Foreign Gift and Contract Reporting
Section 117 of the Higher Education Act provides that colleges and universities must file reports twice a year with the U.S. Department of Education (“DOE”), disclosing all gifts from, or contracts entered into with, a foreign government or non-governmental foreign source (such as, citizens of foreign countries or foreign corporations) with a threshold value above $250,000. The DOE had traditionally paid scant attention to this requirement, offering little in the way of implementing regulations or other such guidance.
Given the growing concerns over foreign (specifically Chinese) influence, the DOE has recently come under attack from Congress and other policy makers for its lax enforcement of the statute, with some estimates suggesting that at least 70% of higher education institutions have not been submitting the required reports. The DOE has, as a result, reacted in a dramatic way, launching several investigations at major research universities and contemplating regulations that would seemingly expand the scope of Section 117 and the burden placed upon colleges and universities.
In response to a number of public comments to the proposed regulations, the DOE, just last month, clarified that only gifts and contracts in excess of $250,000 (considered alone or in combination with all other gifts from and contracts with that foreign source within a calendar year) must be reported and that tuition payments from foreign students need not be reported unless the tuition was paid by a foreign source and exceeds $250,000. The DOE also clarified that, for purposes of Section 117, the definition of "institution" does not include foundations or affiliated entities, thereby removing those from the required reporting.
Still, under the contemplated regulations, an institution receiving the benefit of a gift from, or a contract with, a foreign source, even if through an intermediary, must disclose the gift or contract. In addition, institutions would be required to produce unredacted, true copies of gift instruments and contracts, and would be subjected to criminal penalties for knowingly or willfully failing to comply with the disclosure requirement.
The Office of Legal Affairs will continue to monitor the DOE’s ongoing rulemaking efforts in this area, and will update the university community as warranted. In the meantime, we strongly encourage all university departments/personnel involved in, or with knowledge of, foreign gifts/contracts to promptly report those (e.g. visiting fellowship dollars, contracts, money for research, etc.) to the Office of Financial Aid.
The contents of this article are intended to convey general information only, and not to provide legal advice or opinions. Please contact the Office of Legal Affairs (210-458-4105) to obtain legal counsel on any particular university issue or matter.
