Summary: Poor internal controls have affected the monitoring of licensees and the completeness and accuracy of royalty income received by the National Institutes of Health (NIH). In fiscal year 1999, NIH's Office of Technology Transfer (OTT) did not follow up--with one exception--on the biennial audits of licensees' sales to ensure that licensees with sales that exceed $2 million had been properly audited. In the audited exception, GAO found that there were $9.4 million in uncollected royalty payments, with another $1.2 million projected. OTT also did not exercise its right to designate auditors to conduct reviews and verifications of semiannual royalty reports and royalty payments that could provide OTT assurance that royalty income received from its licensees is based on accurate sales amounts. Additionally, OTT did not enforce its collection policies and procedures to ensure timely payment of royalty fees. NIH's Office of Financial Management system to track royalty payments is not integrated with OTT, making monthly reconciliation labor-intensive. Delays in recording royalty income in its own general ledger increase the risk that financial and budgetary reports to Treasury may be inaccurate and delay distribution of funds.
