Statutory Compliance & Reporting

Introduction Legal
Cash Management Reporting and Compliance
Finance (Including Payroll) Research Compliance (Federal)
Human Resources Risk Management (Safety and Security)

 

(Please note: This section discusses various regulatory and reporting requirements of the U.S. Federal government that may apply to academic or research programs for a U.S.-based institution. Non-U.S. institutions may have requirements based on home-country laws and regulations that are not discussed here. Also, U.S. or other country reporting and regulatory requirements related to endowment and asset management are beyond the scope of this section and not covered, though some of the requirements for academic and research activities may also apply.)

International activities of colleges and universities, though academic in nature and intent, need to comply with domestic and foreign-country reporting and regulatory requirements. Once the registration or legal requirements have been contemplated and established (see Legal Entities and General Legal Support section), the result is often compliance requirements that must be adhered to at the onset of activities as well as monthly, quarterly, and on an annual basis in the home and host country.  Program administrators should work with home- and host-country legal counsel to understand and fulfill any home- and host-country reporting obligations.

Domestic Reporting and Regulations

(Only U.S. reporting and regulatory requirements are discussed in this section. Universities with a home country other than the United States should seek professional assistance to understand domestic requirements of that particular country.)

There are filings and registrations that may be affected or required due to the commencement of activities outside a home country. These generally range from additional information required on a tax return to specific filings of information that are only required due to certain types of activities outside the home country. Opening physical locations (e.g., offices) and bank accounts, being awarded sponsored research funds, granting monies to individuals and institutions, and certain dealings with foreign governments and officials are other examples of activities that commonly trigger domestic reporting.

Using the United States as an example, there are numerous domestic reporting and compliance reporting requirements that may be affected by activities abroad. Those most commonly affected include: (This is not an exhaustive list.)

IRS Form 990

Prior to the new Form 990, reporting foreign activities on the old Form 990 was limited to questions regarding foreign bank accounts and foreign offices. The new Form 990, introduced in 2008, requires exempt organizations that meet certain thresholds regarding their international activities to present detailed information on Schedule F. There are three main parts of the schedule:

  1. General information section about revenue and expenses outside the U.S. greater than $10,000.
  2. Grants to organizations outside U.S. >$5,000.
  3. Grants to individuals outside U.S. >$5,000.

The general information section requires information to be reported by region (not country) and by amount, and to be categorized by activity type. This section also requires listing the total number of offices in each region and the total number of employees or agents in the respective region(s). There is a fourth part of the schedule requiring supplemental narrative information about the procedures to monitor the use of funds by grantmakers and the explanation of how the organization estimated the number of individual grant recipients.

Export Controls Compliance

U.S. export-control laws and regulations impose the same restrictions on the export of items from universities that would apply to other exports from the United States. So if a university is shipping a product or equipment to another country it must ensure that the proposed shipment complies with the export-control laws. This may include other items as well such as encryption products and computers. By definition under U.S. export-control laws and regulations, the release or disclosure of technology to a foreign national may be deemed an export to that foreign national's country of origin and could be subject to licensing requirements.

The Office of Foreign Assets Control (OFAC)

The OFAC administers and enforces economic sanctions programs primarily against countries and groups of individuals. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals. All U.S. persons (which by legal definition includes U.S. institutions) must abide by these sanctions.

OFAC Country Sanctions and List-Based Sanctions are available on the OFAC Sanctions Web page. OFAC also publishes a list of Specially Designated Nationals and Blocked Persons ("SDN list") that includes over 3,500 names of companies and individuals connected with the sanctions targets. U.S. persons are prohibited from dealing with SDNs wherever they are located and all SDN assets are blocked. It is important to check OFAC's Web site on a regular basis to ensure that your SDN list is current. The Excluded Party List System (EPLS) listing is at www.epls.gov.  The purpose of EPLS is to provide a single comprehensive list of individuals and firms excluded by Federal government agencies from receiving federal contracts or federally approved subcontracts and from certain types of federal financial and nonfinancial assistance and benefits.  This listing should be reviewed regularly as it is updated in real time as changes occur.

Report of Foreign Bank and Financial Accounts (Treasury Form TD F 90-22.1)

U.S.-based institutions are generally required to report foreign bank account information annually. They should use the Report of Foreign Bank and Financial Accounts (FBAR). This report should be filed by June 30 each year with the U.S. Department of the Treasury stating that the institution has financial accounts in a foreign country with an aggregate value exceeding $10,000 at any time during the calendar year. The definition of a financial account includes a bank account, brokerage account, mutual fund, unit trust, or other types of financial accounts.

Please note: For U.S. tax purposes university employees may also be required to file an FBAR report and indicate on schedule B of their individual Form 1040 or other annual tax return with the IRS if they have signatory authority over a university-controlled bank account in a foreign country or are a U.S. citizen, permanent resident, or resident alien.

Clery Act

The Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act is a federal law that requires colleges and universities to disclose certain timely and annual information about campus crime and security policies. All public and private institutions of postsecondary education participating in federal student aid programs are subject to it. Compliance is required both for U.S.-owned foreign institutions as well as branches of domestic institutions that are located abroad. 

Institutions that send students to study abroad or to exchange programs at institutions they do not own may or may not be required to disclose crimes occurring there, depending on the specific facility arrangements and consideration given for use of those facilities.  Institutions that share a campus with another international institution or have separate buildings that are rented or leased, including rented classroom space on the campus of another institution, disclosure of crimes that occur in that classroom space while it is occupied by your students is typically required. 

Foreign Corrupt Practices Act (FCPA)

FCPA was enacted to make it unlawful to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the antibribery provisions of the FCPA prohibit payment to a foreign official to influence the foreign official in his or her official capacity.

Other domestic reports, laws, or regulations that may be applicable to activities or programs abroad but not discussed in detail in this section include:

Other domestic reporting requirements are discussed later in the sections specific to certain functional areas.

Foreign Country Compliance and Regulatory Requirements

Setting up programs and activities in a foreign country often triggers local reporting and compliance requirements once a legal structure has been determined and established. In most cases your reporting obligations will be dictated by how your institution is legally registered in the host country. For this reason it is crucial to obtain qualified host-country legal advice in this area. Improper registration or failure to register qualifying activities can have very serious reputational and financial ramifications for a university.  

Hiring local workers, teaching activities, long-term working arrangements for home-country employees, and opening offices or other locations are all examples of activities that often trigger local-country reporting and compliance requirements. It is also important to establish a sound infrastructure for the back-office support functions (e.g., payroll, bookkeeping, compliance filings, etc.). Depending on the activities it may be necessary to approach back-office support in two phases-first establishing a temporary structure to support initial activities and then a more permanent structure to support the long-term operations.

The reporting and local compliance requirements vary greatly by country. Local professional assistance (e.g., legal counsel) must be engaged to ensure all requirements are being met timely and accurately.

Once registration has occurred (see Legal Entities and General Legal Support for discussion on legal registration), examples of ongoing reporting and compliance requirements that may be necessary on a monthly or quarterly basis include: (This is not an exhaustive list.)

Annual reporting requirements may include:

It should be noted that when a U.S. not-for-profit institution registers for legal status in a host country or enters into an agreement with a local government that institution should work with home- and host-country legal counsel in an attempt to gain tax-exempt status in the host country. This status should never be assumed based on the tax-exempt status of the institution in their home country or based on the status in other countries, and tax-exempt entities are not recognized in every country.

Your institution should also check registration requirements for value-added taxes (VAT), goods and services taxes (GST), consumption taxes, or similar taxes levied on goods and services, as well as from corporate income taxes applicable to for-profit institutions. Exemption from the registration of these types of taxes, however, is usually separate and distinct from determination of income tax status. If your U.S. not-for-profit institution cannot obtain tax-exempt status in the host country you may be required to pay corporate income taxes as if you were a for-profit institution. (Note: In some instances it may be beneficial for your institution not to apply for tax-exempt status in a host country. You should consult with home- and host-country legal counsel when making this determination.)

In host countries where VAT or similar taxes are levied on goods and services, even institutions that are tax exempt by the standards the host country may be required to pay VAT upon the purchase of certain goods and services.  After paying VAT the tax-exempt institution may apply for VAT reimbursement from host-country tax authorities. Current and compliant records related to any VAT paid and reimbursed (including VAT receipts) should be kept by host-country finance offices, including reconciling amounts to the institution's general ledger and accounting for currency conversion and exchange rates.

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