The U.S. Department of Education (ED) recently posted an information collection notice seeking public comments on foreign gift and contract reporting requirements under Section 117 of the Higher Education Act (HEA). Based on our review of the questions in the notice and the investigations to date, we believe that ED is strongly leaning towards expanding the reporting requirements of foreign gifts and contracts. The Association of Governing Boards of Universities and Colleges (AGB) prepared this alert as the newly proposed policies will result in significant burdens on institutions attempting to comply with the requirements.
Following recent scrutiny by Congress and the Trump administration into U.S. higher education institutions’ relationships with China, particularly regarding Confucius Institutes, ED opened investigations into several colleges and universities regarding foreign gift and contract reporting requirements.
Under Section 117 of HEA, institutions that receive foreign gifts or that have foreign contracts exceeding $250,000 are required to report this information. However, since its passage, there has been little guidance about how to comply with Section 117. The most recent Dear Colleague letter was published in 2004. As the issue has grown in importance and complexity, higher education associations have asked the Department for clarification regarding reporting requirements. Additional information has not clarified the higher education community’s questions and concerns.
Concern Over Potential Outcomes
Because ED is considering greatly expanding the reporting requirements beyond the usual scope of Section 117, the American Council on Education (ACE) prepared an overview that includes a list of potential areas of concern. Some of the major topics include:
- The reporting of all foreign gifts, contributions, or contracts, regardless of the amount, versus the threshold of $250,000 in current law;
- The expansion of the definition of institution to include all campuses, foundations, affiliated entities, and separate organizations related to the institution;
- For restricted or conditional gifts or contracts, institutions will be required to verify and describe whether “the restricted or conditional gift [was] for the purpose of or did it have the effect of influencing any program or curricula at the institution, either directly or indirectly”;
- Institutions will have no guarantee of confidentiality regarding donation agreements, contracts, and restricted or conditional gift agreements with foreign sources, including agreements with proprietary information that institutions may be contractually obligated not to disclose;
- Institutions would be required to report gifts and contracts from foreign subsidiaries. This could include U.S. entities that are owned or subsidized by foreign sources. Institutions may not know or be aware of foreign ownership or control of U.S. entities from whom they receive donations or with whom they contract (e.g., food service providers, building developers/contractors, research collaborators, etc.) and may be unable to provide that information;
- Institutions would be required to report tuition and fees, room and board, health care/benefit payments, etc. from international students, faculty, and staff;
- The enforcement for compliance would change from civil action by the attorney general to criminal action under federal fraud and false statements law; and
- The estimated time to complete the reporting (10 hours per institution) is unreasonably low.
The Outcome for Boards
An institution’s governing board is accountable for everything that happens or fails to happen at its institution. Likewise, a foundation board has the same level of accountability for its organization and affairs. The potential burden to comply with new Section 117 requirements is incredibly high—AGB has heard from some college presidents and foundation leaders who have indicated they may need to hire additional full-time employees to ensure that there is capacity to gather and report information. AGB members should stay up to date on Section 117 and determine how new requirements could impact institutional practices and reporting procedures.
Questions to Consider
- Does your institution or foundation have defined processes for reporting foreign gifts and contracts?
- Since the definition of institution would be expanded to include all campuses, foundations, affiliated entities, and separate organizations related to the institution, how will your institution report information from various providers? If your foundation or other affiliated entities are separate 501(c)(3) organizations or similar, how does that affect reporting requirements?
- If your institution has a campus in another country, employs faculty, staff, or students from other countries, or admits international students, how will that impact your reporting requirements?
- Will the expanded reporting requirements affect ongoing or new relationships with individuals or groups outside of the U.S.?
- How will the board be informed about Section 117 reports? Will the full board or a committee of the board receive summary information?
Submitting Comments to the Department of Education
If you have questions or concerns about the proposed reporting requirements for Section 117, please respond to the Department’s request for input, which can be done here. The deadline for comments is Tuesday, November 5, 2019.