Key Takeaways:
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Universities should expect increased oversight activity focused on requirements under Section 117 to disclose significant sources of foreign funding, including through audits and/or investigations.
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The EO states that universities will be required to disclose the “true amounts,” sources and purposes of foreign funds, which will be provided to the public for greater access of information.
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The EO directs the Secretary of Education and other agency heads to make certification of compliance with Section 117 material for purposes of FCA liability, and signals that grant funds may be withheld from universities that are not in compliance with Section 117.
On April 23, 2025, President Donald Trump signed an Executive Order (EO) entitled “Transparency Regarding Foreign Influence at American Universities” and issued an accompanying Fact Sheet. The EO rekindles initiatives from the first Trump administration, when former Education Secretary Betsy DeVos increased scrutiny of foreign gifts and contracts to U.S. colleges and universities and cautioned campus officials to more fully report foreign funding to the government. Specifically, the EO highlights the Trump administration’s concern that undisclosed foreign funding may have national security risks, foreign influence implications and compromise academic integrity, citing to an unspecified study that found that from 2010 to 2016, universities failed to disclose more than half of reportable foreign gifts, and asserting that of approximately 6,000 U.S. institutions, only about 300 self-report foreign money each year.
The EO concludes by stating that it is the administration’s policy “to end the secrecy surrounding foreign funds in American educational institutions, protect the marketplace of ideas from propaganda sponsored by foreign governments, and safeguard America’s students and research from foreign exploitation.”
Robust Enforcement of Section 117 of the Higher Education Act
Touting the first Trump administration’s initiation of 19 investigations over the 2019-2021 period, the EO states that work caused universities to report $6.5 billion of previously undisclosed foreign funding. Consistent with those efforts, the EO directs the Secretary of Education to “take all appropriate actions” to enforce Section 117 of the Higher Education Act of 1965, 20 U.S.C. 1011f (Section 117) requirements. Specifically, the EO directs the Secretary to:
(1) Reverse or rescind “any actions by the prior administration that permit higher education institutions to maintain improper secrecy regarding their foreign funding”.
(2) Require universities to “more specifically” disclose the “true source and purpose” of foreign funds.
(3) Provide the American people with greater access to information regarding foreign funding in higher education institutions.
(4) Hold institutions that are found non-compliant accountable by conducting audits, investigations and enforcement actions in collaboration with the Attorney General and relevant departments and agencies.
(5) Prospectively ensure (along with other appropriate executive departments and agencies) that certification of compliance by higher education institutions with Section 117 and any other applicable foreign funding disclosure requirements “is material for purposes of 31 U.S.C. 3729 and for receipt of appropriate Federal grant funds.”
The suggestion that noncompliance with Section 117 could place federal funding at risk raises several questions. Section 117 itself provides only a limited enforcement mechanism: “Whenever it appears that an institution has failed to comply with the requirements of this section, . . . a civil action may be brought by the Attorney General, at the request of the Secretary, . . . to compel compliance with the requirements of this section.” Additionally, only in the case of “knowing” or “willful failure to comply” can the government recover the “full costs . . . of obtaining compliance.” Section 117 provides no other remedies.
The EO’s position that a certification of compliance with Section 117 is “material” for purposes of False Claims Act (FCA) liability is also noteworthy. The EO is ambiguous, however, in explaining the nature of a possible FCA action as it provides that the certification is material for purposes of the FCA “and” for receipt of “appropriate” grant funds, “which shall not be provided in cases of noncompliance with” Section 117. Are those two distinct remedies, an FCA issue and loss of funding? Will grant-making agencies place a Section 117-focused certification into their award terms and conditions? And what does the EO mean by the statement “appropriate” grant funds? Regardless of the answers to those and other questions, the clear intent of the EO is to increase risks of noncompliance with Section 117.
Section 117 also plainly states the information that an institution must report: “For gifts received from or contracts entered into with a foreign source other than a foreign government, the aggregate dollar amount of such gifts and contracts attributable to a particular country. The country to which a gift is attributable is the country of citizenship, or if unknown, the principal residence for a foreign source who is a natural person, and the country of incorporation, or if unknown, the principal place of business, for a foreign source which is a legal entity.” It is therefore uncertain how the EO’s directive that institutions disclose “more specifically” the “true source and purpose” of foreign funds aligns with the statute. To be sure, the Department of Education used subregulatory guidance, including FAQs, in an effort to articulate enhanced reporting expectations during the initial Trump administration. It may well do so again.
What Does This Mean?
The EO may be a harbinger of renewed focus on Section 117 and a precursor to another round of investigations. Going forward, the stakes may also be higher when it comes to Section 117 compliance given the EO’s statement that a certification of compliance with Section 117 is material for FCA purposes.
There are also legislative efforts to enhance Section 117-like reporting requirements. On March 27, 2025, the House, in a bipartisan vote, approved the Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions (DETERRENT) Act, which would lower the reporting threshold to $50,000, with an even stricter reporting threshold of $0 for all contracts entered into with “countries of concern.” Countries of concern currently include China, Russia, Iran, and North Korea. The Act is now pending in the Senate.
As highlighted in the EO, higher education institutions can expect to see a rise in Section 117 nondisclosure investigations, and should be prepared to respond to audits, investigations and enforcement actions.
