20 U.S.C. § 1065 — Endowment challenge grants

Page 301 TITLE 20—EDUCATION § 1065 § 1065. Endowment challenge grants (a) Purpose; definitions (1) The purpose of this section is to establish a program to provide matching grants to eligi- ble institutions in order to establish or increase endowment funds at such institutions, to pro- vide additional incentives to promote fund rais- ing activities by such institutions, and to foster increased independence and self-sufficiency at such institutions. (2) For the purpose of this section: (A) The term ‘‘endowment fund’’ means a fund established by State law, by an institu- tion of higher education, or by a foundation which is exempt from taxation and is main- tained for the purpose of generating income for the support of the institution, but which shall not include real estate. (B) The term ‘‘endowment fund corpus’’ means an amount equal to the grant or grants awarded under this section plus an amount equal to such grant or grants provided by the institution. (C) The term ‘‘endowment fund income’’ means an amount equal to the total value of the endowment fund established under this section minus the endowment fund corpus. (D)(i) The term ‘‘eligible institution’’ means an institution that is an— (I) eligible institution under part A or would be considered to be such an institu- tion if section 1058(b)(1)(C) of this title re- ferred to a postgraduate degree rather than a bachelor’s degree; (II) institution eligible for assistance under part B or would be considered to be such an institution if section 1063 of this title referred to a postgraduate degree rath- er than a baccalaureate degree; or (III) institution of higher education that makes a substantial contribution to post- graduate medical educational opportunities for minorities and the economically dis- advantaged. (ii) The Secretary may waive the require- ments of subclauses (I) and (II) of clause (i) with respect to a postgraduate degree in the case of any institution otherwise eligible under clause (i) for an endowment challenge grant upon determining that the institution makes a substantial contribution to medical education opportunities for minorities and the economically disadvantaged. (b) Grants authorized (1) From sums available for this section under section 1068h of this title, the Secretary is au- thorized to award endowment challenge grants to eligible institutions to establish or increase an endowment fund at such institution. Such grants shall be made only to eligible institu- tions described in paragraph (4) whose applica- tions have been approved pursuant to subsection (g). (2)(A) Except as provided in subparagraph (B), no institution shall receive a grant under this section, unless such institution has deposited in its endowment fund established under this sec- tion an amount equal to the amount of such grant. The source of funds for this institutional match shall not include Federal funds or funds from an existing endowment fund. (B) The Secretary may make a grant under this part to an eligible institution in any fiscal year if the institution— (i) applies for a grant in an amount not ex- ceeding $1,000,000; and (ii) has deposited in the eligible institution’s endowment fund established under this section an amount which is equal to 1⁄2 of the amount of such grant. (C) An eligible institution of higher education that is awarded a grant under subparagraph (B) shall not be eligible to receive an additional grant under subparagraph (B) until 10 years after the date on which the grant period termi- nates. (3) The period of a grant under this section shall be not more than 20 years. During the grant period, an institution may not withdraw or expend any of the endowment fund corpus. After the termination of the grant period, an in- stitution may use the endowment fund corpus plus any endowment fund income for any edu- cational purpose. (4)(A) An institution of higher education is eli- gible to receive a grant under this section if it is an eligible institution as described in sub- section (a)(2)(D) of this section. (B) No institution shall be ineligible for an en- dowment challenge grant under this section for a fiscal year by reason of the previous receipt of such a grant but no institution shall be eligible to receive such a grant for more than 2 fiscal years out of any period of 5 consecutive fiscal years. (5) An endowment challenge grant awarded under this section to an eligible institution shall be in an amount which is not less than $100,000 in any fiscal year. (6)(A) An eligible institution may designate a foundation, which was established for the pur- pose of raising money for the institution, as the recipient of the grant awarded under this sec- tion. (B) The Secretary shall not award a grant to a foundation on behalf of an institution unless— (i) the institution assures the Secretary that the foundation is legally authorized to receive the endowment fund corpus and is legally au- thorized to administer the fund in accordance with this section and any implementing regu- lation; (ii) the foundation agrees to administer the fund in accordance with the requirements of this section and any implementing regulation; and (iii) the institution agrees to be liable for any violation by the foundation of the provi- sions of this section and any implementing regulation, including any monetary liability that may arise as a result of such violation. (c) Grant agreement; endowment fund provisions (1) An institution awarded a grant under this section shall enter into an agreement with the Secretary containing satisfactory assurances that it will (A) immediately comply with the matching requirements of subsection (b)(2), (B) establish an endowment fund independent of any other such fund of the institution, (C) invest the Page 302 TITLE 20—EDUCATION § 1065 endowment fund corpus, and (D) meet the other requirements of this section. (2)(A) An institution shall invest the endow- ment fund corpus and endowment fund income in low-risk securities in which a regulated insur- ance company may invest under the law of the State in which the institution is located such as a federally insured bank savings account or comparable interest-bearing account, certificate of deposit, money market fund, mutual fund, or obligations of the United States. (B) The institution, in investing the endow- ment fund established under this section, shall exercise the judgment and care, under the cir- cumstances then prevailing, which a person of prudence, discretion, and intelligence would ex- ercise in the management of such person’s own affairs. (3)(A) An institution may withdraw and ex- pend the endowment fund income to defray any expenses necessary to the operation of such col- lege, including expenses of operations and main- tenance, administration, academic and support personnel, construction and renovation, commu- nity and student services programs, and tech- nical assistance. (B)(i) Except as provided in clause (ii), an in- stitution may not spend more than 50 percent of the total aggregate endowment fund income earned prior to the time of expenditure. (ii) The Secretary may permit an institution to spend more than 50 percent of the endowment fund income notwithstanding clause (i) if the in- stitution demonstrates such an expenditure is necessary because of (I) a financial emergency, such as a pending insolvency or temporary li- quidity problem; (II) a life-threatening situation occasioned by a natural disaster or arson; or (III) any other unusual occurrence or exigent circumstance. (d) Repayment provisions (1) If at any time an institution withdraws part of the endowment fund corpus, the institu- tion shall repay to the Secretary an amount equal to 50 percent of the withdrawn amount, which represents the Federal share, plus income earned thereon. The Secretary may use such re- paid funds to make additional challenge grants, or to increase existing endowment grants, to other eligible institutions. (2) If an institution expends more of the en- dowment fund income than is permitted under subsection (c), the institution shall repay the Secretary an amount equal to 50 percent of the amount improperly expended (representing the Federal share thereof). The Secretary may use such repaid fund to make additional challenge grants, or to increase existing challenge grants, to other eligible institutions. (e) Audit information An institution receiving a grant under this section shall provide to the Secretary (or a des- ignee thereof) such information (or access there- to) as may be necessary to audit or examine ex- penditures made from the endowment fund cor- pus or income in order to determine compliance with this section. (f) Selection criteria In selecting eligible institutions for grants under this section for any fiscal year, the Sec- retary shall— (1) give priority to an applicant that is re- ceiving assistance under part A or part B or has received a grant under part A of this sub- chapter or part B of this subchapter within the 5 fiscal years preceding the fiscal year in which the applicant is applying for a grant under this section; (2) give priority to an applicant with a greater need for such a grant, based on the current market value of the applicant’s exist- ing endowment in relation to the number of full-time equivalent students enrolled at such institution; and (3) consider— (A) the effort made by the applicant to build or maintain its existing endowment fund; and (B) the degree to which an applicant pro- poses to match the grant with nongovern- mental funds. (g) Application Any institution which is eligible for assistance under this section may submit to the Secretary a grant application at such time, in such form, and containing such information as the Sec- retary may prescribe, including a description of the long- and short-term plans for raising and using the funds under this part. Subject to the availability of appropriations to carry out this section and consistent with the requirement of subsection (f), the Secretary may approve an ap- plication for a grant if an institution, in its ap- plication, provides adequate assurances that it will comply with the requirements of this sec- tion. (h) Termination and recovery provisions (1) After notice and an opportunity for a hear- ing, the Secretary may terminate and recover a grant awarded under this section if the grantee institution— (A) expends portions of the endowment fund corpus or expends more than the permissible amount of the endowment funds income as prescribed in subsection (c)(3); (B) fails to invest the endowment fund in ac- cordance with the investment standards set forth in subsection (c)(2); or (C) fails to properly account to the Sec- retary concerning the investment and expendi- tures of the endowment funds. (2) If the Secretary terminates a grant under paragraph (1), the grantee shall return to the Secretary an amount equal to the sum of each original grant under this section plus income earned thereon. The Secretary may use such re- paid funds to make additional endowment grants, or to increase existing challenge grants, to other eligible institutions under this part. (i) Technical assistance The Secretary, directly or by grant or con- tract, may provide technical assistance to eligi- ble institutions to prepare the institutions to qualify, apply for, and maintain a grant, under this section. (Pub. L. 89–329, title III, § 331, formerly § 332, as added Pub. L. 99–498, title III, § 301(a), Oct. 17, 1986, 100 Stat. 1299; amended Pub. L. 100–50, § 2(a)(12), June 3, 1987, 101 Stat. 336; renumbered Page 303 TITLE 20—EDUCATION § 1066 § 331 and amended Pub. L. 102–325, title III, § 304(a)(3), (b), July 23, 1992, 106 Stat. 476; Pub. L. 103–208, § 2(a)(8), (10), (11), Dec. 20, 1993, 107 Stat. 2457, 2458; Pub. L. 105–244, title III, § 305, Oct. 7, 1998, 112 Stat. 1646; Pub. L. 110–315, title III, § 313, Aug. 14, 2008, 122 Stat. 3180.) Editorial Notes PRIOR PROVISIONS A prior section 331 of Pub. L. 89–329, title III, as added Pub. L. 99–498, title III, § 301(a), Oct. 17, 1986, 100 Stat. 1298, related to establishment of challenge grant pro- gram, was classified to section 1064 of this title prior to repeal by Pub. L. 102–325, § 304(a)(2). A prior section 1065, Pub. L. 89–329, title III, § 332, as added Pub. L. 96–374, title III, § 301, Oct. 3, 1980, 94 Stat. 1396, related to applications for challenge grants, prior to the general revision of this subchapter by Pub. L. 99–498. Another prior section 1065, Pub. L. 89–329, title IV, § 405, Nov. 8, 1965, 79 Stat. 1234; Pub. L. 90–575, title I, § 101(b)(2), Oct. 16, 1968, 82 Stat. 1017, related to allot- ment and reallotment of funds among the States, prior to the general revision of part A of subchapter IV of this chapter by Pub. L. 92–318, title I, § 131(b)(1), June 23, 1972, 86 Stat. 247. A prior section 1065a, Pub. L. 89–329, title III, § 333, as added Pub. L. 98–95, § 2, Sept. 26, 1983, 97 Stat. 708, estab- lished program of matching grants to increase endow- ments at eligible institutions of higher education, prior to the general revision of this subchapter by Pub. L. 99–498. AMENDMENTS 2008—Subsec. (b)(2)(B)(i). Pub. L. 110–315, § 313(a)(1), substituted ‘‘$1,000,000’’ for ‘‘$500,000’’. Subsec. (b)(5). Pub. L. 110–315, § 313(a)(2), substituted ‘‘$100,000’’ for ‘‘$50,000’’. Subsec. (i). Pub. L. 110–315, § 313(b), added subsec. (i). 1998—Subsec. (b)(1). Pub. L. 105–244, § 305(1), sub- stituted ‘‘section 1068h’’ for ‘‘section 1069f’’. Subsec. (b)(2)(B), (C). Pub. L. 105–244, § 305(2), added subpars. (B) and (C) and struck out former subpars. (B) and (C) which authorized Secretary to make grants under this part to eligible institutions in amounts which varied depending on amount appropriated in each fiscal year to carry out this part and limited rights of institutions to reapply for grants when amount appropriated was below specified amounts. 1993—Subsecs. (a)(2)(D), (b)(2)(B), (C), (5). Pub. L. 103–208 realigned margins and in subsec. (b)(5) sub- stituted ‘‘An endowment’’ for ‘‘an endowment’’. 1992—Subsec. (a)(1). Pub. L. 102–325, § 304(b)(1)(A), struck out ‘‘of higher education’’ after ‘‘eligible insti- tutions’’. Subsec. (a)(2)(D). Pub. L. 102–325, § 304(b)(1)(B), added subpar. (D). Subsec. (b)(1). Pub. L. 102–325, § 304(b)(2), inserted ‘‘en- dowment’’ before ‘‘challenge grants’’ and struck out ‘‘of higher education’’ after ‘‘eligible institutions’’. Subsec. (b)(2)(B), (C). Pub. L. 102–325, § 304(b)(3), amended subpars. (B) and (C) generally. Prior to amendment, subpars. (B) and (C) read as follows: ‘‘(B) In any fiscal year in which the appropriations for this part exceeds $10,000,000, the Secretary may make a grant under this part to an eligible institution of higher education if such institution— ‘‘(i) has deposited in its endowment fund estab- lished under this section an amount which is equal to one-half of the amount of such grant; and ‘‘(ii) applies for a grant in an amount exceeding $1,000,000. ‘‘(C) An eligible institution of higher education that is awarded a grant under this section shall not be eligi- ble to reapply for a grant under this section during the 10 years immediately following the period that it re- ceived such grant.’’ Subsec. (b)(4)(A). Pub. L. 102–325, § 304(b)(4), sub- stituted ‘‘subsection (a)(2)(D) of this section’’ for ‘‘sec- tion 1064(a)(1) of this title’’. Subsec. (b)(4)(B). Pub. L. 102–325, § 304(b)(5), sub- stituted ‘‘an endowment challenge grant’’ for ‘‘a chal- lenge grant’’. Subsec. (b)(5). Pub. L. 102–325, § 304(b)(6), amended par. (5) generally. Prior to amendment, par. (5) read as fol- lows: ‘‘Except as provided in paragraph (2)(B), a chal- lenge grant under this section to an eligible institution year shall— ‘‘(A) not be less than $50,000 for any fiscal year; and ‘‘(B) not be more than (i) $250,000 for fiscal year 1987; or (ii) $500,000 for fiscal year 1988 or any suc- ceeding fiscal year.’’ Subsec. (f)(1). Pub. L. 102–325, § 304(b)(7), amended par. (1) generally. Prior to amendment, par. (1) read as fol- lows: ‘‘give priority to an applicant which is a recipient of a grant made under part A or B of this subchapter (or section 1069a of this title) during the academic year in which the applicant is applying for a grant under this section;’’. Subsec. (g). Pub. L. 102–325, § 304(b)(8), inserted ‘‘, including a description of the long- and short-term plans for raising and using the funds under this part’’ before period at end of first sentence. 1987—Subsec. (f)(1). Pub. L. 100–50 inserted ‘‘(or sec- tion 1069a of this title)’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1998 AMENDMENT Amendment by Pub. L. 105–244 effective Oct. 1, 1998, except as otherwise provided in Pub. L. 105–244, see sec- tion 3 of Pub. L. 105–244, set out as a note under section 1001 of this title. EFFECTIVE DATE OF 1993 AMENDMENT Amendment by Pub. L. 103–208 effective as if included in the Higher Education Amendments of 1992, Pub. L. 102–325, except as otherwise provided, see section 5(a) of Pub. L. 103–208, set out as a note under section 1051 of this title. EFFECTIVE DATE OF 1992 AMENDMENT Amendment by Pub. L. 102–325 effective Oct. 1, 1992, see section 2 of Pub. L. 102–325, set out as a note under section 1001 of this title. EFFECTIVE DATE OF 1987 AMENDMENT Amendment by Pub. L. 100–50 effective as if enacted as part of the Higher Education Amendments of 1986, Pub. L. 99–498, see section 27 of Pub. L. 100–50, set out as a note under section 1001 of this title. PART D—HISTORICALLY BLACK COLLEGE AND UNIVERSITY CAPITAL FINANCING Editorial Notes CODIFICATION Pub. L. 105–244, title III, § 301(a)(3), Oct. 7, 1998, 112 Stat. 1636, redesignated part B of subchapter VII of this chapter as part D of subchapter III of this chapter. PRIOR PROVISIONS A prior part D, consisting of sections 1066 to 1069, 1069b to 1069d, and 1069f, was redesignated part F (§ 1068 et seq.) of this subchapter by Pub. L. 105–244, title III, § 301(a)(1), Oct. 7, 1998, 112 Stat. 1636. § 1066. Findings The Congress finds that— (1) a significant part of the Federal mission in education has been to attain equal oppor- tunity in higher education for low-income, educationally disadvantaged Americans and African Americans;