Tucked inside the Innovation and Competition Act, recently passed by the Senate and now on the House’s agenda, are crucial updates to foreign-gift transparency laws — and some big opportunities for improvement.
The public should know when foreign donors make substantial gifts to colleges and universities. In the last few years, foreign governments have bought the right to pick curricula, as the Chinese Communist government did with Confucius Institutes. Royal-family foundations endow campus centers in their own names, as did Saudi Arabia’s Prince Alwaleed bin Talal with $20 million gifts to Harvard and Georgetown. Foreign tech companies such as Huawei and ZTE, both designated by the FCC as “national security threats,” contract with colleges for research collaboration.
Since the 1980s, colleges have been required to disclose gifts and contracts with foreign sources that exceed $250,000 per year. But from the beginning, colleges and their lobbyists have fought that law, Section 117 of the Higher Education Act. Many institutions simply do not file the required disclosures.
When the Trump administration reviewed Section 117, it found widespread noncompliance. A scathing 2020 report from the Department of Education found that Yale “underreported its foreign gifts and contracts by $375 million.” Another university, whose name is redacted, professed itself “dumbfounded” when the department asked how it forgot to document more than $760 million in foreign funding. In 2020, colleges back-reported over $6.5 billion in foreign funding that should have been disclosed years before, but never was.
This widespread pattern of noncompliance makes it all the more important that the Innovation and Competition Act (ICA) must contain updates that strengthen Section 117. As the House considers the ICA, it should keep three important provisions of the bill and add two more, looking to the Countering Communist China Act, introduced recently by Representative Jim Banks (R., Ind.), for guidance.
First, the House must maintain the requirement for colleges to disclose the names of foreign donors. Without this information, it’s impossible to know a problematic gift from a benign one.
Disclosure of the foreign source is the single most important piece of the bill. Current law asks for this information only if the donor is a foreign government, a loophole that invites these governments to make gifts through third parties. The Chinese government did exactly this when it transferred sponsorship of its Confucius Institutes to a government-funded nonprofit, the Chinese International Education Foundation. Foreign governments will only increase their use of such front groups.
Second, the House should keep the ICA’s proposed disclosure threshold at $50,000, if it does not remove the threshold altogether. Currently, colleges don’t have to disclose gifts and contracts unless they exceed $250,000 per year, but that threshold is far too high. Gifts of five digits can sponsor a professorship, endow a lecture series, wine and dine administrators on junkets abroad, and buy influence over a college.
Third, the House should maintain — and strengthen — the ICA’s penalties for noncompliance. Current law permits the secretary of education to ask the attorney general to sue noncompliant institutions — a nuclear option that has never been used. The ICA would impose fines, an important step, though the Senate recommends fees starting as low as $250 per year, so low as to be meaningless to colleges. The House should look to the Foreign Funding Accountability Act, introduced in the Senate by Senator Tom Cotton (R., Ark.), which recommends heftier, more appropriate fines.
The House should also make two key changes. First, it should match Banks’s Countering Communist China Act by ditching “negotiated rulemaking,” which would give the higher-ed lobby veto power over the department’s ability to issue guidance and take enforcement steps. Given higher ed’s strident opposition to foreign-gift transparency, “negotiated rulemaking” could easily gut Section 117 enforcement entirely, allowing schools to return to business as usual and lulling policymakers back to sleep.
The House should further require colleges to provide copies of contracts and agreements they signed when accepting foreign money. Current law asks colleges to provide a “description of . . . conditions or restrictions” on a foreign gift or contract, but this information is self-reported, spotty, and not verifiable. The Department of Education needs copies of gift agreements to ensure compliance, and the public deserves that information as a matter of transparency.
Foreign-gift disclosure is important for national security, the integrity of our colleges, and informed decision-making by everyday Americans. The House must not squander this opportunity to significantly improve all three.