COMMENT BY: OMB Watch
SUBJECT: Against proposed revision to OMB Circular A-110
DATE: March 31, 1999

Dear Mr. Chamey:

We are writing in response to the proposed revisions of OMB Circular A-110, “Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations” (FR, Vol. 64, No. 23, pg. 5684), which amends Section _.36 to make “data relating to published research findings produced under an award” subject to Freedom of Information Act (FOIA) requests.

OMB Watch is a nonprofit research and advocacy organization formed in 1983. A key component of our work is assisting national, state, and community nonprofit groups in complying with federal rules. We have posted information about OMB’s proposed changed to Circular A-110 to thousands of nonprofits and received a number of comments raising many concerns. OMB Watch also has a rich history in promoting the public’s right to know about government information. We have assessed government-wide policies and practices to promote public access and have advocated for changes in laws and regulations that will help the public achieve equal and equitable access.

Our core criticisms with the proposed changes to Circular A-110 have more to do with the statutory requirements made in the FY 1999 omnibus appropriations bill (P.L. 105-277) than with OMB’s proposal. However, we do think that OMB could make changes to its proposal that would help the public better understand how to take advantage of the legislative changes, as well as assist the agencies in complying with the changes.

In summary, while we strongly support the public’s right to know, we believe subjecting nonprofit grantees to FOIA is the wrong approach. We believe agencies should stipulate that grantees and contractors should provide the government with the underlying data as part of grant and contract agreements. In this manner, the “data” would then be considered a government record, as described below, and subject to the procedures of FOIA. This approach fulfills the objective of meeting the public’s right to know without overturning court decisions on FOIA.

FOIA Should Not Apply to Nonprofit Grantees

The FOIA defines the term “agency” to include any “executive department, military department, Government corporation, Government controlled corporation, or other establishment in the executive branch.. . , or any independent regulatory agency.” 5 U.S.C. §552(f). The courts have identified certain factors to consider in determining whether an entity should be regarded as an “agency” for purposes of federal law. In United States v.Orleans, 425 U.S. 807 (1976), a case which involved a statute other than the FOIA, the Supreme Court defined the conditions under which a private organization must be considered a federal agency as follows: “[T]he question here is not whether the. . . agency receives federal money and must comply with federal standards and regulations, but whether its day-to-day operations are supervised by the Federal Government.” Id. at 815.

In other words, an organization will be considered a federal agency only when its structure and daily operations are subject to substantial federal control. See Ciba-Geigy Corp. v. Matthews, 428 F. Supp. 523, 528 (S.D.N.Y. 1977). Subsequently, the Supreme Court ruled that the Orleans standard provides the appropriate basis for ascertaining whether an organization is an “agency” in the context of a FOIA request for “agency records.” Forsham V. Harris, 445 U.S. 169, 180 (1980) (Forsham). See also NLRB v. Sears, Roebuck & Co., 421 U.S. 168 (1975); Rocap v. Indiek, 539 F.2d 174 (D.C. Cir. 1976); Soucie v. David, 448 F.2d 1067 (D.C. Cir. 1971). In 1975, the D.C. Circuit indicated that the most important characteristic of an “agency” is that the entity must have the “authority in law to make decisions.” Washington Research Project v. HEW, 504 F.2d 238, 248 (D.C. Cir. 1974), cert. denied, 421 U.S. 963 (1975).

Even this fact, however, is not always determinative. Public Citizen Health Group v. HEW, 668 F.2d 533 (D.C.Cir. 1981). The National Capital Medical Foundation, Inc. (NCMF) was the entity under consideration in Public Citizens Health Research Group V. HEW, supra. The NCMF owed certain statutory obligations to HEW, having been designated by HEW as a Professional Standards Review Organization. As such, it was required to review health care provided to hospital patients covered by Medicaid and Medicare and to make final and binding determinations as to whether the care rendered was necessary and therefore qualified for federal reimbursement. The court concluded that NCMF had authority in law to make decisions and exercised it daily. The court also proceeded to identify other factors that helped it determine that NCMF is an “agency,” such as that it was financed by the United States, was a creature of statute, performed an executive function, and operated under “direct, pervasive, continuous regulatory control affecting even minutia of the procedures and functions.” Id. at 941.

The characteristics of an “agency,” however, are not always clear. The D.C. Circuit also held that the Vice President’s Task Force on Regulatory Reform, later renamed the Council on Competitiveness, was not an agency because its sole function was to advise the President and Vice President. A dissenting judge pointed out that the Task Force had been created by Executive Order and had administrative support functions and that, no matter what it appeared to have been used for, it had been created as if it were an agency. Meyer v. Bush, 981 F.2d 1288 (D.C. Cir. 1993). Thus, even though it has been given authority to make decisions, an entity may, at times, not be considered an “agency” for purposes of FOIA.

An entity may receive funds from the federal government and even perform work for it, without becoming an agency. In St. Michael’s Convalescent Hosp. v. State of Cal., 643 F.2d 1369, 1379 (9th Cir. 1981), the court rejected the argument that “the federal funds received through the Medicaid program and Medicaid’s pervasive statutory and regulatory scheme necessarily” transformed the recipient state agencies into federal ones for purposes of the FOIA. The court relied on Forsham v. Harris, supra, to hold that there must be extensive control by the grantor agency over the recipient’s day-to-day operations before it could be transformed into an agency. According to the Supreme Court in Forsham v. Harris, “Data generated by a privately controlled organization which has received federal grants (grantee), but which data has not at any time been obtained by the agency, are not ‘agency records’ accessible under the FOIA.” Federal agencies do have the right to collect underlying data currently, by stipulating the collection as a condition of the grant. Once the Agency has the data, it is then considered an “agency record” and is subject to public access.

This question of control has also been emphasized by the 9th Circuit Court in holding that the American Red Cross was not an agency. “It is the existence of this element of substantial federal control that distinguishes those entities that can be fairly denominated as federal agencies under the FOIA from the organizations whose activities may be described as merely quasi-public or quasi-governmental.” Irwin Memorial, Et.al. v. American Red Cross, 640 F.2d 1051, 1055 (9th Cir. 1981). The court recognized that the government exercised a certain degree of control over the Red Cross, but held that it was not sufficient to transform that organization into an agency.

The legislative rider to amend Circular A-110 undermines this rich body of law and, accordingly, we oppose the rider. To the extent that a federal agency chooses to make information collected by entities that receive federal financial assistance publicly available, it can stipulate that the recipient must provide the information to the agency as a condition of receiving the assistance. Once the information is in a federal agency’s possession, it would be deemed “agency records” and subject to the FOIA procedures. Department of Justice v. Tax Analysts, 492 U.S. 136, 144-46 (1989); see also Kissinger v. Reporters Comm. for Freedom of the Press, 445 U.S. 136 (1980); Forsham, 445 U.S. at 182.

Other Areas of Concern

While OMB must carry out the enacted rider, it may have made the problem created by it more pronounced by not providing clarification on the scope of the legislation. We have seven areas of concern: the definition of “data relating to published research findings;” the definition of “developing policy or rules;” the impact on privacy and quality of research and service delivery; the timing of FOIA requests; new FOIA fees and the reimbursement of affected entitics; the application of the proposed rule to projects and activities that involve cost sharing; and the application of the proposed rule to other forms of federal financial assistance.

Data Relating to Published Research Findings

The OMB proposed rule modifies Circular A-110 to allow FOIA requests for “data relating to published research findings produced under an award that were used by the Federal Government in developing policy or rules...” This phrase is the core of the proposal, but stands undefined. It is critical it be clearly defined. Without a definition, anything — from empirical data, to tissue samples, to a researcher’s personal lab notebook or phone records — could arguably be covered. It is possible that almost anything with the most tangential relation to a study could be considered covered, and pursued through legal channels. A further concern is that there is no defined boundary of what data relates to published findings. This is a major problem in research funded by both federal grants and private money (see below).

A definition of “published research findings” is also required as there are varying degrees which research can be considered published. Before a full publication, abstracts of a project are often included in the materials handed out at a conference. Is something as basic as this “published research findings?” Even after publication in a scientific journal, there is still the expectation of peer review and possible refinement of conclusions.

Without a clear regulatory definition of “data” or “published research findings,” it is likely that substantial legal activity will have to occur to arrive at definitions. Such activity would unfairly burden grantees.

Developing Policy or Rules

The OMB proposed rule allows FOIA requests only when the federal government has used the federally awarded data relating to a published research finding in “developing policy or rules.” OMB appears to have based this restriction on the statements of proponents of the legislation. For example, Senator Trent Lott (R-MS) stated that the aim of the legislative rider was to provide public access to federally funded research data that was “used by the Federal Government in developing policy and rules.” 144 Cong. Rec. S12i34 (October 9, 1998) OMB, however, does not provide clarification of what is meant by “developing policy or rules.”

OMB uses the term “Federal Government” as opposed to “Federal agencies.” This would seem to indicate that the proposed rule would apply to any branch of the federal government that uses federally funded research findings in “developing policy or rules.” Moreover, OMB provides no clarification on the definition of “developing policy or rules.” Read in the broadest sense, the OMB proposal can give great latitude to mischievous behavior.

For example, if a member of Congress reads a study on air quality produced under a federal funded grant and introduces a bill based on the research, was the research used to develop policy? If this falls within the scope of “developing policy or rules,” then it is quite likely that special interests that do not support the outcome of “published research findings” will lobby Congress to introduce bills -- even if the legislation is not intended to be enacted -- in order to be able to file FOIA requests. OMB must provide greater definition to the terms "Federal Government” and “developing policy or rules.”

Privacy and Quality of Research and Service Delivery

The proposed changes cause concern that privacy will not be adequately protected, even with the FOIA exemptions in place. While the FOIA exemptions may protect the privacy of records/data about individuals held by nonprofit grantees, their exact application may involve litigation. For example, if a grantee does clinical trials of small, defined populations (e.g., minority children under five with HIV), can the identity of the participants be recognized through computer matching services? Would that constitute an “unwarranted invasion of personal privacy” (under Exemption 6)? It is likely that the answers to these concerns will come in the form of litigation. There is also no guarantee that the exemptions will be applied perfectly and consistently.

Even if private information is protected, most human subject review panels would require researchers to notify subjects of the possibility that personal information about them might become public. Potential subjects may be reluctant to give personal information if it is to become the property of the federal government or the public at large. For example, it may become harder to conduct clinical studies of those who use illegal substances, especially because the granting agency applies the FOIA exemptions, not the grantee. A subject may be less inclined to participate in studies on drug use, alcoholism or similar studies if he or she knows that a government agency may obtain records with their personal information. There are also forms of data that make it extremely difficult to protect privacy, such as videotaped interview or interaction sessions used in social science.

It is also possible that the proposed changes to Circular A-110 would make it more difficult for nonprofit organizations to provide service under a federal grant. The possibility of the public release of records may frighten people from AIDS clinics, shelters for abused women, and similar services. Inevitably, the fear of possible breaches in privacy will have a chilling impact on subject participation and research quality.

Timing of FOIA Requests

The proposed changes state that the awarding agency “shall, within a reasonable time, obtain the requested data” from the grantee. The proposal does not define what a reasonable time is, which can be further complicated by a lack of definition of “published research findings.” Interpretation and publication of research in peer reviewed journals is one of the most important elements of research, and publication is a major incentive for many to conduct research. The possibility of a researcher’s data being open to the public before analysis is completed could serve as a disincentive to research.

There is also a concern that a lack of a clear timetable could result in theft of intellectual property. If data is available before the grant recipient is completely finished with it, there is an opportunity for others to profit from the research. Without a definition of “a reasonable time,” statutes that protect the intellectual property rights of researchers receiving federal money, such as the Bayh-Dole Act, could be undermined. It will become increasingly difficult to find private funding to use in conjunction with federal funding because research that is solely privately funded is not covered, and there is no chance of theft of intellectual property. It is clear that it is not in the interest of private companies to co-fund research that can be used for the profit of others.

It is also unclear under the proposal whether the new regulations will be retroactive. It is unreasonable to apply these regulations to any research ever conducted under a federal grant. It is likely that much of the underlying data from past studies is not accessible, whether it has been lost, destroyed, or is on antiquated media (punch cards, COBOL tape reels, etc.). Any entity that would be forced to provide the underlying data from a project that happened 40 years ago would incur tremendous cost in finding the data, and providing it in some useful fashion.

A mechanism must be included that deals with data under currently ongoing research projects, as well. Many studies, especially in social science, take many years to complete. Unless there is such a mechanism, unfinished studies that have been ongoing for years may have to use substantial resources to prepare their past data for public accessibility.

The absence of clarifications in these areas will likely result in substantial legal activity.

New FOIA Fees and Reimbursement Policy

The OMB proposal states that “If the Federal awarding agency obtains the data solely in response to a FOIA request, the agency may charge the requester a reasonable fee equaling the full incremental cost of obtaining the data.” It goes on to state that the “fee should reflect costs incurred by the agency, the recipient, and applicable subrecipients.” No mechanism for determining the full cost is mentioned. There is no clarification of what exactly is covered by this fee. Is the time that a researcher uses to convert the data to a useable form covered?

There is no mention of exactly who is reimbursed. The proposal only states that the agency may charge the requester for collection of the data, but offers no mechanism or timetable for distribution of the fee. Does the federal agency collect the money, and then divide it between itself and the grantee? If the Treasury collects the money, and reimburses the agency and the grantee, does it do so on a regular basis, or does it become a yearly budget line item for each agency? Moreover, what happens when the grant expires, but the grantee is still subject to FOIA requests? Is there a mechanism for providing reimbursements to the grantee?

Surprisingly, there is no mention of the rights of a grantee to request reimbursement. The absence of this authority raises questions about burdens placed on the grantee. It is likely that an agency will not know the exact cost of obtaining data from a grantee. Can the grantee request reimbursement from the agency in response to a FOIA request? It is especially important that the grantee be able to request reimbursement if organizing the data for the FOIA request will cost more than the amount of cash the grantee has on hand.

If the grantee cannot be reimbursed quickly (or at all), it may be impossible to comply with a FOIA request, which could subject the grantee to legal or other penalties. Without clearly defining a fee and penalty structure, it is impossible for a grantee to know the consequences of non-compliance with a FOIA request, as this is the first time data that is not a direct agency record is covered under FOIA.

Cost Sharing Issues

The proposed changes to Circular A-110 will likely have a chilling impact on research that is jointly funded with federal and private moneys as well. The supplementary information provided with the proposed revision quotes Senator Ben Nighthorse Campbell stating that “the amended Circular shall apply to all Federally funded research, regardless of the level of funding or whether the award recipient is also using non-Federal funds.” This issue is not addressed directly in the proposed regulation. Does this mean that the public can obtain data that was paid for in part (or almost completely) by private funds? To avoid this, will researchers be forced to compartmentalize their research, and state explicitly which part of the research is being conducted using federal money and which part is not (possibly down to the individual experiment)? A stratification such as this may make the research less useful to the granting agency.

If this issue is not addressed, it is almost a certainty that researchers will have difficulty raising any private funds for a project that also used federal funds.

Application of Rule to Other Forms of Federal Financial Assistance

P.L. 105-277 requires changes in Circular A-110, which only applies to institutions of higher education, hospitals, and other nonprofits that receive awards (e.g., grants and cooperative agreements) from the federal government. OMB has a history of keeping grants management rules in symmetry with other forms of federal financial assistance.

To the extent that Congress is changing the definition of “agency” for FOIA consideration, then OMB must look at the broader implications. If nonprofit federal grantees are considered an “agency” for FOIA (at least certain “data” held by such entities), then, too, should state, local and tribal governments that receive grants. Furthermore, those entities that receive federal contracts also should be considered an “agency” for FOIA purposes.

If OMB is to allow FOIA requests of nonprofit entities that receive federal awards, then we strongly encourage OMB to extend the rule to other entities that receive federal financial assistance to conduct research. This seems to be the principle that Congress intended when passing the legislative rider. Senator Richard Shelby (R-AL) stated the rider “represents a first step in ensuring that the public has access to all studies used by the Federal Government to develop Federal policy.” (emphasis added) Senator Trent Lott concurred by indicating that public access should be “to federally funded research data,” not just those supported by grants. Senator Ben Nighthorse Campbell (R-CO) added that the disclosure “shall apply to all Federally funded research.. ." (emphasis added)

Conclusion

We believe the legislative rider to amend Circular A-110 in P.L. 105-277 is unwarranted, unnecessary, and unwise. We encourage OMB to work to repeal the legislation. This should be a high pnonty for the Administration as it sets a dangerous precedent and could dramatically affect the quality of research in this country.

In the absence of a congressional repeal, OMB needs to pursue revisions of it proposed changes to Circular A-110. To that end, we encourage OMB to develop a second proposal to respond to the many concerns raised in this first proposal. This second proposal should be issued simultaneous with changes to rules that affect contractors and state, local, and tribal governments so that these grant rules are made consistent for all recipients of federal financial assistance. Once a second proposal is issued, we encourage OMB to obtain as many comments as possible. We would suggest, for example, convening several forums to educate stakeholders about the proposal to give them an opportunity to comment. These forums should also include briefings for contractors and representatives of state, local, and tribal governments, since they too would be affected by the parallel rule changes.

Finally, prior to finalizing the rules, we would urge OMB to obtain from the Department of Justice a legal analysis of the implications of this legislative change for FOIA and E-FOIA. This legal analysis should also be made available to the public for comment.

Thank you for considering these comments regarding the revision of OMB Circular A-110.

Gary D. Bass
Executive Director