With Harvard Under Scrutiny, Higher Ed Groups Say Rules Around Foreign Gifts Are Unclear

Higher education leaders are crying foul over increased scrutiny of foreign gifts and contracts from the Department of Education. Harvard and Yale are the latest schools across the country the department claims haven't correctly reported that funding. While Harvard and Yale have not commented on the accusations, industry groups argue the regulations in question are unclear and the Department of Education is offering little in the way of guidance.

At issue is a thirty-four year old requirement included in the Higher Education Act called Section 117 which essentially states that colleges and universities that receive a gift or contract valued at $250,000 or more from a foreign source must report that to the Department of Education.

While the definition may sound simple on the surface, many in the higher education community say staying compliant is anything but. And they argue there are a few reasons for that.

"Thirty years ago, the foreign gifts and contracts that universities received were small in number and easy to describe," says Terry Hartle, the senior vice president for government and public affairs at the American Council on Education, an advocacy group representing 1,700 colleges and universities. "The situation has become far more complex."

Hartle argues the language and guidance that currently exist doesn't clearly describe what should happen with all of the global collaborations that happen at U.S. universities right now. Today, many universities have satellite campuses in other countries. For example, NYU has a campus in Abu Dhabi , Harvard Medical School has a research and training center in Dubai and Berklee College of Music has a campus in Spain.

The other factor leading to confusion is that this intense scrutiny over compliance is relatively new.

"In 1986, nobody really paid too much attention to it. Congress didn't pay any attention to it," says Hartle. "And many colleges and universities simply lost sight of it."

Today, that's not the case. Since June of 2019, the Department of Education has launched eight civil compliance investigations. The effort comes shortly after a February Senate report describing foreign spending on U.S. schools a "black hole" and accused colleges and universities of routinely failing to report. The department also faced some heat from lawmakers who said the agency wasn't doing enough to monitor foreign funding going to colleges.

The Department of Education did not respond to a request for a recorded interview. In a statement, officials said the effort is about transparency.

“If colleges and universities are accepting foreign money and gifts, their students, donors, and taxpayers deserve to know how much and from whom. Moreover, it's what the law requires," U.S. Secretary of Education Betsy DeVos wrote. She added that too many universities are either under reporting or not reporting at all.

But higher education groups say schools are not trying to skirt the law.

"What's frustrating on this one is our universities have really been trying to work hard with the federal government," says Toby Smith, the vice president for policy with the Association of American Universities, which represents 65 research universities including Harvard, Yale and MIT. "[The Department of Education] hasn't helped define the rules more clearly."

Smith says AAU's members are reporting a lot of confusion over what exactly Section 117 requires. And many of the questions are pretty simple like: Is it just individual donations above $250,000 that must be reported or a combination of gifts from the same source? Do schools have to provide detailed information from donors who wish to remain anonymous?

And Smith said there's confusion over when some payments might technically be considered a gift and what exactly is considered a "foreign source" and how much research institutions are expected to do to determine whether an organization that made a donation is U.S. based or "controlled by a foreign source."

Groups like the Council for Advancement and Support of Education (CASE), which represents thousands of university development professionals, worry this increased scrutiny over foreign gifts could discourage what's become an important source of funding.

"We need to be making sure we're not doing so much that we discourage these individuals from making these significant gifts," said Brian Flahaven, CASE's senior director for advocacy. "Which, of course, hurts the ability of the institution to achieve its mission like providing financial aid, providing facilities and the academics programs that help students."

Mostly though, the frustration among the higher education community comes from what many describe as a lack of direction and assistance from the Department of Education. Terry Hartle with the American Council on Education says this feels like a break from the agency's typical modus operandi.  In the past, he explains, the agency has been very willing to work with colleges and universities to figure out how to address complicated issues but this time feels different. Hartle says the Department of Education has declined his request to meet and has ignored other requests for assistance.

"Unfortunately on this matter I think the Department of Education would rather beat up institutions than work with them to address the concerns," says Hartle.