US Ivy league Harvard and Yale universities are being investigated over suspicions of receiving undisclosed funds from Saudi Arabia and China among other foreign countries.
According to information from the US Department of Education, the elite schools did not fully report hundreds of millions of dollars in foreign gifts and contracts, reports BBC.
They two universities told BBC they were preparing responses for the government.
The US law dictates that universities are required to report all gifts and contracts from foreign sources that exceeds USD 250,000.
The Department of Education uncovered around USD 6.6 billion in previously unreported gifts from countries including Qatar, China, Saudi Arabia and the United Arab Emirates in July last year. However, the report said this figure could be significantly underestimated.
It has been previously said by officials that foreign spending on US universities act as a "black hole" and often come with strings attached.
One of the officials of the US Secretary of Education, Betsy DeVos, said, "Unfortunately, the more we dig, the more we find that too many are underreporting or not reporting at all."
What are Harvard and Yale accused of?
The Department of Education said Yale University had chosen not to report any foreign funding over the last four years, and is suspected of failing to disclose at least USD 375 million in foreign gifts and contracts.
The agency said it was also concerned that Harvard lacked "appropriate institutional controls over foreign money" and had failed to fully report foreign gifts and contracts.
Earlier this month, the chairman of Harvard's chemistry department and two Chinese researchers were charged with making false statements about ties to the Chinese government.
In letters to the Ivy League universities, the Department of Education called on them to supply the names and addresses of foreign sources involved in contracts and gifts, as well as the activities supported by the funding since August 2013.
Harvard was asked to disclose records involving the governments of China, Qatar, Russia, Saudi Arabia and Iran, as well as companies including Chinese technology giant Huawei.
Officials called on Yale to disclose similar information about foreign contributions.