[Federal Register Volume 67, Number 242 (Tuesday, December 17, 2002)]
[Proposed Rules]
[Pages 77368-77371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31675]



[[Page 77367]]

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Part V





Department of Health and Human Services





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Administration for Children and Families



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45 CFR Part 1050



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

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

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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: Proposed rule.

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SUMMARY: This proposed rule would implement the Charitable Choice 
statutory provisions at section 679 of 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.

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 Administration for Children and Families, Office 
of Community Services, 370 L'Enfant Promenade, SW., 5th floor, 
Washington, DC 20447. Attention: Clarence Carter. Comments will be 
available for public inspection Monday through Friday 8:30 a.m. to 5 
p.m. on the 5th floor of the Department's offices at the above address. 
You may also transmit comments electronically via the Internet at: 
http://www.acf.dhhs.gov/hypernews/ hypernews/. To download an electronic version 
of the rule, you should access ACF's regulation page at: http://www.acf.dhs.gov/budget/html.

FOR FURTHER INFORMATION CONTACT: Clarence Carter, (202) 401-9333.

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. 
9901. Section 9901 sets forth provisions authorizing States to provide 
an opportunity for active participation by faith based groups, as well 
as charitable, private, and neighborhood based organizations, in 
programs directed to eliminate poverty.

II. Background

    Title II of the Community Opportunities, Accountability, and 
Training and Education Services Act of 1998 (COATS) (Pub. L. 105-285) 
set 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 scores 
of 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.

III. Regulatory Provisions

    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 proposed rule 
would implement the Charitable Choice provisions applicable to Federal, 
State, and local governments when funding public and private 
organizations--including religious organizations. The objective of this 
proposed rule is to ensure that the CSBG Act programs are open to all 
eligible organizations, regardless of their religious affiliation or 
character, and to establish clearly the proper uses of CSBG Act funds 
and the conditions for receipt of funding.
    Under the proposed rule a new Part 1050, ``Charitable Choice Under 
the Community Services Block Grant Programs,'' would be added to Title 
45 of the Code of Federal Regulations. We propose to add three sections 
under this part.
    First, section 1050.1, ``Scope,'' would provide that this part 
applies to all programs authorized in the Community Services Block 
Grant Act.
    Second, section 1050.2, ``Definitions,'' would provide the 
following definitions applicable to this proposed new part:

    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 from a 
governmental entity or an intermediate organization, as opposed to 
funding that an organization receives as a result of the genuine and 
independent private choice of a beneficiary.
    Intermediate Organization means a non-governmental 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 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.
    Religious organization means a nonprofit religious organization.

    The third and final section of the proposed new part, ``What 
Conditions Apply to the Charitable Choice Provisions of the CSBG Act?'' 
would be found at section 1050.3. Introductory language would speak to 
the applicability of the Charitable Choice provisions of the CSBG Act. 
Specifically, the rules would provide that the Charitable Choice 
provisions apply whenever the Federal government, or State or local 
governments, provide awards, contracts, or other assistance under any 
program authorized in the Community Services

[[Page 77369]]

Block Grant Act, 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 another nongovernmental organizations to provide 
assistance under any of the programs authorized in the CSBG Act.
    However, because the Charitable Choice provisions refer only to 
Federal, State and local governments, these provisions do not apply to 
Tribal governments operating CSBG programs under section 677 of the 
Community Services Block Grant Act.
    The CSBG Charitable Choice rules apply to programs carried out 
under the CSBG statute. When a program is funded by CSBG as well as by 
other Federal sources, the CSBG Charitable Choice rules apply to the 
use of those funds except to the extent that the Charitable Choice 
provisions are inconsistent with provisions applicable to the other 
funding sources.
    Section 1050.3 of the proposed rule would contain the following 
elements:
    [sbull] Equal Treatment for Religious Organizations. The Charitable 
Choice provision in the CSBG Act clarifies the rights of faith-based 
organizations that receive funding. The proposed rule would make clear 
under paragraph (a) of section 1050.3 that organizations are eligible 
to participate in assistance programs without regard to their religious 
character or affiliation, and that organizations may not be excluded 
from the competition for program 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 and intermediate 
organizations administering programs under the CSBG Act, are prohibited 
from discriminating against organizations on the basis of religion or 
their religious character.
    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 funds ``through a tripartite 
board * * * that fully participates in the development, planning, 
implementation, and evaluation of the program to serve low-income 
communities.'' (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.
    [sbull] Restriction on Religious Activities by Organizations that 
Receive Direct CSBG Funding. Paragraph (b) of section 1050.3 of the 
proposed rule describes limitations on the use of funds provided under 
the CSBG Act directly to an organization by a governmental entity or by 
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, 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.
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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 funding under the CSBG Act cannot engage in inherently religious 
activities. It simply means such an organization cannot fund these 
activities with such funds provided directly from a government source 
or an intermediate organization that has the same duties as a 
governmental entity. Thus, faith-based organizations that receive 
direct funding must take steps to separate, in time or location, their 
inherently religious activities from the government- or intermediate 
organization-funded services that they offer.
    In addition, any participation by a beneficiary in such religious 
activities must be voluntary. An invitation to participate in an 
organization's religious activities is not in itself inappropriate. 
However, participating religious organizations must be careful to 
reassure program beneficiaries that they will receive services 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 CSBG funds are provided to religious organizations as a result of 
a genuine and independent private choice of a program beneficiary. A 
religious organization may receive 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 under a program that is 
designed to give that individual a choice among providers. Thus, 
religious organizations that receive funds under the CSBG Act 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 CSBG-funded services they provide, provided that 
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 CSBG Act programs 
retains its independence from Federal, State, and local governments, 
provided that it does not use direct program 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 government-funded services, without 
removing religious art, icons, scriptures, or other symbols. In 
addition, a government-funded religious organization may retain 
religious terms in its organization's name, select its

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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 funds from programs authorized in 
the CSBG Act does not affect a participating religion 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 thus 
reflect 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 
funded services. The first of these is found under paragraph (e) of the 
proposed rule. This section clarifies that religious organizations are 
prohibited from discriminating against beneficiaries or potential 
beneficiaries on the basis of religion or religious belief. 
Accordingly, religious organizations, in providing services funded in 
whole or in part under any program authorized in the CSBG Act, 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] Fiscal Accountability. Under paragraph (f) of the proposed 
rule, we outline the financial responsibility incurred through the 
receipt of funds from programs authorized under the CSBG Act. Religious 
organizations that receive such funding to provide 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 use of such funds. Religious 
organizations are also required to account for the expenditure of all 
governmental funds and are subject to audit by the government. 
Religious organizations must segregate their government funds provided 
under any of the programs in the CSBG Act from their other funds so 
that only the use of their government funds would be subject to audit 
under the applicable CSBG Act program.
    [sbull] Effect on State and Local Funds. The proposed rule at 
paragraph (g) provides that if a State or local government contributes 
its own funds to supplement federal CSBG funded activities, the State 
or local government has the option to separate out the Federal funds or 
commingle them. However, if the funds are commingled, the Charitable 
Choice provisions apply to all of the commingled funds.
    [sbull] Treatment of Intermediate Organizations. Finally, paragraph 
(h) of the proposed rule provides that, if a nongovernmental 
organization (referred to here as an ``intermediate organization''), 
acting under a contract, grant, 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.

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 3(f) of 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.

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 
proposed rule will have tribal implications, we specifically solicit 
comment on this proposed rule from tribal officials.

List of Subjects in 45 CFR Part 1050

    Grant programs-social programs.


[[Page 77371]]


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


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

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

PART 1050--CHARITABLE CHOICE UNDER THE COMMUNITY SERVICES BLOCK 
GRANT PROGRAM

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). (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 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.
    Religious organization means a nonprofit religious organization.


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-CSBG provided awards, 
contracts, or other assistance under any program authorized in the 
Community Services 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, faith-
based 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, a religious belief, a 
refusal to hold a religious belief, or a refusal to actively 
participate in a religious practice.
    (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 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. 02-31675 Filed 12-12-02; 4:32 pm]
BILLING CODE 4184-01-P