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Foreign Gifts Under Scrutiny

As Education Department opens investigations into whether universities complied with law requiring federal reporting of foreign gifts and contracts, colleges call for more clarity on what the law requires.

July 9, 2019
 
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The Department of Education is stepping up its scrutiny of whether colleges comply with federal reporting requirements regarding disclosures of foreign gifts and contracts.

The department opened investigations last month into whether Georgetown and Texas A&M Universities have fully met all reporting requirements, including in regards to foreign funding associated with their respective campuses in Qatar. Higher education groups say that the law requiring reporting of foreign-sourced gifts and contracts is unclear and requires further clarification from the Education Department.

The scrutiny of foreign gift reporting comes amid broader scrutiny from Washington of American universities' connections with China, including scrutiny of the Confucius Institutes, centers for language education and cultural programming funded by the Chinese government, and of research partnerships with the Chinese telecom company Huawei, which was indicted by the Department of Justice for allegedly stealing trade secrets and violating American sanctions on Iran. Funding for U.S. universities from Saudi sources also came under increased scrutiny following the killing of dissident journalist Jamal Khashoggi at the Saudi consulate in Turkey last fall.

Section 117 of the Higher Education Act has long required that institutions report to the federal government any gift or contract with a foreign source valued at $250,000 or more, “considered alone or in combination with all other gifts from or contracts with that foreign source within a calendar year.”

Less than 3 percent of U.S. colleges report receiving foreign gifts or contracts, according to February Senate testimony from an Education Department official, and there appear to be significant variations in colleges’ reporting practices. A February report from a Senate subcommittee on Confucius Institutes found, for example, that nearly 70 percent of colleges that received more than $250,000 in funding from Hanban -- the Chinese Ministry of Education-affiliated entity that manages the Confucius Institutes -- failed to properly report that information to the federal government.

“Foreign government spending on U.S. schools is effectively a black hole, as there is a lack of reporting detailing the various sources of foreign government funding,” said the report from the Senate Committee on Homeland Security and Governmental Affairs’ Permanent Subcommittee on Investigations.

The report discusses a few (unnamed) examples of colleges that did not report Hanban funding. In one case, in which an institution received $400,000 one year and $1 million another, college officials informed the subcommittee “that it did not have a designated office to file foreign gift reports and that it was in fact not aware of the reporting requirements.” In another case, in which the institution received more than $1 million per year from Hanban, college officials said that their failure to report was due to an accounting discrepancy that defined the relationship with Hanban has an “agreement” rather than a “contract.” In a third case, an institution did not disclose Hanban contributions to its foundation.

Yet it is not clear that gifts made to a university foundation must be reported. Speaking at a Senate Permanent Subcommittee on Investigations hearing in February, Deputy Secretary for Education Mitchell M. Zais acknowledged a lack of clarity on the issue. “Some colleges and universities have independent but affiliated nonprofit research, endowment and alumni foundations, which deliver contracts and gifts,” he said. “It’s unclear which schools report foreign gifts that are channeled through these foundations since the statute does not reference them.”

The American Council on Education and six other major higher education associations have written two letters to the Department of Education since January seeking clarification of rules regarding federal reporting of foreign funding. Among the questions they’ve asked are whether gifts made to an affiliated foundation must be reported and when, if ever, colleges have to disclose the name of a specific foreign donor or entity with which a university contracts as opposed to merely noting the country of origin of the gift or contract. They have also sought clarification on how colleges can submit amended or corrected reports.

The associations noted that the department has never issued formal regulations on foreign gift reporting. Instead it has issued two Dear Colleague letters, the most recent one in 2004.

“There is a lot of confusion among our member institutions on what needs to be reported under Section 117,” said Sarah Spreitzer, the director of government and public affairs at ACE. “We’re concerned with the fact that there continues to be confusion, we haven’t received any additional guidance, and yet they are starting investigations. ACE and our member institutions want to be helpful in responding to these national security issues. We don’t want to be out of compliance; we don’t want to not report. We support the efforts to bring transparency to these partnerships, but we can’t do that without clarification or further guidance from the department.”

The Education Department did not respond to requests for comment.

The department's letters to Georgetown and Texas A&M seem to indicate an expectation that gifts routed through university foundations should be reported. The letter to Georgetown, for example, states that the department believes Georgetown’s reporting “may not fully capture all gifts, contracts and/or restricted and conditional gifts or contracts from or with all foreign sources … For example, Georgetown University’s Section 117 reporting should have included Georgetown University Qatar; all other Georgetown University locations … and all of Georgetown University’s affiliated foundations and nonprofit organizations, whether or not organized under the laws of the United States (e.g., the Prince Alwaleed bin Talal Center for Muslim-Christian Understanding), that receive gifts, enter into contracts and/or receive or enter into restricted or conditional gifts or contracts from or with a foreign source and that operate substantially for the benefit or under the auspices of Georgetown University.”

Georgetown reported more than $36 million in foreign-sourced gifts and contracts in 2018, including a $32.9 million contract with the Qatar Foundation, Georgetown’s sponsor for its branch campus in Doha, and more than $1 million in funding from other Qatari sources. (Other than Qatar, the only other overseas entities from which Georgetown reported receiving a foreign-sourced gift or contract in 2018 were Hong Kong and Spain.)

The letter from the Department of Education asks about Georgetown's Qatari funds as well as gifts and contracts involving specific sources in China, Russia and Saudi Arabia. The letter specifically asks for records involving the Prince Alwaleed bin Talal Center for Muslim-Christian Understanding, which was endowed with a $20 million gift from a Saudi prince made in 2005, and for records involving Huawei and Hanban.

A Georgetown spokesperson said the university takes its reporting obligations seriously and that officials are “working with the Department of Education to provide responsive information demonstrating that it has reported all required information. The department's letter reflects some misunderstandings about Georgetown, as the university does not host a Confucius Institute and regularly reports payments from the Qatar Foundation (the sponsor for our campus in Doha, Qatar) and gifts related to the University's Prince Alwaleed bin Talal Center for Muslim-Christian Understanding.”

The letter the Education Department sent to Texas A&M is similar in specifically singling out foreign gifts and contracts involving the Qatari government and Qatar Foundation, Huawei and Hanban. Texas A&M -- which announced the closure of its Confucius Institute in April 2018 -- reported a little more than $6 million in foreign gifts in 2018, all from the Qatar Foundation. "We take compliance and security very seriously at Texas A&M University," the university said in a statement. "We are reviewing the document from the U.S. Department of Education and are fully cooperating with the inquiry."

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