DOE Signals Renewed Commitment to Enforcement of Foreign Gift Reporting Requirements

The U.S. Department of Education (DOE) recently announced that it is launching an investigation into the foreign gifts reporting practices of two higher education institutions.

Although Section 117 of the Higher Education Act requires that American Title IV-eligible colleges and universities report biannually both gifts from and contracts with foreign sources that exceed $250,000, the DOE alleges that both universities failed to comply with the Act’s requirements. Rather, the DOE alleges that one of the schools failed to report at least $375 million in foreign gifts and contracts over the last four years, instead choosing to not report any gifts or contracts during the period. The DOE’s most recent investigation signals the DOE’s commitment to enforcing Section 117’s reporting requirements. This commitment is also evident from the DOE’s recent proposal to impose criminal liability upon those who certify reports that are not complete and truthful concerning a school’s receipt of gifts from foreign sources.

According to DOE records, United States universities and colleges have reported donations in excess of $6.6 billion from Qatar, China, Saudi Arabia, and the United Arab Emirates since 1990. Given concerns about underreporting by covered institutions, the DOE believes that this sum may significantly understate the total amount of foreign funds received by these institutions. Since the DOE’s announcement on February 12, 2020, other universities have disclosed the receipt of substantial gifts from foreign sources.

“This is about transparency,” said U.S. Secretary of Education Betsy DeVos. “If colleges and universities are accepting foreign money and gifts, their students, donors, and taxpayers deserve to know how much and from whom. Moreover, it’s what the law requires. Unfortunately, the more we dig, the more we find that too many are underreporting or not reporting at all. We will continue to hold colleges and universities accountable and work with them to ensure their reporting is full, accurate, and transparent, as required by the law.”

As Secretary DeVos’s comments make clear, the DOE’s investigation demonstrates a renewed commitment to Section 117 Enforcement Actions. Since June 2019, the DOE has opened eight civil compliance investigations, and since July 2019, the DOE’s enforcement actions have triggered the reporting of approximately $6.5 billion that was previously undisclosed.

Moreover, and more troubling for the university officials who certify compliance, while Section 117 itself only provides for civil liability, the Department has recently proposed adding criminal liability to those who falsely certify the reports. (The proposed reporting requirements are available here.) Thus, Title IV-eligible colleges and universities should ensure that they have appropriate institutional controls over foreign contracts and gifts to ensure compliance with Section 117 and its reporting requirements.

Attorneys in Ballard Spahr’s White Collar Defense/Internal Investigations Group and Education Group routinely assist colleges and universities in ensuring compliance with Section 117.