Tuesday, June 02, 2009

CIRM's Finances and Budget to be Examined Next Week

The financial condition of the $3 billion California stem cell agency will come under scrutiny next week at a meeting of Finance Subcommittee of its board of directors, along with CIRM's $500 million biotech loan program.

Leading the agenda is the proposed budget for the upcoming fiscal year, which begins July 1. Also scheduled to be discussed are funding sources and financing stretching into the first half of 2010-2011.

Following a severe financial scare earlier this year, CIRM is currently in safe financial shape for the next 18 months, despite the state's huge $24 billion deficit. That's because CIRM relies on bond financing and received a $500 million booster this spring as a result of a state bond sale. CIRM also cannot be cut by the state legislature or governor because it is constitutionally outside their control as a result of the ballot initiative that created it.

That is not to say CIRM is out of the longer-term woods. Its funding will only last for another 18 months, absent another bond sale.

The agency has approved $761 million in grants, which extend over several years. Its operations budget is tiny in comparison -- only $13.4 million for the current fiscal year.

The largest component of the budget -- $7 million -- goes for the salaries and benefits for CIRM's 40 staffers. The next largest component -- $2.7 million -- is for outside contracts, necessary because of the small staff and special needs of the agency.

Last year, the budget was missing significant details concerning outside contracting and travel, triggering complaints by the Consumer Watchdog group of Santa Monica, Ca.

When some of the details were produced -- days after CIRM directors routinely approved the budget -- John M. Simpson, stem cell project director for Consumer Watchdog, reported that they showed that CIRM Chairman Robert Klein would be out of the state on CIRM business 88 days, CIRM President Alan Trounson 68 days and Chief Science Officer Marie Csete 75 days. The budgeted dollars -- $558,000 -- were up 287 percent from the previous year.

The latest budget documents from CIRM show that it has spent only $104,000 of the $558,000 as of the end of March. In fact, as of that date, CIRM had spent only $6.7 million of the $13.4 million budgeted for operations this year. CIRM officials tout this as indicative of management frugality, which is to be lauded. But the magnitude of the difference raises questions about CIRM's budget justifications last year. It also raises a question about whether CIRM should fill out its staff to the 50 person limit. The small band appears to be overworked, based both on expressions from some board members and top management as well.

Last June, Michael Goldberg, chair of the Finance Subcommittee and general partner of the venture capital firm of Mohr, Davidow Ventures of Menlo Park, Ca., told his fellow directors to expect a more thorough-going budget document than was presented at that time.

The biotech loan program will come up in connection with a review of the response to an RFP for underwriters for the effort. CIRM staff does not have the expertise to run the effort so outside help is needed. The agency hopes to have more than one underwriter because of the conflicts involved in what is a very small financial community.

June 8 is the deadline for proposals with possible award on June 15, only four days after the Finance Subcommittee meeting.

The RFP did not specify an amount that CIRM would expect to pay for handling the $500 million loan program, but it certainly could be lucrative for the successful applicants.

The public can hear and participate in the meeting at a number of teleconference locations including San Francisco, San Diego, Los Angeles, Palo Alto, Pleasanton and Menlo Park. Specific addresses can be found on the agenda, which does not yet contain any links to background material to be presented at the meeting.

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