Foreign Gift and Contract Reporting in Higher Education: Navigating New Challenges

Recent legislative changes and growing scrutiny have made foreign gift and contract reporting more relevant than ever. Knowing the nuances, compliance strategies and recent developments — including a drastic reduction of the threshold for reporting foreign gifts and contracts— is crucial for your institution.

Background on Foreign Gift and Contract Reporting

Higher education has become increasingly global, with institutions facing a complex web of international partnerships and funding sources. This includes foreign gift and contract reporting, which has become a crucial aspect of compliance and transparency for U.S. colleges and universities.

Foreign gift and contract reporting in U.S. colleges and universities is governed by the Higher Education Act of 1965, specifically Section 117. This section mandates that institutions report gifts and contracts from foreign sources exceeding $250,000 in value to the Department of Education biannually. This requirement underscores the U.S. government’s efforts to maintain transparency in educational funding and safeguard national interests.

These disclosures help in monitoring foreign influence and ensuring academic integrity in higher education. Despite its long-standing presence, the practice of reporting foreign gifts and contracts has garnered increased attention in recent years.

This heightened focus stems from growing concerns about intellectual property security and the potential for foreign entities to influence research agendas and academic freedom. As global interactions intensify, the scope of what constitutes a reportable gift or contract has become a subject of debate.

A Reduced Threshold and Other Recent Developments

In December 2023, the U.S. House of Representatives passed the Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions (DETERRENT) Act. A response to increasing concerns about foreign influence in higher education, it aims to enhance transparency and accountability in foreign funding.

Among other provisions, the DETERRENT Act reduces the threshold for reporting foreign gifts from $250,000 to $50,000. For countries of particular concern, the threshold is even stricter: $0. This substantial change broadens the range of reportable gifts and contracts.

The act eliminates loopholes in reporting and increases scrutiny over financial ties with countries that could threaten national security or academic freedom. It also mandates disclosure of foreign gifts and contracts to individual staff and faculty at research-intensive institutions — a move to address targeted foreign influence.

The DETERRENT Act’s provisions make it a significant legislative milestone in foreign gift and contract reporting for colleges and universities. As of this writing, the act awaits action in the Senate. If it becomes law, non-compliance with its provisions (as well as other requirements of foreign gift reporting) can bring severe consequences like fines and potential loss of Title IV funding.

Challenges Faced by Institutions

Implementation of revised foreign gift and contract reporting requirements present several challenges for higher education institutions. Firstly, identifying and tracking smaller gifts and contracts, especially those from countries of concern, demands more comprehensive internal systems. Institutions must now scrutinize a broader range of international engagements, which can be resource-intensive and complex, especially for institutions with extensive global connections.

Another significant challenge lies in interpreting what constitutes a reportable gift or contract. The lowered threshold and expanded scope mean you must exercise greater diligence in evaluating your foreign engagements. This requires not only an understanding of the legal framework but also the ability to see the subtleties of different types of foreign interactions.

Additionally, you need robust and transparent reporting processes that don’t hinder beneficial international collaborations. The risk of overregulation and the potential impact on academic freedom and international research partnerships are concerns that need careful balancing.

Best Practices for Compliance

Your institution can adopt several best practices to effectively navigate foreign gift reporting requirements.

Enhanced Internal Systems

Develop robust systems for tracking and reporting foreign gifts and contracts. This includes leveraging technology to monitor smaller transactions and ensuring all international engagements are documented and assessed for reportability.

Regular Training and Awareness

Conduct regular training for staff and faculty to increase awareness of the new regulations. This helps in identifying potential reportable activities and understanding the importance of compliance.

Clear Internal Policies

Establish clear internal policies and guidelines on foreign gifts and contracts. This should include protocols for reviewing and approving foreign engagements and a transparent process for reporting them.

Legal and Compliance Expertise

Engage legal and compliance experts to guide you through the legal landscape. Their expertise can help in interpreting the nuances of the law and ensuring that all reporting is accurate and compliant.

Open Communication Channels

Maintain open lines of communication with foreign partners to fully understand the nature of their gifts and contracts. This can aid in accurate reporting and maintaining healthy international relationships.

Regular Audits and Reviews

Conduct regular audits and reviews of foreign gift reporting processes to identify gaps in compliance and areas for improvement.

The heightened focus on foreign gift reporting ties into broader concerns about foreign influence and intellectual property security in academia. As regulations for foreign gift reporting evolve, higher education institutions must stay vigilant and adaptable.

Understanding, complying with and anticipating changes in regulations isn’t just about adhering to legal requirements. It’s about fostering a transparent environment that upholds the integrity of educational institutions. The Council for Advancement and Support of Education (CASE) provides comprehensive resources you can explore in this area.

You can also work with your higher education CPA. They’ll guide you through the regulatory complexities so your institution can benefit from international collaboration while reducing risks.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.