As described in previous alerts dated June 18, 2019 and January 17, 2020, the U.S. Department of Education (ED) has been increasing its scrutiny of higher education institutions’ contracts with, and gifts from, foreign entities and individuals, as well as enhancing its enforcement of related institutional reporting obligations under Section 117 of the Higher Education Act (20 U.S.C. § 1011f). In addition to letters from senior ED officials to institutions regarding Section 117 reporting obligations, ED has at least 10 ongoing investigations of major universities with respect to their compliance with more investigations expected.

The reporting obligations under Section 117 apply to any institution, public or private, or, if a multi-campus institution, any single campus of such institution, in any State, that is legally authorized within such State to provide a program of education beyond secondary school, that provides a program for which the institution awards a bachelor’s degree (or provides not less than a two-year program which is acceptable for full credit toward such a degree) or more advanced degrees, and is accredited by a nationally recognized accrediting agency or association and to which institution Federal financial assistance is extended (directly or indirectly through another entity or person), or which institution receives support from the extension of Federal financial assistance to any of the institution’s subunits.

Institutions that are owned or controlled by a foreign source must file two disclosure reports per year—one no later than January 31 and the other no later than July 31. All other institutions that receive a gift from or enter into a contract with a foreign source, the value of which is $250,000 or more, considered alone or in combination with all other gifts from or contracts with that foreign source within a calendar year, must file a disclosure report no later than January 31 or July 31, whichever is sooner.

Following several months of comments on its “information collection” proposal for a revised Section 117 reporting mechanism, ED issued an electronic announcement on June 22, 2020 unveiling a new online portal for institutions to submit required information about their contracts with, and gifts from, foreign sources. This new online portal is available at https://partners.ed.gov/ForeignGifts, and compliance with Section 117 reporting obligations now must occur through the portal rather than through question 71 of an institution’s electronic application for Title IV federal student aid program participation.

The appendices to the June 22, 2020 electronic announcement contain details regarding what specific information must be reported, including the scope of contracts covered by Section 117 and how to determine the value of gifted property. Further, the appendices clarify that an institution’s Section 117 reporting obligations apply not only to gifts and contracts among the institution and foreign sources, but also to foreign gifts received by, and contracts with, “intermediary organizations” such as alumni associations, supporting foundations, athletic booster clubs, student clubs and affiliated groups where the foreign gift or contract benefits the institution.

ED also makes clear in this announcement that the information required under Section 117 is subject to 18 U.S.C. § 1001, which provides that whoever knowingly and willfully falsifies, conceals, or covers up by any trick, scheme, or device a material fact; makes any materially false, fictitious, or fraudulent statement or representation; or makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry, may be subject to fines and imprisonment. Additionally, if an institution fails to comply with the Section 117 requirements, ED may request that the Department of Justice undertake a civil action against the institution in federal district court.

Given the clear intention of ED to maintain a heightened enforcement posture with respect to Section 117 requirements, higher education institutions should carefully review all of their gifts and contracts with foreign sources, and those with any intermediaries that benefit the institution, to determine whether it has fulfilled these reporting obligations in the past and what additional reporting may be required going forward. Institutions might also consider adopting additional internal mechanisms to ensure that all foreign gifts and contracts subject to Section 117 are known to officials with responsibility for ensuring compliance.