If you're receiving a grant from the National Institutes of Health, make sure you're spending your funds properly. If not, those funds could be lost.

In what has amounted to a wake-up call for researchers, in July the campus' Office of Research sent a letter to a campus listserv notifying some researchers that the NIH has been reviewing unspent balances on awards in recent months.

"The NIH is concerned about large carry-over funds from one year to the next," said Lynne Chronister, associate vice chancellor for research administration in the Office of Research. "Our researchers could end up losing funding if they have carry-over funds that exceed 25 percent of the annual funding."

At UC Davis, NIH funding this year accounted for about $135 million in research funding and 445 projects, according to Ahmad Hakim-Elahi, director of sponsored programs. He estimates that a couple thousand researchers -- faculty, staff, student -- may be involved in these projects.

As Chronister explains, federal sponsors always have the prerogative to enforce this policy, but until this year the NIH has not done so. Yet federal funding is getting tighter, "in part because of defense and homeland security efforts" and the rising budget deficit.

"It's a scary scenario for a researcher to think they may have funding held back," she said.

She noted that the same issue arose during the Persian Gulf War. Since then, NIH has enjoyed a boom. In 1999, Congress started a five-year effort to double the organization's funding and spread the research wealth around the country.

Of course, NIH's enhanced funding yields expectations and pressures. The NIH is getting pushed by Congress to show results.

Chronister said that NIH began scrutinizing unspent balances earlier this year. She pointed out that a couple of UC Davis faculty with large carry-forwards (in the neighborhood of 25 percent) have had their continuation funding reduced significantly.

Every year researchers must update the NIH with a "progress report" on their project.

"If you're not going to spend those funds for some reason this year," said Chronister, "then you need to explain exactly why."

It's much like watching your checkbook and knowing what you have in your bank account. Research projects need the same due diligence when it comes to tracking finances, or researchers may not know if they are in dangerous territory for possible funding reductions.

The only difference is that, unlike household finances, grant-making institutions don't encourage "rainy-day funds," Chronister said. They want the projects completed on a timely basis, and spending the funds is one clear way to measure progress.

"There's not a lot you can do about it if they decide to withhold the funds," Chronister said. "It's reasonable and they have the right to do so. But it catches people off guard because it is a new practice."

Resources available

Toward better financial oversight, the Office of Research offers project-management workshops to faculty and staff. For example, a Sept. 15 video session was presented by the National Council of University Research Administrators, and covered topics such as project management, grants, and how staff can best assist faculty members in research projects.

"We've been putting the word out and answering questions on how to avoid NIH funding pitfalls," said Chronister, adding that the other large grant-making institution that also has a similar policy is the Office of Naval Research.

Chronister suggests that researchers "commit" or spend at least 80 percent of their annual dollars before the end of the year, thus steering clear of the 25 percent carry-over mark that NIH is watching for.

Hakim-Elahi said, "If funds are being held for a specific purpose, it is in the best interest of the project to document the need to hold onto funds and request approval from the sponsor's project officer."

He noted that one way to secure funds may be to charge appropriate salaries to the grant, again with sponsor approval. For example, researchers are encouraged not to "under pay" someone who is leading the research effort. Some researchers do not take full advantage of what they can charge under the grant guidelines.

"Please note that as funds are expended, to comply with the federal regulations, they need to be justifiable and allocable to the specific grant," Hakim-Elahi wrote in the July letter to researchers.

Phyllis Wise, dean of the Division of Biological Sciences -- whose lab studies how estrogens protect against aging and stroke -- says that researchers who have NIH funding have been told that, in this day and age of federal budget deficits, the NIH is looking more carefully at unexpended research funds.

"It behooves all of us to be careful to spend our funds wisely and in a timely manner," she said. "This often times presents challenges since research expenses do not always come in tidy 12-month intervals. Nevertheless, extra attention needs to be paid to research expenditures."

Popular research

In the 2003 fiscal year, the NIH's discretionary budget, or spending not required by law, was larger than all but four of the 15 cabinet-level departments in the federal government, according to the Chronicle of Higher Education. In recent years, a little over half its total budget, which reached $27.2 billion in 2003, has gone to colleges, making the agency the largest single source of funds for academic research.

With its emphasis on health and medical research, the NIH is popular on Capitol Hill. When Congress passed its 2004 appropriations bill, the NIH was one of the few domestic agencies for which Congress provided a significantly larger increase than President Bush had requested.

The Chronicle of Higher Education recently reported, "after so many years of big raises, the NIH has built up a base of multiyear grants that it has committed to continue financing. As a result, a period of slow growth may force the NIH to cut the number of new grants and competitively-awarded renewals."

For more details, contact Hakim-Elahi at (530) 752-6060 or ahakimelahi@ucdavis.edu.