[Federal Register Volume 75, Number 70 (Tuesday, April 13, 2010)]
[Rules and Regulations]
[Pages 18760-18764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-8378]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Part 89
RIN 0991-AB60
Organizational Integrity of Entities That Are Implementing
Programs and Activities Under the Leadership Act
AGENCY: U.S. Department of Health and Human Services.
ACTION: Final rule.
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SUMMARY: The Department is issuing a final rule establishing the
organizational integrity requirements for Federal funding recipients
under the United States Leadership Against HIV/AIDS, Tuberculosis, and
Malaria Act of 2003 (Leadership Act). This rule requires that funding
announcements and agreements with funding recipients include a clause
that states that the recipient is opposed to prostitution and sex
trafficking because of the psychological and physical risks they pose
for women, men and children. This rule also modifies the requirements
for recipient-affiliate separation and eliminates the requirement for
an additional certification by funding recipients.
DATES: This rule is effective May 13, 2010.
FOR FURTHER INFORMATION CONTACT: John Monahan, Office of Global Health
Affairs, Hubert H. Humphrey Building, Room 639H, 200 Independence
Avenue, SW., Washington, DC 20201, Tel: 202-690-6174, E-mail:
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
A. Statutory Background
Congress enacted the United States Leadership Against HIV/AIDS,
Tuberculosis, and Malaria Act of 2003 (``Leadership Act'') in May 2003.
Public Law 108-25 [22 U.S.C. 7601-7682]. The Leadership Act contains
limitations on the use of funds provided to carry out HIV/AIDS
activities under the Act. Subsection 7631(f) prohibits the use of
Leadership Act HIV/AIDS funds ``to provide assistance to any group or
organization that does not have a policy explicitly opposing
prostitution and sex trafficking.'' Subsection 7631(f) was amended in
2004 to exempt certain public international organizations. Consolidated
Appropriations Act of 2004, Public Law 108-199, Div. D, Title II
(2004).
The United States government is opposed to prostitution and sex
trafficking. In enacting the Leadership Act, Congress specifically
found ``Prostitution and other sexual victimization are degrading to
women and children and it should be the policy of the United States to
eradicate such practices. The sex industry, the trafficking of
individuals into such industry, and sexual violence are additional
causes of and factors in the spread of the HIV/AIDS epidemic.''
Leadership Act Sec. 2(23) Public Law 108-25. Congressional hearings at
the time of the Act showed a high incidence of HIV among prostitutes
and that prostitution fueled the demand for sex trafficking.
Accordingly, Congress unambiguously called for the elimination of
prostitution and sex-trafficking as part of the United States' fight
against HIV/AIDS.
Section 301(f) [22 U.S.C. 7631(f)] of the Leadership Act requires
that funding recipients have a policy explicitly opposing prostitution
and sex trafficking. Additionally, recipients of Leadership Act funds
cannot engage in activities that are inconsistent with their opposition
to prostitution and sex trafficking.
Congress did not dictate the means by which the Department would
implement the policy and the Congressional intent of the Act was not to
overburden applicants with unnecessary requirements. For example,
during legislative debate on the Leadership Act, in response to a
question from Senator Leahy on the Senate floor regarding section
301(f), Senator Frist stated that ``a statement in the contract or
grant agreement between the U.S. Government and such organization that
the organization is opposed to the practices of prostitution and sex
trafficking because of the psychological and physical risks they pose
for women * * * would satisfy the intent of the provision.'' 149 CONG.
REC. S6,457 (daily ed. May 15, 2003) (statement of Sen. Frist).
B. Litigation and Regulatory Background
The Leadership Act was challenged on constitutional grounds in two
separate lawsuits after its enactment. In a case filed in the U.S.
District Court for the District of Columbia, plaintiffs claimed the
anti-prostitution provision compelled speech when the organization had
no policy either opposing or supporting prostitution. DKT Int'l v.
United States Agency for Int'l Dev. (USAID), 435 F. Supp. 2d 5 (D.D.C.
2006). Ultimately, the U.S. Court of Appeals for the District of
Columbia Circuit upheld the anti-prostitution provision, holding that
the government had a legitimate interest in ensuring that organizations
chosen to communicate its particular viewpoint did so in an efficient
and effective fashion. DKT Int'l v. USAID, 477 F.3d 758 (DC Cir. 2007).
[[Page 18761]]
In upholding this provision, the DC Circuit relied in part on the fact
that nothing prevented the plaintiff from itself remaining neutral and
setting up a subsidiary that had a policy opposing prostitution to
receive government funds.
A second case was filed in the U.S. District Court for the Southern
District of New York, which granted an injunction against the
Government on the basis that the statute was unconstitutional because
it did not leave open ``adequate alternative channels for
communication.'' Alliance for Open Soc'y Int'l (AOSI) v. USAID, 430 F.
Supp. 2d 222 (S.D.N.Y. 2006). On appeal, the U.S. Court of Appeals for
the Second Circuit remanded the case, in light of newly issued guidance
by the Government providing for organizations to work with affiliates
that would not be subject to the Leadership Act's requirements. AOSI v.
USAID, 254 Fed. Appx. 843 (2d Cir. 2007). Upon remand, however, the
District Court maintained the injunction and allowed additional
plaintiffs to join the suit. AOSI v. USAID, 570 F. Supp. 2d 533
(S.D.N.Y. 2008). The Government has appealed that decision.
Prior to and concurrent with the litigation, the Department took a
number of steps to implement the prostitution policy requirement under
the statute. By December 2003, HHS had begun including a requirement in
all of its grant and cooperative agreement funding announcements that
all recipients under the Leadership Act of HIV/AIDS funds have a policy
explicitly opposing prostitution and sex trafficking. On July 23, 2007,
HHS published ``Organizational Integrity Guidance'' in the Federal
Register to clarify the scope of the policy requirement. The guidance
allowed Leadership Act HIV/AIDS funding recipients to have
relationships with organizations that engage in activities inconsistent
with a policy against prostitution and sex trafficking. 72 FR 41,076
(7/26/2007). HHS followed the issuance of this guidance with a notice
of proposed rulemaking (NPRM) on April 17, 2008, 73 FR 29,096, which
initiated the notice-and-comment rulemaking process. The final rule was
published on December 24, 2008, 73 FR 78,997, corrected on January 16,
2009, 74 FR 2,888 (codified at 45 CFR part 89), and took effect on
January 20, 2009. The final rule established the legal, financial, and
organizational standards for determining whether a funding recipient
had objective integrity and independence from an affiliated
organization that engaged in activities inconsistent with a policy
opposing prostitution and sex trafficking. The final rule also required
all Leadership Act HIV/AIDS funding recipients, including sub-
recipients, to certify compliance with the rule.
On November 23, 2009, the Department again issued a notice of
proposed rulemaking to modify the final rule of January 20, 2009. 74 FR
61096 (11/23/2009). The proposed amendment to the present rule modifies
the criteria for evaluating the separation between recipients and
affiliated organizations, while complying with the statutory
requirement regarding opposition to prostitution and sex trafficking.
It is essential to the Leadership Act that recipients of funds who
implement HIV/AIDS programs and activities do not create confusion as
to the U.S. Government's message opposing prostitution and sex
trafficking by undertaking activities or advocating positions that
conflict with this policy. However, as noted above, the Department has
determined that the Congressional intent of the Leadership Act can be
effectuated through the application of standards that allow more
flexibility for funding recipients than the present guidelines.
II. Description of Final Rule and Response to Comments
The Department received twenty-seven comments in response to the
proposed rule, including one comment filed after the close of the
comment period which was also considered. Comments came from
individuals and organizations both opposed to and in favor of changes
to the previous rule. Several comments were not responsive to the
proposed rule and therefore are not addressed. Several commenters
stated the policy requirement was inconsistent with the Leadership Act
or improperly conflated prostitution with sex trafficking. However, the
final rule is consistent with section 301(f) of the Act which requires
organizations receiving funds to have a policy opposing ``prostitution
and sex trafficking.'' Other comments are discussed under applicable
headings.
Section 89.1 Applicability
This section provides that the policy requirement applies to all
funding recipients not exempted by the Leadership Act. Currently, those
organizations exempted are the Global Fund to Fight AIDS, Tuberculosis,
and Malaria, the World Health Organization, the International AIDS
Vaccine Initiative and any other United Nations agency.
This section also states what is required of HIV/AIDS funding
recipients under the Leadership Act. The Department shall include in
any HIV/AIDS public funding announcement under the Leadership Act the
requirement that recipients agree that they are opposed to the
practices of prostitution and sex trafficking because of the
psychological and physical risks they pose for women, men and children.
This statement will also be included in any Leadership Act HIV/AIDS
funding instrument entered into with the recipient. As explained, the
Department believes this statement is consistent with the anti-
prostitution provision and the Congressional intent behind it, as well
as other goals of the Act.
The Department will work with the Department of State and with
other agencies implementing the Leadership Act to ensure consistent
application of its requirements.
Section 89.2 Definitions
This section defines terms used in this rule. It retains several
terms from the previous iteration of the rule such as ``commercial sex
act'' and ``prostitution.'' However, given the regulation now requires
the anti-prostitution statement only in the announcement and the
awarding instrument to the ``recipient,'' it deletes the terms ``prime
recipient'' and ``subrecipient.'' A definition of ``recipient'' that
mirrors the former ``prime recipient,'' directly funded entity, is
included. While the section deletes the definition of subrecipient, any
organization receiving Leadership Act HIV/AIDS funds must comply with
the statutory requirements.
Several commenters objected to the lack of definition for a number
of terms such as ``affiliate,'' ``restricted activities,'' and ``to the
extent practicable.'' As explained below, the Department's commitment
to a case-by-case approach in this area will allow flexibility based on
the circumstances presented. Some organizations may be better able to
separate themselves from an affiliate ``in the circumstances.''
Conditions in some countries may make it difficult for organizations to
meet certain factors relevant to determining whether sufficient
separation exists. Therefore, any attempt to strictly prescribe the
degree of separation would undermine the purpose of the regulation.
Similarly, the Department does not define the term ``affiliated
organizations.'' In common usage, ``affiliate'' means ``to bring into
close connection as a member or branch.'' Merriam-Webster's Collegiate
Dictionary at 21 (11th ed. 2007). Legal affiliation is only one aspect
of this relationship. The use of separate personnel, accounting,
[[Page 18762]]
timekeeping, space and identifying signage are also factors, among
others. In determining whether there is sufficient separation, the
Department will not base its decision solely on whether an entity is a
legally separate ``affiliate,'' but instead will consider the
likelihood that the degree of separation between a recipient of
Leadership Act HIV/AIDS funds and other connected organizations that
are not required to have a policy opposing prostitution and sex
trafficking will not undermine or confuse the Government's position in
opposition to prostitution and sex trafficking.
As noted by multiple comments, the proposed rule did not define
``restricted activities.'' Several comments expressed concerns that
organizations that work with the victims of prostitution and sex
trafficking would stop providing services that could prevent HIV/AIDS
because of their fear that the Government would determine the
activities were ``restricted activities,'' and revoke Federal funding.
Several comments also sought approval of particular hypotheticals. The
Department does not believe it should provide opinions on hypothetical
scenarios because information may be incomplete. While the Department
does not define restricted activities in the rule, working with other
agencies implementing the Leadership Act, the U.S. Government intends
to provide broad information on types of activities that illustrate
what would be covered.
Section 89.3 Organizational Integrity of the Recipients
This section sets forth the separation requirements for funding
recipients who wish to affiliate with organizations that do not have a
policy opposing prostitution and sex trafficking. Specifically, the
final rule no longer requires that an affiliate be a legally separate
entity. As stated in the November 23, 2009, NPRM, separate legal
incorporation in each of the host countries where a recipient might
work could prove complicated. Additionally, the inherent difficulty of
the Department analyzing multiple foreign legal requirements makes this
factor unworkable as a determinative criterion.
The rule also allows greater flexibility for funding recipients to
demonstrate organizational separation from entities which do not have a
policy opposing sex trafficking and prostitution. As noted in the NPRM,
these changes include changing separate personnel requirements to
allocation of personnel requirements, and the deletion of separate
management and governance requirements.
Many commenters believe that the proposed rule, even with
modification, unlawfully compels speech in violation of the First
Amendment, and therefore cannot be enforced against domestic entities.
The Department disagrees. As explained above, the DC Circuit Court of
Appeals upheld the Leadership Act against constitutional claims even
prior to the promulgation of implementing regulations. The court in
that case specifically relied on the fact that entities were free to
set up affiliates which ``would qualify for government funds as long as
the two organizations' activities were kept sufficiently separate.''
DKT Int'l v. USAID, 477 F.3d at 763. Likewise, the Supreme Court and
the Second Circuit Court of Appeals have upheld more burdensome
regulations where funding recipients had ``adequate alternative
channels for protected expression.'' Brooklyn Legal Servs. Corp. v.
Legal Serv's Corp., 462 F.3d 219, 231 (2d Cir. 2006); Rust v. Sullivan,
500 U.S. 173 (1991).
The goal in implementing the revised rule on the prostitution
policy provision is to ensure that the Government's position opposing
prostitution and sex trafficking is not undermined while allowing
Leadership Act funding recipients greater flexibility in finding
alternative channels for protected expression in diverse areas for
diverse populations. Given the numerous factual situations that may
arise, the Department has deliberately adopted a case-by-case approach
in this area, recognizing that circumstances in some countries may make
it difficult for organizations to satisfy some of the factors
demonstrating objective integrity and independence. The Department also
plans to work with recipients to address individual questions regarding
the separation criteria, and to help remedy violations before taking
enforcement action. We believe these steps will ensure recipients have
adequate channels for engaging in protected speech while still adhering
to the requirement of the Leadership Act that recipient organizations
be opposed to the practices of prostitution and sex trafficking because
of the psychological and physical risks they pose for women, men and
children.
Several commenters also objected to the Department's listing of
only five factors relevant to the integrity analysis when the
regulation allows that other unlisted factors may be taken into
account. Again, the relevant inquiry will not be the presence or
absence of any particular factor, but the ``totality of
circumstances,'' under which the recipient organization is shown to be
sufficiently separate from an affiliate organization that does not have
a policy opposing prostitution. The court decisions previously
discussed all upheld similar regulations where the Government
specifically stated the factors were ``not limited to'' those set forth
in regulation.
Several commenters expressed concern that the extent of restricted
activities by the affiliated organization would be a factor considered
by the Department. Given that the purpose of affiliate separation
requirements is to determine when an affiliated organization is so
closely tied to the funding recipient that a reasonable observer would
attribute its activities to the funding recipient, the Department
agrees that the extent of restricted activities by a separate entity
should not be considered, and therefore has deleted that part of
Subsection 89.3(b)(4).
Several commenters believed the proposed rule should mirror the
Department's non-discrimination regulations for faith based
organizations. Under these regulations, the commenters insist,
``religious activities'' require only time or space separation.
However, the faith based regulations rely on different statutory and
constitutional foundations. The faith based regulations allow religious
and non-religious organizations to compete equally in applying for
Federal funds as long as time, place and other restrictions on
religious activities are met consistent with the Establishment Clause
of the U.S. Constitution. By contrast, the Leadership Act requires all
funding recipients, regardless of the character of their organization,
to have a policy against prostitution and sex trafficking. The
Leadership Act requires that HIV/AIDS funding recipients act
consistently with their opposition to prostitution and sex trafficking.
This requirement necessitates greater separation between funding
recipients and organizations that engage in activities inconsistent
with an opposition to prostitution and sex trafficking, than the faith
based regulations require between governmental programs operated by a
faith based organization and its religious activities. The Department
believes this rule best meets the goals of the Leadership Act's anti-
prostitution provision without infringing upon the constitutional
rights of recipients.
Deleted Section 89.3 Certification
As proposed, former section 89.3 requiring annual certification of
compliance with the anti-prostitution provision by both recipients and
sub-recipients has been deleted. The Department does not believe such
procedures are necessary for compliance
[[Page 18763]]
under the Leadership Act. Recipients are still required to follow the
dictates of the Leadership Act and maintain the required separation
from affiliates that engage in activities inconsistent with an
opposition to prostitution and sex trafficking. The required notice in
the public announcement and awarding instrument will provide notice to
funding recipients of the Leadership Act's anti-prostitution
requirements and allow an opportunity to engage the Department in
further dialogue on the issue if an applicant desires.
Those commenting on this deletion suggested the lack of
certification would make the Leadership Act unenforceable, adding that
the negligible cost of certification is far outweighed by its benefits.
The Department disagrees. The Department is not hampered in its
monitoring or enforcement by the lack of certification, and may still
conduct audits of discretionary grant programs whenever they are
warranted to ensure compliance with program requirements. Nothing in
the Leadership Act requires certification by recipients or prevents
enforcement when those requirements are not met. Given the cost to the
public of administering the certification and the negligible benefit to
the Department, deleting the requirement comports with the goals of the
Paperwork Reduction Act to ``minimize the paperwork burden * * * from
the collection of information by and for the Federal Government.'' 35
U.S.C. 3501.
III. Impact Analysis
Executive Order 12866 and Paperwork Reduction Act
As explained in the NPRM to this final rule, this rule is a
``significant regulatory action'' under Executive Order 12866, section
3(f)(4), because it raises novel legal or policy issues that arise out
of legal mandates and the President's priorities, and accordingly, the
Office of Management and Budget has reviewed it.
This rule modifies a previously issued final rule on the same
subject, published on December 24, 2008, in the Federal Register. The
modification reduces the burden on applicants and funding recipients in
complying with the policy. The December 24, 2008, final rule required
statements and formal documentation from recipients before they could
receive Leadership Act HIV/AIDS funds. The Impact Analysis and the
Paperwork Reduction Act in the December 24, 2008, final rule estimated
the burden and cost of writing the additional documentation. This rule
no longer requires this additional documentation. As a result,
applicants for Leadership Act HIV/AIDS funds will no longer have to
incur the costs outlined in the December 24, 2008, impact analysis and
paperwork burden analysis.
Therefore, the rule should relieve regulated entities by the
amounts specified in the December 24, 2008, final rule. We are
republishing the impact table from the December 24, 2008, final rule.
The burden estimate was $7,337 calculated by assuming an additional
half hour of clerical work to prepare documentation on behalf of 555
grantees at an hourly rate of $ 26.44.
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Number of Average burden
Instrument Number of responses per hours per Average cost Total burden Total burden
respondents respondent response per hour hours cost
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Certifications.................................... 555 1 0.5 $26.44 277.5 $7,337
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List of Subjects in 45 CFR Part 89
Administrative practice and procedure, Federal aid programs, Grants
programs, Grants administration.
Dated: January 22, 2010.
John Monahan,
Interim Director, Office of Global Health Affairs.
Dated: January 22, 2010.
Kathleen Sebelius,
Secretary.
0
Therefore, under the authority of section 301(f) of the Leadership Act,
as amended, and for the reasons stated in the preamble, the Department
revises 45 CFR part 89 to read as follows:
PART 89--ORGANIZATIONAL INTEGRITY OF ENTITIES IMPLEMENTING PROGRAMS
AND ACTIVITIES UNDER THE LEADERSHIP ACT
Sec.
89.1 Applicability and requirements.
89.2 Definitions.
89.3 Organizational integrity of recipients.
Authority: Section 301(f) of the Leadership Act, Pub. L. 108-25,
as amended (22 U.S.C. 7631(f)) and 5 U.S.C. 301.
Sec. 89.1 Applicability and requirements.
(a) This regulation applies to all recipients unless they are
exempted from the policy requirement by the Leadership Act or other
statute.
(b) The Department of Health and Human Services (HHS) components
shall include in the public announcement of the availability of the
grant, cooperative agreement, contract, or other funding instrument
involving Leadership Act HIV/AIDS funds the requirement that recipients
agree that they are opposed to the practices of prostitution and sex
trafficking because of the psychological and physical risks they pose
for women, men, and children. This requirement shall also be included
in the award documents for any grant, cooperative agreement or other
funding instrument involving Leadership Act HIV/AIDS funds entered into
with the recipient.
Sec. 89.2 Definitions.
For the purposes of this part:
Commercial sex act means any sex act on account of which anything
of value is given to or received by any person.
Leadership Act means the United States Leadership Against HIV/AIDS,
Tuberculosis, and Malaria Act of 2003, Public Law 108-25, as amended
(22 U.S.C. 7601-7682).
Prostitution means procuring or providing any commercial sex act.
Recipients are contractors, grantees, applicants or awardees who
receive Leadership Act funds for HIV/AIDS programs directly or
indirectly from HHS.
Sex trafficking means the recruitment, harboring, transportation,
provision, or obtaining of a person for the purpose of a commercial sex
act.
Sec. 89.3 Organizational integrity of recipients.
A recipient must have objective integrity and independence from any
affiliated organization that engages in activities inconsistent with
the recipient's opposition to the practices of prostitution and sex
trafficking because of the psychological and physical risks they pose
for women, men and children (``restricted activities''). A recipient
will be found to have objective integrity and independence from such an
organization if:
(a) The affiliated organization receives no transfer of Leadership
Act HIV/AIDS funds, and Leadership Act HIV/AIDS
[[Page 18764]]
funds do not subsidize restricted activities; and
(b) The recipient is, to the extent practicable in the
circumstances, separate from the affiliated organization. Mere
bookkeeping separation of Leadership Act HIV/AIDS funds from other
funds is not sufficient. HHS will determine, on a case-by-case basis
and based on the totality of the facts, whether sufficient separation
exists. The presence or absence of any one or more factors relating to
legal, physical, and financial separation will not be determinative.
Factors relevant to this determination shall include, but not be
limited to, the following:
(1) Whether the organization is a legally separate entity;
(2) The existence of separate personnel or other allocation of
personnel that maintains adequate separation of the activities of the
affiliated organization from the recipient;
(3) The existence of separate accounting and timekeeping records;
(4) The degree of separation of the recipient's facilities from
facilities in which restricted activities occur; and
(5) The extent to which signs and other forms of identification
that distinguish the recipient from the affiliated organization are
present.
[FR Doc. 2010-8378 Filed 4-12-10; 8:45 am]
BILLING CODE 4150-38-P