[Federal Register Volume 68, Number 189 (Tuesday, September 30, 2003)]
[Rules and Regulations]
[Pages 56430-56449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24289]



[[Page 56429]]

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Part VIII





Department of Health and Human Services





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42 CFR Parts 54 and 54a

45 CFR Parts 96, 260 and 1050



Charitable Choice Provisions and Regulations; Final Rules

  Federal Register / Vol. 68, No. 189 / Tuesday, September 30, 2003 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

42 CFR Parts 54 and 54a

45 CFR Part 96

RIN 0930-AA11


Charitable Choice Regulations Applicable to States Receiving 
Substance Abuse Prevention and Treatment Block Grants, Projects for 
Assistance in Transition From Homelessness Formula Grants, and to 
Public and Private Providers Receiving Discretionary Grant Funding From 
SAMHSA for the Provision of Substance Abuse Services Providing for 
Equal Treatment of SAMHSA Program Participants

AGENCY: Substance Abuse and Mental Health Services Administration, HHS.

ACTION: Final rule.

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SUMMARY: On December 17, 2002, the Department of Health and Human 
Services (HHS) published a Notice of Proposed Rulemaking (NPRM) to 
implement the Charitable Choice statutory provisions of the Public 
Health Service Act, applicable to the Substance Abuse Prevention and 
Treatment (SAPT) Block Grant program, the Projects for Assistance in 
Transition from Homelessness (PATH) formula grant program, insofar as 
recipients provide substance abuse services, and to SAMHSA 
discretionary grants for substance abuse treatment or prevention 
services, which are all administered by the Substance Abuse and Mental 
Health Services Administration (SAMHSA) of the U.S. Department of 
Health and Human Services. The Secretary requested comments on the NPRM 
and gave 60 days for individuals to submit their written comments to 
the Department. The Secretary has considered the comments received 
during the open comment period and is issuing the final regulation in 
light of those comments.

EFFECTIVE DATE: October 30, 2003.

FOR FURTHER INFORMATION CONTACT: Daryl Kade, Associate Administrator 
for Planning and Budget, 12C-06 Parklawn Building, 5600 Fishers Lane, 
Rockville, Maryland 20857, telephone (301) 443-4111.

Background

    Section 1955 of the Public Health Service Act, 42 U.S.C. 300x-65, 
as added by the Children's Health Act of 2000 (Pub. L. 106-310), as 
well as sections 581-584 of the Public Health Service Act, 42 U.S.C. 
290kk, et seq., as added by the Consolidated Appropriations Act (Pub. 
L. 106-554), (hereinafter referred to as ``SAMHSA Charitable Choice 
provisions'') set forth certain provisions which are designed to give 
people in need of substance abuse services a greater choice of SAMHSA-
supported substance abuse prevention and treatment programs. SAMHSA's 
Charitable Choice provisions ensure that religious organizations are 
able to compete on an equal footing for Federal substance abuse funding 
administered by SAMHSA, without impairing the religious character of 
such organizations and without diminishing the religious freedom of 
SAMHSA beneficiaries. These provisions apply to recipients of the 
Substance Abuse Prevention and Treatment (SAPT) Block Grant funds, the 
Projects for Assistance in Transition from Homelessness (PATH) formula 
grant funds, and to SAMHSA discretionary grant funds for substance 
abuse prevention and treatment services.
    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 myriad 
social services to those in need. The SAMHSA 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. SAMHSA's Charitable Choice statutory 
provisions were enacted within the constitutional framework of 
government interaction with religious organizations. The goal of 
Charitable Choice is not to support or sponsor religion, but to ensure 
fair competition among providers of services whether they are public or 
private, secular or faith-based.

Purpose of Rule

    The SAMHSA Charitable Choice provisions contain important 
protections both for religious organizations that receive SAMHSA 
funding for substance abuse services and for the individuals who 
receive services from such programs. The rule will work to ensure that 
SAMHSA substance abuse programs are open to all eligible organizations, 
regardless of religious character or affiliation, and to establish 
clearly the proper uses to which funds may be put and the conditions 
for receipt of funding. The regulations provide maximum flexibility to 
the States and local governments, and to religious organizations that 
are ``program participants'' in implementing these provisions. In that 
vein, the final rules provide that, as part of the application package 
they submit for funding, duly-designated officials from the States, 
local governments, and applicants for SAMHSA discretionary funding for 
applicable programs will assure that they will comply with these 
provisions.

Brief Overview of the Rule

    The Department is amending the regulations to add 42 CFR part 54 
and part 54a. Part 54 addresses implementation of these provisions with 
regard to SAMHSA's Substance Abuse Prevention and Treatment (SAPT) 
Block Grant, 42 U.S.C. 300x-21 to 300x-66, and to SAMHSA's Projects for 
Assistance in Transition from Homelessness (PATH) Formula Grants, 42 
U.S.C. 290cc-21 to 290cc-35, in which the State has most of the 
responsibility for implementation. Part 54a addresses implementation of 
these provisions with regard to SAMHSA's discretionary grant programs, 
42 U.S.C. 290aa, et seq., in which implementation responsibility is 
shared among SAMHSA, and the States and local governments as recipients 
of those grants.

Response to Comments Received on the Proposed Rule

    The Department received comments about the Charitable Choice 
proposed rule from 62 commenters, as follows:
    [sbull] 15 comments from 13 States
    [sbull] 13 comments from faith-based organizations
    [sbull] 11 comments from substance abuse associations and providers
    [sbull] 10 comments from individuals not representing particular 
groups or organizations
    [sbull] 8 comments from advocacy groups and civil rights 
organizations
    [sbull] 2 comments from public and State/local interest groups
    [sbull] 2 from law firms
    [sbull] 1 from a Federal agency
    In general, comments from the States and providers centered on the 
implementation of Section 54.8 and Section 54a.8, the alternative 
services provisions. Comments from faith-based organizations, advocacy 
groups, and interest groups centered on how to keep religious 
activities separated from social services, and how to safeguard the 
rights of both the religious organization and the program beneficiary.

[[Page 56431]]

    The following is a summary of comments by issue, and the 
Department's response to those comments.

Scope. (Secs. 54.1 and 54.1a)

    This section of the rules clarifies that they apply, according to 
SAMHSA's Charitable Choice provisions, only to awards that pay for 
substance abuse prevention and treatment services under 42 U.S.C. 300x-
21, et seq., 42 U.S.C. 290cc-21 to 290cc-35, and 42 U.S.C 290aa, et 
seq. These rules do not apply to awards under any such authorities for 
activities that do not involve the direct provision of substance abuse 
services.
    Comment: One commenter was concerned ``about the singling out of 
substance abuse services from mental health services, [perpetuating] 
the damaging myth that substance abuse service are not truly health 
care services.''
    Response: SAMHSA's mental health programs are not covered by the 
Charitable Choice statutory provisions. However, all of SAMHSA's 
programs are covered by Executive Order 13279, Equal Protection of the 
Laws for Faith-Based and Community Organizations, which establishes 
that all eligible organizations, including faith-based and other 
community organizations are able to compete on an equal footing for 
Federal financial assistance. The Department is working to ensure that 
all its programs, whether substance abuse or mental health, comply with 
the principles set out in this Executive Order.
    Comment: Several commenters opined that the proposed rule was an 
unconstitutional breach of the principle of separation of church and 
state, because it would allow public funds to be given to ``pervasively 
sectarian organizations,'' contrary to longstanding judicial precedent.
    Response: We do not agree with the commenters. Religious 
organizations that receive direct SAMHSA funds for substance abuse 
treatment cannot use such funds for inherently religious activities. 
These organizations must ensure that religious activities are separate 
in time or location from the treatment services and they must also 
ensure that participation in such religious activities is voluntary. 
Furthermore, they are prohibited from discriminating against a program 
beneficiary on the basis of religion, a religious belief, a refusal to 
hold a religious belief, or a refusal to actively participate in a 
religious practice.
    The Supreme Court's ``pervasively sectarian'' doctrine--which held 
that there are certain religious institutions in which religion is so 
pervasive that no government aid may be provided to them, because their 
performance of even ``secular'' tasks will be infused with religious 
purpose--no longer enjoys the support of a majority of the Court. Four 
Justices expressly abandoned it in Mitchell v. Helms, 530 U.S. 793, 
825-829 (2000) (plurality opinion), and Justice O'Connor's opinion in 
that case set forth reasoning that is inconsistent with its underlying 
premises, see id. at 857-858 (O'Connor, J., concurring in judgment, 
joined by Breyer, J.) (requiring proof of ``actual diversion of public 
support to religious uses''). Thus, six members of the Court have 
rejected the view that aid provided to institutions will invariably 
advance the institutions' religious purposes, and that view is the 
foundation of the ``pervasively sectarian'' doctrine. We therefore 
believe that when current precedent is applied to a substance abuse 
program, or to the SAMHSA Charitable Choice provisions, government may 
fund all service providers, without regard to religion and free of 
criteria that require the provider to abandon its religious expression 
or character.

Definition of Religious Organization. (Secs. 54.2 and 54.2a)

    In the NPRM, the Department defined ``religious organization'' as a 
``non-profit religious organization,'' consistent with 42 U.S.C. 
290kk(c)(6). This definition covers the breadth of organizations that 
could potentially apply for federal funding under the Charitable Choice 
Regulations.
    Comments: Six commenters requested a more detailed definition of 
``religious organizations'' and some offered suggestions including 
using the tax code definition of ``religious organization.'' The 
commenters felt it was important to know to which organizations the 
Charitable Choice regulations applied.
    Response: Throughout the proposed rule, we used the term 
``religious organization'' and the term ``faith-based organization'' 
interchangeably. Neither the U.S. Constitution nor the relevant Supreme 
Court precedents contain a comprehensive definition of religion or a 
religious organization that must be applied to this rule. Yet, an 
extensive body of judicial precedent provides the practical guidelines 
that States and religious organizations need to conform to the 
Establishment and the Free Exercise Clauses of the First Amendment to 
the U.S. Constitution. In addition, following investigation into the 
definition provided by the tax code, the Department determined that the 
definition did not serve to provide more clarity to the definition in 
the preamble. Therefore, the Department, in the final rule, has not 
further defined that term. Please note that the Department is planning 
to ask organizations to identify whether they are religious 
organizations as part of a survey entitled Survey on Ensuring Equal 
Opportunity for Applicants.
    Comment: Several commenters asked that the final rule provide 
additional guidance on how to comply with the Establishment Clause and 
that it detail the scope of religious content that must be excluded 
from public funding.
    Response: In enacting the Charitable Choice provisions, Congress 
did not include specific statutory provisions with guidance on how to 
meet constitutional requirements. Like Congress, we do not believe it 
is appropriate in this rule to provide either States or religious 
organizations with detailed guidance on how to comply with the 
Establishment or Free Exercise Clauses of the Constitution. States and 
faith-based organizations have years of experience and extensive 
practice in following case law and adhering to judicial precedent to 
conform to these provisions. In enacting the SAMHSA Charitable Choice 
provision, Congress sought to conform the law to this precedent while 
providing maximum flexibility to the States in carrying out statutory 
requirements. The requirement in the proposed rule closely mirrors the 
statutory provision and we have retained the identical language of the 
proposal in the final rule.

Restriction on Religious Activities by Organizations that Receive 
Funding Directly from SAMHSA. (Secs. 54.2 and 54a.2)

    In the NPRM, the Department defined ``inherently religious'' as 
including ``worship, proselytization, or instruction.'' Faith-based 
organizations cannot use Federal funds to support such activities.
    Comment: Many commenters addressed the issue of what constitutes 
``inherently religious activities.'' Some groups stated that the 
definition provided in the NPRM, of ``worship, proselytization, or 
instruction,'' did not clarify sufficiently what activities could be 
funded by federal funds. They noted that questions of what constitutes 
religious content and the religious nature of program must be 
addressed. Without this clarification, the provision opens the door to 
other activities--including desirable ones such as providing food and 
shelter--that may be undertaken for religiously informed reasons being 
ruled ineligible for SAMHSA funding support.

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    Response: The Charitable Choice regulation maintains that the 
organization's inherently religious activities must be kept separate--
i.e., in time or location--in order to prevent the organization from 
using some or all of the SAMHSA funds provided to it to further its 
inherently religious activities. The inherently religious activities 
must be funded privately in their entirety.
    For example, a church has a contract with SAMHSA to provide a 
substance abuse prevention class. The class is held in the finished 
basement of the church, the same place where the pastor of the church 
holds a Bible study group at the end of the day, when all other classes 
have ended. The pastor has extended an open invitation for anyone who 
wishes, to attend the study group. The church must use private funds to 
pay for this Bible study activity. Thus, faith-based organizations that 
receive direct SAMHSA funds must take steps to separate, in time or 
location, their inherently religious activities from the SAMHSA-funded 
services that they offer.
    In addition, any participation by a program beneficiary in 
inherently 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 
services or benefits 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.
    As some of the commenters noted, it would be difficult to establish 
an acceptable list of all inherently religious activities. Inevitably, 
the definition would fail to include some inherently religious 
activities or include certain activities that are not inherently 
religious. Our approach is consistent with Supreme Court precedent, 
which likewise has not comprehensively defined inherently religious 
activities. The Court has explained, however, that prayer and worship 
are inherently religious, but that social services do not become 
inherently religious merely because they are conducted by individuals 
who are religiously motivated to undertake them or view the activities 
as a form of ``ministry.''
    Comment: Other commenters were concerned because the potential for 
violating the requirement to separate religious and non-religious 
components of a program is heightened in the area of substance abuse 
services, which is sometimes viewed as a spiritual problem.
    Response: The restrictions on inherently religious activities by 
organizations that receive funding directly from SAMHSA \1\ remain the 
same as those described in the proposed rule. The Department agrees 
that these activities include worship, religious instruction, and 
proselytization. (Other basic examples include prayer meetings and 
devotional studies of sacred texts.) The right to maintain a group's 
religious character does not include the right to use government funds 
to pay for inherently religious activities or materials.
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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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    Comment: Questions were also raised about whether 12-step programs 
or, specifically, AA programs, are religious programs.
    Response: With regard to the 12-step and AA meetings, we note that 
any inherently religious activities must be voluntary and must be 
offered separately in time or location from the program that receives 
direct SAMHSA funding.
    Comment: A commenter stated that the exclusion of all ``inherently 
religious'' activities from government funding is flawed, and puts many 
faith-based organizations in the position of having to choose either to 
deny their core religious perspectives on social issues or to reject 
government funds for their programs that accomplish the government's 
objectives.
    Response: This limitation on the use of the direct funds, which 
tracks the SAMHSA Charitable Choice statute, is not meant to put an 
organization in the position of having to deny its religious 
perspectives on social issues, or in the position of having to reject 
government funds for its programs that are consistent with the purposes 
of the SAMHSA program. We recognize that while the government regards 
services like feeding the hungry or helping substance abusers return to 
their communities as social services or secular work, some 
organizations may regard these same activities as acts of mercy, 
spiritual service, fulfillment of religious duty, good works, or the 
like. Therefore, providing social services that otherwise satisfy the 
requirements for funding under a government program--e.g., providing 
food for the hungry or helping substance abusers rejoin their 
communities--would constitute an appropriate use of funds, as long as 
government funds are not used to pay for inherently religious 
activities such as prayer and worship.
    Comment: Several commenters recommended that the phrase ``separate 
in time or location'' be changed to ``separate in time and location.'' 
According to the commenter, this would ``prevent a religious provider 
from completing a service component, and then moving directly into a 
prayer service without notice or a break.''
    Response: The Department has decided to leave the final regulation 
as it was stated in the NPRM. Changing the regulation in the suggested 
way would place an undue burden on the providers and is not legally 
necessary. For example, such a rule would impose an unnecessarily harsh 
burden on small religious organizations, which may have access to only 
one location that is suitable for the provision of SAMHSA-funded 
services. As to the commenter's fear that a provider may move directly 
from the service component into a prayer service without notice or 
taking a break, it should be noted that the rule makes it clear that 
religious activity must be separated in time or location from the 
SAMHSA-funded services and participation by a beneficiary must be 
voluntary. We believe the rule adequately addresses this situation.

Equal Treatment for Religious Organizations. (Sec. 54.3 and 54a.3)

    Under SAMHSA's Charitable Choice provisions, organizations are 
eligible to participate in SAMHSA programs without regard to their 
religious character or affiliation, and organizations may not be 
excluded from the competition for Federal funds 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.
    Comments: Eleven commenters said that faith-based providers should 
be held to the same program standards that are applicable to other 
providers. Commenters felt that without such a standard, faith-based 
organizations would have an unfair advantage in providing services, and 
that the overall effect would be lower standards of care.
    Response: These regulations are established in accordance with the 
law

[[Page 56433]]

to provide evenhanded treatment of SAMHSA program participants--that 
is, to ensure that religious organizations are not discriminated 
against on the basis that the religious organization has a religious 
character. These regulations do not establish a preference for faith-
based organizations and, much like the Charitable Choice laws, in fact, 
provide that ``nothing in these regulations shall restrict the ability 
of the Federal government, or a State or local government, from 
applying to religious organizations the same eligibility conditions in 
applicable programs as are applied to any other nonprofit private 
organization.''
    Comment: One commenter felt that the NPRM failed to distinguish 
between ``discrimination and the application of special rules required 
to protect the character of religious organizations.'' Another 
commenter suggested that the final rule should also prohibit 
discrimination ``in favor of'' faith-based organizations. In selecting 
contractors, a government entity should not allow a provider's 
religious character to influence its selection.
    Response: According to other comments received from faith-based 
organizations, most groups recognize that the regulations and the 
Charitable Choice laws serve to protect program recipients and are 
consistent with the Establishment Clause. These regulations do not 
establish a form of discrimination or preferential treatment, but 
rather deal with the special situation involved in the funding of 
religious organizations. Nothing in the regulations is intended to 
preclude those administering the program from accommodating religious 
organizations in a manner consistent with the Establishment Clause.
    Comment: A couple of commenters, noting the importance of the equal 
treatment provisions, observed that the proposed rule is consistent 
with the statute and strongly supported retention in the final rule.
    Response: We agree with these comments and have retained similar 
language in the final rule.
    Comment: One commenter noted that the provisions equate religious 
and non-religious providers and seek to treat them as equals, thereby 
failing to recognize the unique place that religion has in our society. 
This commenter believed that religion should be above the fray of 
government funding, regulation and auditing, not reduced to it.
    Response: This rule does not present any violation of 
constitutional church-state principles. Rather, this rule governs the 
conscious decision of a religious organization to administer regulated 
activities, by accepting public funds to do so. Therefore, consistent 
with the SAMHSA Charitable Choice laws, we have retained language that 
enables faith-based organizations to compete on an equal footing for 
funding, within the framework of constitutional church-state 
guidelines. This does not in any way denigrate the special place of 
religion in the Constitution or its unique role in society. As the 
Supreme Court has recognized, respect for religious freedom at times 
permits (and at times requires) treating religion on an equal basis.

Nondiscrimination Against Beneficiaries. (Sec. 54.7 and 54a.7)

    This provision of the NPRM restated the statutory requirement that 
programs receiving federal funding may not discriminate against program 
recipients on the basis of their religion or religious beliefs or a 
refusal to actively participate in a religious practice.
    Comment: Many of the commenters expressed concern over the use of 
the word ``active'' in setting forth the prohibition from 
discriminating against beneficiaries or potential 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. 
They believed that the word ``actively'' implies that beneficiaries are 
not protected if they refuse to passively participate in religious 
practices. They also believed that faith-based organizations could 
compel beneficiaries to attend activities like sermons, prayers, and 
religious lectures, or force beneficiaries to bow their heads or remain 
standing during the delivery of proselytizing messages, religious 
instruction or worship. Further, they interpreted the word ``active'' 
to allow the delivery of such messages using facilities and equipment 
funded by the government. They believed this word opens the door 
wherein vulnerable clients may be exposed to inappropriate ``passive'' 
religious practices. The commenters recommended removing the word 
``actively'' from the final regulations.
    Response: In enacting the SAMHSA Charitable Choice provisions, 
Congress provided that program participants may not discriminate 
against program beneficiaries ``on the basis of religion, a religious 
belief, or a refusal to actively participate in a religious practice.'' 
42 U.S.C. 300x-65(f). Further, Congress stipulated that the religious 
freedom of beneficiaries may not be diminished and provided that 
beneficiaries who object to the religious character of a service 
provider have a right to an alternative provider. These provisions are 
straightforward and are sufficient to protect the religious freedom of 
program beneficiaries. Accordingly, we have retained the language of 
the proposed rule, which is based on Congress's own language. We 
reiterate, however, as indicated in the rules at sections 54.4 and 
54a.4, that inherently religious activities are not to be made part of 
a program that is directly funded by SAMHSA. Inherently religious 
activities, such as prayer and worship, may only be offered to 
beneficiaries on a voluntary basis and must be provided separately, in 
time or location.
    Comment: The commenters suggested that we strengthen the provision 
in this subsection so clients may not be coerced, explicitly or 
tacitly, to participate in religious activities, or feel pressured to 
participate in such activities. Individuals in need are not always in a 
condition to make a thoughtful and well-considered decision whether or 
not to participate in worship or similar activities offered by a 
religious social service provider, particularly when the individual is 
in great need of the service.
    Response: We believe that the provision suffices as written. 
However, we will use this opportunity to reaffirm that a person's 
participation in any religious activities must be entirely voluntary. 
Beneficiaries of directly funded SAMHSA services have the right not to 
take part in any religious practices to which they object. Therefore, 
they may, at any time, refuse to participate in inherently religious 
activities. We recommend that States and organizations help to ensure 
that clients and prospective clients have a clear understanding of the 
services offered by an organization by having literature available to 
give to the client which fully explains the services offered, including 
any inherently religious activities, as well as the individual's 
rights.
    Comment: One commenter wrote that the rules should clarify that 
individuals who refuse to participate in the inherently religious 
activities will not be excluded from the program and will not suffer 
any discrimination in the administration of the program. Congress 
specified that Federal funds may not be used for religious purposes, 
but the rules provide no enforcement mechanism, so beneficiaries have 
no administrative relief if violations occur.
    Response: The SAMHSA Charitable Choice provision explicitly 
prohibits a religious organization from discriminating against a 
participant on the basis of religion, religious belief, or

[[Page 56434]]

refusal to actively participate in a religious practice. For example, 
if the service provider is a faith-based organization, that 
organization may not discriminate against the individual on account of 
religion or a religious belief. In addition, the faith-based 
organization may not turn away a beneficiary from the organization's 
program solely because the beneficiary refuses to participate in an 
inherently religious practice. Hence, this provision ensures the 
beneficiary's right not to take part in any inherently religious 
practices to which he or she objects. The individual's participation in 
an inherently religious activity must be entirely voluntary. Likewise, 
it is well established that government may not compel an individual, 
through material penalty or loss of public benefit or advantage, to 
profess a religious belief or to observe an inherently religious 
practice.
    Comment: One commenter wrote that the proposed rule does not 
require a secular alternative. Therefore, it lacks constitutionally 
required safeguards for beneficiaries. Another commenter suggested that 
beneficiaries should be referred to programs to which they have no 
religious objection.
    Response: The proposed rule provided that if the applicant or 
recipient objects to the religious character of a SAMHSA service 
provider, he or she is entitled to an alternative provider to which the 
individual has no religious objection. This is in keeping with the 
SAMHSA Charitable Choice provisions, which require that the beneficiary 
be provided assistance from ``an alternative provider.'' The Charitable 
Choice statute does not specify that the alternative provider needs to 
be a secular organization; it need only be a provider to which the 
beneficiary has no objection (unless, of course, the beneficiary 
objects to the religious character of all faith-based providers, in 
which case he is entitled to a secular alternative). We have chosen not 
to adopt this suggestion for three reasons. First, some beneficiaries 
may prefer an alternative religious organization, rather than a secular 
organization, and we prefer to provide beneficiaries with as many 
choices as possible. Second, the Charitable Choice statute prohibits 
direct funding of inherently religious activities (which must also be 
voluntary), and many faith-based organizations in any case deliver 
their services in a secular manner. As a result, most beneficiaries do 
not object to the religious character of these organizations, and we do 
not want to exclude them as potential providers of service. Third, 
under the permissive statutory language that we have retained, State 
and local governments may offer a secular alternative. We believe 
States will implement this requirement in a manner consistent with 
their obligation to ensure compliance with the Establishment Clause of 
the First Amendment.
    Comment: One commenter would like us to recognize that religious 
organizations and secular organizations sometimes discriminate on the 
basis of sexual orientation or gender identity. The commenter suggested 
that we develop a regulation banning religious, sexual orientation and/
or gender identity discrimination with Federal or other public funds.
    Response: Religious and secular organizations alike must follow 
Federal civil rights laws prohibiting discrimination on the bases of 
race, color, national origin, gender, age, and disability. However, the 
Federal civil rights laws are silent on discrimination on the basis of 
sexual orientation, and we decline to impose such restrictions by 
regulation.
    Comment: Several commenters noted that if religious organizations 
are providing program services and facilities, then they must be in 
compliance with the Americans with Disabilities Act (ADA).
    Response: It is beyond the scope of these regulations to address 
how various civil rights laws might apply in all situations. As noted 
previously, organizations providing programs services and facilities 
must comply with Federal civil rights laws to the extent those laws are 
applicable. We note that section 307 of the Americans with Disabilities 
Act of 1990 excludes religious organizations or entities controlled by 
religious organization, including places of worship, from coverage 
under the provision that deal with public accommodations. On the other 
hand, there exist a number of other Federal prohibitions against 
discrimination on the basis of disability. For example, section 504 of 
the Rehabilitation Act of 1973, and its implementing regulations at 45 
CFR part 84, prohibit discrimination on the basis of disability in 
programs or activities receiving Federal financial assistance.

Religious Character and Independence. (Sec. 54.5 and 54a.5)

    Sections 54.5 and 54a.5 of the final rule clarify that a religious 
organization that participates in the SAMHSA program retains its 
independence from Federal, State, and local governments, provided that 
it does not use direct SAMHSA 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 SAMHSA-funded services, without removing religious art, icons, 
scriptures, or other symbols. In addition, a religious organization 
that receives SAMHSA funds 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.
    Comment: A number of commenters expressed concern that a religious 
organization in receipt of SAMHSA funds does not have to remove the 
religious art, icons, scriptures, or other symbols. The commenters 
think that this provision is too broad. It could result in the 
organization providing services in a setting that may well constitute a 
``pervasively sectarian'' atmosphere in which members of a different 
religion may not feel comfortable or welcome to receive their SAMHSA-
funded benefits. For example, the organization could conduct the 
government-funded program in a chapel, leading to a reasonable 
misperception of government endorsement of or support for religion.
    Response: The SAMHSA Charitable Choice provisions impose on the 
government a duty not to intrude into the institutional autonomy of 
religious organizations. Specifically, each participating faith-based 
organization in receipt of SAMHSA funds ``shall'' retain its 
independence from Federal, State and local governments. This 
independence includes control over the definition, development, 
practice, and expression of its religious beliefs. In addition, the 
statutes expressly prohibit State, Federal, and local governments from 
requiring a religious organization to alter its form of internal 
governance or remove religious art, icons, scripture, or other symbols 
in order to be eligible to receive directly funded SAMHSA funds to 
provide services to beneficiaries. And, it should be noted that, if the 
beneficiary objects to the religious character of the organization, 
then he or she is entitled to receive the service from an alternate 
provider to which the beneficiary has no religious objection.
    Finally, as noted above, the Supreme Court's ``pervasively 
sectarian'' doctrine no longer enjoys the support of a majority of the 
Court. See Mitchell v. Helms, 530 U.S. 793, 825-829 (2000) (plurality 
opinion); id. at 857-858 (O'Connor, J., concurring in judgment,

[[Page 56435]]

joined by Breyer, J.) (requiring proof of ``actual diversion of public 
support to religious uses''). Accordingly, the Department (like 
Congress) does not believe that the Constitution requires exclusion of 
organizations that are governed by religious organizations or whose 
facilities contain religious symbols.

Employment Practices. (Sec. 54.6 and 54a.6)

    The NPRM restated the SAMHSA's Charitable Choice provisions, which 
provide that a religious organization's exemption provided under 
section 702 of the Civil Rights Act of 1964 regarding employment 
practices shall not be affected by its participation in, or receipt of 
funds from, a designated program. To the extent that 42 U.S.C. 300x-
57(a)(2) or 42 U.S.C. 290cc-33(a)(2) imposes religious 
nondiscrimination requirements on the employment practices of program 
participants, the NPRM clarifies that such requirements do not apply to 
program participants that demonstrate that these requirements would 
substantially burden their exercise of religion.
    Comments: Numerous comments were received dealing with the 
employment practices provisions in the proposed rule. Nineteen out of 
23 comments made about this provision supported the removal of the 
provision from the final rule. Many commenters felt that the Religious 
Freedom Restoration Act (RFRA) was an inappropriate basis for the 
regulation and did not provide the statutory authority to overrule the 
broad anti-discrimination provision in SAMHSA's authorizing legislation 
for the Substance Abuse Prevention and Treatment (SAPT) block grant in 
the Public Health Service Act. They argued that religious groups would 
not be substantially burdened by having to comply with these 
requirements, and that, in any event, the government had a compelling 
interest in imposing the requirements.
    Response: The Department does not agree with the comments. We 
believe that, in addition to being a reasonable construction of the 
SAMHSA Charitable Choice provision, the inapplicability of the 
discrimination provisions of the SAPT block grant program and the PATH 
program, 42 U.S.C. 300x-57(a)(2) and 42 U.S.C. 290cc-33(a)(2), to 
religious organizations that demonstrate a substantial burden on their 
exercise of religion follows from RFRA. Under RFRA, the government may 
not impose legal requirements that substantially burden a grantee's 
exercise of religion unless doing so is the least restrictive means of 
furthering a compelling government interest. 42 U.S.C. 2000bb-1(b). 
Accordingly, where a religious entity establishes that its exercise of 
religion would be substantially burdened by the religious 
nondiscrimination provisions cited above, RFRA supercedes those 
statutory requirements, thus exempting the religious entity therefrom, 
unless the Department has a compelling interest in enforcing them.
    The Department's rationale in this regard is set out in the NPRM. 
See 67 FR 77350, 77351-77352 (Dec. 17, 2002). Several points, however, 
merit elaboration. First, the Department recognizes that not all 
religious organizations that might receive funding under the SAPT block 
grant and PATH programs would be substantially burdened by the 
application of the religious nondiscrimination requirements of 42 
U.S.C. 300x-57(a)(2) and 42 U.S.C. 290cc-33(a)(2). For example, some 
religious organizations are concerned only with their employees' 
commitment to providing social services, not with any profession of 
faith, and thus do not consider religion in hiring people to perform 
such services. Such groups would not likely be burdened by having to 
comply with a religious nondiscrimination requirement. Many other 
religious organizations, however, consider religious faith critical to 
all of their employees' activities, including those that involve 
providing government-funded social services to the public. For these 
groups, imposition of a religious nondiscrimination requirement can 
impose a particularly harsh burden. As Justice Brennan explained: 
``Determining that certain activities are in furtherance of an 
organization's religious mission, and that only those committed to that 
mission should conduct them, is * * * a means by which a religious 
community defines itself.'' Corporation of Presiding Bishop v. Amos, 
483 U.S. 327, 342 (1987) (Brennan, J., concurring). For groups that 
deem religious faith an important part of their self-definition, having 
to make employment decisions without regard to their faith would 
substantially alter the charter of their organization.
    In recognition that the religious nondiscrimination requirements of 
42 U.S.C. 300x-57(a)(2) and 42 U.S.C. 290cc-33(a)(2) would 
substantially burden some but not other grantees, the RFRA exemption is 
limited to those organizations that are able to certify that: (1) They 
sincerely believe that employing individuals of a particular religion 
is important to the definition and maintenance of their religious 
identity, autonomy, and/or communal religious exercise; (2) they make 
employment decisions on a religious basis in analogous programs; (3) 
the grant in question would materially affect their ability to provide 
the type of services in question; and (4) providing the services in 
question is expressive of their values or mission. We disagree, 
however, with some commenters' assertion that no religious organization 
would be substantially burdened by having to make hiring decisions 
without regard to their faith while participating in the SAMHSA 
program.
    Second, the fact that SAMHSA is a funding program does not mean 
that the Federal government necessarily possesses a ``compelling 
interest'' in imposing religious nondiscrimination provisions upon the 
employment practices of participating religious organizations. To begin 
with, religious organizations' exemption from the religious 
nondiscrimination requirements of Title VII (the availability of that 
exemption is expressly clarified by the SAMHSA Charitable Choice law, 
42 U.S.C. 290kk-1(e), 300x-65(d)(2)) reflects Congress's judgment that 
employment decisions are an important component of religious 
organizations' autonomy, and that the government has a much stronger 
interest in applying a religious nondiscrimination requirement to 
secular organizations than to religious organizations'many of whose 
existence depends upon their ability to define themselves on a 
religious basis. Moreover, many federal funding programs--including the 
discretionary grant programs administered by the Secretary under Title 
V of the Public Health Service Act--do not impose a religious 
nondiscrimination requirement upon the employment practices of 
grantees. Rather, Congress's application of religious nondiscrimination 
requirements in the employment context is quite selective, which makes 
it difficult to regard the government as having a compelling interest 
in imposing such a requirement in this particular context. Finally, 
secular entities that administer federally funded social programs 
generally are not barred from considering their ideologies in making 
employment decisions. In this respect, allowing faith-based grantees to 
consider religious motivation in hiring simply levels the playing 
field, allowing them to consider ideology on the same basis as other 
organizations.
    Comment: Several commenters agreed that the proposed rule regarding 
the Title VII exemption reflects a proper understanding of civil rights 
law. When

[[Page 56436]]

a faith-based organization receives government funding and hires staff 
on a religious basis, the Federal civil rights law is not violated.
    Response: We agree with these commenters and have retained the 
identical language in the final rule. This statutory and regulatory 
provision of Charitable Choice does not change the status quo; it 
simply clarifies applicability of the Title VII exemption under the 
SAMHSA Charitable Choice law.
    Comment: Several commenters believed that the proposed rule allows 
employment discrimination in violation of constitutional prohibitions 
and court decisions that have struck down government-funded 
discrimination. One commenter explicitly stated that this provision 
runs afoul of the ``no-religious-tests clause'' of the Constitution 
under which ``no religious test shall ever be required as a 
qualification to any office or public trust under the United States.'' 
Other commenters stated that the exemption from Title VII of the Civil 
Rights Act was never intended to permit a religious organization to 
favor co-religionists in hiring when using Federal funds to pay the 
salaries and wages of employees who are carrying out government-funded 
social service programs.
    Response: We do not agree that these comments accurately portray 
the law. In 1972, Congress broadened section 702(a) of the Civil Rights 
Act to exempt religious organizations from the religious 
nondiscrimination provisions of Title VII, regardless of the nature of 
the job at issue. The broader, amended provision was unanimously upheld 
by the Supreme Court in 1987 and, absent a specific statutory repeal, 
remains applicable even when religious organizations are delivering 
federally funded social services. Thus, although section 702(a) of the 
Civil Rights Act of 1964 is permissive--it does not require religious 
staffing--religious organizations may consider their faith in making 
employment decisions without running afoul of Title VII. The effect of 
the explicit preservation of the Title VII exemption is no different 
from the rule that applies in other programs that are simply silent on 
the question of the applicability of Title VII in the funding context, 
and, as noted above, there are many such programs. Concerning the 
commenters' suggestion that allowing a federally funded organization to 
consider faith in making employment decisions would violate the ``no 
religious test'' clause of the Constitution, we would simply note that 
it is well settled that the receipt of government funds does not 
convert the employment decisions of private institutions into ``state 
action'' that is subject to constitutional restrictions such as the 
``no religious test'' clause.
    Comment: Several commenters noted that the clause--``nothing in 
this section shall be construed to modify or affect any State law or 
regulation that relates to discrimination in employment''--did not 
address local laws and asked us to clarify in the final rule that the 
Charitable Choice provisions do not preempt any State or local law that 
relates to discrimination in employment.
    Response: This provision of the SAMHSA Charitable Choice law 
preserves a ``Federal or State law or regulation that relates to 
discrimination in employment.'' 42 U.S.C. 290kk-1(e). In contrast, 42 
U.S.C. 290kk-1(d)(1) provides that a religious organization 
participating in the program ``shall retain its independence from 
Federal, State, and local government * * *'' Congress thus was 
cognizant of the distinction between State and local law in drafting 
the SAMHSA Charitable Choice statute, and we believe that the existing 
language faithfully implements the statute.
    Comment: One commenter wanted the Department to clarify under 
section 54.6(b) that the certification that is required to show that 
its religious exercise would be substantially burdened by the 
nondiscrimination requirements under the SAPT block grant and PATH 
programs should be submitted to SAMHSA.
    Response: The Department does not believe that it is necessary for 
the subgrantees to provide such documentation to SAMHSA unless SAMHSA 
requests it, as indicated previously in the proposed rule which is now 
finalized.
    Comment: One commenter pointed out that oversight of the employment 
practices would generate an administrative burden on the States.
    Response: The Department recognizes this possibility of generating 
an administrative burden on the States and has included extensive 
flexibility for the implementation of the provision by the States.

Notice, Referral, and Provision of Alternative Services. (Sec. 54.8 and 
54a.8)

    If an otherwise eligible program beneficiary or prospective 
beneficiary objects to the religious character of a program 
participant, within a reasonable period of time after the date of such 
objection, such program beneficiary must be referred to an alternative 
provider that has the capacity to provide the services, is accessible, 
and is of at least equal value as the provider to which the beneficiary 
objected. Under SAMHSA's Charitable Choice provisions, the 
responsibility for providing the alternative services rests with the 
``the appropriate Federal, State, or local government'' that 
administers the program or is a program participant. The NPRM proposed 
that States provide and fund alternative services for SAPT block grant-
funded beneficiaries and PATH program beneficiaries who have objected 
to the religious character of a program participant. States may use 
SAPT block grant and PATH grant funding to provide and fund such 
services from a provider to which the program beneficiaries do not have 
a religious objection, in a manner consistent with State law and 
policy.
    With respect to SAMHSA discretionary grant funding, when SAMHSA 
provides funding directly to another unit of government, such as a 
State or local government, that unit of government is responsible for 
providing the alternative services. When SAMHSA provides discretionary 
grant funding directly to nongovernmental organizations, SAMHSA is the 
responsible unit of government.
    Comments: All thirteen States and eleven providers that commented 
on the NPRM urged more flexibility for the States and providers in 
implementing these provisions. Fourteen of these commenters had 
concerns about the administrative and fiscal burden occasioned by this 
provision. Several were concerned that an ``essentially duplicate 
system of care'' would have to be developed, ``with the faith-based 
community in charge of deciding, by default, what services must be 
duplicated in order to assure that the beneficiary has freedom of 
choice.'' Others appreciated the discretion we had provided to States, 
but were concerned that the expectation of alternative services may 
expose States to litigation based on availability and how they define 
comparable services. Finally, one State commenter recommended that 
``[I]f SAMHSA is interested in minimizing administrative costs, I 
recommend that these requirements be eliminated in lieu of existing 
State requirements.''
    At the same time, other commenters believed that the proposed rule 
left too much discretion to States to define the terms ``reasonably 
accessible,'' ``a reasonable period of time,'' ``comparable,'' 
``capacity,'' and ``value that is not less than.'' These commenters 
asked that we either provide Federal definitions for these terms, or 
establish baseline parameters or guidelines.

[[Page 56437]]

    Response: After carefully considering these concerns, the 
Department agrees that it is important to provide flexibility to the 
States in determining how to establish procedures for notice, referral, 
and provision of alternative services. As noted in the NPRM, the 
Department recognizes that a range of methods that fulfill these 
responsibilities is possible. Therefore, the Department does not seek 
to prescribe a single, inflexible referral and alternative provider 
system that States must adopt when States are the responsible units of 
government. The Department believes it is vital to any effective 
implementation of these provisions that SAMHSA, State and local 
agencies, and religious organizations work cooperatively to develop 
systems to comply with these provisions, monitor compliance, identify 
compliance problems and take necessary corrective actions.
    SAMHSA's Charitable Choice provisions apply to three different 
granting situations. The first is when the State itself is the 
recipient of SAPT block grant and PATH formula funds or when the States 
receive a discretionary grant from SAMHSA. Because of the broad range 
of State circumstances, coupled with the States' proven success in 
establishing systems to address such circumstances, States may develop 
referral and alternative service systems that are compatible with the 
treatment and prevention systems they administer, including reasonably 
defining and applying the terms ``reasonably accessible,'' ``a 
reasonable period of time,'' ``comparable,'' ``capacity,'' and ``value 
that is not less than.'' SAMHSA will work with the States as they 
develop their implementation plans, providing technical assistance and 
opportunities for the States to discuss implementation approaches with 
one another. Allowing the States such discretion will not require the 
development of duplicate systems and will reduce regulatory and 
paperwork burden.
    The second situation is when SAMHSA awards discretionary funds 
directly to local governments. The third is when SAMHSA awards 
discretionary funds directly to faith-based nonprofit organizations. 
The unit of government responsible for providing and funding 
alternative services in these situations is defined at section 54a.8 as 
follows:

    ``With respect to SAMHSA discretionary programs, for purposes of 
determining what is the appropriate Federal, State, or local 
government, the following principle shall apply: When SAMHSA 
provides funding directly to another unit of government, such as a 
State or local government, that unit of government is responsible 
for providing the alternative services. When SAMHSA provides 
discretionary grant funding directly to a nongovernmental 
organization, SAMHSA is the responsible unit of government.''

    Therefore, in the second circumstance, when SAMHSA awards 
discretionary funds to local governments, local governments are 
responsible for providing alternative services for program 
beneficiaries who may object to a faith-based program they are funding 
with SAMHSA funds. SAMHSA expects that local governments will work with 
the States and comply with the implementation approach adopted by their 
respective States.
    In the third circumstance--when SAMHSA provides discretionary funds 
directly to faith-based organizations--SAMHSA will work with those 
organizations and consult with the States to ensure that program 
beneficiaries are provided alternative services in accordance with the 
statutory and regulatory requirements. As provided in the rule in 
section 54a.8(e), if there are no publicly funded alternatives 
available for the beneficiary, these grantees must contract with an 
alternative provider for the provision of such services, and the 
grantee may use the SAMHSA grant funds to finance the services. Should 
a grantee incur unanticipated additional costs as a result of providing 
alternative services beyond the discretionary grants awarded, the 
grantee may request reimbursement of those funds from SAMHSA, as the 
responsible unit of government, in the form of a request for 
supplemental funds to cover unanticipated costs. Based the past 
experience of other HHS agencies in implementing similar provisions, 
objections to the religious character of program participants have been 
rare, which is perhaps unsurprising in light of the fact that 
beneficiaries may not be required to participate in any inherently 
religious activities as a condition of receiving services. Thus, SAMHSA 
expects that such an occurrence will be infrequent and only occur when 
the referral is to a private provider. While the specific circumstances 
will vary from jurisdiction to jurisdiction, we anticipate that in many 
cases, referrals will be made to programs that are funded, at least in 
part, from public funds, and therefore the burden of this requirement 
will not be substantial.
    Comment: SAMHSA posed certain questions to commenters in the 
Federal Register Notice about what commenters thought constituted 
``reasonable period of time,'' ``reasonably accessible services,'' and 
what the best understanding of ``services that* * * have a value that 
is not less than the value of [services that would otherwise be 
provided].''
    Commenters provided the following input in response:
    [sbull] With regard to ``reasonable period of time,'' commenters 
suggested this would be anywhere from 24 hours after a request for 
alternative services to 4-6 weeks after such request. Most commenters 
reiterated that the States should determine what ``a reasonable period 
of time'' is.
    [sbull] With regard to what ``reasonably accessible services'' are, 
commenters urged a focus on comparable level of care and reasonable 
accommodation. They noted that in large cities it may be easy to effect 
a referral to an alternative provider, but in smaller communities and 
rural areas, there may be only one existing licensed provider in the 
county.
    [sbull] With regard to what constitutes equivalent services, 
commenters recommended that this phrase be interpreted to mean the 
value of the services themselves, without regard to the administrative 
costs involved.
    Response: Although commenters made many good suggestions for 
defining these terms, the wide variety of responses to the questions 
SAMHSA raised underscores the need for State flexibility and the need 
for Departmental restraint in defining terms or regulating procedures 
for referral and provision of alternative services.
    Comment: Commenters asked for clarification of ``how these 
recipients would fund and deliver services from alternative 
providers.'' Another commenter offered the opinion that States would 
need to establish formal set-asides within discretionary grants to 
cover alternative placements.
    Response: As indicated above, the regulation (consistent with the 
statute) requires the ``responsible unit of government'' to provide and 
fund alternative services. With regard to the suggestion for set-
asides, Federal cost policies do not permit grantees to have set-aside/
contingency dollars.
    Comment: Several commenters were concerned about the ``excessive 
burden on the treatment program to monitor the action of an individual 
who has not been admitted to its program and for whom the program is 
not receiving funding.'' In particular, several commenters noted 
``faith-based organizations should not bear the burden of securing and 
financing alternative services.''
    Response: SAMHSA considered these comments carefully in finalizing 
this rule, and has concluded that, when SAMHSA is the responsible unit 
of

[[Page 56438]]

government (that awards discretionary funds directly to a religious 
organization), it will follow the rule that applies to the other 
granting circumstances--that is, the grantee (which may be the State, 
the local government, or in this instance, the religious organization) 
will use grant funds, if necessary, to cover the cost of securing and 
providing alternative services. As indicated earlier, SAMHSA 
anticipates that in many cases, referrals will be made to programs that 
are funded, at least in part, from public funds, and therefore the 
burden of this requirement will not be substantial.
    Comment: With regard to the program participant's responsibility to 
refer objecting program beneficiaries to alternative services, one 
commenter recommended that a ``gateway'' referral system that takes 
place before a beneficiary arrives at any provider be established and 
administered by the government. In the same vein, another commenter 
suggested that referral take place through ``coordination that 
result[s] in referrals not requiring opt-outs.''
    Response: State and local governments have the flexibility to 
implement the requirement as they see fit so long as they meet all of 
the statutory and regulatory requirements. The Department is not 
mandating any one method.
    Comment: Several commenters noted that the requirement to provide 
alternative services places additional burdens on State agencies, when 
the States are the responsible units of government, especially in rural 
areas. A faith-based organization may be selected as the service 
provider for a particular geographic area. Ensuring that an alternative 
service provider is available could require the State to make dual sets 
of services available, and thus increase costs. As a result, many of 
these commenters suggested that the requirement to provide alternative 
services is unreasonable. Some suggested that exceptions be permitted 
or that the requirement should be eliminated. Others noted that with 
this requirement, some States may choose not to contract out or provide 
community-based services, especially in rural areas.
    Response: SAMHSA's Charitable Choice provisions impose the 
requirement to provide accessible and comparable assistance or services 
within a reasonable period of time to an individual who has an 
objection to the religious character of an organization. In the 
proposed rule, with the exception of requiring notice and referral, we 
did not expand or enhance the rights of beneficiaries to assistance 
from an alternative provider, but simply clarified this statutory 
right. We also left substantial discretion to the States to define 
terms and carry out the statutory objectives. We are not free, however, 
to eliminate the statutory requirement to provide alternative services.
    We also believe that commenters may have potentially overestimated 
the impact and potential burden of this requirement. Through the 
Department's Administration on Children and Families' TANF program, 
many faith-based organizations have a long history of contracting with 
State and local governments to address the secular purpose of providing 
assistance and services to needy families. In this situation, few 
beneficiaries have objected to the religious nature of these providers, 
which is perhaps unsurprising in light of the fact that, under TANF's 
Charitable Choice provisions, any inherently religious activities must 
be offered separately and on a voluntary basis. We also do not believe 
that States will decide not to contract out or provide community-based 
services in order to avoid this requirement. Since the statutory 
Charitable Choice requirements have applied since 2000, we believe that 
State and local governments are providing alternative services, in 
compliance with the law, and discovering and enhancing procedures that 
efficiently and effectively address this requirement.
    Comment: Several provider commenters were concerned that faith-
based programs receiving SAMHSA funding ``should conform to principles 
of religious tolerance and inclusiveness.''
    Response: All recipients of SAMHSA funding are required to comply 
with Sections 54.7 and 54a.7, dealing with nondiscrimination toward 
program beneficiaries.
    Comment: One State commenter was concerned about having to provide 
notice and alternative services to beneficiaries in SAMHSA-funded 
substance abuse prevention programs.
    Response: SAMHSA appreciates this concern and recommends that 
grantees contact their State's substance abuse agency to secure 
information about alternative prevention services in the State. Many 
States' governors have used SAMHSA State Incentive Grants (SIGs) to 
coordinate their prevention systems, and, as a result, will have 
comprehensive information on prevention services available in 
particular areas.
    Comment: One State offered implementation suggestions, including 
that ``the provision of alternative services could be addressed in 
contract language through a requirement that providers identify 
services available for referral.'' Several States noted that they 
already provide beneficiaries a choice of providers.
    Response: The Department hopes that States will work with each 
other to identify effective implementation approaches, such as those 
noted above. We decline, however, to impose this particular requirement 
across the board.
Notice
    The SAMHSA Charitable Choice provisions require SAMHSA-funded 
religious organizations providing substance abuse services, public 
agencies that refer individuals to such SAMHSA-funded programs, and the 
appropriate Federal, State, or local governments that administer these 
SAMHSA-funded programs to ensure that notice is provided to 
beneficiaries and prospective beneficiaries regarding alternative 
services. It further requires the program participant to notify the 
responsible unit of government of all such referrals.
    Comments: Several commenters recommended that notice of 
availability of alternative providers be given to all beneficiaries at 
the outset.
    Response: Below is a model notice that grantees may wish to use:

Model Notice to Individuals Receiving Substance Abuse Services

    No provider of substance abuse services receiving Federal funds 
from the U.S. Substance Abuse and Mental Health Services 
Administration, including this organization, may discriminate 
against you 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.
    If you object to the religious character of this organization, 
Federal law gives you the right to a referral to another provider of 
substance abuse services to which you have no religious objection. 
The referral, and your receipt of alternative services, must occur 
within a reasonable period of time after you request them. The 
alternative provider must be accessible to you and have the capacity 
to provide substance abuse services. The services provided to you by 
the alternative provider must be of a value not less than the value 
of the services you would have received from this organization.

    In addition, section 54.8(b) and 54a.8(b) of the regulation has 
been changed to add the word, ``all'' before ``program beneficiaries'' 
as follows:

    Program participants, public agencies that refer individuals to 
designated programs, and the appropriate Federal, State, or local 
governments that administer designated programs or are program 
participants shall ensure that notice is provided to all program

[[Page 56439]]

beneficiaries or prospective program beneficiaries of their rights 
under this section. (Emphasis added.)

    SAMHSA assumes that providers will be able to provide such notice 
when program beneficiaries can understand their rights--which may be at 
the outset of services.
    Comment: Other commenters recommended States should be given 
latitude to comply with the Notice requirements.
    Response: The Department agrees. SAMHSA is providing a ``model 
notice'' to the States and other grantees, but is not requiring them to 
use this notice.
    Comment: Another State commenter recommended that program 
participant notify the State ``or responsible unit of government'' of 
such referral.
    Response: The Department will insert the suggested language, ``or 
responsible unit of government'' in 54.8(c)(4).
Referral to Alternative Provider
    If an individual objects to the religious character of the 
substance abuse treatment or prevention program from which they are 
receiving services, the religious organization (program participant) 
must refer the individual, within a reasonable period of time, to 
another provider of substance abuse services. The requirements 
regarding referral are set out in sections 54.8(c) and 54a.8(c).
    Comments: Several commenters felt that the government should 
require that a non-religious alternative be available. On this point, 
several asked whether a program beneficiary had to be referred to a 
religious provider if that is the only alternative.
    Response: The proposed rule at sections 54.8 and 54a.8 provided 
that if the applicant or recipient objects to the religious character 
of a SAMHSA service provider, he or she is entitled to an alternative 
provider to which the individual has no religious objection. This is in 
keeping with the SAMHSA Charitable Choice provisions at sections 582(f) 
and 1955-(e) of the Public Health Service Act, 42 U.S.C. 290kk-1(f) and 
300xx-65(e), which require States to provide the individual with 
assistance from ``an alternative provider.'' Hence, the alternative 
provider could, but does not have to be, a secular alternative (unless, 
of course, the beneficiary objects to the religious character of all 
faith-based providers). We have retained the wording of this provision.
    Comment: One commenter wrote that the proposed rule does not 
require a secular alternative. Therefore, it lacks constitutionally 
required safeguards for beneficiaries.
    Response: The Charitable Choice statute does not specify that the 
alternative provider needs to be a secular organization. We have chosen 
not to adopt this suggestion for three reasons. First, the purpose of 
the statute is to respect beneficiary choice, and some beneficiaries 
may prefer an alternative religious provider to an alternative secular 
provider. Second, many faith-based organizations deliver services in a 
secular manner. As a result, most beneficiaries will not object to the 
religious character of these organizations, and we do not want to 
exclude them as potential providers of service. Third, under the 
permissive statutory language that we have retained, State and local 
governments may offer a secular alternative. We believe States will 
implement this requirement in a manner consistent with their obligation 
to ensure compliance with the Establishment Clause of the First 
Amendment.
    Comment: Others wanted a more general requirement that the 
government ensure the existence of at least one alternative service 
provider to protect the rights of beneficiaries; on this point, several 
States and providers noted the problem of the availability of 
alternative services in a rural setting. In contrast, one State 
stressed that the regulations ``must not require the establishment of 
alternative providers where none currently exist.''
    Response: The Department expects States, local governments and 
other grantees to abide by the statutory and regulatory requirements 
with respect to providing alternative services. We will work together 
to ensure compliance. In addition, we note that the statute prohibits 
grantees from using direct funding for inherently religious activities, 
and that any such activities must be voluntary. These requirements are 
sufficient to protect the religious freedom of beneficiaries.
    Comment: Several commenters felt that the referral responsibility 
should be the government's, rather that the religious organization's 
(as a program participant).
    Response: The Department is relying on the close cooperation among 
SAMHSA, States, providers and religious organizations to develop 
referral systems that are based primarily on shared responsibility. 
Religious organizations can look to the responsible unit of government 
for assistance, including access to SAMHSA's treatment facility locator 
at http://findtreatment.samhsa.gov to identify providers in the 
surrounding area. See the regulations for further detail.
    Comment: Several commenters, mainly providers, underscored the 
importance of ensuring that the confidentiality protections, including 
those provided in 42 CFR part 2 and HIPAA, are complied with; others 
were concerned, however, that confidentiality rules would block 
information sharing between religious organizations and secular 
providers.
    Response: The SAMHSA Charitable Choice laws do not override the 
confidentiality laws of 42 CFR part 2 and HIPAA. Therefore, the final 
regulations will contain the same provision from the NPRM in section 
54.8(c)(3), as follows:

    All referrals shall be made in a manner consistent with all 
applicable confidentiality laws, including, but not limited to, 42 
CFR part 2 (``Confidentiality of Alcohol and Drug Abuse Patient 
Records'').

    Comment: Two State commenters were concerned that SAMHSA's 
Charitable Choice provisions confer a ``special entitlement'' to 
certain beneficiaries to services, similar to that of the ``priority'' 
set-aside populations currently listed in SAPT block grant law.
    Response: With regard to a ``special entitlement'' being created, 
SAMHSA agrees with a State commenter who stated that ``[T]he States can 
assure that steps can and will be taken to assure protection of these 
rights without granting religious objectors more extensive rights than 
those of the general population of beneficiaries''. * * * [Existing 
protections are sufficient.]''

Fiscal Accountability. (Sec. 54.10 and 54a.10)

    The fiscal accountability section of the regulation provided that 
religious organizations receiving SAMHSA funding would be held to the 
same fiscal accountability requirements as other organizations, 
including generally accepted auditing and accounting principles. Faith-
based organizations would also be required to keep any federal funds in 
a separate account from non-federal funds. Only the segregated Federal 
funds are subject to audit by the government under the SAMHSA program.
    Comment: The Department received 13 comments on the issue of fiscal 
accountability. All of the comments received on this section supported 
segregation of funds and strict adherence to Federal audit and cost 
principles and requirements. There was some concern about the ability 
of faith-based organizations to maintain separate accounts.

[[Page 56440]]

    Response: The final rule provides that religious organizations 
receiving SAMHSA discretionary funds will be subject to audit, just 
like any other non-governmental organization receiving such funds. The 
faith-based organization is to use the funds in accordance with the 
grant and all applicable laws and regulations. For discretionary 
grants, as provided in 45 CFR 74.26 and 92.26, SAMHSA grantees are 
responsible for obtaining audits by an independent auditor following 
generally accepted government auditing standards, in accordance with 
applicable OMB circulars. When the State is the grantee, the State is 
responsible for the appropriate use of its SAMHSA funds, so the 
organization (as the subgrantee) needs to be able to show to the State 
and the auditor that it used the funds for the purpose intended by the 
State. This must also be in accordance with the Single Audit Act and 
OMB Circular A-133.
    Moreover, HHS is authorized to conduct any additional audits or 
reviews that are warranted, irrespective of the amount of Federal funds 
expended by the grantee annually, in order to ensure compliance with 
program requirements including the restriction against funding of 
inherently religious activities. HHS may determine that such audits or 
reviews are warranted based upon any information received by the agency 
that raises an issue concerning the propriety of expenditures.
    Comment: Several commenters were concerned about religious 
organizations operating as intermediary organizations. One commenter 
notes that the ``proposed rule creates the risk that comparable 
religious intermediaries will not act in a religiously neutral 
manner.'' Another commenter believed using such intermediaries has the 
effect of advancing religion and noted that the delegation of 
governmental authority to a religious organization violates the 
Establishment Clause. Another commenter believed it would raise 
questions about the accountability of tax dollars and that it promotes 
religion.
    Response: We do not agree that the use of a religious organization 
as an intermediate organization is unconstitutional. Our review did not 
disclose any precedents, legal or otherwise, that would prevent a 
governmental unit from selecting a religious organization as an 
intermediate organization. The purpose of the regulations at sections 
54.12 and 54a.12 is not to delegate authority to organizations to carry 
out tasks that are traditionally reserved for a governmental agency. It 
simply recognizes what has occurred in States already--that is, States 
have used block grant funds to contract with intermediaries to manage 
programs and make sub-awards to other organizations as part of their 
substance abuse service systems. Although such intermediary 
organizations may be utilized, we emphasize that the governmental unit 
that procures such services is accountable for Federal funds and must 
assure that the intermediary abides by all statutory and regulatory 
requirements, including these regulations, and must assure that the 
intermediary acts in a religiously neutral manner and that direct funds 
are not expended for inherently religious activities.

Educational Requirements for Personnel in Drug Treatment Programs (Sec. 
54.13 and 54a.13)

    This provision, restated directly from SAMHSA's Charitable Choice 
laws, seeks to redress ``unduly rigid or uniform educational 
qualification for counselors and other personnel in drug treatment 
programs.'' States establish such licensure and certification 
requirements.
    Comment: Of the eighteen comments received on this section, sixteen 
stressed that faith-based organizations should have to meet the same 
licensing and certification requirements as other providers. One 
commenter noted that language should be clarified that the goal of this 
section is to ensure non-discrimination against training programs 
offered by religious organizations, rather than to loosen State 
requirements designed to ensure quality of care to clients.
    Response: The final rule restates the statutory requirement of 42 
U.S.C. 290kk-3, which provides that, in determining whether personnel 
of a program participant that has a record of successful drug treatment 
for the preceding three years have satisfied State or local 
requirements for education and training, a State or local government 
shall not discriminate against education and training provided to such 
personnel by a religious organization, so long as such education and 
training is comparable to the coursework or training provided by 
nonreligious organizations or is substantially equivalent to education 
and training that the State or local government would otherwise credit 
for purposes of determining whether the relevant requirements have been 
satisfied (emphasis added).
    In keeping with its approach to provide States with wide 
flexibility in implementing the alternative service provisions, the 
Department is enabling the States to determine whether the education 
and training provided by a religious organization is ``substantially 
equivalent'' to that provided by nonreligious organizations, and is in 
accordance with applicable State certification and licensure 
requirements. States are encouraged to provide simplified information 
about their State's certification and licensure requirements to 
religious organizations, highlighting, if appropriate, different 
requirements for different stages of treatment (e.g., outreach versus 
medically-indicated treatment).
    Comment: Two commenters felt that faith-based organizations should 
be provided more flexibility, with one commenting that ``[S]tates 
should reconsider their existing certification requirements to ensure 
that their existing certification requirements do not unnecessarily 
discourage alternative treatment strategies and thus the involvement of 
new providers.'' The commenter also suggested that ``SAMHSA provide 
guidance on the range of drug treatments that are effective and on the 
range of educational paths that prepare people to offer those different 
treatment modalities.''
    Response: The Department urges the States to work with their faith-
based providers to ensure that these providers have clear information 
on licensure and certification requirements, and to ensure that new 
providers are encouraged and supported. With regard to guidance from 
the Department on types of drug treatment, we refer interested parties 
to the full range of SAMHSA's Treatment Improvement Protocols (TIPS), 
available at www.samhsa.gov.
    Comment: Several commenters noted that substance abuse treatment is 
a medical treatment, not a social service, and that ``prevailing models 
treat addiction as a biopsychosocial disorder,'' not a social problem.
    Response: The Department agrees that certain aspects of substance 
abuse treatment are medical in nature. State licensure and 
certification systems recognize this characterization as well. SAMHSA 
encourages States to work with their provider community to clarify 
different treatment alternatives.

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

[[Page 56441]]

private sector, of $100 million or more in any one year.
    Comment: Numerous States, providers, faith-based organizations and 
public interest groups stated that the proposed rule constitutes an 
unfunded mandate by SAMHSA and asked that an unfunded mandate analysis 
be completed. In the words of one commenter, ``there is a broad 
delegation of responsibility to States for providing secular 
alternatives without providing corresponding resources to carry it out. 
SAMHSA should provide `much more specific regulation' and resources 
necessary to carry this out.''
    Response: 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. As provided in sections 54.8 
and 54a.8, States and other grantees can use grant funds to implement 
these provisions, and these regulations impact only existing Federal-
funding streams, unless the State or local governments commingle other 
funds with Federal funds.

Assurances and State Oversight of the Charitable Choice Requirements

    The NPRM proposed that States, as a standard part of their 
applications for funding under each program, certify that they will 
comply with all of the requirements of the SAMHSA Charitable Choice 
provisions and submit to the Secretary a summary each year of the steps 
it has taken to implement this regulation.
    Comments: Eight commenters felt that the stated assurance for 
tracking implementation and accountability was not strong enough. One 
commenter recommended spot-checks and reporting requirements to make 
sure faith-based providers and governments were complying with the 
final rule.
    Response: The Department believes that signed assurances, plus 
existing compliance and auditing standards, provide the needed 
oversight and guarantee that the States, localities and religious 
organizations are implementing the regulation properly and that all 
beneficiaries' rights are being upheld as required.

Complaint System

    Comment: One commenter pointed out that no complaint, investigation 
and resolution process was discussed in the NPRM.
    Response: For the PATH formula grant and SAPT block grant, and for 
discretionary programs, program participants and beneficiaries can 
contact the Administrator, SAMHSA. Complaints and comments will be 
addressed on a case-by-case basis as needed.

Indirect and Direct Funding

    In the Charitable Choice context, the term ``direct'' funding is 
used to describe funds that are provided ``directly'' to a 
participating organization `` i.e., based on the government's own 
decision and without any intervening steps--by a governmental entity or 
an intermediate organization with the same duties under this part as a 
governmental entity, as opposed to funds that such an organization 
receives as the result of the genuine and independent private choice of 
a beneficiary through a voucher, certificate, coupon or other similar 
mechanism.
    Comment: One commenter wrote that the indirect funding definition 
opens the door to government-funded worship and proselytization. This 
commenter asked us to require that all government-funded services be 
free of religious content. In addition, the commenter thinks that 
``free and independent choice'' is a myth which incorrectly assumes 
that people in need will be able to shop for services. Social services 
are not available on a scale that makes ``choice'' real. This commenter 
believes people use the most geographically accessible providers.
    Response. With respect to indirect funding, we find no basis to 
require that all government-funded services be free of religious 
content. Furthermore, we disagree that funding services indirectly 
opens the door to government-funded worship and proselytization. The 
Supreme Court has consistently held that governments may fund programs 
that place the benefit in the hands of individuals, who in turn have 
the freedom to choose the provider to which they take their benefit and 
``spend'' it, whether that institution is public or private, secular or 
religious. Therefore, any consequential aid to religion having its 
origin in such a program is the result of the beneficiary's own choice. 
In other words, indirect funding means that individual private choice, 
rather than the government, determines which social service provider 
eventually receives the funds. As a general matter, this removes 
involvement on the part of the government in worship and 
proselytization.
    Comment: Several other commenters were concerned that indirect 
funding mechanisms would not be subject to the requirements of this 
rule, giving way to government funding of religious activities. One 
commenter asked for clarification whether a faith-based organization 
receiving indirect funding from the government could require active 
participation by a beneficiary in religious activities. Some commenters 
seemed to be confused as to whether the rules applied to indirect 
funding.
    Response: It is the Department's position that these regulations 
apply only to direct funding and not to indirect funding pursuant to 
vouchers, certificates or similar funding mechanisms. To the extent 
that religious organizations receive Federal funding indirectly through 
vouchers, certificates or similar funding mechanisms, the Charitable 
Choice regulations do not apply.
    Comment: One faith-based commenter recommended that beneficiaries 
be given the opportunity to choose to use indirect funding for the 
religious services provided to them.
    Response: Making this a requirement is beyond the authority of the 
Charitable Choice statutes.

Vouchers

    President Bush announced his ``Access to Recovery'' program in his 
State of the Union Address in January 2003. This initiative will 
provided increased access to services for the Nation's substance 
abusers while also expanding the range of treatment providers 
available. In short, the voucher program will enhance consumer choice 
and allow recovery to be pursued in an individualized manner.
    Comment: We received approximately 15 comments about the voucher 
program being developed by the Department. Some commenters recommended 
that requirements from the Zelman case be included in the Charitable 
Choice regulations. Other commenters discussed their opposition to the 
government use of vouchers while others felt that vouchers would 
violate the Establishment Clause. Also, commenters questioned whether 
the voucher program allowed for a true ``genuine and independent 
choice.''
    Response: Neither the NPRM, nor the final rule, create a voucher 
program. Since these regulations in and of themselves do not create a 
voucher program, we do not believe these comments are relevant to the 
regulations at issue. As to the specifics of the voucher program, such 
details are beyond the scope of this regulation. Furthermore, the 
Department disagrees with the comments and believes that voucher 
programs are a viable mechanism for funding services and are 
constitutionally permissible.

[[Page 56442]]

    We do not agree with the contentions that vouchers for religiously 
based services would violate the Establishment Clause, force 
individuals to attend ``pervasively sectarian'' institutions, or lack 
secular purpose, for the following reason: the Supreme Court has upheld 
the constitutionality of mechanisms of indirect aid, such as vouchers. 
Therefore, we think that it is reasonable to conclude that neutral, 
indirect aid to a religious organization does not violate the 
Establishment Clause.

Applicability of Charitable Choice to the PATH Program

    SAMHSA's program, Projects in Transition from Homelessness (PATH), 
funds outreach and some substance abuse services for homeless persons 
with mental illness. The Department has determined that the Charitable 
Choice provisions apply to the programs under PATH that provide 
substance abuse services.
    Comment: Several commenters were concerned that the State PATH 
offices have ``no administrative capacity to monitor such reporting of 
client specific information.'' They also commented that, because the 
reporting burden ``doesn't seem to quite fit with the PATH program, 
implementing the Charitable Choice regulation for PATH will require 
development of an entirely new planning and accounting system.''
    Response: The Department appreciates these concerns, but is 
confident that, with sufficient flexibility, States will be able to 
develop client referral and monitoring systems that will enable PATH 
grant officials to comply with the regulation.

Executive Order 12866

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when rulemaking is 
necessary, to select regulatory approaches that provide the greatest 
net benefits (including potential economic, environmental, public 
health, safety distributive and equity effects). We have determined 
that the rule is a ``significant regulatory action'' under Section 3(f) 
of the Executive Order, and the Office of Management and Budget has 
therefore reviewed it under that Order.

Paperwork Reduction Act of 1995

    This final rule contains information collections which are subject 
to review by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (the PRA) (44 U.S.C. 3507(d)). The 
title, description and respondent description of the information 
collections are shown in the following paragraphs with an estimate of 
the annual reporting and record keeping burden. Included in the 
estimate is the time for reviewing instructions, searching existing 
data sources, gathering and maintaining the data needed, and completing 
and reviewing the collection of information.
    Title: Regulations to Implement SAMHSA's Charitable Choice 
Statutory Provisions--42 CFR Parts 54 and 54a.
    Description: Section 1955 of the Public Health Service Act (42 
U.S.C. 300x-65), as amended by the Children's Health Act of 2000 (Pub. 
L. 106-310), and sections 581-584 of the Public Health Service Act (42 
U.S.C. 290kk, et seq.), as added by the Consolidated Appropriations Act 
(Pub. L. 106-554), set forth various provisions which aim to ensure 
that religious organizations are able to compete on an equal footing 
for Federal funds to provide substance abuse services. These provisions 
allow religious organizations to offer substance abuse services to 
individuals without impairing the religious character of the 
organizations or the religious freedom of the individuals who receive 
the services. The provisions apply to the SAPT Block Grant, PATH 
formula grant program, and to certain SAMHSA discretionary grant 
programs (programs that pay for substance abuse treatment and 
prevention services, not for certain infrastructure and technical 
assistance activities). Every effort has been made to assure that the 
reporting, record keeping and disclosure requirements of the 
regulations allow maximum flexibility in implementation and impose 
minimum burden.
    Description of Respondents: Not-for-profit institutions; State, 
Local or Tribal Government.
    Response burden estimate: This rule includes requirements for 
disclosure by program participants to program beneficiaries of their 
rights to receipt of services from an alternative service provider, for 
notification by program participants to the applicable level of 
government of referrals made to alternative service providers, and 
requirements for reporting of activities to comply with these 
regulations. The rule also requires that a program participant under 
the SAPT Block Grant and the PATH programs that believes it would be 
substantially burdened by application of the requirements of 42 U.S.C. 
300x-57(a)(2) or 42 U.S.C. 290cc-33(a)(2) must sign a certification to 
that effect and must maintain documentation to support the 
certification.
    Comment: SAMHSA received three comments related to response burden 
estimates. One comment noted that States would need to enhance their 
current data systems to track an individual's choice of providers or 
referral between providers.
    Response: The regulations do not require that States track 
individuals. They require only that a religious organization that is a 
program participant refer a beneficiary who objects to the religious 
character of the organization to an alternative provider and that the 
program participant notify the State of the referral. Each State or 
local government may determine its own reporting procedures.
    Comment: One State commented that it believes the annual burden 
estimates are not supported with reliable data.
    Response: At the present time, there is no known source of 
information to quantify precisely the numbers or proportions of program 
beneficiaries who will request referral to alternative providers. The 
Department believes that less than one percent, the proportion 
suggested by the commenter, of program beneficiaries will make such 
requests.
    Comment: A third State commented that the burden of implementation 
will depend on the number of objections from beneficiaries.
    Response: The Department agrees with the State that this is true. 
However, the Department believes that there will be a minimal number of 
program beneficiaries who request referral to alternative providers and 
that the flexibility provided with regard to implementation will 
minimize information collection burden. Experience in the first several 
years of implementing the rule will provide an empirical basis for any 
adjustments of burden estimates associated with the information 
collection requirements.

[[Page 56443]]



                                             Annual Burden Estimates
----------------------------------------------------------------------------------------------------------------
                                                     Number of     Responses per     Hours per
           42 CFR citation and purpose              respondents     respondent       response       Total hours
----------------------------------------------------------------------------------------------------------------
   Part 54--States Receiving SAPT Block Grants and/or Projects for Assistance in Transition from Homelessness
                                                     Grants
----------------------------------------------------------------------------------------------------------------
                                                    Reporting
----------------------------------------------------------------------------------------------------------------
54.8(c)(4) Program participant notification to                40               4            0.33              53
 responsible unit of government regarding
 referrals to alternative service providers.....
54.8(e) Annual report by PATH grantees on                     56               1            2.00             112
 activities undertaken to comply with 42 CFR
 Part 54........................................
-------------------------------------------------
                                                   Disclosure
----------------------------------------------------------------------------------------------------------------
54.8(b) Program participant notice to program
 beneficiaries of rights to referral to an
 alternative service provider...................
    SAPT BG.....................................           1,000             275             .05          13,750
    PATH........................................             100             170             .05             850
-------------------------------------------------
                                                  Recordkeeping
----------------------------------------------------------------------------------------------------------------
54.6(b) Documentation must be maintained to                   50               1            1.00              50
 demonstrate significant burden for program
 participants under 42 U.S.C. 300x-57 or 42
 U.S.C. 290cc-3(a)(2)...........................
                                                 -----------------
Part 54--Subtotal...............................           1,156  ..............  ..............          14,815
-------------------------------------------------
Part 54a--States, local governments and religious organizations receiving funding under Title V of the PHS Act
 for substance abuse prevention and treatment services
----------------------------------------------------------------------------------------------------------------
                                                    Reporting
----------------------------------------------------------------------------------------------------------------
54a.8(c)(1)(iv) Program participant notification              25               4            .083              8
 to State or local government of a referral to
 an alternative provider........................
54a(8)(d) Program participant notification to                 20               2             .25              10
 SAMHSA of referrals............................
-------------------------------------------------
                                                   Disclosure
----------------------------------------------------------------------------------------------------------------
54a.8(b) Program participant notice to program               100             275             .05           1,375
 beneficiaries of rights to referral to an
 alternative service provider...................
Part 54a--Subtotal..............................             100  ..............  ..............           1,393
                                                 -----------------
    Total.......................................           1,256  ..............  ..............          16,208
----------------------------------------------------------------------------------------------------------------

    In addition, the regulations for the SAPT Block Grant (45 CFR part 
96) will be amended to include at 45 CFR 92.122(f)(5) a requirement to 
include as part of the annual report a description of the activities 
the State has undertaken to comply with 42 CFR part 54. This reporting 
burden is estimated as follows:

----------------------------------------------------------------------------------------------------------------
                                                     Number of     Responses per     Hours per
           45 CFR citation and purpose              respondents     respondent       response       Total hours
----------------------------------------------------------------------------------------------------------------
96.122(f)(5) Annual report of activities the                  60               1               2             120
 State undertook to comply with 42 CFR Part 54..
----------------------------------------------------------------------------------------------------------------

    The information collection provisions in this final rule have been 
approved under OMB control number 0930-0242. This approval expires 09/
30/2006. An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid OMB control number.

Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 605(b)) requires the 
Federal government to anticipate and reduce the impact of rules and 
paperwork requirements on small businesses and other small entities. 
Small entities are defined in the Act to include small businesses, 
small non-profit organizations, and small governmental entities. This 
rule will affect primarily the 50 States, the District of Columbia, and 
certain Territories. It also does have an impact on potential grantees, 
some of which are small entities. However, the number of small entities 
affected and the size of the impact does not require a regulatory 
flexibility analysis under the requirements of the Act. Therefore, we 
certify that this rule will not have a significant impact on small 
entities.
    Comment: One commenter noted that the ``proposed rules will impact 
a large number of nonprofit organizations, both faith-based and 
secular, that wish to partner with government in providing SAMHSA 
services'' and called for SAMHSA to conduct a regulatory flexibility 
analysis.
    Response: While the commenter is accurate in his assertion that 
nonprofit organizations, some of which would be considered small 
entities under the Regulatory Flexibility Act definition, will be 
affected by this rule, the economic impact of this particular rule on 
small entities will not be significant.

[[Page 56444]]

The rule simply allows faith-based organizations to compete for a wider 
range of government funding on an equal footing as other qualified 
applicants. The economic impact stems from the individual funding 
opportunities, which are not included in this rule. We have certified 
that this rule will not have a significant impact on small entities, 
and therefore a regulatory flexibility analysis is not required.

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. In the NPRM, we 
specifically solicited comments from State and local government 
officials.
    Comment: Two commenters specifically mentioned that we should have 
consulted with State and local officials before the issuance of a final 
rule.
    Response: We believe that our solicitation of comments from the 
public in the NPRM satisfied the consultation requirement of Executive 
Order 13132. SAMHSA provided a comment period, during which time the 
agency heard from many State agencies and local providers, and the 
rules have been drafted in a manner that provides States flexibility.

    Dated: September 22, 2003.
Tommy G. Thompson,
Secretary of Health and Human Services.

0
For the reasons set forth in the preamble, 42 CFR chapter I and 45 CFR 
Subtitle A are amended as follows:

42 CFR CHAPTER I

0
1. Part 54 is added to read as follows:

PART 54--CHARITABLE CHOICE REGULATIONS APPLICABLE TO STATES 
RECEIVING SUBSTANCE ABUSE PREVENTION AND TREATMENT BLOCK GRANTS 
AND/OR PROJECTS FOR ASSISTANCE IN TRANSITION FROM HOMELESSNESS 
GRANTS

Sec.
54.1 Scope.
54.2 Definitions.
54.3 Nondiscrimination against religious organizations.
54.4 Religious activities.
54.5 Religious character and independence.
54.6 Employment practices.
54.7 Nondiscrimination requirement.
54.8 Right to services from an alternative provider.
54.9 Assurances and State oversight of the Charitable Choice 
requirements.
54.10 Fiscal accountability.
54.11 Effect on State and local funds.
54.12 Treatment of intermediate organizations.
54.13 Educational requirements for personnel in drug treatment 
programs.

    Authority: 42 U.S.C. 300x-65, et seq., 42 U.S.C. 290kk, et seq., 
42 U.S.C. 300x-21, et seq., 42 U.S.C. 290cc-21, et seq., and 42 
U.S.C. 2000bb, et seq.

Sec.  54.1  Scope.

    These provisions apply only to funds provided directly to pay for 
substance abuse prevention and treatment services under 42 U.S.C. 300x-
21 et seq., and 42 U.S.C. 290cc-21 to 290cc-35. This part does not 
apply to direct funding under any such authorities for activities that 
do not involve the provision of substance abuse services, such as for 
infrastructure activities authorized under Section 1971 of the PHS Act, 
42 U.S.C. 300y, and for technical assistance activities. This part 
implements the SAMHSA Charitable Choice provisions, 42 U.S.C. 300x-65 
and 42 U.S.C. 290kk, et seq.


Sec.  54.2  Definitions.

    (a) Applicable program means the programs authorized under:
    (1) The Substance Abuse Prevention and Treatment (SAPT) Block 
Grant, 42 U.S.C. 300x to 300x-66, and
    (2) The Projects for Assistance in Transition from Homelessness 
(PATH) Formula Grants, 42 U.S.C. 290cc-21 to 290cc-35 insofar as they 
fund substance abuse prevention and/or treatment services.
    (b) Religious organization means a nonprofit religious 
organization.
    (c) Program beneficiary means an individual who receives substance 
abuse services under a program funded in whole or in part by applicable 
programs.
    (d) Program participant means a public or private entity that has 
received financial assistance, under an applicable program.
    (e) SAMHSA means the U.S. Substance Abuse and Mental Health 
Services Administration.
    (f) SAMHSA Charitable Choice provisions means the provisions of 42 
U.S.C. 300x-65 and 42 U.S.C. 290kk, et seq.
    (g) Direct funding or Funds provided directly means funding that is 
provided to an organization directly by a governmental entity or 
intermediate organization that has the same duties under this part 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 through a voucher, certificate, coupon, or other similar 
mechanism.


Sec.  54.3  Nondiscrimination against religious organizations.

    (a) Religious organizations are eligible, on the same basis as any 
other organization, to participate in applicable programs, as long as 
their services are provided consistent with the Establishment Clause 
and the Free Exercise Clause of the First Amendment to the United 
States Constitution. Except as provided herein or in the SAMHSA 
Charitable Choice provisions, nothing in these regulations shall 
restrict the ability of the Federal government, or a State or local 
government, from applying to religious organizations the same 
eligibility conditions in applicable programs as are applied to any 
other nonprofit private organization.
    (b) Neither the Federal government nor a State or local government 
receiving funds under these programs shall discriminate against an 
organization that is, or applies to be, a program participant on the 
basis of religion or the organization's religious character or 
affiliation.


Sec.  54.4  Religious activities.

    No funds provided directly from SAMHSA or the relevant State or 
local government to organizations participating in applicable programs 
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 funds directly from 
SAMHSA or the relevant State or local government under any applicable 
program, and participation must be voluntary for the program 
beneficiaries.


Sec.  54.5  Religious character and independence.

    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. The organization may 
not expend funds that it receives directly from SAMHSA or the relevant 
State or local government 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 supported by applicable programs, 
without removing religious art, icons, scriptures, or other symbols. In 
addition, a SAMHSA-funded religious

[[Page 56445]]

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.


Sec.  54.6  Employment practices.

    (a) 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.
    (b) To the extent that 42 U.S.C. 300x-57(a)(2) or 42 U.S.C. 290cc-
33(a)(2) precludes a program participant from employing individuals of 
a particular religion to perform work connected with the carrying on of 
its activities, those provisions do not apply if such program 
participant is a religious corporation, association, educational 
institution, or society and can demonstrate that its religious exercise 
would be substantially burdened by application of these religious 
nondiscrimination requirements to its employment practices in the 
program or activity at issue. In order to make this demonstration, the 
program participant must certify: that it sincerely believes that 
employing individuals of a particular religion is important to the 
definition and maintenance of its religious identity, autonomy, and/or 
communal religious exercise; that it makes employment decisions on a 
religious basis in analogous programs; that the grant would materially 
affect its ability to provide the type of services in question; and 
that providing the services in question is expressive of its values or 
mission. The organization must maintain documentation to support these 
determinations and must make such documentation available to SAMHSA 
upon request.
    (c) Nothing in this section shall be construed to modify or affect 
any State law or regulation that relates to discrimination in 
employment.
    (d) The phrases ``with respect to the employment,'' ``individuals 
of a particular religion,'' and ``religious corporation, association, 
educational institution, or society'' shall have the same meaning as 
those terms have under section 702 of the Civil Rights Act of 1964, 42 
U.S.C. 2000e-1(a).


Sec.  54.7  Nondiscrimination requirement.

    A religious organization that is a program participant shall not, 
in providing program services or engaging in outreach activities under 
applicable programs, 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.


Sec.  54.8  Right to services from an alternative provider.

    (a) General requirements. If an otherwise eligible program 
beneficiary or prospective program beneficiary objects to the religious 
character of a program participant, within a reasonable period of time 
after the date of such objection, such program beneficiary shall have 
rights to notice, referral, and alternative services, as outlined in 
paragraphs (b) through (d) of this section.
    (b) Notice. Program participants that refer an individual to 
alternative service providers, and the State government that 
administers the applicable programs, shall ensure that notice of the 
individual's right to services from an alternative provider is provided 
to all program beneficiaries or prospective beneficiaries. The notice 
must clearly articulate the program beneficiary's right to a referral 
and to services that reasonably meet the requirements of timeliness, 
capacity, accessibility, and equivalency as discussed in this section. 
A model notice is set out in appendix A to part 54a.
    (c) Referral to an alternative provider. If a program beneficiary 
or prospective program beneficiary objects to the religious character 
of a program participant that is a religious organization, that 
participating religious organization shall, within a reasonable time 
after the date of such objection, refer such individual to an 
alternative provider. The State shall have a system in place to ensure 
that referrals are made to an alternative provider. That system shall 
ensure that the following occurs:
    (1) The religious organization that is a program participant shall, 
within a reasonable time after the date of such objection, refer the 
beneficiary to an alternative provider;
    (2) In making such referral, the program participant shall consider 
any list that the State or local government makes available to entities 
in the geographic area that provide program services, which may include 
utilizing any treatment locator system developed by SAMHSA;
    (3) All referrals shall be made in a manner consistent with all 
applicable confidentiality laws, including, but not limited to, 42 CFR 
Part 2 (``Confidentiality of Alcohol and Drug Abuse Patient Records'');
    (4) Upon referring a program beneficiary to an alternative 
provider, the program participant shall notify the State or responsible 
unit of government of such referral; and
    (5) The program participant shall ensure that the program 
beneficiary makes contact with the alternative provider to which he or 
she is referred.
    (d) Provision and funding of alternative services. If an otherwise 
eligible applicant or recipient objects to the religious character of a 
SAMHSA-funded service provider, the recipient is entitled to receive 
services from an alternative provider. In such cases, the State or 
local agency must provide the individual with alternative 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 SAMHSA-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.
    (e) PATH annual report. As part of the annual report to SAMHSA, 
PATH grantees shall include a description of the activities the grantee 
has taken to comply with 42 CFR part 54.


Sec.  54.9  Assurances and State oversight of the Charitable Choice 
requirements.

    In order to ensure that States receiving grant funding under the 
SAPT block grant and PATH formula grant programs comply with the SAMHSA 
Charitable Choice provisions and provide oversight of religious 
organizations that provide substance abuse services under such 
programs, States are required as part of their applications for funding 
to certify that they will comply with all of the requirements of such 
provisions and the implementing regulations under this

[[Page 56446]]

part, and that they will provide such oversight of religious 
organizations.


Sec.  54.10  Fiscal accountability.

    (a) Religious organizations that receive applicable program funds 
for substance abuse services 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.
    (b) Religious organizations shall segregate Federal funds they 
receive under an applicable program into a separate account from non-
Federal funds. Only the Federal funds shall be subject to audit by 
government under the SAMHSA program.


Sec.  54.11  Effects on State and local funds.

    If a State or local government contributes its own funds to 
supplement activities carried out under the applicable programs, the 
State or local government has the option to separate out the Federal 
funds or commingle them. If the funds are commingled, the provisions of 
this part shall apply to all of the commingled funds in the same 
manner, and to the same extent, as the provisions apply to the Federal 
funds.


Sec.  54.12  Treatment of intermediate organizations.

    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 
nongovernmental organizations to provide services under any applicable 
program, the intermediate organization shall have the same duties under 
this part as the government. The intermediate organization retains all 
other rights of a nongovernmental organization under this part and the 
SAMHSA Charitable Choice provisions.


Sec.  54.13  Educational requirements for personnel in drug treatment 
programs.

    In determining whether personnel of a program participant that has 
a record of successful drug treatment for the preceding three years 
have satisfied State or local requirements for education and training, 
a State or local government shall not discriminate against education 
and training provided to such personnel by a religious organization, so 
long as such education and training is comparable to that provided by 
nonreligious organizations, or is comparable to education and training 
that the State or local government would otherwise credit for purposes 
of determining whether the relevant requirements have been satisfied.

0
2. Add a new Part 54a to read as follows:

PART 54a--CHARITABLE CHOICE REGULATIONS APPLICABLE TO STATES, LOCAL 
GOVERNMENTS AND RELIGIOUS ORGANIZATIONS RECEIVING DISCRETIONARY 
FUNDING UNDER TITLE V OF THE PUBLIC HEALTH SERVICE ACT, 42 U.S.C. 
290aa, ET SEQ., FOR SUBSTANCE ABUSE PREVENTION AND TREATMENT 
SERVICES

Sec.
54a.1 Scope.
54a.2 Definitions.
54a.3 Nondiscrimination against religious organizations.
54a.4 Religious activities.
54a.5 Religious character and independence.
54a.6 Employment practices.
54a.7 Nondiscrimination requirement.
54a.8 Right to services from an alternative provider.
54a.9 Oversight of the Charitable Choice requirements.
54a.10 Fiscal accountability.
54a.11 Effect on State and local funds.
54a.12 Treatment of intermediate organizations.
54a.13 Educational requirements for personnel in drug treatment 
programs.
54a.14 Determination of nonprofit status.
Appendix to Part 54a--Model notice to individuals receiving 
substance abuse services.

    Authority: 42 U.S.C. 300x-65, and 42 U.S.C. 290kk, et seq., 42 
U.S.C. 290aa, et seq.


Sec.  54a.1  Scope.

    These provisions apply only to funds provided directly to pay for 
substance abuse prevention and treatment services under Title V of the 
Public Health Service Act, 42 U.S.C. 290aa, et seq., which are 
administered by the Substance Abuse and Mental Health Services 
Administration. This part does not apply to direct funding under any 
such authorities for only mental health services or for certain 
infrastructure and technical assistance activities, such as cooperative 
agreements for technical assistance centers, that do not provide 
substance abuse services to clients. This part implements the 
provisions of 42 U.S.C. 300x-65 and 42 U.S.C. 290kk, et seq.


Sec.  54a.2  Definitions.

    (a) Applicable program means the programs authorized under Title V 
of the PHS Act, 42 U.S.C. 290aa, et seq., for the provision of 
substance abuse prevention and or treatment services.
    (b) Religious organization means a nonprofit religious 
organization.
    (c) Program beneficiary means an individual who receives substance 
abuse services under a program funded in whole or in part by applicable 
programs.
    (d) Program participant means a public or private entity that has 
received financial assistance under an applicable program.
    (e) SAMHSA means the Substance Abuse and Mental Health Services 
Administration.
    (f) SAMHSA Charitable Choice provisions means the provisions of 42 
U.S.C. 300x-65 and 42 U.S.C. 290kk, et seq.
    (g) Direct funding or Funds provided directly means funding that is 
provided to an organization directly by a governmental entity or 
intermediate organization that has the same duties under this part 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 through a voucher, certificate, coupon, or other similar 
mechanism.


Sec.  54a.3  Nondiscrimination against religious organizations.

    (a) Religious organizations are eligible, on the same basis as any 
other organization, to participate in applicable programs as long as 
their services are provided consistent with the Establishment Clause 
and the Free Exercise Clause of the First Amendment to the United 
States Constitution. Except as provided herein or in the SAMHSA 
Charitable Choice provisions, nothing in these regulations shall 
restrict the ability of the Federal government, or a State or local 
government, from applying to religious organizations the same 
eligibility conditions in applicable programs as are applied to any 
other nonprofit private organization.
    (b) Neither the Federal government nor a State or local government 
receiving funds under these programs shall discriminate against an 
organization that is, or applies to be, a program participant on the 
basis of the organization's religious character or affiliation.


Sec.  54a.4  Religious activities.

    No funds provided directly from SAMHSA or the relevant State or 
local government to organizations participating in applicable programs 
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

[[Page 56447]]

or services for which it receives funds directly from SAMHSA or the 
relevant State or local government under any applicable program, and 
participation must be voluntary for the program beneficiaries.


Sec.  54a.5  Religious character and independence.

    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. The organization may 
not expend funds that it receives directly from SAMHSA or the relevant 
State or local government 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 supported by applicable programs, 
without removing religious art, icons, scriptures, or other symbols. In 
addition, a SAMHSA-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.


Sec.  54a.6  Employment practices.

    (a) 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.
    (b) Nothing in this section shall be construed to modify or affect 
any State law or regulation that relates to discrimination in 
employment.


Sec.  54a.7  Nondiscrimination requirement.

    A religious organization that is a program participant shall not, 
in providing program services or engaging in outreach activities under 
applicable programs, discriminate against a program beneficiary or 
prospective program 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.


Sec.  54a.8  Right to services from an alternative provider.

    (a) General requirements. If an otherwise eligible program 
beneficiary or prospective program beneficiary objects to the religious 
character of a program participant, within a reasonable period of time 
after the date of such objection, such program beneficiary shall have 
rights to notice, referral, and alternative services, as outlined in 
paragraphs (b) through (d) of this section. With respect to SAMHSA 
discretionary programs, for purposes of determining what is the 
appropriate Federal, State, or local government, the following 
principle shall apply: When SAMHSA provides funding directly to another 
unit of government, such as a State or local government, that unit of 
government is responsible for providing the alternative services. When 
SAMHSA provides discretionary grant funding directly to a 
nongovernmental organization, SAMHSA is the responsible unit of 
government.
    (b) Notice. Program participants that refer an individual to 
alternative providers, and the appropriate Federal, State, or local 
governments that administer the applicable programs, shall ensure that 
notice of the individual's rights to services from an alternative 
provider is provided to all program beneficiaries or prospective 
beneficiaries. The notice must clearly articulate the program 
beneficiary's right to a referral and to services that reasonably meet 
the requirements of timeliness, capacity, accessibility, and 
equivalency as discussed in this section. A model notice is set out in 
appendix A to this part.
    (c) Referral to services from an alternative provider. If a program 
beneficiary or a prospective program beneficiary objects to the 
religious character of a program participant that is a religious 
organization, that participating religious organization shall, within a 
reasonable time after the date of such objection, refer such individual 
to an alternative provider.
    (1) When the State or local government is the responsible unit of 
government, the State shall have a system in place to ensure that such 
referrals are made. That system shall ensure that the following occurs:
    (i) The religious organization that is a program participant shall, 
within a reasonable time after the date of such objection, refer the 
beneficiary to an alternative provider;
    (ii) In making such referral, the religious organization shall 
consider any list that the State or local government makes available to 
entities in the geographic area that provide program services, which 
may include utilizing any treatment locator system developed by SAMHSA;
    (iii) All referrals are to be made in a manner consistent with all 
applicable confidentiality laws, including, but not limited to, 42 CFR 
part 2 (``Confidentiality of Alcohol and Drug Abuse Patient Records'');
    (iv) Upon referring a program beneficiary to an alternative 
provider, the religious organization shall notify the responsible unit 
of government of such referral; and
    (v) The religious organization shall ensure that the program 
beneficiary makes contact with the alternative provider to which he or 
she is referred.
    (2) When SAMHSA is the responsible unit of government, the referral 
process is as follows:
    (i) When a program beneficiary requests alternative services, the 
religious organization will seek to make such a referral.
    (ii) If the religious organization cannot locate an appropriate 
provider of alternative services, the religious organization will 
contact SAMHSA. They will work together to identify additional 
alternative providers, utilizing the SAMHSA Treatment Locator system, 
if appropriate.
    (iii) The religious organization will contact these alternative 
providers and seek to make the referral, in a manner consistent with 
all applicable confidentiality laws, including, but not limited to, 42 
CFR part 2 (``Confidentiality of Alcohol and Drug Abuse Patient 
Records'').
    (iv) In the event the religious organization is still unable to 
locate an alternative provider, it may again contact SAMHSA for 
assistance.
    (d) Referral reporting procedures. The program participant shall 
notify the appropriate Federal, State or local government agency that 
administers the program of such referral. If a State or local 
government is the responsible unit of government, it may determine its 
own reporting procedures. When SAMHSA is the responsible unit of 
government, this notification will occur during the course of the 
regular reports that may be required under the terms of the funding 
award.
    (e) Provision and funding of alternative services. The responsible 
unit of government, as defined in paragraph (a) of this section, shall 
provide to an otherwise eligible program beneficiary or prospective 
program beneficiary who objects to the religious character of a program 
participant, services and fund services from an alternative provider 
that is reasonably accessible to, and has the capacity to provide such 
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 appropriate State or local governments

[[Page 56448]]

that administer SAMHSA-funded programs shall ensure that notice of 
their right to alternative services is provided to applicants or 
recipients. The alternative provider need not be a secular 
organization. It must simply be a provider to which the program 
beneficiary has no religious objection.
    (1) When the State receives a discretionary grant from SAMHSA, it 
shall utilize its own implementation procedures for these provisions 
and shall use funds from the SAMHSA discretionary grant to finance such 
alternative services, as needed;
    (2) When the local government receives a discretionary grant from 
SAMHSA, it shall utilize State implementation procedures for these 
provisions and shall use funds from the SAMHSA discretionary grant to 
finance such alternative services, as needed;
    (3) When a religious organization receives a discretionary grant 
from SAMHSA, if a publicly funded alternative provider is available 
that is reasonably accessible and can provide equivalent services, the 
religious organization shall refer the beneficiary to that provider. 
However, if such a provider is not available, the religious 
organization shall contract with an alternative provider to provide 
such services and may finance such services with funds from the SAMHSA 
discretionary grant.


Sec.  54a.9  Oversight of the Charitable Choice requirements.

    In order to ensure that program funds are used in compliance with 
the SAMHSA Charitable Choice provisions, applicants for funds under 
applicable programs are required, as part of their applications for 
funding, to certify that they will comply with all of the requirements 
of the SAMHSA Charitable Choice provisions and the implementing 
regulations under this part.


Sec.  54a.10  Fiscal accountability.

    (a) Religious organizations that receive applicable program funds 
for substance abuse services 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.
    (b) Religious organizations shall segregate Federal funds they 
receive under applicable programs into a separate account from non-
Federal funds. Only the Federal funds shall be subject to audit by the 
government under the SAMHSA program.


Sec.  54a.11  Effect on State and local funds.

    If a State or local government contributes its own funds to 
supplement activities carried out under the applicable programs, the 
State or local government has the option to separate out the Federal 
funds or commingle them. If the funds are commingled, the provisions of 
this part shall apply to all of the commingled funds, in the same 
manner, and to the same extent, as the provisions apply to the Federal 
funds.


Sec.  54a.12  Treatment of intermediate organizations.

    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 
nongovernmental organizations to provide services under any applicable 
program, the intermediate organization shall have the same duties under 
this part as the government. The intermediate organization retains all 
other rights of a nongovernmental organization under this part and the 
SAMHSA Charitable Choice provisions.


Sec.  54a.13  Educational requirements for personnel in drug treatment 
programs.

    In determining whether personnel of a program participant that has 
a record of successful drug treatment for the preceding three years 
have satisfied State or local requirements for education and training, 
a State or local government shall not discriminate against education 
and training provided to such personnel by a religious organization, so 
long as such education and training is comparable to that provided by 
nonreligious organizations, or is comparable to education and training 
that the State or local government would otherwise credit for purposes 
of determining whether the relevant requirements have been satisfied.


Sec.  54a.14  Determination of nonprofit status.

    The nonprofit status of any SAMHSA applicant can be determined by 
any of the following:
    (a) Reference to the organization's listing in the Internal Revenue 
Service's (IRS) most recent list of tax-exempt organizations described 
in section 501(c)(3) of the IRS code.
    (b) A copy of a currently valid IRS Tax exemption certificate.
    (c) A statement from a State taxing body, State Attorney General, 
or other appropriate State official certifying that the applicant 
organization has a nonprofit status and that none of its net earnings 
accrue to any private shareholder or individuals.
    (d) A certified copy of the organization's certificate of 
incorporation or similar document if it clearly establishes the 
nonprofit status of the organization.
    (e) Any of the above proof for a State or national parent 
organization and a statement signed by the parent organization that the 
applicant organization is a local nonprofit affiliate.

Appendix--to Part 54a--Model Notice of Individuals Receiving Substance 
Abuse Services

Model Notice to Individuals Receiving Substance Abuse Services

    No provider of substance abuse services receiving Federal funds 
from the U.S. Substance Abuse and Mental Health Services 
Administration, including this organization, may discriminate 
against you 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.
    If you object to the religious character of this organization, 
Federal law gives you the right to a referral to another provider of 
substance abuse services. The referral, and your receipt of 
alternative services, must occur within a reasonable period of time 
after you request them. The alternative provider must be accessible 
to you and have the capacity to provide substance abuse services. 
The services provided to you by the alternative provider must be of 
a value not less than the value of the services you would have 
received from this organization.

45 CFR Subtitle A

PART 96--[AMENDED]

0
1. The authority for part 96 continues to read as follows:

    Authority: 31 U.S.C. 1243 note, 7501-7507; 42 U.S.C. 300w et 
seq., 300x et seq., 300y et seq., 701 et seq., 8621 et seq., 9901 et 
seq., 1397 et seq.


0
2. Amend Sec.  96.122(f)(5) by adding paragraph (f)(5)(v) to read as 
follows:


Sec.  96.122  Application content and procedures.

* * * * *
    (f) * * *
    (5) * * *
    (v) A description of the activities the State has undertaken to 
comply with 42 CFR part 54.
* * * * *
0
3. Amend Sec.  96.123(a) by adding paragraph (a)(18) to read as 
follows:


Sec.  96.123  Assurances.

    (a) * * *

[[Page 56449]]

    (18) The State will comply with the requirements of 42 CFR part 54.

[FR Doc. 03-24289 Filed 9-25-03; 12:15 pm]
BILLING CODE 4150-31-P