[Federal Register Volume 67, Number 242 (Tuesday, December 17, 2002)]
[Proposed Rules]
[Pages 77362-77366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31674]



[[Page 77361]]

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Part IV





Department of Health and Human Services





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Administration for Children and Families



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45 CFR Part 260



Charitable Choice Provisions Applicable to the Temporary Assistance for 
Needy Families Program; Proposed Rule

  Federal Register / Vol. 67, No. 242 / Tuesday, December 17, 2002 / 
Proposed Rules  

[[Page 77362]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Part 260

RIN 0970-AC12


Charitable Choice Provisions Applicable to the Temporary 
Assistance for Needy Families Program

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement the Charitable Choice 
statutory provisions at section 104 of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (PRWORA) as amended. These 
provisions apply to the Temporary Assistance for Needy Families (TANF) 
program administered by the Administration for Children and Families 
(ACF). The proposed rule applies to State and local governments that 
administer or provide TANF services and benefits through contracts with 
organizations or with certificates, vouchers, or other forms of 
disbursement, as well as to faith-based organizations that receive, or 
apply to receive such funding. It is ACF's policy that, within 
constitutional church-state guidelines, faith-based organizations 
should be able to compete on an equal footing for TANF funding, and ACF 
supports the participation of faith-based organizations in the TANF 
program.

DATES: Consideration will be given to comments received by February 18, 
2003.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to April Kaplan, Administration for Children and 
Families, Office of Family Assistance, 370 L'Enfant Promenade, SW., 5th 
floor, Washington, DC 20447. Comments will be available for public 
inspection Monday through Friday 8:30 a.m. to 5 p.m. at the above 
address. You may also transmit comments electronically via the Internet 
at: http://www.acf.dhhs.gov/hypernews/topics21.htm. To download an 
electronic version of the rule, you should access http://www.acf.dhhs.gov/budget.html.

FOR FURTHER INFORMATION CONTACT: April Kaplan, (202) 401-5138.

SUPPLEMENTARY INFORMATION: 

I. Statutory Authority

    This proposed regulation is issued under the authority granted to 
the Secretary of Health and Human Services (the Secretary) by 42 U.S.C. 
1302, and 42 U.S.C. 604a. Section 1302 of 42 U.S.C. authorizes the 
Secretary to publish regulations that may be necessary for the 
efficient administration of the functions for which he is responsible 
under the Social Security Act (the Act). Section 604a of Title 42 of 
the United States Code sets forth provisions authorizing States to use 
faith-based groups, as well as other nongovernmental charities, 
community groups and private organizations, to provide benefits and 
services under the TANF program that help families achieve self-
sufficiency and includes certain conditions related to such authority.
    Section 417 of the Social Security Act provides that the Federal 
government may not regulate or enforce State conduct under the TANF 
provisions authorized in Title IV-A, except to the extent expressly 
provided by law. Section 417 applies only to Federal regulation or 
enforcement of provisions in Title IV-A of the Act. Because this 
proposed rule implements provisions in PRWORA, rather than the TANF 
provisions in Title IV-A, the limitations set forth in section 417 do 
not apply. These proposed regulations are drafted in a manner that 
provides States with maximum flexibility, while complying with the 
Charitable Choice statutory provisions.

II. Background

    Title I of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA) (Pub. L. 104-193) sets forth 
certain ``Charitable Choice'' provisions clarifying State authority to 
use religious organizations to provide benefits and services that help 
families achieve self-sufficiency under the TANF program (hereinafter 
referred to as ``TANF Charitable Choice provisions.'') In addition to 
giving families a greater choice of TANF-funded providers, these 
provisions set forth certain requirements to ensure that religious 
organizations are able to compete on an equal footing for funds under 
the TANF program, without impairing the religious character of such 
organizations and without diminishing the religious freedom of TANF 
beneficiaries.
    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 scores 
of social services to those in need. The TANF Charitable Choice 
provisions 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.

III. Regulatory Provisions

    The TANF Charitable Choice provisions contain important protections 
both for religious organizations that receive funding and for the 
individuals who receive their services. This proposed rule would 
implement the Charitable Choice provisions applicable to State and 
local governments, and to religious organizations in their use of TANF 
funding. The objective of this proposed rule is to ensure that the TANF 
program is open to all eligible organizations, regardless of their 
religious affiliation or character, and to establish clearly the proper 
uses to which funds may be put and the conditions for receipt of 
funding.
    Under the proposed rule a new section 260.34, ``What conditions 
apply to the Charitable Choice provisions of TANF?'' would be added to 
existing TANF rules. Introductory language would address the 
applicability of the Charitable Choice provisions of TANF. 
Specifically, the rules would provide that Charitable Choice applies 
whenever a State or local government uses Federal TANF funds or expends 
State or local funds claimed to meet the maintenance-of-effort (MOE) 
requirements of TANF to procure services and benefits from 
nongovernmental organizations, or redeems certificates, vouchers, or 
other forms of disbursement from them in connection with the TANF 
program. When State or local funds are used to meet the TANF 
maintenance-of-effort requirements, the provisions apply irrespective 
of whether the State or local funds are co-mingled with Federal funds, 
segregated, or expended in separate State programs. The proposed rules 
also clarify that, pursuant to section 104(k) of PRWORA, nothing in the 
Charitable Choice requirements shall be construed to preempt any 
provision of a State constitution or State statute that prohibits or 
restricts the

[[Page 77363]]

expenditure of State funds in or by religious organizations.
    When the term ``assistance'' is used in the Charitable Choice 
provisions, it broadly refers to all kinds of help, services and 
benefits and is broader than the definition of ``assistance'' found 
under section 260.31 of this part. Thus, the Charitable Choice 
provisions apply to any and all of the services and benefits available 
to clients through contracts, certificates, vouchers, or other forms of 
disbursement of TANF funds. However, because the Charitable Choice 
provisions refer only to State and local governments, they do not apply 
to Tribal governments operating TANF programs under section 412 of the 
Social Security Act.
    The proposed rule also would make the following specific additions 
to the TANF rules:
    [sbull] Equal Treatment for Religious Organizations. Under the TANF 
Charitable Choice provisions, organizations are eligible to participate 
in the TANF program without regard to their religious character or 
affiliation, and organizations may not be excluded from the competition 
for TANF funds simply because they are religious. Specifically, 
religious organizations are eligible to compete for funding on the same 
basis, and under the same eligibility requirements, as all other 
nonprofit organizations. The Federal government, and State and local 
governments administering funds under the TANF program, are prohibited 
from discriminating against organizations on the basis of religion or 
their religious character.
    [sbull] Restriction on Religious Activities by Organizations that 
Receive Direct TANF Funding. Paragraph (b) of section 260.34 of the 
proposed rule describes limitations on the use of TANF funding provided 
directly to an organization by a governmental entity or an intermediate 
organization that has the same duties as a governmental entity, as 
opposed to those funds that an organization receives as the result of 
the genuine and independent private choice of a beneficiary.\1\ 
Specifically, TANF and MOE 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 an 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 TANF or MOE funds, 
and participation must be voluntary for the beneficiaries. This 
requirement ensures that such funds are not used to support inherently 
religious activities. Thus, direct TANF and MOE funds may not be used, 
for example, to conduct prayer meetings, studies of sacred texts, or 
any other activity that is inherently religious.
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    \1\ In the Charitable Choice context, the term ``direct'' 
funding is used to describe funds that are provided ``directly'' by 
a governmental entity or an intermediate organization with the same 
duties as a governmental entity, as opposed to funds that an 
organization receives as the result of the genuine and independent 
private choice of a beneficiary. In other contexts, the term 
``direct'' funding may be used to refer to those funds that an 
organization receives directly from the Federal government (also 
known as ``discretionary'' funding), as opposed to funding that it 
receives from a State or local government (also known as 
``indirect'' or ``block grant'' funding). In these proposed 
regulations, the term ``direct'' has the former meaning.
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    This restriction does not mean that an organization that receives 
direct TANF or MOE funds cannot engage in inherently religious 
activities. It simply means that such an organization cannot fund these 
activities with direct TANF funds. Additionally, an organization cannot 
fund these activities with funds that are used to meet the MOE 
requirements, since those funds must be spent consistent with the 
Charitable Choice requirements. Thus, faith-based organizations that 
receive direct TANF or MOE funds must take steps to separate, in time 
or location, their inherently religious activities from the TANF or 
MOE-funded services that they offer.
    In addition, any participation by a program beneficiary in such 
religious activities must be voluntary. An invitation to participate in 
an organization's religious activities is not in itself inappropriate. 
However, directly-funded religious organizations must be careful to 
reassure program beneficiaries that they will receive help even if they 
do not participate in these activities, and that their decision will 
have no bearing on the services they receive. In short, any 
participation by recipients of services in such religious activities 
must be voluntary and understood to be voluntary.
    These restrictions on inherently religious activities do not apply 
where TANF or MOE funds are provided to religious organizations as a 
result of a genuine and independent private choice of a beneficiary. A 
religious organization may receive such funds as the result of a 
beneficiary's genuine and independent private choice if, for example, a 
beneficiary redeems a voucher, coupon, certificate, or similar funding 
mechanism that was provided to that individual using TANF or MOE funds 
under a program that is designed to give that individual a choice among 
providers. Thus, religious organizations that receive TANF funds to 
provide services as a result of a beneficiary's genuine and independent 
private choice need not separate, in time or location, their inherently 
religious activities from the TANF funded services they provide, 
provided they otherwise satisfy the requirements of the program.
    [sbull] Religious Character and Independence of Religious 
Organizations. Paragraph (c) of the proposed rule clarifies that a 
religious organization that participates in the TANF program retains 
its independence from Federal, State, and local governments, provided 
that it does not use direct TANF or MOE funds to support inherently 
religious activities. It may continue to carry out its mission, 
including the definition, practice and expression of its religious 
beliefs. Among other things, religious organizations may use their 
facilities to provide TANF-funded services, without removing religious 
art, icons, scriptures, or other symbols. In addition, a TANF-funded 
religious organization 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.
    [sbull] Employment Practices. Under paragraph (d), the proposed 
rule clarifies that the receipt of TANF or MOE funds 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, hire employees 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 liberty of communities of faith. The TANF Charitable Choice 
provisions thus reflects the recognition that a religious organization 
may determine that, in 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.
    [sbull] Nondiscrimination Against Beneficiaries. The proposed rule 
also contains provisions that apply to the individuals who receive 
TANF- or MOE-funded services. The first of these is found under 
paragraph (e) of the proposed rule, which clarifies that religious 
organizations are prohibited from discriminating against beneficiaries 
or potential beneficiaries

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on the basis of religion or religious belief. Accordingly, religious 
organizations, in providing services funded in whole or in part by TANF 
or MOE, may not discriminate against current or prospective program 
beneficiaries on the basis of religion, a religious belief, a refusal 
to hold a religious belief, or a refusal to actively participate in a 
religious practice.
    [sbull] Notice, Referral, and Provision of Services from 
Alternative Providers.  Paragraph (f) of section 260.34 of the proposed 
rule clarifies that individuals who are receiving or may receive TANF 
or MOE-funded services may object to the religious character of that 
provider, in which case they are entitled to receive services from an 
alternative provider. In such cases, the State or local agency must 
refer the individual to an alternative provider of services within a 
reasonable period of time, as defined by the State. That alternative 
provider must be reasonably accessible and have the capacity to provide 
comparable services to the individual. Such services shall have a value 
that is not less than the value of the services that the individual 
would have received from the program participant to which the 
individual had such objection. The alternative provider need not be a 
secular organization. It must simply be a provider to which the program 
beneficiary has no religious objection. Because of the comprehensive 
nature and range of services provided under TANF, we are explicitly 
leaving it to the States' discretion how best to define and achieve 
these statutory objectives.
    A client's right to alternative services is best implemented when 
he or she is informed and referral procedures for alternative services 
are in place. Therefore, the proposed rule outlines the 
responsibilities of religious organizations, and State or local 
governments, with respect to notice, referral, and provision of 
services from alternative providers.
    Notice. Under the proposed rule, States and local governments shall 
ensure that notice is provided to beneficiaries and prospective 
beneficiaries regarding alternative services. The notice should clearly 
articulate the program beneficiary's right to a referral, within a 
reasonable period of time, as defined by the State, to an alternative 
service provider. That alternative provider must be reasonably 
accessible and have the capacity to provide comparable services to the 
individual. Such services shall have a value that is not less than the 
value of the services that the individual would have received from the 
provider to which the individual had such objection, as reasonably 
determined by the State agency. While the responsibility for providing 
the alternative service rests with the State or local agency, each 
participating organization has a responsibility to help clients know 
and understand their rights.
    Referral. If an individual objects to the religious character of 
the organization providing services they are receiving, the State or 
provider must refer the individual, within a reasonable period of time, 
as defined by the State, to an alternative provider of services. That 
alternative provider must be reasonably accessible and have the 
capacity to provide comparable services to the individual. Such 
services shall have a value that is not less than the value of the 
services that the individual would have received from the program 
participant to which the individual had such objection, as determined 
by the State. In making a referral, the State or local government, and 
religious organization, in consultation with the recipient, should 
consider alternative providers reasonably available in the geographic 
area.
    We encourage State and local governments and contracting 
organizations to develop and implement reasonable procedures for 
tracking referred clients to make sure that the individual makes or has 
an opportunity to make contact with the alternative provider to which 
the individual is referred.
    Provision of Alternative Services. The responsibility for providing 
the alternative services rests with the ``the appropriate Federal, 
State, or local government'' that administers the program. As discussed 
above, the State or local agency must refer the individual to an 
alternative provider of services within a reasonable period of time, as 
defined by the State. That alternative provider must be reasonably 
accessible and have the capacity to provide comparable services to the 
individual. Such services shall have a value that is not less than the 
value of the services that the individual would have received from the 
program participant to which the individual had such objection, as 
determined by the State.
    ACF recognizes that a range of methods may fulfill these 
responsibilities, and therefore does not seek to prescribe a single, 
inflexible referral system that States must adopt. Rather, we encourage 
State agencies, working in concert with local governments and program 
providers, to develop systems to comply with the requirements, monitor 
compliance, identify compliance problems, and take necessary corrective 
actions. It is important that the State agency and religious 
organizations work cooperatively to develop systems to comply with this 
provision, monitor compliance, identify compliance problems and take 
necessary corrective actions.
    [sbull] Fiscal Accountability. Under paragraph (g) of the proposed 
rule, we outline the financial responsibility incurred through the 
receipt of TANF funds. Religious organizations that contract to provide 
TANF services or benefits are subject to the same requirements as other 
nongovernmental organizations to account, in accordance with generally 
accepted auditing and accounting principles, for the use of such funds. 
Religious organizations may segregate their TANF accounts from 
nongovernmental funds for other activities. If religious organizations 
choose to segregate their funds in this manner, only the segregated 
funds are subject to audit by the government under the TANF program.
    [sbull] Effect on State and Local Funds. The TANF Charitable Choice 
requirements apply to ``a State program funded under part A of title IV 
of the Social Security Act,'' or under the TANF program. Section 104 of 
PRWORA also applies to ``any other program established or modified 
under title I or title II of this Act that permits contracts with 
organizations; or permits certificates, vouchers, or other forms of 
disbursement to be provided to beneficiaries as a means of providing 
assistance.'' Title I of PRWORA encompasses all the TANF provisions, 
including the requirement at section 409(a)(7) that States expend State 
or local funds on eligible families for activities that serve TANF 
purposes. These State contributions are known as maintenance-of-effort, 
or MOE, contributions. Therefore, under the proposed rules at paragraph 
(h), the Charitable Choice provisions apply whenever a State or local 
government uses Federal TANF funds or expends State or local funds 
claimed to meet the ``maintenance-of-effort'' (MOE) requirements of the 
TANF program to procure services and benefits from nongovernmental 
organizations, or redeems certificates, vouchers, or other forms of 
disbursement. In other words, when State or local funds are used to 
meet the TANF MOE requirements, the Charitable Choice provisions apply 
irrespective of whether the State or local funds are co-mingled with 
Federal funds, segregated, or expended in separate State programs. The 
proposed rules also clarify that, pursuant to section 104(k) of PRWORA, 
nothing in

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the Charitable Choice requirements shall be construed to preempt any 
provision of a State constitution or State statute that prohibits or 
restricts the expenditure of State funds in or by religious 
organizations.
    [sbull] Treatment of Intermediate Organizations. Finally, paragraph 
(i) of the proposed rule provides that, if a nongovernmental 
organization (referred to here as an ``intermediate organization''), 
acting under a contract or other agreement with the Federal government 
or a State or local government, is given the authority under the 
contract or agreement to select other nongovernmental organizations to 
provide services under the program, the intermediate organization must 
ensure that there is compliance with the Charitable Choice provisions. 
The intermediate organization retains all other rights of a 
nongovernmental organization under the Charitable Choice provisions.

IV. 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.

V. 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. The primary impact is on State governments. State governments 
are not considered small entities under the Regulatory Flexibility Act.

VI. 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 the Executive 
Order, and therefore has been reviewed by the Office of Management and 
Budget.

VII. 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.

VIII. Congressional Review

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

IX. 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.

X. 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 solicit comment from State and 
local government officials on this proposed rule.

List of Subjects in 45 CFR Part 260

    Grant programs--social programs, Loan programs--social programs, 
Public assistance programs.

    Dated: December 12, 2002.
Tommy G. Thompson,
Secretary of Health and Human Services.

    For the reasons discussed above, title 45 CFR chapter II is 
proposed to be amended as follows:

PART 260--[AMENDED]

    1. The authority citation for 45 CFR part 260 continues to read as 
follows:

    Authority: 42 U.S.C. 601, 601 note, 603, 604, 606, 607, 608, 
609, 610, 611, 619, and 1308.

    2. Section 260.30 is amended to add the following two definitions 
in alphabetical order to read as follows:


Sec.  260.30  What definitions apply under the TANF regulations?

* * * * *
    Direct funding or funds provided directly means funding that is 
provided to an organization directly by a governmental entity or an 
intermediary organization that has the same duties as a governmental 
entity, as opposed to funding that an organization receives as the 
result of the genuine and independent private choice of a beneficiary.
* * * * *
    Religious organization means a nonprofit religious organization.
* * * * *
    3. A new Sec.  260.34 is added to read as follows:


Sec.  260.34  What conditions apply to the Charitable Choice provisions 
of TANF?

    These Charitable Choice provisions apply whenever a State or local 
government uses Federal TANF funds or expends State and local funds 
used to meet maintenance-of-effort requirements of the TANF program to 
procure services and benefits from nongovernmental organizations, or 
provides TANF beneficiaries with certificates, vouchers, or other forms 
of disbursement redeemable from such organizations. However, nothing in 
this section shall be construed to preempt any provision of a State 
constitution or State statute that prohibits or restricts the 
expenditure of State funds in or by religious organizations.
    (a) (1) Religious organizations are eligible, on the same basis as 
any other organization, to participate in TANF programs as long as 
their TANF or MOE-funded services are provided 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 
in its use of TANF or MOE funds shall discriminate against an 
organization that applies to provide, or provides, TANF services or 
benefits on the basis of the organization's religious character or 
affiliation.
    (b) No TANF or MOE funds provided directly to participating 
organizations may be expended 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 for which it 
receives direct TANF funds under this part, and participation must be 
voluntary for the beneficiaries of those programs or services.
    (c) A religious organization that participates in the TANF program 
will retain its independence from Federal, State, and local governments 
and may continue to carry out its mission,

[[Page 77366]]

including the definition, practice and expression of its religious 
beliefs, provided that it does not expend TANF or MOE funds that it 
receives directly to support any inherently religious activities, such 
as worship, religious instruction, or proselytization. Among other 
things, faith-based organizations may use space in their facilities to 
provide TANF-funded services without removing religious art, icons, 
scriptures, or other symbols. In addition, a TANF-funded 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, a TANF 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 TANF or MOE funds shall 
not, in providing program services or benefits, discriminate against a 
TANF applicant or recipient on the basis of religion, a religious 
belief, a refusal to hold a religious belief, or a refusal to actively 
participate in a religious practice.
    (f) If an otherwise eligible TANF applicant or recipient objects to 
the religious character of a TANF service provider, the recipient is 
entitled to receive services from an alternative provider. In such 
cases, the State or local agency must refer the individual to an 
alternative provider of services within a reasonable period of time, as 
defined by the State agency. That alternative provider must be 
reasonably accessible and have the capacity to provide comparable 
services to the individual. Such services shall have a value that is 
not less than the value of the services that the individual would have 
received from the program participant to which the individual had such 
objection, as defined by the State agency. The alternative provider 
need not be a secular organization. It must simply be a provider to 
which the recipient has no religious objection. States may define and 
apply the terms ``reasonably accessible,'' ``a reasonable period of 
time,'' ``comparable,'' ``capacity,'' and `` value that is not less 
than.'' The appropriate State or local governments that administer 
TANF-funded programs shall ensure that notice of their right to 
alternative services is provided to applicants or recipients. The 
notice must clearly articulate the recipient's right to a referral and 
to services that reasonably meet the timeliness, capacity, 
accessibility, and equivalency requirements discussed above.
    (g) Religious organizations that receive TANF funds are subject to 
the same regulations as other nongovernmental organizations to account, 
in accordance with generally accepted auditing/accounting principles, 
for the use of such funds. Religious organizations may keep any TANF 
funds they receive for services segregated in a separate account from 
nongovernmental funds. If religious organizations choose to segregate 
their funds in this manner, only the TANF funds are subject to audit by 
the government under the program.
    (h) This section applies whenever a State or local organization 
uses TANF funds to procure services and benefits from nongovernmental 
organizations, or redeems certificates, vouchers, or other forms of 
disbursement from them whether with Federal funds, or State and local 
funds claimed to meet the maintenance-of-effort requirements of section 
409(a)(7) of the Social Security Act. When State or local funds are 
used to meet the TANF MOE requirements, the provisions apply 
irrespective of whether the State or local funds are co-mingled with 
Federal funds, segregated, or expended in separate State programs.
    (i) Preemption. Nothing in this section shall be construed to 
preempt any provision of a State constitution or State statute that 
prohibits or restricts the expenditure of State funds in or by 
religious organizations.
    (j) If a nongovernmental intermediate organization, acting under a 
contract or other agreement with a State or local government, is given 
the authority under the contract or agreement to select nongovernmental 
organizations to provide TANF or MOE-funded services, the intermediate 
organization must ensure that there is compliance with the Charitable 
Choice provisions. The intermediate organization retains all other 
rights of a nongovernmental organization under the Charitable Choice 
provisions.

[FR Doc. 02-31674 Filed 12-12-02; 4:32 pm]
BILLING CODE 4184-01-P