[Federal Register Volume 68, Number 189 (Tuesday, September 30, 2003)]
[Proposed Rules]
[Pages 56418-56423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24292]



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Part VI





Department of Education





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34 CFR Parts 74, 75, 76, and 80



Direct Grant Programs; State-Administered Programs; Administration of 
Grants and Agreements With Institutions of Higher Education, Hospitals, 
and Other Non-Profit Organizations; and Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments; Proposed Rule

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

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DEPARTMENT OF EDUCATION

34 CFR Parts 74, 75, 76, and 80

RIN 1890-AA11


Direct Grant Programs; State-Administered Programs; 
Administration of Grants and Agreements With Institutions of Higher 
Education, Hospitals, and Other Non-Profit Organizations; and Uniform 
Administrative Requirements for Grants and Cooperative Agreements to 
State and Local Governments

AGENCY: Center for Faith-Based and Community Initiatives, Office of the 
Secretary, U.S. Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to amend the Education Department 
General Administrative Regulations (EDGAR) governing direct grant 
programs; State-administered programs; the administration of grants and 
agreements with institutions of higher education, hospitals, and other 
non-profit organizations; and the uniform administrative requirements 
for grants and cooperative agreements to State and local governments. 
The amendments are intended to clarify that faith-based organizations 
are eligible to participate in programs on the same basis as any other 
private organization, with respect to programs for which such other 
organizations are eligible.

DATES: We must receive your comments on or before December 1, 2003.

ADDRESSES: Address all comments about these proposed regulations to 
John J. Porter, Director, Center for Faith-Based and Community 
Initiatives, Office of the Secretary, U.S. Department of Education, 555 
New Jersey Avenue, NW., suite 410, Washington, DC 20208-8300. You may 
also fax your comments to (202) 208-1689.
    If you prefer to send your comments through the Internet, use the 
following address: [email protected].
    You must include the term ``proposed rule'' in the subject line of 
your electronic message.

FOR FURTHER INFORMATION CONTACT: John J. Porter. Telephone: (202) 219-
1741.
    If you use a telecommunications device for the deaf (TDD), you may 
call the Federal Information Relay Service (FIRS) at 1-800-877-8339.
    Individuals with disabilities may obtain this document in an 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed under FOR FURTHER 
INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: 

Invitation To Comment

    We invite you to submit comments regarding these proposed 
regulations. To ensure that your comments have maximum effect in 
developing the final regulations, we urge you to identify clearly the 
specific section or sections and paragraph or paragraphs of the 
proposed regulations that each of your comments addresses and to 
arrange your comments in the same order as the proposed regulations.
    We invite you to assist us in complying with the specific 
requirements of Executive Order 12866 and its overall requirement of 
reducing the regulatory burden that might result from these proposed 
regulations. Please let us know of any further opportunities we should 
take to reduce potential costs or increase potential benefits while 
preserving the effective and efficient administration of the 
Department's programs.
    During and after the comment period, you may inspect all public 
comments about these proposed regulations in suite 410, 555 New Jersey 
Avenue, NW., Washington, DC, between the hours of 8:30 a.m. and 4 p.m., 
Eastern time, Monday through Friday of each week except Federal 
holidays.

Assistance to Individuals With Disabilities in Reviewing the Rulemaking 
Record

    On request, we will supply an appropriate aid, such as a reader or 
print magnifier, to an individual with a disability who needs 
assistance to review the comments or other documents in the public 
rulemaking record for these proposed regulations. If you want to 
schedule an appointment for this type of aid, please contact the person 
listed under FOR FURTHER INFORMATION CONTACT.

Background

    Faith-based organizations make an important contribution to the 
education of Americans and provide an important part of the social 
services network of the United States. Faith-based organizations acting 
alone or in partnership with public schools, community-based 
organizations, institutions of higher education, and other private 
organizations do much good work to advance the quality of education for 
all Americans. Often this good work of faith-based organizations is 
done despite meager resources, and in the past, it has generally been 
done without the assistance of the Federal Government.
    The Department seeks to facilitate the contribution of faith-based 
and community organizations to increase the effectiveness of its 
programs and to provide equal access to a quality education for all 
Americans. We believe this will strengthen the effort to make sure that 
no child is left behind.
    President Bush has directed Federal agencies, including this 
Department, to take steps to ensure that Federal policies and programs 
are fully open to faith-based organizations in a manner that is 
consistent with the U.S. Constitution and statutory requirements. The 
Administration believes that faith-based organizations possess an 
under-appreciated ability to meet the educational needs of 
disadvantaged children and to strengthen our system of education. The 
Administration believes that Federal agencies should ensure that there 
is equal opportunity for all private organizations, faith-based and 
secular, to use Federal resources to meet the needs of their 
communities.
    President Bush has signed two Executive orders relevant to the 
Department's efforts on the faith-based and community initiative. 
Executive Order 13198, dated January 29, 2001, directs the Department 
to identify and eliminate regulatory and other programmatic obstacles 
to the full contribution of faith-based and community groups in order 
to increase the effectiveness of the Department's programs. Executive 
Order 13279, dated December 12, 2002, directs the Department to review 
and evaluate existing policies that have implications for faith-based 
and community organizations in order to assess the consistency of those 
policies with certain fundamental principles and policymaking criteria 
designed to ensure a level playing field for religious and nonreligious 
organizations. The order directs the Department, to the extent 
permitted by law, (1) to amend all such existing policies to ensure 
that they are consistent with the fundamental principles and 
policymaking criteria; (2) where appropriate, to implement new policies 
that are consistent with and necessary to further the fundamental 
principles and policymaking criteria; and (3) to implement new policies 
that are necessary to ensure that the Department collects data 
regarding the participation of faith-based and community organizations 
in social service programs that receive Federal financial assistance. 
This proposed amendment to the Department's regulations is part of its 
effort to comply with these Executive orders.

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Significant Proposed Regulations

    Current Regulations. Current program eligibility regulations at 34 
CFR parts 75 and 76 do not state specifically that faith-based 
organizations are eligible to apply for and to receive funding under 
Department of Education programs on the same basis as other private 
organizations, with respect to programs for which such organizations 
are eligible. Similarly, current procurement regulations at 34 CFR 
parts 74 and 80 do not state specifically that faith-based 
organizations are eligible to contract with or otherwise receive 
assistance from grantees and subgrantees on the same basis as other 
private organizations, with respect to contracts or assistance for 
which such organizations are eligible.
    Proposed Regulations and Reasons. Proposed Sec. Sec.  75.52 
(Eligibility of faith-based organizations for a grant) and 76.52 
(Eligibility of faith-based organizations for a subgrant) state 
specifically that faith-based organizations are eligible to apply for 
and to receive funding under Department of Education programs on the 
same basis as any other private organization, with respect to programs 
for which such other organizations are eligible.
    The Department seeks to clarify that the most qualified applicants 
will receive funding under the Department's programs, and that the 
religious character or affiliation of the private organizations that 
apply will not be taken into account. For that reason, the Department 
is additionally proposing the removal of Sec. Sec.  75.532(a)(4), 
(b)(1) and (2) and 76.532(a)(4), (b)(1) and (2), which prohibit 
grantees and subgrantees, respectively, from using their grants and 
subgrants to pay for an activity of a school or department of divinity.
    In addition, to clarify that grantees may not use their grants to 
pay for equipment or supplies used for religious worship, instruction, 
or proselytization, the Department is proposing a technical amendment 
to Sec.  75.532(a)(2).
    Moreover, although the Department believes that grantees and 
subgrantees may use their grants and subgrants to pay for construction, 
remodeling, repair, operation, or maintenance of any facility or part 
of a facility only to the extent that such facilities are used for 
eligible Department-funded activities (and not for inherently religious 
activities such as religious worship, instruction, or proselytization, 
or any other ineligible purpose), the Department is proposing simply to 
remove Sec. Sec.  75.532(a)(3) and 76.532(a)(3) because there is no 
statutory authority under which a grantee or subgrantee may use its 
grants and subgrants for construction, remodeling, repair, operation, 
or maintenance of any private educational facility (or part of a 
private educational facility). Because no Department program funds 
capital improvements for any such facility, these regulations have no 
application and are unnecessary.
    Lastly, the Department is proposing to add a new paragraph (f) to 
Sec.  74.44 and a new paragraph (j) to Sec.  80.36 to clarify that 
faith-based organizations are eligible to contract with and otherwise 
receive assistance from grantees and subgrantees, including States, on 
the same basis as other private organizations, with respect to 
contracts or assistance for which such organizations are eligible. The 
proposed paragraphs state that such faith-based organizations are 
subject to the same limitations to which grantees and subgrantees are 
subject regarding the use of Department funds for inherently religious 
activities, unless the organization is selected as a result of the 
genuine and independent private choice of the beneficiary of the 
program and provided the organization otherwise satisfies the 
requirements of the program.

Proposed Sec. Sec.  75.52 (Eligibility of Faith-Based Organizations for 
a Grant) and 76.52 (Eligibility of Faith-Based Organizations for a 
Subgrant)

    Proposed paragraph (a)--Participation by faith-based organizations 
in the Department's programs. This paragraph clarifies that a faith-
based organization is eligible to participate in the Department's 
direct grant programs (proposed Sec.  75.52) and State-administered 
programs (proposed Sec.  76.52) on the same basis as any other private 
organization, with respect to programs for which such other 
organizations are eligible. If a faith-based organization meets the 
statutory and regulatory tests for eligibility, the Department 
considers it eligible. The inclusion of qualified faith-based 
organizations increases the pool of potential applicants and enhances 
competition. As a result, the inclusion of qualified faith-based 
organizations increases the quantity of highly qualified applicants 
that are eligible to receive Federal funding, contributing to an 
increase in effectiveness of the Department's programs, a savings of 
Federal dollars, the generation of new ideas, and the provision of 
services to people who may not otherwise receive them. The Department 
needs the contribution of qualified faith-based organizations that 
serve in areas of great need and that have strong ties to the community 
to achieve the Department's goal of ensuring that no child is left 
behind.
    Consistent with this principle, the paragraph additionally provides 
that the Department and the States shall not discriminate against a 
private organization on the basis of the organization's religious 
character or affiliation.
    Proposed paragraph (b)--Prohibition on use of funds for inherently 
religious activities. This paragraph clarifies that a faith-based 
organization that receives a grant under a program of the Department 
(proposed Sec.  75.52) or a subgrant from a State under a State-
administered program of the Department (proposed Sec.  76.52) is 
subject to the provisions of Sec. Sec.  75.532 and 76.532, 
respectively. Those sections prohibit grantees (Sec.  75.532) and 
States and subgrantees (Sec.  76.532) from using their grants and 
subgrants to pay for inherently religious activities, such as religious 
worship, instruction, or proselytization; and for equipment or supplies 
used for religious worship, instruction, or proselytization. Sections 
75.532 and 76.532 also currently prohibit grantees and subgrantees from 
using their grants and subgrants to pay for construction, remodeling, 
repair, operation, or maintenance of any facility or part of a facility 
to be used for religious worship, instruction, or proselytization; and 
an activity of a school or department of divinity, as so defined. As 
explained above, however, the Department seeks to eliminate those 
provisions elsewhere in these proposed regulations.
    Proposed paragraph (c)--Inherently religious activities that must 
be offered separately in time or location and be voluntary. This 
paragraph clarifies that a private organization that engages in 
inherently religious activities, such as religious worship, 
instruction, or proselytization, must offer those services separately 
in time or location from any programs or services supported by grants 
from the Department (proposed Sec.  75.52) or subgrants from a State 
under a State-administered program of the Department (proposed Sec.  
76.52), and that participation in any such inherently religious 
activities by beneficiaries of the programs supported by the grants or 
subgrants must be voluntary.
    The religious liberties of program beneficiaries must be guarded. 
No one should be coerced into participating in inherently religious 
activities to receive federally funded services. Thus, the inherently 
religious activities of faith-based groups must be separated by time

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or location from the programs or services supported by grants from the 
Department or subgrants from a State under a State-administered program 
of the Department, and participation in such inherently religious 
activities by beneficiaries of the program supported by the grants or 
subgrants must be voluntary.
    Proposed paragraph (d)--Faith-based organizations may retain their 
religious character. The restrictions on the use of grants and 
subgrants for inherently religious activities do not prohibit faith-
based organizations from engaging in inherently religious activities. 
The restrictions only prohibit such funds from being used to support 
these activities. This paragraph clarifies that a faith-based 
organization does not have to suppress its religious identity to 
qualify for a grant or subgrant.
    A faith-based organization that applies for or receives a grant or 
subgrant may maintain its character and independence, including the 
definition, practice, and expression of its religious beliefs, provided 
that it does not use the grant or subgrant to support inherently 
religious activities. Many faith-based organizations are concerned that 
they must give up their religious identity to receive Federal funding 
and, as a result, have not sought opportunities to use Federal funds to 
meet needs in their communities. This concern has served as a barrier 
to facilitating the contribution of faith-based organizations to aid 
the Department in achieving its goal of making programs more effective. 
The Federal Government does not ask other types of private 
organizations to compromise their philosophical identity or ideology to 
receive Federal funds so the Department does not require faith-based 
organizations to compromise their philosophical identity or ideology 
either. Faith-based organizations, like other private organizations, 
must use the Federal funds for the purpose of the applicable program. 
Clarifying that faith-based organizations do not have to suppress their 
religious identity encourages them to participate in the Department's 
programs and contributes to increasing the effectiveness of the 
Department's programs.
    Proposed paragraph (e)--Prohibition on discrimination against 
program beneficiaries or prospective program beneficiaries on the basis 
of religion. This paragraph prohibits discrimination by private 
organizations against beneficiaries or prospective beneficiaries of the 
Department's programs on the basis of religion. One who administers or 
delivers services to such beneficiaries (e.g., an employee or 
prospective employee of a grantee or subgrantee) is not considered a 
``beneficiary'' or ``prospective beneficiary'' for purposes of this 
provision.
    Proposed paragraph (f)--Effect of contribution of own funds. In the 
case of grants or subgrants that require fund matching, the 
Department's regulations stipulate that Federal rules apply to those 
matching funds. In addition, in cases where grantees and subgrantees 
pledge to contribute their own funding in excess of matching funds 
required under the grant or subgrant announcement, those excess funds 
pledged in the grant or subgrant application are considered part of a 
``grant agreement'' and are therefore also subject to Federal rules.
    If a grantee or subgrantee provides funds in excess of those funds 
stipulated in grant or subgrant matching requirements or agreements, 
Federal rules will not apply to the extent that those excess funds are 
not commingled with the funds stipulated in the matching requirements 
or agreement. If the excess funds are separated from those ``required'' 
funds, they will not be subject to Federal rules. If those excess funds 
are not kept separate from the ``required'' funds, they will be subject 
to Federal rules.
    Technical amendment to Sec.  75.532(a)(2) relating to the 
prohibition on use of grants to pay for equipment or supplies to be 
used for religious worship, instruction, or proselytization.
    To clarify that grantees cannot use their grants to pay for 
equipment or supplies used for religious worship, instruction, or 
proselytization, the Department is proposing a technical amendment to 
Sec.  75.532(a)(2). The Department believes that no clarification is 
needed for Sec.  76.532(a)(2) relating to States and subgrantees.
    Removal of Sec. Sec.  75.532(a)(3) and 76.532(a)(3) relating to the 
prohibition on use of grants and subgrants to pay for construction, 
remodeling, repair, operation, or maintenance of any facility or part 
of a facility to be used for religious worship, instruction, or 
proselytization.
    The Department believes that grantees and subgrantees may use their 
grants and subgrants to pay for construction, remodeling, repair, 
operation, or maintenance of any facility or part of a facility only to 
the extent that such facilities are used for eligible Department-funded 
activities (and not for inherently religious activities such as 
religious worship, instruction, or proselytization, or any other 
ineligible purpose). The Department is nevertheless proposing the 
removal of Sec. Sec.  75.532(a)(3) and 76.532(a)(3) because there is no 
statutory authority for grantees and subgrantees to use their grants 
and subgrants for construction, remodeling, repair, operation, or 
maintenance of any private educational facility (or part of a private 
educational facility). The Department accordingly has no programs that 
fund such capital improvements. Therefore, rather than amend these 
provisions to clarify the limitations under which grantees and 
subgrantees could use their grants and subgrants if such statutory 
authority existed, the Department proposes simply to remove these 
provisions. If and when such uses are authorized by statute, the 
Department will issue program-specific regulations in accordance with 
the statute.
    Removal of Sec. Sec.  75.532(a)(4), (b)(1) and (2) and 
76.532(a)(4), (b)(1) and (2) relating to the prohibition on use of 
grants and subgrants to pay for an activity of a school or department 
of divinity.
    Consistent with the principle that faith-based organizations are 
eligible to apply for and to receive funding under Department of 
Education programs on the same basis as any other private organization, 
with respect to programs for which such other organizations are 
eligible, the Department is additionally proposing the removal of 
Sec. Sec.  75.532(a)(4), (b)(1) and (2) and 76.532(a)(4), (b)(1) and 
(2), which prohibit grantees and subgrantees, respectively, from using 
their grants and subgrants to pay for an activity of a school or 
department of divinity. Grantees and subgrantees that use their grants 
and subgrants to pay for such an activity will still be subject to 
Sec. Sec.  75.532(a) and 76.532(a), which prohibit them from using 
their grants and subgrants to pay for (1) religious worship, 
instruction, or proselytization, and (2) equipment or supplies to be 
used for those activities. To the extent that they perform eligible 
activities, however, they need not be disqualified from participating 
in Federal programs simply by virtue of their status as religious 
schools or departments.

Proposed Sec. Sec.  74.44(f) (Procurement Procedures) and 80.36(j) 
(Procurement)

    Lastly, the Department seeks to clarify that faith-based 
organizations are eligible to contract with or otherwise receive 
assistance from grantees and subgrantees, including States, on the same 
basis as other private organizations, with respect to contracts or 
assistance for which such organizations are eligible. Such faith-based 
organizations are subject to the same limitations to which grantees and 
subgrantees are subject regarding the

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use of funds for inherently religious activities, unless the 
organization is selected as a result of the genuine and independent 
private choice of the beneficiary of the program and provided the 
organization otherwise satisfies the requirements of the program. For 
example, a supplemental educational service provider that contracts 
with or otherwise receives assistance from a subgrantee pursuant to 
section 1116 of the Elementary and Secondary Education Act of 1965, as 
amended by the No Child Left Behind Act of 2001, is not subject to the 
same limitations to which grantees and subgrantees are subject 
regarding the use of funds for inherently religious activities because 
the provider, by statute, is selected as a result of the genuine and 
independent private choice of the parent of an eligible child. However, 
the provider must still satisfy all applicable statutory requirements.

Executive Order 12866

1. Potential Cost and Benefits

    Under Executive Order 12866, we have assessed the potential costs 
and benefits of this regulatory action.
    The potential costs associated with the proposed regulations are 
minimal and arise from statutory requirements and those we have 
determined to be necessary for administering the Department's programs 
effectively and efficiently.
    In assessing the minimal potential costs and substantial benefits--
both quantitative and qualitative--of this regulatory action, we have 
determined that the benefits would justify the costs.
    We have also determined that this regulatory action would not 
unduly interfere with State, Local, and Tribal governments in the 
exercise of governmental functions.
Summary of Potential Costs and Benefits
    These proposed regulations would not add significantly to the costs 
of implementing the Department's programs, but will significantly 
increase the benefits that the Secretary believes will be obtained 
through successful implementation.
    As noted elsewhere in this preamble, the proposed regulations would 
increase the pool of potential applicants from which the Department may 
select grantees, the States may select subgrantees, and grantees and 
subgrantees may select entities with which to contract or otherwise 
provide assistance, thereby increasing the quantity of highly qualified 
private organizations that are eligible to receive Federal funding. The 
proposed regulations will enable the Department to facilitate the 
contribution of faith-based organizations to increase the effectiveness 
of the Department's programs. The proposed regulations will also ensure 
that Federal funds are used only for proper purposes and clarify for 
faith-based organizations, the Department, and the public the rules for 
using Federal funds.
    The existing procedures for ensuring that Federal funds will be 
used for proper purposes will be used to ensure that funds are not 
diverted to improper purposes. The Department will employ its standard 
procedures for monitoring grantees that it would employ even if the 
proposed regulations were not promulgated. For purposes of the Unfunded 
Mandates Reform Act of 1995, these regulations do not include a Federal 
mandate that might result in increased expenditures by State, local, 
and tribal governments, or increased expenditures by the private sector 
of more than $100 million in any one year.

2. Clarity of the Regulations

    Executive Order 12866 and the Presidential memorandum on ``Plain 
Language in Government Writing'' require each agency to write 
regulations that are easy to understand.
    The Secretary invites comments on how to make these proposed 
regulations easier to understand, including answers to questions such 
as the following:
    [sbull] Are the requirements in the proposed regulations clearly 
stated?
    [sbull] Do the proposed regulations contain technical terms or 
other wording that interferes with their clarity?
    [sbull] Does the format of the proposed regulations (grouping and 
order of sections, use of headings, paragraphing, etc.) aid or reduce 
their clarity?
    [sbull] Would the proposed regulations be easier to understand if 
we divided them into more (but shorter) sections? (A ``section'' is 
preceded by the symbol ``Sec.  '' and a numbered heading: for example, 
Sec.  75.52 Eligibility of faith-based organizations for a grant.)
    [sbull] Could the description of the proposed regulations in the 
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in 
making the proposed regulations easier to understand? If so, how?
    [sbull] What else could we do to make the proposed regulations 
easier to understand?
    Send any comments that concern how the Department could make these 
proposed regulations easier to understand to the person listed in the 
ADDRESSES section of the preamble.

Regulatory Flexibility Act Certification

    The Secretary certifies that these proposed regulations would not 
have a significant economic impact on a substantial number of small 
entities. These proposed regulations require the Department and States 
to administer grant programs in accordance with constitutional 
standards and to maximize the efficiency and productivity of such 
programs. States are not considered small entities under the Regulatory 
Flexibility Act.

Paperwork Reduction Act of 1995

    These proposed regulations do not require any additional 
information collection requirements.

Intergovernmental Review

    These proposed regulations affect direct grant programs that are 
subject to Executive Order 12372 and the regulations in 34 CFR part 79. 
One of the objectives of the Executive order is to foster an 
intergovernmental partnership and to strengthen federalism. The 
Executive order relies on processes developed by State and local 
governments for coordination and review of proposed Federal financial 
assistance.
    This document provides early notification of our specific plans and 
actions for these programs.

Assessment of Educational Impact

    The Secretary particularly requests comments on whether these 
proposed regulations would require transmission of information that any 
other agency or authority of the United States gathers or makes 
available.

Electronic Access to This Document

    You may view this document, as well as all other Department of 
Education documents published in the Federal Register, in text or Adobe 
Portable Document Format (PDF) on the Internet at the following site: 
http://www.ed.gov/news/fedregister.
    To use PDF you must have Adobe Acrobat Reader, which is available 
free at this site. If you have questions about using PDF, call the U.S. 
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in 
the Washington, DC area at 202-512-1530.

    Note: The official version of this document is the document 
published in the Federal Register. Free Internet access to the 
official edition of the Federal Register and the Code of Federal 
Regulations is available on GPO Access at: http://www.access.gpo.gov/nara/index.html. (Catalog of Federal Domestic 
Assistance Number does not apply.)


[[Page 56422]]



List of Subjects



34 CFR Part 74

    Accounting, Grant programs, Reporting and recordkeeping 
requirements.

34 CFR Part 75

    Accounting, Administrative practice and procedure, Education, Grant 
programs--Education, Private schools, Reporting and recordkeeping 
requirements.

34 CFR Part 76

    Administrative practice and procedure, Compliance, Eligibility, 
Grant administration, Reporting and recordkeeping requirements.

34 CFR Part 80

    Accounting, Grant programs, Reporting and recordkeeping 
requirements.

    Dated: September 22, 2003.
Rod Paige,
Secretary of Education.
    For the reasons stated in the preamble, the Secretary proposes to 
amend parts 74, 75, 76, and 80 of title 34 of the Code of Federal 
Regulations as follows:

PART 75--DIRECT GRANT PROGRAMS

    1. The authority citation for Part 75 continues to read as follows:

    Authority: 20 U.S.C. 1221e-3 and 3474, unless otherwise noted.

    2. A new Sec.  75.52 is added to subpart A under the heading 
``Eligibility for a Grant'' to read as follows:


Sec.  75.52  Eligibility of faith-based organizations for a grant.

    (a)(1) A faith-based organization is eligible to apply for and to 
receive a grant under a program of the Department on the same basis as 
any other private organization, with respect to programs for which such 
other organizations are eligible.
    (2) The Department shall not discriminate against a private 
organization on the basis of the organization's religious character or 
affiliation.
    (b) The provisions of Sec.  75.532 apply to a faith-based 
organization that receives a grant under a program of the Department.
    (c) A private organization that engages in inherently religious 
activities, such as religious worship, instruction, or proselytization, 
must offer those services separately in time or location from any 
programs or services supported by a grant from the Department, and 
participation in any such inherently religious activities by 
beneficiaries of the programs supported by the grant must be voluntary.
    (d)(1) A faith-based organization that applies for or receives a 
grant under a program of the Department may retain its independence, 
autonomy, right of expression, religious character, and authority over 
its governance.
    (2) A faith-based organization may, among other things--
    (i) Retain religious terms in its name;
    (ii) Continue to carry out its mission, including the definition, 
development, practice, and expression of its religious beliefs;
    (iii) Use its facilities to provide services without removing or 
altering religious art, icons, scriptures, or other symbols from these 
facilities;
    (iv) Select its board members and otherwise govern itself on a 
religious basis; and
    (v) Include religious references in its mission statement and other 
chartering or governing documents.
    (e) A private organization that receives a grant under a program of 
the Department shall not discriminate against a beneficiary or 
prospective beneficiary of that program on the basis of religion or 
religious belief.
    (f) If a grantee contributes its own funds in excess of those funds 
required by a matching or grant agreement to supplement Federally 
funded activities, the grantee has the option to segregate those 
additional funds or commingle them with the funds required by the 
matching requirements or grant agreement. However, if the additional 
funds are commingled, this section applies to all of the commingled 
funds.

(Authority: 20 U.S.C. 1221e-3 and 3474)

    3. Section 75.532(a)(2) is revised to read as set forth below; 
paragraphs (a)(3) and (4) are removed; and paragraph (b) is removed and 
reserved.


Sec.  75.532  Use of funds for religion prohibited.

    (a) * * *
    (2) Equipment or supplies to be used for any of the activities 
specified in paragraph (a)(1) of this section.
    (b) [Reserved]

PART 76--STATE-ADMINISTERED PROGRAMS

    4. The authority citation for part 76 continues to read as follows:

    Authority: 20 U.S.C. 1221e-3, 3474, 6511(a), and 8065a, unless 
otherwise noted.
    5. A new Sec.  76.52 is added to subpart A under the heading 
``Eligibility for a Grant or Subgrant'' to read as follows:


Sec.  76.52  Eligibility of faith-based organizations for a subgrant.

    (a)(1) A faith-based organization is eligible to apply for and to 
receive a subgrant under a program of the Department on the same basis 
as any other private organization, with respect to programs for which 
such other organizations are eligible.
    (2) States shall not discriminate against a private organization on 
the basis of the organization's religious character or affiliation.
    (b) The provisions of Sec.  76.532 apply to a faith-based 
organization that receives a subgrant from a State under a State-
administered program of the Department.
    (c) A private organization that engages in inherently religious 
activities, such as religious worship, instruction, or proselytization, 
must offer those services separately in time or location from any 
programs or services supported by a subgrant from a State under a 
State-administered program of the Department, and participation in any 
such inherently religious activities by beneficiaries of the programs 
supported by the subgrant must be voluntary.
    (d)(1) A faith-based organization that applies for or receives a 
subgrant from a State under a State-administered program of the 
Department may retain its independence, autonomy, right of expression, 
religious character, and authority over its governance.
    (2) A faith-based organization may, among other things--
    (i) Retain religious terms in its name;
    (ii) Continue to carry out its mission, including the definition, 
development, practice, and expression of its religious beliefs;
    (iii) Use its facilities to provide services without removing or 
altering religious art, icons, scriptures, or other symbols from these 
facilities;
    (iv) Select its board members and otherwise govern itself on a 
religious basis; and
    (v) Include religious references in its mission statement and other 
chartering or governing documents.
    (e) A private organization that receives a subgrant from a State 
under a State-administered program of the Department shall not 
discriminate against a beneficiary or prospective beneficiary of that 
program on the basis of religion or religious belief.
    (f) If a State or subgrantee contributes its own funds in excess of 
those funds required by a matching or grant

[[Page 56423]]

agreement to supplement federally funded activities, the State or 
subgrantee has the option to segregate those additional funds or 
commingle them with the funds required by the matching requirements or 
grant agreement. However, if the additional funds are commingled, this 
section applies to all of the commingled funds.

(Authority: 20 U.S.C. 1221e-3, 3474, and 6511(a))


Sec.  76.532  [Amended]

    6. Section 76.532 is amended by removing (a)(3) and (a)(4); and 
removing and reserving (b).

PART 74--ADMINISTRATION OF GRANTS AND AGREEMENTS WITH INSTITUTIONS 
OF HIGHER EDUCATION, HOSPITALS, AND OTHER NON-PROFIT ORGANIZATIONS

    7. The authority citation for part 74 continues to read as follows:

    Authority: 20 U.S.C. 1221e-3 and 3474, OMB Circular A-110, 
unless otherwise noted.

    8. Section 74.44 is amended by adding new paragraph (f) to read as 
follows:


Sec.  74.44  Procurement procedures.

* * * * *
    (f)(1)(i) A faith-based organization is eligible to contract with 
or otherwise receive assistance from recipients on the same basis as 
any other private organization, with respect to contracts or assistance 
for which such other organizations are eligible.
    (ii) Recipients shall not discriminate against a private 
organization on the basis of the organization's religious character or 
affiliation.
    (2) The provisions of Sec. Sec.  75.532 and 76.532 applicable to 
grantees and subgrantees apply to a faith-based organization that 
contracts with or otherwise receives assistance from a recipient, 
unless the faith-based organization is selected as a result of the 
genuine and independent private choice of the beneficiary of the 
program and provided the organization otherwise satisfies the 
requirements of the program.
    (3) A private organization that engages in inherently religious 
activities, such as religious worship, instruction, or proselytization, 
must offer those services separately in time or location from any 
programs or services supported by a contract with or assistance 
received from a recipient and participation in any such inherently 
religious activities by beneficiaries of the programs supported by the 
contract or assistance must be voluntary, unless the organization is 
selected as a result of the genuine and independent private choice of 
the beneficiary of the program and provided the organization otherwise 
satisfies the requirements of the program.
    (4)(i) A faith-based organization that contracts with or otherwise 
receives assistance from a recipient may retain its independence, 
autonomy, right of expression, religious character, and authority over 
its governance.
    (ii) A faith-based organization may, among other things--
    (A) Retain religious terms in its name;
    (B) Continue to carry out its mission, including the definition, 
development, practice, and expression of its religious beliefs;
    (C) Use its facilities to provide services without removing or 
altering religious art, icons, scriptures, or other symbols from these 
facilities;
    (D) Select its board members and otherwise govern itself on a 
religious basis; and
    (E) Include religious references in its mission statement and other 
chartering or governing documents.
    (5) A private organization that contracts with or otherwise 
receives assistance from a recipient shall not discriminate against a 
beneficiary or prospective beneficiary of the program on the basis of 
religion or religious belief.

PART 80--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 
COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS

    9. The authority citation for part 80 continues to read as follows:

    Authority: 20 U.S.C. 1221e-3(a)(1) and 3474, OMB Circular A-102, 
unless otherwise noted.

    10. Section 80.36 is amended by adding new paragraph (j) to read as 
follows:


Sec.  80.36  Procurement.

* * * * *
    (j) Contracting with faith-based organizations. (1)(i) A faith-
based organization is eligible to contract with or otherwise receive 
assistance from grantees and subgrantees, including States, on the same 
basis as any other private organization, with respect to contracts or 
assistance for which such other organizations are eligible.
    (ii) Grantees and subgrantees, including States, shall not 
discriminate against a private organization on the basis of the 
organization's religious character or affiliation.
    (2) The provisions of Sec. Sec.  75.532 and 76.532 applicable to 
grantees and subgrantees apply to a faith-based organization that 
contracts with or otherwise receives assistance from a grantee or 
subgrantee, including a State, unless the faith-based organization is 
selected as a result of the genuine and independent private choice of 
the beneficiary of the program and provided the organization otherwise 
satisfies the requirements of the program.
    (3) A private organization that engages in inherently religious 
activities, such as religious worship, instruction, or proselytization, 
must offer those services separately in time or location from any 
programs or services supported by a contract with or assistance 
received from a grantee or subgrantee, including a State, and 
participation in any such inherently religious activities by 
beneficiaries of the programs supported by the contract or assistance 
must be voluntary, unless the organization is selected as a result of 
the genuine and independent private choice of the beneficiary of the 
program and provided the organization otherwise satisfies the 
requirements of the program.
    (4)(i) A faith-based organization that contracts with or otherwise 
receives assistance from a grantee or subgrantee, including a State, 
may retain its independence, autonomy, right of expression, religious 
character, and authority over its governance.
    (ii) A faith-based organization may, among other things--
    (A) Retain religious terms in its name;
    (B) Continue to carry out its mission, including the definition, 
development, practice, and expression of its religious beliefs;
    (C) Use its facilities to provide services without removing or 
altering religious art, icons, scriptures, or other symbols from these 
facilities;
    (D) Select its board members and otherwise govern itself on a 
religious basis; and
    (E) Include religious references in its mission statement and other 
chartering or governing documents.
    (5) A private organization that contracts with or otherwise 
receives assistance from a grantee or subgrantee, including a State, 
shall not discriminate against a beneficiary or prospective beneficiary 
of the program on the basis of religion or religious belief.

[FR Doc. 03-24292 Filed 9-29-03; 8:45 am]
BILLING CODE 4000-01-P