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A state legislative audit has found problems with a taxpayer-funded medical research partnership and the way it awards millions of dollars in grants, including its use of a grant reviewer who had financial ties to one of the applicants and some math errors that caused applicants to lose out on funding.

The review, released Tuesday by the Office of the Legislative Auditor, didn’t question specific awards, but it encouraged officials to establish a tighter decisionmaking process at Regenerative Medicine Minnesota, the taxpayer-funded partnership between the University of Minnesota and Mayo Clinic.

The audit raised concerns that a grant reviewer with a financial connection to one of the applicants was allowed to grade competing biobusiness proposals in 2016 and gave the lowest marks of all reviewers to five of them.

The audit also questioned why some grant proposals in 2018 received reviews from three evaluators, while others only received two. The differing oversight seemed to matter in 2018, when only grants reviewed by two evaluators were approved.

“Given the unequal treatment, unsuccessful grantees could have challenged the awards due to the potential bias in the scoring,” the report said.

University and Mayo leaders said they disagree with the audit findings regarding the partnership, which was first approved and funded by the Legislature in 2014. It was created to focus Minnesota’s medical might around the exciting potential of regenerative medicine and the untapped ability of the human body to heal itself when coaxed to do so.

The leaders nonetheless agreed to changes in grant-reviewing policies, including a future ban on reviewers having connections to companies or applicants in the categories they score. In the 2016 instance, the reviewer had disclosed her conflict, they noted, and she was not permitted to review her own organization’s proposal.

The partnership since 2014 has issued more than $21 million in grants in four categories — discovery science, education, biobusiness development and clinical care. Examples range from $500,000 given to researcher Deborah Ferrington to hasten treatment of age-related macular degeneration, to $3,962 given for a youth innovators’ science education event in Duluth.

In a response letter, leaders of the partnership said it was unfair and speculative for the Legislative Auditor to conclude that individual errors or oversights amounted to systemic problems.

“No finding in the report by itself or in combination with others is sufficient to support [the legislative Auditor’s] conclusion that the [Regenerative Medicine Minnesota] partnership’s internal controls were generally not adequate,” the letter stated. The co-chairmen of the partnership are Dr. Jakub Tolar, the U’s vice president for clinical affairs, and Mayo’s Dr. Andre Terzic.

The two sides also disagreed on whether the original state legislation permitted the partnership to issue grants for educational purposes such as grade school camps to inspire children to pursue math and engineering careers. While partnership leaders said they believe they have the flexibility to fund such grants, they said they would seek changes in the original legislation to make that clear. The audit report stressed that it wasn’t challenging the importance of such grants, just whether the organization had state permission to fund them.

The audit also found some mistakes in the grant-reviewing process, including the use of an incorrect formula that allowed one applicant to receive $250,000 and a competing applicant with higher scores to miss out. Scores also were mistakenly transferred from evaluation forms to comparative spreadsheets, or mistakenly calculated. The partnership leaders said they are reviewing their process to prevent future mistakes.

“Administrative errors are not acceptable,” Tolar and Terzic wrote.

The report will be presented Wednesday to lawmakers on the Legislative Audit Commission’s audit subcommittee.

Jeremy Olson • 612-673-7744