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Statement from California state controller's office to IOM-CIRM panel April 10, 2012

Statement from California state controller's office to IOM-CIRM panel April 10, 2012

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Published by DavidJensen
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For more on the California stem cell agency, read the California Stem Cell Report -- californiastemcellreport.blogspot.com.

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Published by: DavidJensen on Apr 12, 2012
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Remarks by Ruth Holton-Hodson, Deputy StateController, Health and Consumer Policy, to IOM April 10, 2012.Thank you for the opportunity to provide the State Controller’s perspective onCIRM. The State Controller, as you may know, chairs the Citizens FinancialOversight and Accountability Commission which actually has quite limitedoversight authority, contrary to what our name might suggest. The CFAOC’scharge per Proposition 71 is to “review the annual financial audit, the StateController’s report and evaluation of the audit and the financial practices of theinstitute … The committee shall provide recommendations on the institute’sfinancial practice and performance.”The State Controller’s report referred to in Prop. 71 is not a detailed analysisof CIRM’s expenditures and the appropriateness of those expenditures, but rather an overview of CIRM’s income, expenses and accounting policies. The purpose of the audit is to ascertain whether CIRM is following generally accepted accounting practices and that the audit is conducted in accordance with government auditingstandards. I would note here that the Controller’s office has found that all of CIRM’s audits and accounting practices have complied with government auditingstandards. The CFAOC has no authority to conduct a performance audit or reviewthe merits of CIRM’s expenditures.Given our limited statutory scope, the CFAOC has focused its attention ontransparency and accountability. At our annual CFAOC meetings, we haveregularly raised concerns about the transparency of CIRM’s budget which was broken down by departments rather than by function, such as legal, andcommunications. There was also consistently a very large category of expenses,titled “Other” which in 2011 was $605,000. This made it very difficult for the public to easily see how operational dollars were being spent. We are very pleasedthat CIRM’s new leadership recognized this as a problem and quickly adopted amuch more transparent budget format which is broken down by function. Tomake CIRM’s expenditures as transparent as possible, we have also recommendedthat they post the annual budget on the website. Again, we’re pleased to say thatthe new leadership has agreed to do this.At our 2010 meeting we announced that we would require that all CFAOCmembers Statements of Economic Interest (SEI’s) and travel expenses be posted onthe CFAOC and CIRM websites. We also called on CIRM to do the same for ICOCmembers and CIRM’s executive staff. We were perplexed that it took a year to get
Independent Citizens’ Oversight CommitteeMarch 7, 2011Page 2
this done, but pleased to see that they are now available. At our most recentmeeting, we also recommended that CIRM post all of its private donations andthey have agreed to do this.The CFAOC strongly supported the recommendations of the Little Hoover Commission and SB 1064 which implemented some of those recommendations,although we were disappointed that the SCO was not given statutory authority toconduct performance audits as recommended in the Hoover commission report.Another critical piece to accountability is assuring the public throughappropriate disclosures that CIRM is acting proactively to avoid any potentialconflicts of interest in its decision making process. Unfortunately, Prop. 71 buildsin potential conflicts given the required representation on the ICOC. We believethat CIRM has good policies in place to ensure that ICOC members recusethemselves on votes related to matters where there would be a conflict. CFAOCmembers have raised concerns about potential conflicts of interest as CIRM movesto work more closely with industry. It will be important to be as transparent as possible as these relationships develop to avoid to the greatest extent possible even perceived conflicts of interest-which as we all know can be as damaging as actualconflicts.Finally, a word on CIRM’s governance structure. Last year, the Controller,strongly advocated that the ICOC take advantage of the transition period to newleadership, and redefine the role of the Chair from a co-executive model to anoversight model. Accountability in the oversight of an organization is premised onthe ability of the board to be objective and distinct from management.
That is whythe California Public Employee Retirement System and the California StateTeachers Retirement System both have a policy of voting in support of shareholder resolutions that separate the chair and the CEO of corporate boards because board independence is at the heart of effective governance and accountability. The public deserves no less from publicly-funded agencies. As the Controller hasstated, while the co-executive model may have been appropriate during CIRM’sinitial startup period, CIRM has now moved into the next phase of itsorganizational development, and it is time to have a clear separation of management of CIRM from oversight. The ICOC’s most important role – to

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