Foreign Influence in US Education

The Panama Papers in 2017 revealed that American colleges and universities stash large portions of their endowment funds overseas.  Perhaps as an investment tool multiplier. What about the flip side? What about the flow of foreign funds to US colleges and universities? It must be pretty big bucks.

For instance, the large, influential law firm, Perkins and Cole is providing informative guidance to educational entities on the importance of adhering to federal governmental regulations relating to the “reporting of foreign investments into U.S. schools and universities by ” Chinese, Russian, Qatari, Saudi, and Iranian governments and government-controlled corporations. According to testimony to the US Senate “approximately 91 universities “reported receiving over $1.3 billion in gifts and contracts from foreign governmental and non-governmental sources in 105 countries.”

Federal Reporting Requirements

Going well beyond the harmful potential for fraud in educational settings; particularly fraud in higher education, the Higher Education Act of 1965 was established to reduce the potential for foreign malign influence over, or access to, our nation’s colleges and universities. Specifically, section 117 of the Higher Education Act, requires most 2-year and 4-year colleges and universities to disclose gifts from, or contracts with a foreign source in the amount of $250,000 or more in one year. And to disclose foreign ownership and control. These disclosures must be submitted to the U.S. Department of Education by January 31 or July 31 of each year. The three categories of information included in the disclosure report are as follows:

  1. gifts received from or contracts entered into with a foreign source, other than a foreign government;
  2. gifts received from or contracts entered into with a foreign government; and
  3. ownership or control of an institution of higher education by a foreign source.

Other articles of interest

How prevalent is the non-reporting practice?

Of the roughly 3,700 colleges and universities in the US, Inside Higher Education reported that “less than 3% report receiving foreign gifts or contracts” based upon a testimony to the U.S. Senate by General Zais. To paraphrase, General Zais testimony relating that section 117 is porous (full of loopholes) for these reasons:

  1. the disclosure requirement uses the “self-report” honors system;the college or university must report the name of the country to which the gifts and contracts are attributable, and the aggregate dollar amount. The name of the foreign source or company is not a requirement;
  2. the federal government has not issued any regulations, just guidance two letters (February 1995 and October 2004);
  3. most colleges and universities receive gifts and donations through their affiliated endowments, alumni networks, nonprofit research, think tanks, and foundations. Section 117 does not address or reference these entities;
  4. the U.S. Department of Education uses the student financial aid electronic database as the collection point for this information.

Call to Action

As of this writing, colleges and universities are anxiously contacting their federal education liaisons for guidance. They do not want to take on the appearance of duplicity and deceit. See this quote from IHC, “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. ” It is hoped that our dear readers would be just as vigilant in contacting their representatives in Congress and the Senate to ask for greater accountability measures and strengthened oversight thereby reducing the threat to national security.

Leave a Reply

Your email address will not be published. Required fields are marked *