Disclosing foreign gifts and contracts: An expanding area of compliance for higher education institutions

The Higher Education Act was passed by Congress in 1986. Since then, higher education institutions have been required by Section 117 of the act to biannually report to the U.S. Department of Education (ED) gifts from or contracts entered into with a foreign government or nongovernmental foreign source with a value of at least $250,000.  

The burden of reporting gifts or contracts with foreign entities rests on the financial aid offices of the institutions. Under the statute, reporting is only required when the $250,000 threshold is met when tallying up all of the gifts from or contracts with a single source. This prevents the need to report smaller interactions that would exceed the threshold amount if the gifts and contracts of multiple entities were aggregated. The ED’s Federal Student Aid Handbook provides practical guidance regarding the reporting requirements (on pages 2-180 to 2-182).

Until recently, Section 117 did not appear to be a priority for ED enforcement. However, the ED recently issued Notices of Investigation and Records Requests to four large institutions in order to determine whether they are in compliance with Section 117. These institutions are Cornell University, Rutgers University, Georgetown University and Texas A&M University. The ED also issued an information collection request in the Federal Register on September 6, 2019, asking for feedback on the ED’s request to vastly expand the data it collects regarding foreign gift or contract disclosures.

The proposed request for information has created confusion and a large amount of dialogue surrounding what changes would go into effect for institutional reporting of foreign gifts and contracts. However, the proposed changes in the September 6 information collection request are still under consideration and have not yet received final approval. Interim guidance has been issued, in the meantime, to assist schools in reporting the previous six months of required disclosures, which is due on January 31, 2020, with the subsequent reporting deadline falling on July 31, 2020.

Given the current enforcement efforts, it is important for institutions to evaluate their compliance program for Section 117. Steps to consider include:

• Ensuring that proper policies and procedures are in place to provide information regarding foreign gifts and contracts to the financial aid office.
• Training individuals from around the institution on the foreign gift and contract reporting requirements, if not done so already, including individuals from:
  • Advancement/development
  • Alumni engagement
  • Athletics
  • Hospitals
  • Research centers/facilities
  • Study abroad programs and foreign campuses
  • Other programs on campus that contract with foreign entities
• Gathering all information about foreign gifts and contracts from around the institution to determine whether new reports need to be made.
• Reviewing the list of disclosures submitted to the ED to determine whether your institution has made its required reports over the past six years.  (Guidance provided by the ED in 2004 indicates that if your institution discovers it has not filed a required report, it should file the missed report immediately.)
• Creating a plan for how to record and report all foreign gifts and contracts if the ED starts requiring such disclosures as is suggested by its new information collection proposal.

Institutions should plan to monitor future communications from the ED for updates on whether and how the new information collection request may be implemented.