By Owen Daugherty, NASFAA Staff Reporter
The Department of Education (ED) on Tuesday released its findings in a report following extensive investigations into whether higher education institutions properly reported foreign gifts they received, alleging billions of dollars in gifts have been underreported over the course of several decades.
The report published Tuesday by ED’s Office of General Counsel (OGC) suggests that institutions “vigorously pursue foreign money,” but lack effective oversight or reporting of those gifts, and asserts that some institutions have flouted Section 117 of the Higher Education Act (HEA), which requires institutions participating in Title IV programs to submit disclosure reports to ED with information about foreign gifts and contracts that value $250,000 or more.
“This law has been on the books for decades, and for decades enforcement was lax. But not anymore,” Education Secretary Betsy DeVos said Tuesday at an event highlighting the report’s findings. “We took action to make sure the public is afforded the transparency the law requires.”
The report serves as the culmination of ED’s efforts over the last several months to increase its scrutiny of institutions’ ties with foreign entities, following a bipartisan Senate report released in February 2019 that cited inaction by ED regarding the monitoring of foreign gifts, particularly those of Chinese origin.
Several examples were highlighted both at the event Tuesday and in the report itself to underscore the notion that foreign entities utilize gifts and contracts to wield influence over U.S. higher education institutions.
In her remarks summarizing the findings of the report, DeVos alleged pervasive non-compliance by institutions has been uncovered, saying investigations outlined in the report found roughly $6.5 billion in previously unreported foreign gifts or contracts.
She also touted ED’s newly updated foreign gifts reporting portal, saying in the roughly three months since its overhaul, approximately $3.8 billion in foreign gifts and contracts has been reported, with 60 institutions filing a report for the first time.
Additionally, prior to the new portal, there were 500 to 1,000 transactions in a six-month period, according to ED. Since the new portal was put in place, it has captured over 7,000 transactions in a three-month period.
Notably, the report stated that current Section 117 reporting requirements are “neither complicated nor burdensome."
“With respect to the portal, we’re getting a lot of feedback from universities,” Harley “Bucky” Methfessel, senior counsel for information and technology in the department’s OGC, said at the event. “We originally collected only seven fields of data and now we’re collecting roughly 130 fields of data.”
He added that many institutions are reporting that the portal is “not particularly burdensome for them and the site is easy to use.”
The report stated that since institutions are able to track “every cent owed and paid by their students,” they should be able to track funds coming from foreign sources, “including those adversarial to American interests.”
The new portal requires institutions to provide more information about their foreign financial ties than what was previously mandated, a move that has drawn ire from many colleges and universities after more than a year of seeking clarification on the reporting required by the Section 117 statute. NASFAA first requested clarification from ED on foreign gift reporting requirements in August 2019.
ED first published notice of a new proposed form to collect information regarding the reporting of foreign gifts and contracts in September 2019. NASFAA joined dozens of other higher education organizations in a letter to ED late last year during an Information Collection Request (ICR) period, arguing that ED’s proposed request went beyond the scope of the law by “directing institutions to make disclosures — without statutory basis — of a vastly expanded amount of information and documents.”
Additionally, the letter argued the original ICR published in September expanded the reporting requirements for institutions, significantly increasing both the burden and cost to schools obligated to report additional information.
ED then sent a revised ICR in December after it reviewed the comments submitted. The updated ICR clarified some questions from the higher education community related to the reporting threshold stated in Section 117, but largely resembled the original ICR. It also increased the reporting burden estimate for schools from 10 hours to 20 hours, based on public comment.
ED had requested the Office of Management and Budget (OMB) to conduct an emergency review of the new ICR by January 2. A community letter sent to ED — signed by NASFAA — opposed ED’s request for emergency processing, arguing that the request did not meet the requirements for an emergency review.
The December ICR was ultimately withdrawn and resubmitted by the department on February 10 as a standard, non-emergency request, allowing for a 30-day comment period. The February request removed the requirement for institutions to provide unredacted “true copies” of contracts and gift agreements, and OMB noted that ED would pursue the notice and comment rulemaking process to address the collection of "true copies."
The higher education community, including NASFAA, submitted comments on the February ICR, arguing that the new request exceeded the disclosure reporting required under the statutory authority outlined in Section 117.
ED was recommended to adhere to what the Section 117 statute requires for the reporting of gift and contract information, and limit reporting in the ICR to the definition of institution. After the comment period closed, but prior to OMB issuing a decision on the request, NASFAA in March joined in a letter sent to DeVos requesting a delay on ED's regulatory efforts related to both Section 117 and Title IX amid the COVID-19 crisis.
ED's revised proposed expansion of foreign gift and contract reporting requirements submitted in February was approved by OMB on April 13. The final request was essentially unchanged from the draft version released in February.
NASFAA and the higher education community had previously urged ED to establish a rulemaking process for foreign gift reporting to allow higher education stakeholders to offer advice and feedback on the best ways to provide institutions with clear information on the foreign gifts reporting process.
A large portion of the report released Tuesday focuses on the influence foreign entities wield over America’s higher education institutions, alleging that “there is very real reason for concern that foreign money buys influence or control over teaching and research.”
ED said the report is intended “to highlight for institutions of higher education the importance of compliant, transparent, and effective reporting under Section 117 and to assist schools in assessing the state of their compliance.”
Publication Date: 10/21/2020