October 26, 2020Client Alert

U.S. ED Report Details Underreporting of Foreign Gifts and Contracts by Higher Education Institutions

On October 20, 2020, U.S. Secretary of Education Betsy DeVos released a report detailing vast underreporting of foreign money totaling $6.5 billion by higher education institutions. The foreign sources of this money include China, Russia, Saudi Arabia, the United Arab Emirates, and Qatar. Section 117 of the Higher Education Act of 1965, 20 U.S.C. 1011f (Section 117) requires nearly all higher education institutions to report foreign gifts and contracts that have a value of $250,000 or more and to disclose any foreign ownership or control to the Secretary of Education.

Historically, fewer than 300 of the approximately 6,000 U.S. higher education institutions self-report foreign money each year. According to the report, by not disclosing foreign money as mandated by Section 117, higher education institutions are potentially making themselves vulnerable to hostile governments and their instrumentalities who are attempting to infiltrate “cutting-edge American research projects, influence curricula, and gain access to systems and information.”

In the report, the U.S. Department of Education (ED) detailed concerns regarding the threat posed by foreign money and foreign interference to academic integrity, free speech on campuses, and national security. These concerns are shared throughout the administration, and the ED specifically discussed the threat posed by Confucius Institutes and Chinese talent recruitment plans. Earlier this month, the State Department and the ED sent letters to higher education institution officials urging them to rethink their connections to Confucius Institutes, as they pose a threat to free speech, and give China links to U.S. higher education institutions through students and researchers.

Some of the report’s findings included:

  • Huawei, a Chinese based technology company, had financial connections to almost all the higher education institutions. Many of these agreements and gifts concerned topics like nuclear science or those related to industries like robotics, semiconductors, and online cloud services.
  • The Skolkovo Institute of Science and Technology, a research institution in Russia, facilitates academic exchange and cooperation between Russian and American graduate students and professors regarding issues such as oil and gas extraction, biomedical research, communication infrastructure, and energy research — issues that could concern national security.
  • The Saudi Arabian government invested significant financial resources to disseminate its ideological views at Georgetown University and several other U.S. higher education institutions.
  • Higher education institutions have agreements with Chinese companies that could allow China to leverage those relationships to dominate the global market — the facial recognition market and the artificial intelligence markets are of particular concern.
  • Foreign money and contracts are seeking out institutions for their research and development, as well as specific technologies.

Since the report’s release, there have been some critiques. U.S. higher education institutions have generally defended these international collaborations and have said that the agency’s reporting requirements under Section 117 were unclear. One institution explained that it found the details of the report puzzling. Additionally, the Association of American Universities, an organization that represents research universities, called the report a politically driven attack on the country’s leading research universities rather than a serious security assessment.  Regardless of any perceived motivation, the report demonstrates a continued focus on foreign investment in U.S. higher education, and emphasizes the need for continued vigilance in compliance with all reporting obligations.

Our Higher Education team is here to help and provide guidance regarding the findings of this report and compliance with Section 117. Please contact your Michael Best Attorney with any questions.

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