Foreign Gift and Contract Reporting

Section 117 of the Higher Education Act requires institutions to disclose to the Department of Education (DoE) contracts, grants, agreements with or gifts from a foreign source, with a value of $250,000 or more, considered alone or in combination with all other gifts from or contracts with the same foreign source, within a calendar year. Information to be disclosed varies depending on whether the funding is a contract or a gift, whether it is restricted or conditional, and whether the foreign source is a foreign government, legal entity, individual, or an agent or subsidiary of a foreign legal entity. Once the $250,000 threshold is met, all disaggregated individual gifts/contracts that add up to the threshold (and beyond) must be reported. Because transactions which could trigger the $250,000 threshold occur in many different units across Penn State, units should report qualifying foreign source contracts and gifts received in any amount, no matter how small.

Reports are submitted biannually: January 31 (covering the previous July 1-December 31 period) and July 31 (covering the previous January 1-June 30 period).

Penalties for knowingly or willfully failing to comply with this reporting requirement include loss of Title IV federal student aid funds and reimbursement to the U.S. Treasury for the full cost of obtaining compliance. As of June 26, 2020, ten institutions are under investigation for failing to report or under-reporting.

Due Diligence Recommendation

The Department has stated that institutions must conduct “reasonable due diligence” when they receive the benefit of a contract or gift from any entity to determine whether the gift or contract is from or with a foreign source.

A good faith effort to determine the foreign source of a gift or contract may be achieved by gathering information directly from a counterparty or by gathering information through independent research.

Reasonable due diligence may vary. More diligence may be appropriate when transactions involve a “new” foreign source, and less diligence may be appropriate when transactions involve a “repeat” foreign source.

Units should adopt procedures whereby any unit signing a contract or accepting a gift should ascertain whether the other party is a foreign source.

The unit can make its own determination based on the address and information supplied by the sponsor/donor or with information otherwise available to the unit; or by requesting that the sponsor/donor certify whether they are a foreign source.

If the country of incorporation/place of business or residence is foreign, this address can be used to determine whether to include the transaction in the report. If the country of incorporation/place of business or residence is U.S. based, the unit would need to determine whether the sponsor/donor is an agent, subsidiary, or affiliate of a foreign source.