizona-specific populations or needs. Finally, the
Commission should include in its annual report some of the impacts reported in
TGen's annual reports.
Office of the Auditor General
page iii
State of Arizona
page iv
Office of the Auditor General
TABLE OF CONTENTS
concluded
page v
Introduction & Background 1
Finding 1: Commission-funded projects appear to have
positive impacts, but impacts could be better documented
and reported 11
Some impact measures collected partially or not at all; most not included
in annual report 11
Commission should require and report impact information on TGen 18
Recommendations 19
Sunset Factors 21
Agency Response
Tables:
1 Competitive Contracts
Fiscal Years 2006 through 2008
(Unaudited) 4
2 Schedule of Revenues, Expenditures, and Changes in Fund Balance
Fiscal Years 2006 through 2008
(Unaudited) 7
3 Types of Information Collected and Reported
For Commission-Funded Projects
Fiscal Years 2001 through 2007 12
Figures:
1 Distribution of Commission’s Awarded Research Monies
Fiscal Year 2008
(Unaudited) 2
page vi
State of Arizona
The Office of the Auditor General has conducted a performance audit and sunset
review of the Arizona Biomedical Research Commission (Commission) pursuant to
an October 5, 2006, resolution of the Joint Legislative Audit Committee. This audit
was conducted as part of the sunset review process prescribed in Arizona Revised
Statutes (A.R.S.) §41-2951 et seq.
History and purpose
The Commission was created in 1984 to provide monies to individuals,
organizations, corporations, and institutions, public or private, in this state that
conduct research on the causes and cures, medically accepted treatments, or
prevention of diseases, including new drug discovery and development. It does this
primarily by annually providing: (1) approximately $6.6 million through a competitive
contract process to various Arizona medical research institutions employing
biomedical researchers and (2) $5.5 million to a nonprofit biomedical research
organization known as the Translational Genomics Research Institute (TGen)
headquartered in Phoenix (see Figure 1, page 2). The Commission receives Arizona
tobacco tax revenues and Arizona Lottery fund monies to pay for its contracts with
the various research institutions and TGen.
Commission provides monies for competitive contract
projects
Individuals, organizations, and institutions in the State conducting biomedical
research have an opportunity to annually request commission funding to support
their projects. The Commission uses a competitive process to decide which projects
should be awarded funding, and also requires that the researchers receiving
commission monies submit progress reports that commission staff review prior to
authorizing payments.
Office of the Auditor General
INTRODUCTION
& BACKGROUND
page 1
Commission uses competitive process to award project
funding—Annually, the Commission issues a Request for Proposal
(RFP) for biomedical research contracts to Arizona medical research
entities and individuals. The RFP requests proposals from individuals,
organizations, corporations, and institutions in the State for projects or
services that advance research into the diagnosis, causes, and prevention
of diseases as well as for the treatment and formulation of cures. For
example, commission-funded projects have included those related to
Alzheimer's Disease, cancer, cerebral palsy, Parkinson's Disease, and the
West Nile Virus (see textbox, page 3, for example projects). Project
proposals are reviewed and scored based on several criteria (see textbox),
by both commission members and commission-contracted, out-of-state
peer reviewers who are considered to be scientific, health, and medical
experts. The Commission's criteria are similar to criteria used by the
National Institutes of Health, which funds medical research projects
nationally.
State of Arizona
page 2
Key Proposal Evaluation Criteria
• Scientific merit and uniqueness
• Adequacy of researcher's facility and
staff
• Project's relevance to Arizonans
• Training and competence of principal
investigator and staff
Source: Auditor General staff review of the Commission's
RFP for fiscal year 2009 awards and Peer Review
Questionnaire criteria.
1 Amounts are rounded to the nearest thousand.
2 The Other category consists of awards to four institutions: Mayo Clinic Scottsdale, $250,000; Inter Tribal
Council, $150,000; Molecular Profiling Institute, $145,000; and Mayo Clinic Arizona, $136,000.
3 In addition to the $5.5 million TGen received from the Commission’s Health Research Fund, TGen also
received over $200,000 through the Commission's competitive contract process.
Source: Auditor General staff analysis of the Commission's fiscal year 2008 competitive projects database and
its February 23, 2007, Amendment to Funding Agreement with TGen.
Figure 1: Distribution of Commission's Awarded Research Monies1
Fiscal Year 2008
(Unaudited)
University of Arizona ($3.4 Million)
TGen ($5.7 Million)3
Arizona State University ($980,000)
Other ($681,000)2
Sun Health ($510,000)
St. Joseph’s Hospital ($444,000)
Northern Arizona University ($374,000)
The Commission's RFP allows projects to request different funding amounts and
the funding is typically provided for 3 years. For example, the Commission awards
small contracts for up to $50,000 per year that are generally for new researchers,
pilot programs, and projects with limited scope. The Commission also awards
contracts of up to $150,000 per year for collaborative projects involving multiple
researchers and institutions. The Commission's largest contracts of up to $250,000
per year require both collaboration and matching monies from the contractors.
According to a commission official, once the project proposals are scored,
contract awards are made based on ranking and the monies available for that year.
Since the Commission generally funds a project for up to 3 years, the amount of
money that is available for new projects is determined based on projected
revenues and an analysis of ongoing projects' expenditures. In fiscal year 2008, the
Commission awarded new contracts to 13 small projects and 7 large projects (see
Table 1, page 4).
Some research institutions submit more proposals than others, and therefore may
receive more contracts. For example, according to the Commission's fiscal year
2007 annual report, the University of Arizona submitted 76 project proposals, and
14 were accepted for fiscal year 2008. By contrast, Arizona State University
submitted 24 project proposals, and 3 received contracts.
Office of the Auditor General
page 3
Examples of Commission Contract Projects
• New Drug for Rheumatoid Arthritis (Fiscal years 2005 through 2007; contract total
$150,000)
This project by Sun Health Research Institute in Sun City involved working with the
drug sodium narcistatin and two other anti-cancer drugs to discover which was the
most effective to treat the inflammation and bone loss that characterize rheumatoid
arthritis. The project results support sodium narcistatin as a safe, effective, and,
according to the main project researcher, possibly less expensive candidate for use
in treating rheumatoid arthritis. Further, this project provided necessary data to
present the drug to a pharmaceutical company, after which it may become available
for public use. The researcher reported that without the Commission's funding the
project would not have been able to continue.
• Comparing Smoking Cessation Treatments for Persons with Serious Mental Illness (Fiscal
years 2003 through 2005; contract total $329,000)
This project, which was awarded to La Frontera Center (a comprehensive behavioral
health services provider) in Tucson, included 121 participants and focused on
smoking cessation treatments for people with serious mental illness. According to
information for this randomized, controlled project, this population's smoking rate is
2–3 times higher than the general population and cessation interventions for this
population are understudied. This project found that overall, participants were able to
reduce the amount they were smoking by about 66 percent but, by the most
conservative tests, nicotine replacement patches did not improve smoking cessation
rates over just monetary incentives alone.
Source: Auditor General staff review of self-reported annual progress report information and interviews with project researchers.
Commission monitors project contracts—According to commission staff, at
the beginning of each contract year, the Commission requires project award
recipients to submit an annual budget summary that shows the amounts the
researcher expects to spend in different categories such as personnel, equipment,
supplies, and travel. The Commission also requires that quarterly and annual
expenditure reports be submitted for review and comparison with the annual
budget summary prior to payment issuance. A researcher can reassign approved
amounts from one category to another, but when reassigning amounts to or from
the personnel or equipment categories, the research institution must request a
budget transfer in writing. After commission staff review the expenditures, the
researcher's institution is reimbursed for the authorized expenditures. In addition,
the Commission requires that an annual progress report be submitted before each
year's final payment is made. The researcher is required to include in the annual
progress report information such as the status of the research, whether he/she has
published any information about the research, and whether he/she has received
additional monies from other sources for the project.
State of Arizona
page 4
Fiscal Year 2006 Fiscal Year 2007 Fiscal Year 2008
Number
of
Contracts
Contract
Award
Amount1
Number
of
Contracts
Contract
Award
Amount1
Number
of
Contracts
Contract
Award
Amount1
New contracts
Small 17 $ 846,939 20 $ 985,749 13 $ 589,436
Large 13 2,203,963 8 1,259,436 7 958,111
30 3,050,902 28 2,245,185 20 1,547,547
Continuing contracts
Small 19 925,065 24 1,185,627 36 1,785,161
Large 17 2,461,768 21 3,496,752 19 3,264,322
36 3,386,833 45 4,682,379 55 5,049,483
Total 66 $6,437,735 73 $6,927,564 75 $6,597,030
Table 1: Competitive Contracts
Fiscal Years 2006 through 2008
(Unaudited)
1 Commission contracts usually last up to 3 years. However, this column represents the monies awarded on contracts for
the applicable fiscal year only.
Source: Auditor General staff analysis of the Commission's competitive contract project data for fiscal years 2006 through
2008.
Commission provides monies to TGen
From fiscal years 2003 through 2007, the Legislature appropriated a total of $5.5
million of the Commission's Health Research Fund monies annually to TGen. The
Legislature appropriated $500,000 of this amount through fiscal year 2012. Further,
in 2007, the Commission voted to continue providing the other $5 million in funding
from its Health Research monies annually to TGen through fiscal year 2012.
TGen is a private nonprofit research institute performing advanced translational
genomics research on neurologic and metabolic diseases. For example, auditors
learned from a presentation given by TGen officials that it has performed research on
a variety of diseases such as prostate cancer, renal (kidney) disease, and
Amyotrophic Lateral Sclerosis, or ALS (Lou Gehrig's Disease). Further, TGen reported
being involved in collaborative biomedical research projects with the Scottsdale
Mayo Clinic, and it has collaborated with the State's three universities to apply for
grants. Additionally, TGen reported that it is collaborating with institutions
internationally in countries such as Switzerland, Mexico, and Singapore.
Based on a review of legislative hearing minutes, it appears that the Legislature
appropriated these monies to TGen because biotechnology is a fast-growing
segment of the United States economy, and establishing a world-class genomics
institute in Arizona would advance economic development by increasing
employment levels and improve Arizona citizens' health prospects. Once the $5
million legislative appropriation ended, according to the Commission, its review of
TGen determined that TGen was serving as a central hub of activities encouraging
and promoting collaborative research among Arizona biomedical research
institutions. Further, it indicated that an independent economic impact analysis of
TGen showed that TGen was making progress toward building its economic base
and that additional state funding was needed to ensure TGen could meet its goal of
becoming self-sufficient. In addition, the Governor requested the Commission to
continue the funding. Based on these factors, the Commission decided to continue
to provide funding to TGen for an additional 5 years.
TGen's gross revenue was over $25 million in fiscal year 2003 and nearly $45 million
in fiscal year 2007.1 The State's contract with TGen indicates that the state monies
provided to TGen are to be used to pay for such costs as personnel, professional
and outside services, equipment, supplies, travel, and other administrative
expenses. According to TGen, national entities do not offer grants that provide
funding solely for operating costs.
Office of the Auditor General
page 5
1 These amounts are based on information TGen provided to the Internal Revenue Service.
Staffing and organization
The Commission is composed of nine commissioners appointed by the Governor for
3-year terms, with three commissioners each from the general public, the medical
community, and the scientific research community. As of June 2008, according to a
commission official and the Commission's fiscal year 2007 annual report, the general
public commissioners include an attorney, an accountant/director of an Alzheimer's
Disease institute, and a policy and political affairs vice president for the Arizona
Medical Association. Commissioners representing the medical and scientific
research community include, among others, a vascular surgeon, a director of clinical
education, a professor of physiology and medical anatomy, and a human geneticist.
The Commission has six staff. The Executive Director and Deputy Director oversee
the Commission's administrative responsibilities, including developing the annual
competitive contract Request for Proposal, planning the competitive contract project
budget, and overseeing the other four employees. These staff do such things as
receive and record the peer review scores and process the peer reviewers'
payments, facilitate commissioner and staff payroll, receive Request for Proposal
responses and check them for completeness, process payments to research
institutions, and monitor the commission-funded contracts by ensuring that
researchers submit quarterly and annual reports.
Budget
As shown in Table 2 (see page 7), the Commission does not receive any General
Fund monies. Rather, its revenue comes primarily from two non-General Fund
sources. The Commission receives money from Arizona tobacco tax revenues and
Arizona Lottery proceeds. According to statutes, the Commission receives 5 cents of
each dollar deposited into the Tobacco Products Tax Fund and the Tobacco Tax and
Health Care Fund, which totaled $10.3 million in fiscal year 2008. Between fiscal
years 1995 and 2001, the Commission was restricted to spending tobacco tax
monies on tobacco-related medical research, but then A.R.S. §36-275 was amended
to allow the Commission to spend these monies on nontobacco-related medical
research. Additionally, the Commission receives 11.8 percent of Arizona Lottery
monies deposited into the Healthy Arizona Fund. In fiscal year 2008, it received $2.5
million from this source. The Commission's Arizona Lottery monies are unrestricted
and can be spent on any type of medical research.
As shown in Table 2, the Commission's tobacco tax revenues can fluctuate each year
because the amount the Commission receives depends upon how much is
generated by tobacco taxes. According to a commission official, because
State of Arizona
page 6
Office of the Auditor General
page 7
2006 2007 2008
(Actual) (Actual) (Actual)
Revenues:
Tobacco sales taxes2 $16,034,127 $12,335,473 $10,334,953
Lottery proceeds3 2,309,716 2,439,296 2,515,843
Interest income 285,728 475,155 511,131
Total revenues 18,629,571 15,249,924 13,361,927
Expenditures and operating transfers:
Personal services and related benefits 436,133 477,409 494,132
Professional and outside services4 15,131,178 11,858,102 10,636,810
Travel, in-state 11,258 3,464 1,014
Aid to individuals5 9,017 10,901 8,047
Other operating 64,401 62,072 66,588
Equipment 15,304 12,618 22,118
Total expenditures 15,667,291 12,424,566 11,228,709
Net operating transfers out6 999,997 1,000,747 1,006,830
Total expenditures and operating transfers out 16,667,288 13,425,313 12,235,539
Net change in fund balance 1,962,283 1,824,611 1,126,388
Fund balance, beginning of year 8,850,204 10,812,487 12,637,098
Fund balance, end of year7 $10,812,487 $12,637,098 $13,763,486
Table 2: Schedule of Revenues, Expenditures, and Changes in Fund Balance1
Fiscal Years 2006 through 2008
(Unaudited)
1 This schedule includes financial activity for both of the Commission's funds. The Commission maintains the Disease Control
Research Fund and the Health Research Fund as authorized by A.R.S. §§36-274 and 36-275, respectively.
2 Amount consists of 5 cents of every dollar deposited into the Tobacco Products Tax Fund and the Tobacco Tax and Health Care Fund
that the Commission receives under A.R.S. §§36-770 and 36-773, respectively. In addition, the fiscal year 2006 amount includes $3
million of tobacco sales taxes appropriated to the Department of Health Services but allocated to the Commission to pay for
Alzheimer's research projects conducted by TGen in accordance with Laws 2005, Chapter 286, §44.
3 Amount consists of monies appropriated to the Commission from the lottery revenues pursuant to Proposition 203, a 1996 voter-approved
initiative. The Commission receives 11.8 percent of the amount distributed to the Healthy Arizona funds.
4 Amount primarily consists of monies paid to the Arizona universities and research institutions for competitive contracts, and to TGen.
5 According to the Commission, the amount consists of payments for the Commission's employee tuition assistance program.
6 Amount primarily consists of a $1 million transfer to the Department of Health Services for Alzheimer's disease research as required
by each year's General Appropriations Act.
7 According to the Commission, ending fund balances are primarily designated for contracts the Commission has entered into that
extend up to 3 years. In addition, lottery proceeds are primarily received at the end of the year and, therefore, are not available until
the next fiscal year to pay contract expenditures. This also contributes to a larger fund balance at year-end.
Source: Auditor General staff analysis of the Arizona Financial Information System (AFIS) Accounting Event Transaction File for fiscal
years 2006 through 2008, and the AFIS Trial Balance by Fund report for fiscal year 2006.
State of Arizona
page 8
commission-funded projects generally last up to 3 years and its tobacco tax
revenues fluctuate, it must carefully manage its budget and maintain a fund balance
sufficient to ensure that it can pay for all contracts each year. For example, because
the tobacco tax revenues have been decreasing and the Commission must fund
TGen $5.5 million per year, the Commission decided to fund only smaller $50,000
contracts in fiscal year 2009.
Statute requires that a portion of lottery monies generated be given to other
agencies before the Commission receives its amount. The Commission became
eligible to receive a share of lottery proceeds in 1996. However, based on the
amount of lottery proceeds generated and the use of those proceeds for other
statutory obligations, the Commission did not receive a share of lottery monies until
fiscal year 2004. As shown in Table 2, since fiscal year 2006, the Commission has
received more than $2 million annually from the Arizona Lottery.
The Commission's largest expenditure is for professional and outside services. This
category primarily includes monies paid for its research contracts and TGen
contract, but it also includes monies paid to patent attorneys and the peer reviewers
who have a part in reviewing and scoring contract proposals.1 Additionally, a portion
of the tobacco tax revenues and lottery monies is used by the Commission for its
personal services and related benefits and operating expenses.
Scope and methodology
This performance audit and sunset review focused on illustrating the impact of
projects receiving commission monies between fiscal years 2001 and 2007, and
determining whether the Commission gathers appropriate impact information. This
report contains one finding and associated recommendations:
 Commission-funded research projects appear to result in benefits for the State,
but the Commission should enhance its efforts to gather and report the impacts
of the projects it funds. Based on information reported by project researchers,
commission-funded research results in a number of positive impacts for the
State, such as bringing in millions of dollars in additional research monies from
other granting organizations, and addressing Arizona-specific concerns, such
as conducting research on Valley Fever and sun-induced skin cancer. Although
the Commission gathers and reports some important impact information,
obtaining or reporting additional information, such as the number of patents
and jobs resulting from commission-funded research contracts and its TGen
contract, will improve its ability to demonstrate the impact of the monies
provided for these contracts.
1 Peer reviewers are paid $75 to $100 for each peer review. According to commission staff, an average of 300 peer reviews
are conducted each fiscal year.
Office of the Auditor General
page 9
The Commission's performance was also analyzed in accordance with the 12
statutory sunset factors (see pages 21 through 25).
Auditors used a number of methods to obtain information about the issues
addressed in this report. Auditors' general methods included reviewing Arizona
statutes and the Commission's annual reports for fiscal years 2003 through 2007;
attending three commission meetings; and interviewing commissioners, commission
management, and staff to obtain general information about the Commission and
determine its statutory responsibilities and requirements. In addition, to obtain a
general understanding of its internal controls, auditors reviewed commission policies,
procedures, and request for proposal requirements, and observed commission staff
performing their work.
In addition, the following specific methods were used:
 To illustrate the impact of the Commission's projects and determine whether the
projects the Commission funds appear to have a positive benefit for the State,
auditors reviewed a random sample of hard-copy files for 27 commission
projects.1 Auditors conducted follow-up interviews with ten researchers from the
27 projects to obtain the most updated information about project
accomplishments and to obtain information not contained in the file.
Additionally, auditors interviewed or corresponded with four individuals familiar
with medical research in specific medical disciplines such as cerebral palsy
treatments and Parkinson's Disease to gain their assessment of the relative
impact of commission-funded projects. In addition, to determine if the
Commission was gathering appropriate impact information, auditors analyzed
various articles and documents about the impacts of biomedical research, and
obtained information on impact-reporting practices in four other states and for
the Science Foundation Arizona.2 Auditors also attended a meeting for the
Commission's Parkinson's Disease project and interviewed representatives from
the Michael J. Fox Foundation who are also providing monies for part of this
project. Finally, auditors reviewed TGen contract information and annual reports,
attended a TGen presentation, and toured a TGen facility in Phoenix.
 To determine if the Commission is functioning in accordance with the 12
statutory sunset factors, auditors reviewed applicable statutes, interviewed and
corresponded with commission management, reviewed the State's open
meeting laws and the Commission's compliance with them, and reviewed
various commission contracts.
1 The 27 projects reviewed consisted of projects receiving commission funding in fiscal years 2001 through 2007. The
selected projects represent a variety of research institutions, including 15 projects from the University of Arizona, 7
projects from Arizona State University, and 5 projects from other institutions.
2 These four entities include the Roman Reed Spinal Cord Injury Research Fund in California, the James and Esther King
Biomedical Research Program in Florida, the Indiana 21st Century Research and Technology Fund, and the New Jersey
Commission on Spinal Cord Research.
State of Arizona
page 10
 To develop information for the Introduction and Background section, auditors
compiled unaudited information from the Arizona Financial Information System
(AFIS), state laws, a Commission RFP and Peer Review Questionnaire, the
Commission's database containing competitive contract project information,
and other agency-provided documents.
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the members of the Arizona
Biomedical Research Commission and the Executive Director and staff for their
cooperation and assistance throughout the audit.
Commission-funded projects appear to have
positive impacts, but impacts could be better
documented and reported
Biomedical research projects that the Arizona Biomedical Research Commission
(Commission) funds appear to benefit the State, but the Commission can take steps
to better demonstrate and report the impacts. The Commission annually collects
information on some important impacts of the projects it funds, such as articles
published or projects researching medical issues relevant to Arizona. Other impact
information, such as the number of patents or number and amount of additional
research grants resulting from commission-funded projects, is only partially collected
and is not reported. Collecting and reporting more complete impact information in
the Commission's annual report, as well as making the annual report available on its
Web site, would further help show how the Commission is operating in the public
interest. In addition, although the Translational Genomics Research Institute (TGen)
annually reports some impact information to the Commission, it does not include all
impacts in its annual report as required by the contract, and the Commission does
not report TGen impacts in the Commission's annual report. Since the Commission's
funding for TGen represents nearly half of all the funding the Commission provides
for research projects and services each year, better reporting of TGen's impacts
would help show what is being accomplished through the State's support.
Some impact measures collected partially or not at all;
most not included in annual report
According to information reported by researchers, commission-funded projects
appear to have resulted in positive outcomes. As indicated in the Introduction and
Background (see pages 1 through 10), the Commission annually provides
approximately $6.6 million to Arizona institutions for biomedical research projects.
Office of the Auditor General
page 11
FINDING 1
Many of the positive outcomes of these projects, however, are not made visible
because the Commission gathers only partial or no information about them and does
not include them in its annual report.
To help identify the impacts of these projects, auditors evaluated self-reported
information submitted to the Commission from 27 randomly selected commission-funded
competitive contract projects that received funding between fiscal years 2001
and 2007. Auditors conducted follow-up interviews with ten researchers from the 27
projects to obtain the most updated information about project accomplishments and
to obtain information not contained in the file.1 In addition, auditors reviewed various
articles and documents about the impacts of biomedical research and obtained
information on impact-reporting practices in four other states and for the Science
Foundation Arizona to identify some additional measures that the Commission could
collect information about to help further demonstrate project impacts.
As illustrated in Table 3, this work demonstrated that a wider range of measures is
available than the Commission is currently reporting. It also demonstrated that
measures currently being collected are not necessarily complete.
1 To identify the potential impacts of commission-funded projects, auditors reviewed commission files for 27 projects,
including 15 projects the Commission funded at the University of Arizona, 7 projects at Arizona State University, and 5
projects at other institutions. See Introduction and Background, pages 1 through 10, for more information.
State of Arizona
page 12
Type of Information
Was Information
Collected?
Was Information
Reported?
Number of patents Partial No
Additional research monies
received from other sources Partial No
Number of publications Yes Yes
Number of presentations Partial Partial
Project relevance to Arizona Yes No
Number of collaborative projects Yes No
Number and types of jobs funded Yes No
Number of projects involving
translational research1 Yes Yes
Table 3: Types of Information Collected and Reported
For Commission-Funded Projects
Fiscal Years 2001 through 2007
1 Translational research is medical research that attempts to more directly connect basic
research to patient care.
Source: Auditor General staff analysis of the Commission's Annual Report for fiscal year
2007, budget summaries and file review of the 27 commission-funded projects
between fiscal years 2001 and 2007, and the Commission's fiscal year 2007 annual
progress report form.
The Commission does
not report much of the
impact information it
collects.
First, the Commission is only partially collecting information on three important
impacts and should include all three in its annual report. Specifically:
 Patents—Patents represent accomplishments, and the
Commission collects information on patents where it is the
controlling party (see textbox), but it should also collect
information on other patents from projects it funds, and it should
include patent information in its annual report. A patent is
considered beneficial because it provides protection for project
discoveries that have potential for commercialization, and
patents may also generate revenue for the Commission.
According to the Commission, it is the controlling party for eight
patents, including one for a compound that inhibits cancer tumor
growth and one for a compound that inhibits cancer cells from
expelling anticancer drugs. If the Commission provides the
largest direct payment of monies on a project that obtains a
patent, then according to the Commission's contracts, it may be
considered the controlling party and has a right to a percentage
of the revenues generated from the patent.1
Even if the Commission is not a controlling party of a patent, the Commission
should require researchers whose projects have received commission funding
to report all patents the project received. Even though the Commission may not
be the controlling party, if it contributed funding to a research project that
received a patent, that patent demonstrates a positive impact of the
Commission's funding. The Commission requires researchers who receive
commission funding to provide an annual progress report on their projects. The
Commission should require researchers to include information on all patents
received in the annual progress report. Finally, once this information is collected,
to help better demonstrate the positive impacts of the projects it funds, the
Commission should include patent information in its annual report.
 Additional research monies received—One impact of the commission-funded
research projects is that some may apply for and receive additional research
monies from private or national organizations. Based on information reported by
researchers in the sample of 27 projects reviewed, auditors found that 16
projects received at least 27 additional grants totaling over $19 million. These
additional monies can supplement the state monies the Commission awarded.
According to experts, researchers, and granting organizations, large research
grants from federal government and private organizations are often needed to
conduct significant research, but are more likely to be awarded to projects that
already have preliminary data showing positive outcomes. According to the
Commission, one purpose of its small contract awards (i.e., those up to $50,000
1 According to the Commission, as of May 2008, it had received $30,000 in fees as a result of licensing one of these
patents, and this money was used to offset commission expenditures related to seeking a patent.
Office of the Auditor General
page 13
Patent Definitions
Patent: The grant of a property right
issued by the government that
confers upon the creator of an
invention the sole right to make, use,
and sell that invention for a set
period of time.
Controlling Party: The party to the
contract that makes the largest
verifiable payment to the research
being performed.
Source: The United States Patent and Trademark Office
Web site as of June 4, 2008, and commission
contract.
per year) is to provide support in the early stages of research when preliminary
data needs to be gathered, and which then allows the researcher to apply for
larger grants.
Although the Commission collects information about additional research monies
received by commission-funded projects, this information is sometimes
incomplete. The Commission's annual progress report form requests
researchers of commission-funded projects to provide a description of direct
and indirect funding received and a list of sources of support. However, auditors
found that researchers sometimes did not provide complete information
regarding other awards such as the source, the number of other awards, or the
amount of funding. The Commission should revise its annual progress report
form to require that researchers report both the source and the amount of each
additional grant received. In addition, the Commission should include this
information in its annual report.
 Publications and presentations—Two related project outcome measures are the
number of publications issued and the number of presentations given; the
Commission collects information on the first, but not the second. In the sample
of 27 projects auditors reviewed, researchers for 18 of the projects reported a
total of 107 publications resulting from the projects the Commission funded.
State of Arizona
page 14
Parkinson's Disease Project
Fiscal years 2006 through 2008; contract total $750,000
This project seeks to understand and better define the causes, identify biomarkers, and find
new treatments for Parkinson's Disease by working with subjects enrolled in a brain and body
donation program. Subjects, normal controls and those with Parkinson's disease, are studied
from the time of enrollment through autopsy examination after death. This project involves a
consortium of Arizona institutions collaborating on multiple projects at ASU, Banner Health,
Barrow Neurological Institute, Mayo Clinic Arizona, Sun Health Research Institute, and TGen.
As of June 2008, the project had conducted more than 5,000 clinical evaluations on over
1,000 living patients and over 1,000 autopsy examinations.
According to representatives from the Michael J. Fox Foundation, which also provided funding
for this project, this project is unique because no other project in their portfolio, and possibly
in the country, has access to a post-mortem brain and body bank for Parkinson's Disease,
Alzheimer's Disease, and control group patients. This project is important because it may
discover identifying markers leading to early diagnosis and intervention, identification of
different types of the disease and how drugs affect these types at various stages, and
improvements in quality of life for patients who currently have the disease until a cure is found.
• 14 publications
• 22 presentations
• $2.8 million award from the Michael J. Fox Foundation
Source: Auditor General staff review of commission database and annual report information, self-reported annual progress report
information, information from the project researcher, interview with Michael J. Fox Foundation representatives, and information
from the Foundation's Web site.
Publications are a common measure used to determine the success of a
research project and a way for sharing research discoveries.1 Presentations, like
publications, are a way for sharing research discoveries, and Arizona
researchers may be invited to orally present research discoveries or progress at
conferences or other speaking events, including those held in Arizona.
According to one researcher, presentations are important because they provide
a convenient forum in which to disseminate important and timely information to
the public and to other health professionals throughout the State.
Although the Commission does not ask researchers to report on the
presentations they make regarding commission-funded projects, some
researchers have reported the information to the Commission. For the 27
projects auditors reviewed, researchers for 10 of the projects reported
conducting a total of 25 presentations. For example, one researcher reported
giving an oral presentation and a poster session in 2007 about acupuncture for
children with cerebral palsy at the Society for Acupuncture Research
Conference in Baltimore, Maryland. The Commission should continue
requesting information about publications. Further, to ensure the Commission
has complete information on presentations, it should also require researchers to
provide information about presentations in their annual progress reports. The
Commission can also more clearly illustrate information about presentations
given by separating this information from publications and consistently labeling
it as presentation information in its annual report.
Second, the Commission is collecting information on three important impact
measures, and it should include information on them in its annual report. Specifically:
 Special Arizona populations or needs—A project's relevance to specific Arizona
populations and needs is one factor that the Commission collects information
1 According to the Commission, publications include abstracts or articles presented in peer-reviewed journals.
Office of the Auditor General
page 15
Alzheimer's Disease Project
Fiscal years 2001 through 2003; contract total $378,000
This project from Sun Health Research Institute in Sun City, Arizona, branched into several additional
projects that the Commission funded, totaling an estimated $2 million since 2001. A primary
discovery of these projects is that copper found in tap water, coupled with high cholesterol, could be
a link to the progression and possibly the onset of Alzheimer's. Further, drinking purified or distilled
water could substantially reduce the rate of progressively severe cognitive deterioration in the
disease. Additionally, the researcher directed a clinical study showing that Lipitor TM, a cholesterol-lowering
medication, slows the progression of and reduces the deterioration caused by Alzheimer's
Disease.
• 43 publications
• More than $2 million in additional grants
Source: Auditor General staff review of commission database and annual report, self-reported annual progress report information, interview with
project researcher, and review of Sun Health Research Institute Web site.
on and considers in deciding which projects to fund. Four of the 27 projects
auditors reviewed addressed a special Arizona population or need, including
research about Valley Fever and cures using desert plants. In addition, narrative
project information in the Commission's fiscal years 2006 and 2007 annual
reports identified that the Commission has funded other projects that address
concerns specifically relevant to Arizona, such as a scorpion antivenom project
(see textbox below), a sun-induced skin cancer project, a project studying
increased heart attack mortality related to air pollution in metropolitan areas
such as Phoenix, and a project related to researching the high incidents of
rheumatoid arthritis in the Tucson area. Although this impact may be discerned
by reading narrative project information in the annual report, the Commission
could better highlight this impact by including in its annual report a summary of
the number of projects that focus on Arizona-specific populations or needs.
 Project collaboration—The Commission considers collaborations a positive
impact and believes collaborations increase the efficiency of biomedical
research by reducing repetition and addressing interrelated components of the
same problem. Similar to the National Institutes of Health, which encourages
collaborations as a way for multiple disciplines to share knowledge and provides
specific funds for such research, the Commission encourages collaboration
between researchers by offering larger awards (e.g., $150,000 and $250,000
State of Arizona
page 16
Scorpion Antivenom Project
Fiscal years 2006 through 2008; contract total $540,553
This project initially began in 2000 when the Arizona producer of scorpion antivenom retired and
experts reported that the State would run out of the antivenom in the next 5 years. Beginning in fiscal
year 2005, the Legislature appropriated $150,000 annually through the Department of Health
Services to distribute antivenom that was donated by a pharmaceutical company in Mexico. This
project first received funding in 2006 to conduct clinical tests to obtain the federal Food and Drug
Administration's (FDA) approval, and to create a video protocol to train physicians to diagnose and
treat patients with scorpion stings. The University of Arizona provided matching monies for this
project, and the Commission granted this project a 1-year extension for 2009 to complete testing for
FDA approval.
According to the researcher, every year over 8,000 Arizonans are stung by scorpions, and stings
from certain scorpions found primarily in Arizona can be potentially life-threatening for children and
extremely painful for adults. Since its inception, the project has made antivenom available to 250
patients in Arizona through their participation in the study. The program has trained over 150
doctors, and 21 hospitals throughout Arizona are participating in the study. The researcher hopes that
the FDA will make its final decision to approve or disapprove the antivenom sometime in 2009.
Source: Auditor General staff review of commission database and annual report information, self-reported annual progress report information, and
interview with the project researcher.
per year) for collaborative projects. Of the 27 projects auditors reviewed, 18 were
large collaborative projects, and 4 additional small projects involved
collaboration, even though this was not required. According to the Commission,
in the past it was common practice for researchers to work individually, but
increasingly, multiple-investigator, multiple-institution, and/or interdisciplinary
collaborative projects have become more prevalent. Because the Commission
supports collaboration, it should include the number of collaborative projects
funded each year in its annual report.
 Information on jobs funded—The creation of jobs is an important impact of the
Commission’s providing funding to biomedical research projects. Each
commission-funded project is required to annually submit a budget summary,
which includes information such as employees' names and position titles, and
the amount of commission money used to fully or partially fund the position.
Based on a review of the final year budget summaries for the 27 projects in the
auditor's sample, commission money was used to fully fund 23 positions at a
cost of about $800,000 and to partially fund 80 positions at a cost of about $1.4
million. Positions funded included principal investigators, research technicians
and assistants, and program coordinators. Since the number of jobs fully or
partially funded is an important economic benefit for the State, the Commission
should include this information in its annual report.
Office of the Auditor General
page 17
BioTechnology Collaboration Project
Fiscal years 2005 through 2007; contract total $300,000
This project created a Web-based data management system to help Arizona researchers to
collaborate with others around the world on large-scale clinical studies. According to the project's
researcher, most institutions use different computer systems, which makes sharing information
difficult, time-consuming, and costly. The Web-based system will give researchers a central place to
enter their data, control its visibility, and easily view data other researchers have contributed. Study
results will be more timely as they are available immediately when data is entered. All Arizona
researchers and institutions have free access to the results of the system. A similar system created
by this researcher is now used by the National Institutes of Health.
The Web-based system has been used for projects including:
• A Lou Gehrig's Disease study sponsored by the Muscular Dystrophy Association and run
by TGen with 10 national institutions, including the Mayo Clinic in Scottsdale.
• A brain cancer study that is a collaboration between TGen and 15 global institutions across
10 countries.
Source: Auditor General staff review of commission database, self-reported annual progress report information, and an interview and e-mail
correspondence with the project researcher.
Third, the Commission should continue to collect information on one important
impact measure and should continue to include it in its annual report.
Specifically:
 Translational Research—According to a report prepared for the
Commission, translational research (see textbox) is research that
converts basic research knowledge into such real world technologies as
drugs, vaccines, and diagnostic devices. The production, distribution,
and marketing of these technologies drive the creation of new jobs,
attract related industry to the area, and bring cutting-edge technologies
to the state’s patient population.1 In its fiscal year 2007 annual report, the
Commission categorized the projects receiving commission funding
into three categories: basic, translational, and clinical. According to the
Commission, translational research is often underfunded even though
this step in the research process is needed to move basic research
beyond the lab on toward the clinic and to commercialization. As noted
in the Commission's 2007 report, 15 of the Commission's 72 projects
were translational research projects.
Finally, although individual project information is available on the Commission's Web
site, the annual report is available only by mail. Therefore, to improve accessibility, the
Commission should include its annual report on its Web site.
Commission should require and report impact
information on TGen
The Commission annually provides $5.5 million to TGen for operating expenses such
as personnel, professional and outside services, equipment, supplies, travel, and
other administrative expenses. According to TGen, national entities do not offer
grants that provide funding solely for operating costs. Without the Commission's
funding, TGen believes it would not have the monies necessary to compete and
continue seeking National Institutes of Health and other research grants. Although
the Commission's funding for operating costs does not directly support specific
research projects, based on legislative hearing minutes, it appears that the
Legislature appropriated these monies to TGen because establishing a world-class
genomics institute would advance economic development and improve Arizona
citizens' health prospects.
The Commission’s contract with TGen requires TGen to provide to the Commission
an annual report that contains a summary of TGen's activities, which includes
impacts such as grants obtained, patents applied for and granted,
1 Battelle Memorial Institute. Seizing the Translational Research Opportunity in Arizona. A report to the Arizona Biomedical
Commission and the Flinn Foundation. Columbus, OH: Battelle Memorial Institute, June 2006.
State of Arizona
page 18
Research Categories
Basic Research: Scientific studies
that increase knowledge of basic
life processes.
Translational research: Medical
research that attempts to more
directly connect basic research to
patient care.
Clinical research: The study of
drugs, biologics, or devices in
human subjects with the intent to
discover potential effects and/or
determine safety or usefulness.
Source: Auditor General staff analysis of the
Commission's 2007 Annual Report
information.
commercialization of intellectual property, articles and abstracts published, and spin-offs.
1 Auditors found that TGen is reporting some information on grants and
published articles and abstracts, and also includes some additional information such
as the number and type of new positions created and information on its
collaborations with other bioscience entities. However, auditors' review of TGen's
annual reports found that these reports did not always contain all of the contractually
required information, and that the Commission does not include TGen's impact
information in its annual report. For example, auditors found that the TGen reports
submitted for fiscal years 2003 through 2007 did not contain information on patents,
and only two reports contained information on the commercialization of intellectual
property and spin-offs. A commission official indicated that it is satisfied with the
information it is receiving from TGen. According to commission and TGen officials,
the Commission receives information on TGen's activities through the contractually
required annual report as well as through one commission member's participation on
TGen's Board, and periodic meetings and tours. In addition, according to TGen, all
required information is requested and reported to the Commission through a variety
of means; however, TGen is willing to include all of the information in its future annual
reports to the Commission.
Although the Commission is receiving TGen impact information through several
means, to better ensure that the public is aware of TGen's impacts, the Commission
should ensure that TGen reports all contractually required information, and that this
impact information is included in the Commission's annual report. Further, to bring
the TGen reporting in line with the other key impact items identified for non-TGen,
commission-funded projects, the Commission should also require that TGen
annually report information on the numbers and types of jobs created, numbers of
presentations given, projects that are specific to Arizona populations or needs, and
collaborations.
Recommendations:
1. The Commission should take steps to collect more complete impact information
on commission-funded projects by revising its annual progress report request
form to require researchers to report information on:
a. Patents received, whether or not the Commission is the controlling party.
b. Both the source and amount of additional funding received.
c. Presentations given related to commission-funded projects.
Office of the Auditor General
page 19
Impact information
annually provided by
TGen should also be
included in the
Commission’s annual
report.
1 A spin-off is a new company that is created based on the discovery or findings of a research project.
2. The Commission should report more complete impact information in its annual
report by including information on the number of patents, additional funding
received, presentations given, projects relevant to Arizona-specific populations
or needs, collaborations, and the number and types of jobs receiving full or
partial commission funding.
3. The Commission should improve accessibility to its annual report by posting the
annual report on its Web site.
4. The Commission should ensure that TGen's annual report effectively presents
impact information by:
a. Ensuring that TGen reports all contractually required impacts.
b. Requiring that TGen also report on the number and types of jobs created
as well as the other key impact items identified for commission-funded
projects, including presentations, projects relevant to Arizona-specific
populations or needs, and collaborations.
5. The Commission should include in its annual report some of the impacts
reported in TGen's annual report.
State of Arizona
page 20
In accordance with Arizona Revised Statutes (A.R.S). §41-2954, the Legislature
should consider the following 12 factors in determining whether the Arizona
Biomedical Research Commission (Commission) should be continued or
terminated.
1. The objective and purpose in establishing the Commission.
The Legislature established the Disease Control Research Commission
(Commission) in 1984 to improve the health of Arizonans by providing funding
for research into the causes, treatments, and cures for diseases. In 2005, the
Commission's name was changed by statute to the Arizona Biomedical
Research Commission. To carry out its responsibility, a nine-member
Commission is empowered by A.R.S. §36-273(A)(1) to:
"…Contract with individuals, organizations, corporations and institutions, public
or private, in this state for any projects or services that, in the commission's
determination, may advance research into the causes, the epidemiology and
diagnosis, the formulation of cures, the medically accepted treatment or the
prevention of diseases including new drug discovery and development."
2. The effectiveness with which the Commission has met its objective and purpose
and the efficiency with which it has operated.
As indicated above, the Commission is empowered to contract with individuals,
organizations, corporations, and institutions, public or private, in this state to
conduct biomedical research. In fiscal year 2008, the Commission provided
approximately $6.6 million to 75 research contracts that were awarded on a
competitive basis. The Commission also provided $5.5 million to the
Translational Genomics Research Institute (TGen), a nonprofit Arizona
biomedical research institute. As discussed in Finding 1 of this report, the
projects that the Commission has provided funding to appear to benefit Arizona.
For example, based on information reported by researchers, 16 of the 27
projects auditors reviewed obtained additional funding from other sources
totaling over $19 million (see Finding 1, pages 11 through 20). In addition,
according to narrative project information in the Commission's fiscal years 2006
Office of the Auditor General
page 21
SUNSET FACTORS
and 2007 annual reports, the Commission has provided monies to research
projects that focus on Arizona-specific needs, such as a project related to
researching the high incidence of rheumatoid arthritis in the Tucson area and a
scorpion antivenom project.
Auditors did not identify any efficiency concerns, but did identify the need for the
Commission to enhance its efforts to gather and report project impacts. For
example, the Commission should require researchers to report additional
information to the Commission, such as the number of patents resulting from
commission-funded projects and the number of presentations given on
commission-funded projects. In addition, the Commission should include this
information in its annual report and make this report available on its Web site
(see Finding 1, pages 11 through 20).
3. The extent to which the Commission has operated within the public interest.
The Commission has operated within the public interest by contracting with
entities that conduct research related to the causes, treatments, and prevention
of diseases, including issues that especially impact Arizonans' health. For
example, one of the Commission's contract projects is conducting the clinical
testing necessary to obtain federal Food and Drug Administration approval for
scorpion antivenom. In addition, the Commission provides monies for research
associated with specific diseases, such as Parkinson's Disease, Rheumatoid
Arthritis, and Alzheimer's Disease, which affect members of the public (see
Introduction and Background, pages 1 through 10, and Finding 1, pages 11
through 20).
4. The extent to which rules adopted by the Commission are consistent with the
legislative mandate.
This factor is not applicable because the Commission does not have statutory
authority to promulgate rules.
5. The extent to which the Commission has encouraged input from the public
before adopting its rules and the extent to which it has informed the public as to
its actions and their expected impact on the public.
Although the Commission does not have statutory authority to promulgate rules,
it takes steps to inform the public of its actions. For example, the Commission's
meetings are open to the public, and it makes information available on its Web
site, including its active Requests for Proposals (RFPs) for research projects and
a listing of projects that have been awarded. In addition, the Commission
produces an annual report, which, according to the Commission, was
distributed in 2008 to about 125 state government, university, nonprofit
organization officials, and others. Further, according to the Commission, it
State of Arizona
page 22
distributes close to 1,000 copies of its annual RFPs to Arizona biomedical
researchers and briefs Arizona legislators on its activities and progress in the
biomedical sciences. However, as mentioned above, auditors found that the
Commission should request additional information regarding projects it has
funded and include this information in its annual report to further help illustrate
the impact of commission-funded projects. Further, the Commission should
include its annual report on its Web site (see Finding 1, pages 11 through 20).
In addition, auditors found that the Commission was not fully complying with
Arizona's open-meeting laws. The Commission did not ensure that its meeting
dates, times, and agendas were posted for public viewing, and the Secretary of
State's Office did not have the required notice on where the Commission would
post its meeting information for public viewing. However, during the audit, the
Commission made changes to correct these issues.
6. The extent to which the Commission has been able to investigate and resolve
complaints that are within its jurisdiction.
This factor is not applicable because the Commission is not a regulatory agency
and, therefore, has no need to investigate and resolve complaints regarding
regulated persons or entities.
7. The extent to which the Attorney General or any other applicable agency of state
government has the authority to prosecute actions under the enabling
legislation.
This factor is not applicable because the Commission is not a regulatory agency
with enforcement or oversight responsibilities. However, the Commission has
signed an agreement with the Attorney General's Office for legal services
support.
8. The extent to which the Commission has addressed deficiencies in its enabling
statutes, which prevent it from fulfilling its statutory mandate.
The Commission has successfully sought changes to its statutes since 1998.
For example:
 Laws 1998, Chapter 12—This change modified A.R.S. §36-273 to provide
the Commission the authority to enter into technology transfer agreements.
According to a commission official, technology transfer is the process of
converting scientific findings from research laboratories into useful
products by the commercial sector. Further, while the Commission owned
some technology, it did not have the authority to license it to another entity
for commercialization purposes. Therefore, the Commission sought this
statutory change to generate a return on its investment in the technology,
which could then be used to fund additional research contracts.
Office of the Auditor General
page 23
 Laws 1998, Chapter 99—This amendment modified A.R.S. §36-272 to
change the Department of Health Services Director from the Commission's
chairperson to a non-voting member and allow the DHS Director to send a
designee.
 Laws 2001, Chapter 387—This change amended A.R.S. §36-275 to allow
the Commission to spend tobacco tax monies on nontobacco-related
research.
 Laws 2005, Chapter 170—These changes amended A.R.S. §36-271 to
revise the Commission's name from the Disease Control Research
Commission to the Biomedical Research Commission, and A.R.S. §36-272
provided for additional compensation of commission members. According
to a commission official, the Commission's name was changed to better
reflect the work the Commission does. Commission compensation
changed so that members now receive $200 per day for every day of active
service and are eligible for additional compensation for expenditures
incurred in attending meetings.
According to a commission official, as of May 2008 the Commission did not
have any plans to seek legislative changes in 2009.
9. The extent to which changes are necessary in the laws of the Commission to
adequately comply with the factors listed in the sunset law.
This audit did not identify a need for any legislative changes.
10. The extent to which the termination of the Commission would significantly harm
the public health, safety, or welfare.
Although terminating the Commission would not necessarily harm the public's
safety or welfare, the Commission funds projects that focus on research that can
help improve individuals' health. For example, commission-funded projects
have focused on specific diseases that can affect all people, including
Arizonans, such as cancer, Parkinson's Disease, and Alzheimer's Disease. In
addition, auditors determined after reviewing a sample of 27 projects that 4 of
the projects addressed a special Arizona population or need, including research
about Valley Fever and cures using desert plants. Additionally, the commission-funded
projects can also result in some economic benefits to Arizona if
commission-sponsored researchers receive additional monies from other
sources to continue their work.
State of Arizona
page 24
11. The extent to which the level of regulation exercised by the Commission is
appropriate and whether less or more stringent levels of regulation would be
appropriate.
This factor is not applicable because the Commission does not have regulatory
authority.
12. The extent to which the Commission has used private contractors in the
performance of its duties and how effective use of private contractors could be
accomplished.
The Commission uses several private contractors. In December 2006, the
Commission extended its 2-year cost reimbursement contract with the Battelle
Memorial Institute through September 2008. In 2002, prior to the initial 2004
contract with the Commission, Battelle worked with business, economic
development, governmental, and university leaders to assess Arizona's
competitive position in the biosciences and develop an Arizona biosciences
economic roadmap with recommended strategies for Arizona to pursue in the
next 10 years. According to an Arizona Bioscience Roadmap document, Battelle
is considered a world-wide leader in the development, commercialization, and
transfer of technology. An aspect of the Roadmap's overall goal is to make
Arizona a leading Southwestern state in selective biosciences. According to a
commission official, Battelle's work with the Commission is instrumental in
helping it participate with other bioscience stakeholders in Arizona to meet the
roadmap goals. For example, one of the strategies outlined in the plan is to build
up the State's bioscience research infrastructure, and one of the ways to do this
is to secure federal investments to build Arizona's bioscience capacity.
According to the Commission, it has worked with Battelle, university leaders,
and bioscience researchers to apply for the Clinical and Translational Science
award from the National Institutes of Health. According to a commission official,
this award will bring federal monies to the State to be used to build a
collaborative bioscience consortium and will further Arizona's progress toward
the roadmap goals. In addition to this work, Battelle is involved in developing
and maintaining the Commission's Web site.
The Commission also contracts with a lobbyist that keeps the Commission
informed about legislation that could impact it. According to the Commission, it
also depends on the specialized scientific expertise of over 200 peer reviewers
whose evaluations of project proposals enable the Commission to make careful
contract award decisions. Finally, although the Commission has an Attorney
General's Office representative who, according to the Commission, helps with
issues including contracting and state procurement law, it also contracts with
outside legal counsel as needed for assistance with special areas such as
intellectual property issues related to patents.
Office of the Auditor General
page 25
State of Arizona
page 26
Office of the Auditor General
AGENCY RESPONSE
State of Arizona
page 28
4. The Commission should ensure that TGen’s annual report effectively presents impact
information by:
a. Ensuring that TGen reports all contractually required impacts.
The finding of Auditor General is agreed to the audit recommendation will be
implemented.
b. Requiring that TGen also report on the number and types of jobs created as well
as the other key impact items identified for commission-funded projects, including
presentations, projects relevant to Arizona-specific populations or needs, and
collaborations
The finding of Auditor General is agreed to the audit recommendation will be
implemented.
5. The Commission should include in its annual report some of the impacts reported in
TGen’s annual report.
The finding of the Auditor General is agreed to and the audit recommendation will be
implemented.
The work of the Arizona Biomedical Research Commission is intricate and complex. The
Auditor General staff and especially the on-site auditors and their supervisor were willing
listeners and learners. Their attendance at Commission meetings and interactions with
Commission members was both professional and welcomed. The Commission thanks them
for their hard work, suggestions, and cooperation.
Submitted on Behalf of the Commission,
Dawn C. Schroeder, D.D.S., M.A.
Executive Director
Performance Audit Division reports issued within the last 24 months
Future Performance Audit Division reports
Board of Podiatry Examiners
07-10 Department of Economic
Security—Division of Child
Support Enforcement
07-11 Arizona Supreme Court,
Administrative Office of the
Courts—Juvenile Detention
Centers
07-12 Department of Environmental
Quality—Vehicle Emissions
Inspection Programs
07-13 Arizona Supreme Court,
Administrative Office of the
Courts—Juvenile Treatment
Programs
08-01 Electric Competition
08-02 Arizona’s Universities—
Technology Transfer Programs
08-03 Arizona’s Universities—Capital
Project Financing
08-04 Arizona’s Universities—
Information Technology Security
06-09 Department of Health
Services—Behavioral Health
Services for Adults with Serious
Mental Illness in Maricopa
County
07-01 Arizona Board of Fingerprinting
07-02 Arizona Department of Racing
and Arizona Racing Commission
07-03 Arizona Department of
Transportation—Highway
Maintenance
07-04 Arizona Department of
Transportation—Sunset Factors
07-05 Arizona Structural Pest Control
Commission
07-06 Arizona School Facilities Board
07-07 Board of Homeopathic Medical
Examiners
07-08 Arizona State Land Department
07-09 Commission for Postsecondary
Education