[Federal Register Volume 68, Number 189 (Tuesday, September 30, 2003)]
[Rules and Regulations]
[Pages 56466-56470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24290]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Part 1050

RIN 0970-AC13


Charitable Choice Provisions Applicable to Programs Authorized 
Under the Community Services Block Grant Act

AGENCY: Administration for Children and Families (ACF), Department of 
Health and Human Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule implements the Charitable Choice statutory 
provisions in the Community Services Block Grant Act (``CSBG Act''). 
These provisions apply to programs authorized under the Act, including 
the Community Services Block Grant Program, Training, Technical 
Assistance and Capacity Building Program, Community Food and Nutrition 
Program, National Youth Sports Program, and discretionary grants for 
economic development, rural community development, and neighborhood 
innovation, which are all administered by the Administration for 
Children and Families (ACF). It is ACF's policy that, within the 
framework of constitutional church-state guidelines, faith-based 
organizations should be able to compete on an equal footing for 
funding, and ACF supports the participation of faith-based 
organizations in these programs.

EFFECTIVE DATE: October 30, 2003.

FOR FURTHER INFORMATION CONTACT: Clarence Carter, Director, Office of 
Community Services (OCS), Administration for Children and Families 
(ACF), United States Department of Health and Human Services, at (202) 
401-9333.

SUPPLEMENTARY INFORMATION: On December 17, 2002, the Administration for 
Children and Families (ACF), Department of Health and Human Services 
(HHS), published in the Federal Register (67 FR 77368) a proposed rule 
to implement the Charitable Choice statutory provisions of section 679 
of the Community Services Block Grant Act (``CSBG Act''). Title 42 
U.S.C. Section 9920. Section 679 of the CSBG Act provides for the 
participation of religious organizations in programs authorized by the 
Act. ACF provided a 60-day comment period on the proposed rule, which 
ended on February 18, 2003.
    The proposed rule was issued under the authority granted to the 
Secretary of Health and Human Services (the Secretary) by Title 42 
U.S.C. 9901. Section 9901 authorizes States to provide an opportunity 
for active participation by faith-based groups, as well as other 
charitable, private, and neighborhood-based organizations, in programs 
directed to eliminate poverty.
    Title II of the Community Opportunities, Accountability, and 
Training and Education Services Act of 1998 (COATS) (Pub. L. 105-285) 
sets forth certain ``Charitable Choice'' provisions clarifying Federal, 
State, and local authority to use religious organizations to provide 
benefits and services that help families achieve self-sufficiency in 
programs authorized under the CSBG Act. In addition to giving families 
a greater choice of providers, these provisions set forth certain 
requirements to ensure that religious organizations are able to compete 
on an equal footing for funds without impairing the religious character 
of such organizations and without diminishing the religious freedom of 
the CSBG Act recipients.
    President Bush has made it one of his Administration's top 
priorities to ensure that Federal programs are fully open to faith-
based and community groups in a manner that is consistent with the 
Constitution. It is the Administration's view that faith-based 
organizations are an indispensable part of the social services network 
of the United States. Faith-based organizations, including places of 
worship, nonprofit organizations, and neighborhood groups, offer 
numerous social services to those in need. The Charitable Choice 
provisions in the CSBG Act are consistent with the Administration's 
belief that there should be an equal opportunity for all organizations, 
both faith-based and nonreligious, to participate as partners in 
Federal programs to serve Americans in need.
    The Charitable Choice provisions in the CSBG Act contain important 
protections both for religious organizations that receive funding, and 
for the individuals who receive their services. This Final Rule 
implements the Charitable Choice provisions applicable to Federal, 
State, and local governments when funding public and private 
organizations--including religious organizations. This final rule is 
intended to ensure that the CSBG Act programs are open to all eligible 
organizations, regardless of their religious affiliation or character.

Response to Comments Received on the Proposed Rule

    Thirteen organizations submitted comments on the proposed rule. The 
majority of the comments were from organizations that focus on civil 
liberties and/or separation of church and state. Comments were also 
received from major national religious organizations that provide 
social services, and also representatives of community action agencies 
(CAAs).
    While three national religious organizations supported the proposed 
rule as drafted, a majority of the comments took issue with major 
provisions, including those designed to keep religious activities 
separated from social services, safeguard the identity and functional 
options of religious organizations, protect the rights and options of 
beneficiaries, and assure appropriate accounting of expended funds.
    The following is a summary of comments by issue, and the 
Department's response to those comments:

[[Page 56467]]

Eligibility of Religious Organizations (Section 1050.3(a)(1) and (2))

    Comments: Several comments questioned the constitutionality of 
funding what could be ``pervasively'' religious organizations. They 
asked that the rule's language be strengthened to assure that religious 
programs that receive public funds for secular services ``provide such 
services in a completely secular manner and setting.'' Three comments 
supported the proposed rule as drafted.
    Response: We do not agree with the commenters. Religious 
organizations that receive direct CSBG Act funds cannot use such funds 
for inherently religious activities. These organizations must ensure 
that religious activities are separate in time or location from the 
treatment services and they must also ensure that participation in such 
religious activities is voluntary. Furthermore, they are prohibited 
from discriminating against a program beneficiary on the basis of 
religion or a religious belief.
    The Supreme Court's ``pervasively sectarian'' doctrine--which held 
that there are certain religious institutions in which religion is so 
pervasive that no government aid may be provided to them, because their 
performance of even ``secular'' tasks will be infused with religious 
purpose--no longer enjoys the support of a majority of the Court. Four 
Justices expressly abandoned it in Mitchell v. Helms, 530 U.S. 793, 
825-829 (2000) (plurality opinion), and Justice O'Connor's opinion in 
that case set forth reasoning that is inconsistent with its underlying 
premises, see id. at 857-858 (O'Connor, J., concurring in judgment, 
joined by Breyer, J.) (requiring proof of ``actual diversion of public 
support to religious uses''). Thus, six members of the Court have 
rejected the view that aid provided to religious institutions will 
invariably advance the institutions' religious purposes, and that view 
is the foundation of the ``pervasively sectarian'' doctrine. We 
therefore believe that when current precedent is applied to a social 
service program, or to the CSBG Act Charitable Choice provisions, 
government may fund all service providers, without regard to religion 
and free of criteria that require the provider to abandon its religious 
expression or character.

Separating Religious Activity From Social Services (Section 1050.3(b))

    Comments: Most of the comments asked for alternative language to 
ensure complete separation of religious activities from secular 
activities being provided by religious organizations. Several suggested 
changing the phrase ``separated, in time or location,'' to ``time and 
location.'' Three comments supported the rule as drafted.
    Response: The language in the proposed regulation provides 
appropriate safeguards to separate religious activities from secular 
activities supported by programs covered by this statute and 
regulation. As stated in the explanation of the proposed rule, program 
funds that are provided directly to a participating organization may 
not be used to support inherently religious activities, such as 
worship, religious instruction, or proselytization. If the organization 
engages in such activities, the activities must be offered separately, 
in time or location, from the programs or services for which it 
receives direct funding under the CSBG Act, and participation must be 
voluntary for the program participants. This requirement ensures that 
program funds provided directly to religious organizations are not used 
to support inherently religious activities. Thus, funds provided 
directly under the CSBG Act to a participating organization may not be 
used, for example, to conduct prayer meetings, studies of sacred texts, 
or any other activity that is inherently religious. Additionally, 
organizations may not fund these activities with cost sharing or 
matching funds, which must be used in a manner consistent with the 
federal funds. Moreover, a requirement that participating faith-based 
organizations separate their inherently religious activities from HHS-
funded activities in both time and location would impose an 
unnecessarily harsh burden on small religious organizations, which may 
have access to only one location that is suitable for the provision of 
HHS-funded services.

Independence of Religious Organizations (Section 1050.3(c))

    Comments: Several comments questioned the ability of religious 
organizations to retain their governing structures, which may permit 
discrimination on the basis of religious belief, when the current CSBG 
statute calls for tripartite governing boards that represent the broad 
community to be served. Three comments supported the proposed rule as 
drafted.
    Response: The Charitable Choice provisions must be implemented 
within the context of the authorizing legislation. The Community 
Services Block Grant Program under the CSBG Act contains specific 
requirements concerning CSBG ``eligible entities.'' The law requires 
that all ``eligible entities'' in that program administer CSBG Act 
funds ``through a tripartite board * * * that fully participates in the 
development, planning, implementation, and evaluation of the program to 
serve low-income communities.'' (Title 42 U.S.C. 9910). Section 9910 
further requires that the tripartite board include equal representation 
from elected public officials, representatives of low-income families 
in the neighborhoods served, and officials or members of business, 
industry, labor, religious, law enforcement, education or other major 
groups interested in the community served. We believe that religious 
organizations that become ``eligible entities'' to receive CSBG Act 
funding can comply with the board requirements of the CSBG Act so long 
as the members of their boards that oversee services and programs 
funded by the CSBG Act are truly representative of the these three 
constituencies.

Employment Discrimination (Section 1050.3(d))

    Comments: A majority of comments: (1) Objected to the proposed rule 
interpretation that religious organizations are exempt from Title VII 
of the Civil Rights Act that prohibits employment discrimination on the 
basis of religious belief; and (2) want applicable State and local 
antidiscrimination statutes to apply to religious organizations 
receiving social services funding. One comment objected to the ability 
of religious organizations to discriminate on the basis of sexual 
orientation and gender identity. Three comments support the proposed 
rule as drafted.
    Response: The receipt of funds from programs authorized in the CSBG 
Act does not affect a participating religious organization's exemption 
provided under 42 U.S.C. 2000-e regarding employment practices. Title 
VII of the Federal Civil Rights Act of 1964 provides that a religious 
organization may, without running afoul of Title VII, employ 
individuals who share its religious beliefs. This provision helps 
enable faith-based groups to promote common values, a sense of 
community and unity of purpose, and shared experiences through 
service--all of which can contribute to a religious organization's 
effectiveness. It thus helps protect the religious liberties of 
communities of faith. The CSBG Act's Charitable Choice provisions 
expressly preserve a religious organization's exemption from the 
religious nondiscrimination provisions of Title VII, 42 U.S.C. 
9920(b)(3), and thus reflect the recognition that a religious 
organization may determine that, in

[[Page 56468]]

order to define or carry out its mission, it is important that it be 
able to take its faith into account in making employment decisions. 
Title 42 U.S.C. 9918(c) prohibits persons from being excluded from 
participation in CSBG-funded programs or activities or subject to 
discrimination based on race, color, national origin, sex, age, or 
disability. We decline to impose additional restrictions by regulation.

Protection of Beneficiaries (Section 1050.3(e))

    Comments: Most comments asked for alternative language that would 
provide stronger protections for beneficiaries of social services from 
being exposed to religious ceremonies or practices against their will. 
They recommended that the language protect such beneficiaries from both 
``passive'' as well as ``active'' non-voluntary religious 
participation. Some suggest removing the word ``actively'' while others 
suggest adding the word ``passively'' to the rule. Three comments 
support the rule as drafted.
    Response: We have chosen not to accept the change in response to 
these comments. It was not the intent of Congress to permit religious 
discrimination in the treatment of beneficiaries, and the CSBG Act 
charitable choice provisions adequately protect beneficiaries from 
discrimination. Although the statute does not specifically address this 
issue, the final rule prohibits discrimination against beneficiaries on 
the basis of ``religion or religious belief.'' This phrasing is 
slightly different from that in the proposed rule, but is substantively 
similar. In addition, no funds provided directly to religious 
organizations to provide assistance under any program may be used for 
sectarian worship, instruction or proselytization, and inherently 
religious activities must be voluntary for program beneficiaries. These 
requirements are sufficient to protect the religious freedom of 
beneficiaries.

Accounting and Auditing Requirements (Sections 1050.3(f) and (g))

    Comments: Several commenters thought the language in the 
Supplemental Information section of the proposed rule needs to be moved 
to the rule itself, especially descriptions of what constitutes strong 
separation of religious from secular social service activities for 
purposes of auditing, recordkeeping, and reporting. Also, several 
commenters asked for alternative language that would clearly state that 
Federal, State and local funding for secular purposes must be separated 
and accounted for, and that State and local laws apply in such cases.
    Response: The language in the rule is clear and provides for 
adequate accounting and auditing of funds. It also provides for 
appropriate safeguards for the fiscal accountability of such 
organizations. Religious organizations are subject to the same 
statutory and regulatory provisions as other non-governmental 
organizations to account for Federal funds in accordance with generally 
accepted accounting principles. For instance, States administering CSBG 
funds are obligated to conduct reviews of grantees as provided in 
Section 678B of the CSBG Act. Moreover, each State has an obligation 
under Section 678D of the Act to establish fiscal control and 
accounting procedures necessary to assure the proper accounting of 
funds paid to the State.
    Regulations applicable to the CSBG program similarly require that 
States manage and monitor grant and sub-grant activities supported by 
the award. 45 CFR 74.51(a). Eligible entities are also required to 
obtain audits by an independent auditor in accordance with the Single 
Audit Act and OMB Circular A-133. 45 CFR 74.26(a). Expenditures must 
conform to the same Federal cost principles that are ordinarily 
applicable to each award in order to be allowable. 45 CFR 74.27(a).
    Moreover we are authorized to conduct site visits as warranted. We 
may determine that such audits or reviews are warranted based upon any 
information received by the agency which raises an issue concerning the 
propriety of expenditures.
    Religious organizations are also required to segregate government 
funds into a separate account, and those funds are subject to audit by 
the government. While the CSBG Act requires a separate account for 
government funds we note that non-profit status is not statutorily 
required in all programs authorized by the CSBG Act (e.g., training and 
technical assistance awards). We have therefore deleted the definition 
of religious organization--i.e., ``a non-profit organization''--from 
the regulation. We also made this change for consistency with the CSBG 
Act which does not define the term.

Religious Organizations as ``Intermediate Organizations'' (Section 
1050.3(h))

    Comments: Several commenters strongly opposed allowing religious 
organizations receiving government funds for social services to 
contract with other organizations to provide these services. They 
questioned the constitutionality of this subcontracting possibility 
arguing that it creates a situation in which religious organizations 
are serving a government responsibility of administration and 
oversight.
    Response: The Department believes that faith-based organizations 
that are designated as ``eligible entities'' under the CSBG Act are not 
prohibited from operating in a manner consistent with the rights and 
responsibilities afforded other community-based organizations under the 
Act, including the opportunity to contract with other organizations to 
provide services or carry out other responsibilities of the grant. 
Religious groups, like any other groups that serve as intermediate 
organizations, will be subject to generally applicable requirements 
that ensure the fair and lawful administration of the program.

Vouchers

    Comments: Discussion of the possible use of vouchers in the 
Supplemental Information section of the proposed rule caused several 
commenters to contend that the recent Supreme Court decision on 
educational vouchers would require several conditions not discussed or 
provided for in the proposed rule: (1) Availability of choice through 
an alternative service provider that is not a religious organization; 
and (2) Clear notification to a beneficiary that they had a choice of 
receiving comparable service in a non-religious organization setting. 
Comments either suggested that the rule require the availability of 
alternative service choices, or objected to the fact that by providing 
funds to religious organizations, a situation was created in which 
competing services would have to be created at considerable expense, or 
wanted stronger language regarding notification to beneficiaries that 
they had a choice of service providers.
    Response: Mention of vouchers in the Supplemental Information 
section of the proposed rule was offered as an example of how a 
potential beneficiary might approach a faith-based organization for 
services, and was not intended to form the basis for establishing in 
this rulemaking criteria for social service voucher programs. Further, 
since vouchers are not currently used in programs funded by the CSBG 
Act, we anticipate few or no situations in which the issues raised by 
commenters would apply.

Regulatory Procedures

    Comments: One commenter viewed the proposed rule as a ``major 
regulation,'' thereby requiring a

[[Page 56469]]

regulatory flexibility analysis, and subjected to the report 
requirements, pre-issuance assessment, and congressional review that 
are mandatory by statute.
    Response: The Department does not agree that this is a ``major 
regulation'' thereby requiring a regulatory flexibility analysis and 
subjecting it to reporting requirements, pre-issuance assessment, and 
congressional review that are mandated by statute in certain 
circumstances. As indicated in the following section, this rule does 
not require the collection of new information, nor does it call for the 
creation of programs or services beyond those currently being provided. 
Rather, it establishes conditions of participation for faith-based 
organizations for programs and services already being funded through 
the CSBG Act.

Paperwork Reduction Act of 1995

    No new information collection requirements are imposed by these 
regulations, nor are any existing requirements changed as a result of 
their promulgation. Therefore, the requirements of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)), regarding reporting and 
record keeping, do not apply.

Regulatory Flexibility Analysis

    The Secretary certifies, under 5 U.S.C. 605(b), as enacted by the 
Regulatory Flexibility Act (Pub. L. 96-354), that this rule will not 
result in a significant impact on a substantial number of small 
entities.

Regulatory Impact Analysis

    Executive Order 12866 requires that regulations be reviewed to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that this 
rule is consistent with these priorities and principles. This rule is 
considered a ``significant regulatory action'' under 3(f) of the 
Executive Order, and therefore has been reviewed by the Office of 
Management and Budget.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that a covered agency prepare a budgetary impact statement before 
promulgating a rule that includes any Federal mandate that may result 
in the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector, of $100 million or more in any one 
year.
    The Department has determined that this rule would not impose a 
mandate that will result in the expenditure by State, local, and Tribal 
governments, in the aggregate, or by the private sector, of more than 
$100 million in any one year.

Congressional Review

    This regulation is not a major rule as defined in 5 U.S.C. chapter 
8.

Assessment of Federal Regulation and Policies on Families

    Section 654 of the Treasury and General Government Appropriations 
Act of 1999 requires Federal agencies to determine whether a proposed 
policy or regulation may affect family well-being. If the agency's 
determination is affirmative, then the agency must prepare an impact 
assessment addressing seven criteria specified in the law. These 
regulations will not have an impact on family well-being as defined in 
the legislation.

Executive Order 13132

    Executive Order 13132, Federalism, requires that Federal agencies 
consult with State and local government officials in the development of 
regulatory policies with federalism implications. Consistent with 
Executive Order 13132, we specifically solicited comment from State and 
local government officials on this rule.

Executive Order 13175: Consultation and Coordination with Indian Tribal 
Governments

    Executive Order 13175 (65 FR 67249, November 6, 2000) requires us 
to develop an accountable process to ensure ``meaningful and timely 
input by tribal officials in the development of regulatory policies 
that have tribal implications.'' Although it is not clear that the rule 
will have tribal implications, we specifically solicited comments on 
this rule from tribal officials.

List of Subjects in 45 CFR Part 1050

    Grant programs-social programs.

(Catalog of Federal Domestic Assistance Programs No. 93569 Community 
Services Block Grant)

    Dated: September 22, 2003.
Wade F. Horn,
Assistant Secretary for Children and Families.
Tommy G. Thompson,
Secretary of Health and Human Services.

0
For the reasons discussed above, we are adding to 45 CFR chapter X a 
new part 1050 to read as follows:

PART 1050--CHARITABLE CHOICE UNDER THE COMMUNITY SERVICES BLOCK 
GRANT ACT PROGRAMS

Sec.
1050.1 Scope.
1050.2 Definitions.
1050.3 What conditions apply to the Charitable Choice provisions of 
the CSBG Act?

    Authority: 42 U.S.C. 9901 et seq.


Sec.  1050.1  Scope.

    This part applies to programs authorized under the Community 
Services Block Grant Act (CSBG Act). Title 42 U.S.C. 9901, 9913, 9920, 
9921, 9922, 9923.


Sec.  1050.2  Definitions.

    Applicable program means any program authorized under Title II of 
the Community Opportunities, Accountability, and Training and Education 
Act of 1998, 42 U.S.C. 9901, et seq.
    Direct funding, directly funded or funding provided directly means 
funding that is provided to an organization directly by a governmental 
entity or an intermediate organization that has the same duties as a 
governmental entity, as opposed to funding that an organization 
receives as a result of the genuine and independent private choice of a 
beneficiary.
    Intermediate organization means an organization that is authorized 
by the terms of a contract, grant or other agreement with the Federal 
Government, or a State or local government, to select other non-
governmental organizations to provide assistance under an applicable 
program. For example, when a State uses CSBG Act funds to pay for 
technical assistance services provided by a private entity and also 
authorizes that entity to subcontract for a portion of the technical 
assistance effort, the private entity is an intermediate organization.
    Program beneficiary or recipient means an individual who receives 
services under a program funded in whole or part by an applicable 
program.
    Program participant means a public or private entity that has 
received financial assistance under an applicable program.


Sec.  1050.3  What conditions apply to the Charitable Choice provisions 
of the CSBG Act?

    These Charitable Choice provisions apply whenever the Federal 
government, or a State or local government, uses funds under the CSBG 
Act to provide awards, contracts, or other assistance under any program 
authorized in the Community Services

[[Page 56470]]

Block Grant, 42 U.S.C. 9901, et seq. Additionally, these provisions 
apply whenever an intermediate organization acting under a contract, 
grant, or other agreement with a Federal, State, or local government 
entity selects nongovernmental organizations to provide assistance 
under any of the programs authorized under the Community Services Block 
Grant Act.
    (a)(1) Religious organizations are eligible, on the same basis as 
any other organization, to participate in the applicable programs as 
long as they use program funds consistent with the Establishment Clause 
and the Free Exercise Clause of the First Amendment to the United 
States Constitution.
    (2) Neither the Federal government nor a State or local government 
receiving funds under an applicable program shall discriminate against 
an organization that applies to provide, or provides, services or 
benefits on the basis of the organization's religious character or 
affiliation.
    (b) No program participant that receives direct funding under an 
applicable program may expend the program funds for inherently 
religious activities, such as worship, religious instruction, or 
proselytization. If an organization conducts such activities, it must 
offer them separately, in time or location, from the programs or 
services directly funded under any applicable program, and 
participation must be voluntary for program beneficiaries.
    (c) A religious organization that participates in an applicable 
program will retain its independence from Federal, State, and local 
governments and may continue to carry out its mission, including the 
definition, practice and expression of its religious beliefs, provided 
that it does not expend any direct funding under the applicable program 
to support any inherently religious activities, such as worship, 
religious instruction, or proselytization. Among other things, 
religious organizations may use space in their facilities to provide 
services funded under an applicable program without removing religious 
art, icons, scriptures, or other symbols. In addition, such a religious 
organization retains the authority over its internal governance, and it 
may retain religious terms in its organization's name, select its board 
members on a religious basis, and include religious references in its 
organization's mission statements and other governing documents.
    (d) The participation of a religious organization in, or its 
receipt of funds from, an applicable program does not affect that 
organization's exemption provided under 42 U.S.C. 2000e-1 regarding 
employment practices.
    (e) A religious organization that receives funds under an 
applicable program, shall not, in providing program services or 
benefits, discriminate against a program beneficiary or prospective 
program beneficiary on the basis of religion or a religious belief.
    (f) Religious organizations that receive funds under an applicable 
program are subject to the same regulations as other nongovernmental 
organizations to account, in accordance with generally accepted 
auditing and accounting principles, for the use of such funds. In 
addition, religious organizations are required to keep any Federal 
funds they receive for services segregated in a separate account from 
non-Federal funds. Only the segregated government funds are subject to 
audit by the government under the applicable program.
    (g) If a State or local government contributes its own funds to 
supplement CSBG Act funded activities, the State or local government 
has the option to segregate the Federal funds or commingle them. 
However, if the funds are commingled, the Charitable Choice provisions 
apply to all of the commingled funds.
    (h) If a nongovernmental intermediate organization, acting under a 
grant, contract, or other agreement with the Federal, State or local 
government, is given the authority to select nongovernmental 
organizations to provide services under an applicable program, then the 
intermediate organization must ensure that there is compliance with 
these Charitable Choice provisions. The intermediate organization 
retains all other rights of a nongovernmental organization under the 
Charitable Choice provisions.

[FR Doc. 03-24290 Filed 9-25-03; 12:15 pm]
BILLING CODE 4184-01-P