FOREIGN GIFT AND CONTRACT REPORTING LEGAL

“Gift” is defined to include a gift of money OR PROPERTY (non-monetary). Includes gifts of securities, land/real property, equipment and goods. Value non-monetary gifts at Fair Market Value at the time the non-monetary property is “received,” or transferred to Penn (e.g., when title to stocks are transferred; when property title is transferred; etc.)Penn is defined to include all of its “intermediaries” if any part of the gift directly or indirectly benefits the university: Include the UK and Hong Kong Foundations Include gifts to Penn Wharton China Center; UPenn International; Penn Praxis; Univ. of Penn. Press; Morris Arboretum; Annenberg Center for Performing Arts (Penn Live Arts); etc. (Health System components—gifts DAR knows about vs. contracts) 4<br>

Threshold: $250,000 or more, in the aggregate, RECEIVED during calendar year. All parts of Penn have to report every gift and contract, even if only for $1, from a “foreign source,” so gifts and contracts from the same “foreign source” can be aggregated across all other parts of Penn. Do not apply your own minimum financial “threshold” (e.g. only gifts of $25,000 or more.) Aggregating is done by the central Division of Finance from all the data from DAR and rest of Penn:
Hypothetical Example: Takeda Pharmaceutical Company, incorporated in Japan, entered into a $90,000 contract with Wharton Executive Education to train Takeda finance professionals. Takeda Pharmaceutical Co. also makes a $200,000 gift to Penn Nursing to support a lecture series in hospice care for seniors. When aggregated, this totals $290,000, and, therefore, needs to be reported as two transactions (one gift and one contract) with a single “foreign source” from Japan. 5<br>

Process:

DAR and all Schools, Centers, and other administrative units gather data and send to Central University Division of Finance.

Then Central University Division of Finance aggregates all of the centrally-available data (e.g., sponsored research agreements) with all of the data received from DAR, Schools, Centers and other administrative units, and prepares a single report for the University of Pennsylvania as a whole and single institution of higher education. 6<br>

Multi-year gifts:

Q: Penn signed a gift agreement, in which Jane Smith, a Canadian citizen, promises to pay Penn $150,000 every year for 5 years, pledging to pay a total of $750,000. When does DAR report this to Division of Finance? When does Division of Finance report this to the federal and state governments?

A: For gifts, the federal government’s guidance is to report the gift when the amount Penn receives equals or exceeds $250,000 in a single calendar year from the same foreign source. Penn is using the same guidance to determine when to report to Pennsylvania, except the threshold is $100,000 in Penn’s fiscal year from the same foreign source.

So DAR should report the gift to Central Finance as soon as Jane Smith pays the first $1, and report however much DAR receives (let’s assume $150,000) during the calendar year (for federal reporting) or fiscal year (for PA reporting). If the amount is under $250,000 for the calendar year, then Central Finance will not report at all to the federal gov’t. If the amount is over $100,000 but under $250,000 during the fiscal year, then Central Finance will report to Harrisburg, but not to D.C.

(This is the current guidance; if there is more guidance from D.C. or Harrisburg, this will be updated.) 7<br>

Federal Definition of a “Foreign Source”: Any foreign government (including an agent of a foreign gov’t), and Any foreign individual, and Any foreign legal entityHOW do you determine if an individual or legal entity is a "foreign source"?  If an individual: by his/her country of citizenship, or, if that is not known to Penn, then by the individual's principal residence.  If a legal entity: by the country of incorporation or legal formation, or if that is not known to Penn, then by the legal entity's principal place of business.Report every gift received to Central University Division of Finance, even if $1, IF it is from a “foreign source.” The first question to ask is: is this a gift from, or contract with, a “foreign source”? Yes or No. If Yes, report to Central University Division of Finance, even if $1. 8<br>

FAQs from Development Regarding Foreign Source Definition:● Asking for citizenship. It is not unlawful to ask a person for his/her citizenship. It is unlawful to discriminate based upon citizenship. Penn isn’t discriminating; we want the individual’s gift! But Penn, by law, has to try to determine and report his/her citizenship. ● Dual citizenship for an individual. If a person is both a U.S. and a non-U.S. citizen (e.g., Canadian), he/she is NOT a “foreign source” for Foreign Gift-Contract reporting purposes. But if the person holds dual citizenship and neither are U.S., then he/she IS a “foreign source.” Pick and report to Division of Finance the citizenship the donor prefers, or which is most closely associated with him/her (e.g., primary residence.) ● Green Card Holder (Permanent U.S. Resident status). The individual IS a “foreign source” for Foreign Gift-Contract reporting purposes. Report country of citizenship, even though the person permanently lives and works in the U.S.● Agency Issues. E.g.: Donor-advised funds? Trusts? Pledge from Person X but actual payment is made by Person Y? Etc. CASE BY CASE Analysis… 9<br>

The definition of a foreign government includes “agents” of a foreign government. Foreign government-owned universities, research institutes, consulates, and government agencies are examples of “agents” of a foreign government and should be reported. Hypothetical Example: The Abu Dhabi Tourism and Culture Authority (with offices in New York City) entered into a contract for training with SAS Organizational Dynamics department. The Abu Dhabi Tourism and Culture Authority is a department of the United Arab Emirates (UAE) government. The fact that it has a location in New York City and the SAS training will be provided in New York does not matter; it is a “Foreign Source” and is part of a “foreign government.” The Dubai Ministry of Education entered into a collaborative research agreement with Penn’s Graduate School of Education. The Dubai Ministry of Education is also a department of the United Arab Emirates (UAE) government. These two contracts would be aggregated, and reported as two contracts with the UAE government, if the aggregated dollar amount received equaled or exceeded $250,000 in a single calendar year. 10<br>

What Information Gets Reported to the Federal Gov't?What the statute requires: (A) If the foreign source is a foreign government: the aggregate dollar amount of all of the gifts from, and contracts with, the foreign government received during the calendar year (B) For all other foreign sources: the aggregate dollar amount of all of the gifts from, and contracts with, a foreign source from a particular country. What the Dept. of Education requires to use its submission website: Name and Address of Foreign Source Whether a Gift or Contract (or Restricted Gift or Restricted Contract) Dollar Amount of Each Individual Gift or Contract that Aggregates to Threshold Foreign Country 11<br>

ADDITIONAL REPORTING for "Restricted or Conditional Gifts or Contracts" DEFINITION: WHAT is a "Restricted or Conditional Gift or Contract"? (Here's the actual statutory language:) “restricted or conditional gift or contract” means any endowment, gift, grant, contract, award, present, or property of any kind which includes provisions regarding-- (A) the employment, assignment, or termination of faculty; (B) the establishment of departments, centers, research or lecture programs, or new faculty positions; (C) the selection or admission of students; or (D) the award of grants, loans, scholarships, fellowships, or other forms of financial aid restricted to students of a specified country, religion, sex, ethnic origin, or political opinion.[Preference vs. restriction in subsection (D)] 12<br>

What Information Gets Reported to the Federal Gov't for a Restricted or Conditional Gift or Contract? (A) If the foreign source is a foreign government: the amount, the date, a description of such conditions or restrictions, and the name of the foreign government. (B) For all other foreign sources: the amount, the date, a description of such conditions or restrictions, and the country of the foreign source. E.g.: “a gift to establish a new research Center on Diabetes” “a gift to establish an annual lecture program on robotics” “a gift for a new endowed professorship in Chemical Engineering”REMEMBER: Restricted or conditional gifts are a subset of all gifts from foreign sources. Even if a gift is NOT a “restricted or conditional gift” from a foreign source, it still must be reported to Division of Finance as a gift from a “foreign source.”DAR is responsible for reading each gift agreement, and determining if the gift from a foreign source is a “restricted or conditional gift,” and, if so, sending a description of the restriction/conditions to Central University Division of Finance. 13<br>

Current Pennsylvania Law (24 P.S. 6301-6307, in effect since 1986):Penn needs to report gifts from, and contracts with, a "foreign source," where the amount Penn receives in the aggregate from that foreign source is $100,000 or more during Penn's fiscal year (July 1 to June 30).Report Once Each Fiscal Year (by November 15, for fiscal year ended on June 30th)Threshold: aggregate of $100,000 or more RECEIVED during Penn’s fiscal year from a foreign source. (However, DAR should report every gift, even if only $1, from a foreign source, to Central University Division of Finance.) 14<br>

WHO is a "Foreign Source"? ● Could be a foreign government ● Or could be a foreign individual: defined as someone who "is not a citizen or national of the United States or a trust territory or protectorate thereof.“ Citizenship is required; PA law does not allow Penn to “fall back” on the individual’s principal residence if Penn doesn’t know the individual’s citizenship. ● Or could be a foreign legal entity 15<br>

HOW do you determine if a donor/contracting party is a "foreign legal entity?“NOTE: This is different from the U.S. statute, and potentially more complicated: Actual definition from Pennsylvania law of a “foreign legal entity”: (1) Any legal entity created under the laws of a foreign government. [or](2) Any legal entity created under the laws of the United States or of any state or political subdivision thereof if: (i) fifty percent of the ownership of the stock of, or interest in, such legal entity is directly or indirectly owned legally or beneficially by one or more foreign governments or one or more foreign persons; (ii) fifty percent of the membership of any such entity is composed of foreign persons or legal entities created under the laws of a foreign government or agents of such legal entities; or (iii) fifty percent of the assets of such entity are derived from contributions or loans from foreign governments or foreign persons. 16<br>

What information gets reported to Harrisburg? NOTE: Different from federal law. (1) The name and address of the donor of the gift. (2) The amount and date of the making of each gift. (3) The subject of each gift. (4) A detailed description of any terms, restrictions, requirements or conditions imposed on the college by the terms of the gift. (5) A detailed description of the purpose for which the gift will be used by the college or university, including the identification of the persons whom the gift is explicitly intended to benefit. 17<br>

Partial Exception for Penn Alumnus (only available under Pennsylvania law, not federal law): (Actual statutory language:) "if the foreign source is an alumnus, and no grant or contract contains any conditions, restrictions, requirements, matching provisions or designations other than that the grant or contract is given for the benefit of the institution as a whole, the disclosure report shall be required to disclose only the nationality and country of residence of the foreign source." NOTE: Name and address of donor who is a Penn alumnus, and dollar amount and date of gift, do not have to be disclosed to Harrisburg if gift meets the conditions above: (1) donor is an alumnus; (2) unrestricted gift—no conditions or restrictions or matching provisions; and (3) benefits University of Pennsylvania, not a particular School, Center, or program. However, still have to report the gift if it is $100,000 or more in Penn's fiscal year, and disclose the donor's nationality and country of residence. 18<br>

Pennsylvania Penalty for Noncompliance [NOTE: Potentially severe and significant]:  Actual statutory language: "Any college or university that willfully or intentionally fails to disclose the information required . . . shall be subject to a civil penalty of 105% of the amount of any undisclosed gift." 19<br>

Enforcement Actions by Federal Gov't (since 2019 through 2021)  Georgetown Fordham Texas A&M Stanford Cornell U. Alabama Rutgers Auburn MIT Florida State U. Maryland Georgia State Harvard UNLV Yale U. New Mexico U. Texas U. Wisconsin Case Western Reserve  U.S. Dept. of Education has publicly issued a statement identifying Penn as one of 10 universities that was late and/or incomplete in disclosing foreign gifts and contracts from past years.The data submitted to both Washington DC and to Harrisburg are publicly available. 20<br>

Reporting tools and requirements Use Program code R117 when depositing a payment via BEN Deposits or Creating a journal in the General Ledger
CNAC-ORG-BC-0XXXXX-OBJ-R117-CREF
Should not be used for 4, 5 or 6 funds
Should only be used for Revenue and Cash object codes
Submit reports using the Penn template (https://www.finance.upenn.edu/accounting-reporting/reporting-foreign-gifts-and-contracts/ )
When submitting data:
If an entity is a Foreign Government or an agent of a foreign government, make sure to add a Y in column D to include the country/government name in column E
If the payment is a contract, a start and end date is required. If an end date is not available, please provide the best date that you believe can be used
Reports should be sent to Bob Speakman bspeakma@upenn.edu
Penn collects foreign gift and contract data for reporting quarterly: 21<br>

Penn Resources for Foreign Gift and Contract Reporting Division of Finance Website (https://www.finance.upenn.edu/accounting-reporting/reporting-foreign-gifts-and-contracts/ )
FAQs
Reporting template
Still have questions?
Contact Bob Firestone in Office of General Counsel (robert.firestone@ogc.upenn.edu) or Missy Peloso in Office of Research Services (epeloso@upenn.edu) (for interpretive questions)
Contact Bob Speakman (bspeakma@upenn.edu ) in Office of Research Services for submission of data and operational questions 22<br>