Three investigations and counting: The federal spotlight on foreign gift reporting

Section 117 of the Higher Education Act of 1965 requires U.S. colleges and universities to report gifts and contracts from foreign sources that, alone or combined, total $250,000 or more in a calendar year. The law was enacted to ensure transparency about foreign influence in American higher education — particularly as international funding relationships have grown more complex and wide-reaching.

Section 117 requires institutions to file a disclosure report with the Department whenever any of the following conditions occur within a calendar year: 

• An institution receives a gift or gifts of money or property from a foreign source that meets or exceeds the $250,000 reporting threshold
• An institution enters into a contract with a foreign source that meets or exceeds the $250,000 reporting threshold
• An institution receives and enters into a combination of gifts and contracts that meets or exceeds the $250,000 reporting threshold
• A foreign source obtains ownership or control of an institution, or there is a substantive change to a previously reported ownership or control status 

Colleges and universities must report:

• The name and address of the foreign source
• The amount, date and purpose of each gift or contract
• Any conditions or restrictions attached to the funds
• The name of any foreign owners or controlling interests, if the source is a legal entity

Reports are due twice annually, by January 31 and July 31, and must be submitted through the ED’s Section 117 reporting portal.

If your institution accepts federal dollars in any form, you are subject to Section 117 reporting. This includes:

• Public and private universities
• Community colleges
• Independent research institutes affiliated with colleges
• Institutions receiving any form of federal funding — not just Title IV financial aid 

The definition of federal funding is broad. It includes, but is not limited to:

• Federal student aid (e.g., Pell Grants, Stafford Loans)
• Federal research grants (e.g., from NIH, NSF, DOD, DOE)
• Cooperative agreements
• Department of Education institutional grants
• Any other federal financial support

The Department enforces Section 117 through its Office of the General Counsel. Investigations may be triggered by:

• Media reports
• Whistleblower tips and reports
• Incomplete or missing disclosures
• Discrepancies between reported relationships on institutional annual reports and the Section 117 report

Recent enforcement efforts have involved audits, records requests and referrals to other federal agencies, including the Department of Justice.

Non-compliance can lead to: 

• Federal investigations
• Public relations crises
• Loss of eligibility for federal funding
• Potential civil or criminal penalties for knowingly false reporting 

Even prestigious institutions are not immune. The risk is not hypothetical, it’s happening now.

Institutional leaders must move Section 117 from the margins to the mainstream of compliance oversight. That means: 

• Identifying all units/departments that may receive foreign funds, which may include:
  Office of the Controller, Office of Sponsored Programs and Research Centers, Office of Philanthropy and Alumni Engagement and Foundation Centers, Office of University Counsel, Office of Institutional Research and Compliance, Office of International Affairs and Export Controls
• Centralizing tracking of foreign contracts and gifts
• Clarifying roles and responsibilities for data collection and reporting
• Verifying submissions with appropriate segregation of duties
• Applying due diligence when collecting general information and data related to received funds
• Validating past submissions for completeness and accuracy
• Training staff on what counts as a reportable transaction

Key questions college and university leaders should ask include the following.

• Are we confidently capturing all foreign contracts and gifts over the $250,000 threshold?
• If passed, are we prepared for Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions (DETERRENT) Act, which expands oversight and disclosure requirements for institutions of higher education regarding foreign gifts and contracts, lowering the reporting threshold from $250,000 to $50,000 and requiring disclosures at the faculty and staff level, which will lower the threshold to $50,000?
• Do we know which offices on campus are most likely to engage with foreign sources?
• Who reviews and certifies the information in our filings?
• Have we assessed the internal controls supporting our compliance?
• Are we confident in the completeness of our reported funds and that no foreign sources are being misrepresented as domestic entities or subsidiaries?
• When was the last time we audited our Section 117 process?