[Federal Register Volume 69, Number 109 (Monday, June 7, 2004)]
[Proposed Rules]
[Pages 31773-31777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12654]


=======================================================================
-----------------------------------------------------------------------

AGENCY FOR INTERNATIONAL DEVELOPMENT

22 CFR Parts 202, 205, 211, and 226

RIN 0412-AA52


Participation by Religious Organizations in USAID Programs

AGENCY: Agency for International Development (USAID).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This rule proposes to implement Executive Branch policy that, 
within the framework of constitutional guidelines, religious (or 
``faith-based'') organizations should be able to compete on an equal 
footing with other organizations for USAID funding. This proposed rule 
would revise USAID regulations pertaining to the award of grants, 
cooperative agreements and contracts awarded for the purpose of 
administering grant programs to ensure their compliance with this 
policy and to clarify that faith-based organizations are eligible to 
participate in programs on the same basis as any other organization, 
with respect to programs for which such other organizations are 
eligible.

DATES: Comments must be submitted by August 6, 2004.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the: Center for Faith-Based and Community 
Initiatives, U.S. Agency for International Development, Room 3.09-22, 
1300 Pennsylvania Avenue, NW., Washington, DC 20523. Communications 
should refer to the ``proposed rule.'' You may submit your comments by 
fax to 202-216-3351 or by e-mail to [email protected]. A copy of each 
communication submitted will be available for inspection and copying 
between 8:30 a.m. and 5:30 p.m. at the above address.

FOR FURTHER INFORMATION CONTACT: Michael Magan, Director, Center for 
Faith-Based and Community Initiatives, USAID, Rm. 3.3.30, 1300 
Pennsylvania Ave., NW., Washington, DC 20523; telephone: (202) 712-4080 
(this is not a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    Religious (or ``faith-based'') organizations make an important 
contribution to the delivery of humanitarian and economic assistance in 
much of the world. Faith-based organizations acting alone or in 
partnership with local and national governments, community-based 
organizations, institutions of higher education, and other private 
organizations do much good work to meet the pressing needs of countries 
and their citizens, consistent with the objectives of the U.S. foreign 
assistance program.
    Faith-based non-profit organizations have been implementing 
humanitarian and development activities for USAID for decades. 
Nevertheless, USAID seeks to further facilitate the contribution of 
faith-based and community organizations to increase the reach and 
effectiveness of its programs. We believe this will strengthen the 
effort, given priority in the national security strategy of the United 
States, to respond to the humanitarian and economic development needs 
of countries world-wide.
    President Bush has directed Federal agencies, including USAID, to 
take steps to ensure that Federal policy and programs are fully open to 
faith-based and community groups in a manner that is consistent with 
the Constitution. The Administration believes that such groups possess 
an under-appreciated ability to meet the needs of disadvantaged people 
overseas struggling to make a better life, recover from a disaster or 
live in a free and democratic country. The Administration believes that 
there should be an equal opportunity for all organizations--both 
religious and nonreligious--to participate as partners in Federal 
programs.
    As part of these efforts, President Bush issued Executive Order 
13198 on January 29, 2001. The Order, which was published in the 
Federal Register on January 31, 2001 (66 FR 8499), created Centers for 
Faith-Based and Community Initiatives in five Cabinet departments--
Housing and Urban Development, Health and Human Services, Education, 
Labor, and Justice. The Executive Order charged the Centers to identify 
and eliminate regulatory, contracting, and other programmatic obstacles 
to the participation of faith-based and community organizations in the 
provision of social services by their Departments. On December 12, 
2002, President Bush issued Executive Order 13280. That Order, 
published in the Federal Register on December 16, 2002 (66 FR 77145), 
created Centers in two additional agencies--the United States Agency 
for International Development and the Department of Agriculture--and 
charged those Centers with duties similar to those set forth in 
Executive Order 13198. On December 12, 2002, President Bush also issued 
Executive Order 13279, published in the Federal Register on December 
12, 2002 (67 FR

[[Page 31774]]

77141). That Executive Order charges Executive Branch agencies to 
ensure equal protection of laws to faith-based and community groups 
that apply for funds to meet and administer social service programs 
domestically and abroad. President Bush called for an end to 
discrimination against faith-based organizations and, consistent with 
the First Amendment to the United States Constitution, ordered 
implementation of these policies throughout the Executive Branch, 
including, among other things, allowing organizations to retain their 
religious autonomy over their internal governance and composition of 
boards, and over their display of religious art, icons, scriptures, or 
other religious symbols, when participating in government-funded 
programs. President Bush directed each Executive Branch agency, 
including USAID, to implement these policies. This proposed rule is 
part of USAID's efforts to fulfill its responsibilities under these 
Executive Orders.

II. This Proposed Rule

A. Purpose of Proposed Rule

    Consistent with the President's initiative, this proposed rule 
would revise USAID's regulations to ensure that there are no 
unwarranted barriers to the equal participation of faith-based 
organizations in USAID's programs. The objective of this proposed rule 
is to ensure that USAID's programs are open to all qualified 
organizations, regardless of their religious character, and to 
establish clearly the proper uses to which funds may be put, and the 
conditions for receipt of funding. In addition, this proposed rule is 
designed to ensure that the implementation of USAID's programs is 
conducted in a manner consistent with the requirements of the 
Constitution, including the President's Article II responsibilities to 
conduct the foreign affairs of the nation and to act as its sole 
representative in international relations.

B. USAID Regulations Amended by Proposed Rule

    This rule proposes to revise in its entirely 22 CFR part 205, 
Payments to and on Behalf of Participants in Nonmilitary Economic 
Development Training Programs. It's new title would be ``Participation 
by Religious Organizations in USAID Programs.''
    This rule also proposes to amend the following USAID regulations:

    1. 22 CFR part 202, Overseas Shipment of Supplies by Voluntary Non-
Profit Relief Agencies.
    2. 22 CFR part 211, Transfer of Commodities for Food Use in 
Disaster Relief, Economic Development, and Other Assistance.
    3. 22 CFR part 226, Administration of Assistance Awards to U.S. 
Non-Government Organizations.

C. Proposed Regulatory Amendments to Title 22

    The revised part 205 will apply to all Federal financial assistance 
(including grants, cooperative agreements and contracts that administer 
grant programs) awarded by USAID. Award documentation for such Federal 
financial assistance will include standard clauses that incorporate the 
standards of part 205 and USAID internal directives will highlight, 
explain, and incorporate part 205 by reference. The rule also proposes 
to make corresponding changes to existing parts 202, 211 and 226 of 22 
CFR that relate to aspects of Federal financial assistance programs 
administered by USAID.
    1. Participation by religious organizations in USAID programs. The 
proposed rule would make clear that organizations are eligible to 
participate in USAID programs without regard to their religious 
character or affiliation, and that organizations may not be excluded 
from the competition for USAID assistance awards or sub-awards simply 
because they are religious. Specifically, religious organizations are 
eligible to compete for funding on the same basis, and under the same 
eligibility requirements, as all other nonprofit organizations. The 
Federal government and intermediary organizations administering USAID 
funds are prohibited from discriminating for or against organizations 
on the basis of religious character or affiliation in the selection of 
service providers. Nothing in this rule precludes those administering 
USAID funded programs from accommodating religious organizations in a 
manner consistent with the Religion Clauses of the First Amendment to 
the Constitution, as they have been interpreted to apply in the 
domestic context.
    2. Inherently religious activities. The proposed rule describes the 
requirements applicable to all recipient and sub-recipient 
organizations regarding the use of USAID funds for inherently religious 
activities. Specifically, a participating organization may not use 
direct financial assistance \1\ from USAID to support inherently 
religious activities, such as worship, religious instruction, or 
proselytization. If the organization engages in such activities, the 
activities must be offered separately, in time or location, from the 
programs or services funded with direct USAID assistance, and 
participation must be voluntary for the beneficiaries of the USAID-
funded programs or services. This requirement ensures that direct 
financial assistance from USAID to religious organizations is not used 
to support inherently religious activities. Such assistance may not be 
used, for example, to conduct worship services, prayer meetings or any 
other activity that is inherently religious.
---------------------------------------------------------------------------

    \1\ As used in this proposed rule, the terms ``direct USAID 
assistance'' or ``direct financial assistance from USAID'' refers to 
direct funding within the meaning of the Establishment Clause of the 
First Amendment as it has been interpreted to apply in the domestic 
context. For example, direct USAID assistance may mean that the 
government or an intermediate organization with similar duties as a 
governmental entity under a particular USAID program selects an 
organization and enters a grant relationship with the organization 
for provision of needed services. In contrast, many indirect funding 
scenarios place the choice of service provider in the hands of a 
beneficiary, and then pay for the cost of that service through a 
voucher, certificate, or other similar means of payment.
---------------------------------------------------------------------------

    This restriction does not mean that an organization that receives 
USAID funds cannot engage in inherently religious activities. It simply 
means that such an organization cannot fund these activities with 
direct financial assistance from USAID. Thus, faith-based organizations 
that receive direct financial assistance from USAID must take steps to 
separate, in time or location, their inherently religious activities 
from the direct USAID-funded services that they offer.
    In addition, the proposed rule clarifies that the legal 
restrictions applicable to religious programs within correctional 
facilities will sometimes be different from the legal restrictions that 
apply to other USAID programs, on account of the fact that the degree 
of government control over correctional environments sometimes warrants 
affirmative steps by prison officials, in the form of chaplaincies and 
similar programs, to ensure that prisoners have access to opportunities 
to exercise their religion in the prison.
    3. Independence of religious organizations. The proposed rule 
clarifies that a religious organization that participates in USAID 
programs will retain its independence and may continue to carry out its 
mission, including the definition, practice, and expression of its 
religious beliefs, provided that it does not use direct financial 
assistance from USAID to support any inherently religious activities, 
such as worship, religious instruction, or proselytization. Among other 
things, a faith-based organization may use space in its facilities to 
provide USAID-funded services, without

[[Page 31775]]

removing religious art, icons, scriptures, or other religious symbols. 
In addition, a USAID-funded religious organization may retain religious 
terms in its organization's name, select its board members and 
otherwise govern itself on a religious basis, and include religious 
references in its organization's mission statements and other governing 
documents.
    4. Use of USAID funds for acquisition, construction, or 
rehabilitation of structures. The proposed rule clarifies that USAID 
funds may be used for the acquisition, construction, or rehabilitation 
of structures only to the extent that those structures are used for 
conducting eligible activities under the specific USAID program. Where 
a structure is used for both eligible and inherently religious 
activities, the proposed rule clarified that USAID funds may not exceed 
the cost of those portions of the acquisition, construction, or 
rehabilitation that are attributable to eligible activities. USAID 
funds may not be used for acquisition, construction, or rehabilitation 
of sanctuaries, chapels, or any other rooms that a religious 
congregation that is a recipient or sub-recipient of USAID assistance 
primarily uses as a place of worship.
    5. Nondiscrimination in providing assistance. The proposed rule 
clarifies that an organization that receives direct financial 
assistance from USAID shall not, in providing program assistance, 
discriminate against a program beneficiary or potential program 
beneficiary on the basis of religion or religious belief. Accordingly, 
religious organizations, in providing services directly funded in whole 
or in part by USAID, may not discriminate against current or 
prospective program beneficiaries on the basis of religion or religious 
belief.
    6. Assurance requirements. This rule proposes to direct the removal 
of those provisions of USAID's agreements, covenants, memoranda of 
understanding, policies, or regulations that require only USAID-funded 
religious organizations to provide assurances that they will not use 
monies or property for inherently religious activities. All 
organizations that participate in USAID programs, including religious 
ones, must carry out eligible activities in accordance with all program 
requirements and other applicable requirements governing the conduct of 
USAID-funded activities, including those prohibiting the use of direct 
financial assistance from USAID to engage in inherently religious 
activities. In addition, to the extent that provisions of USAID's 
agreements, covenants, policies, or regulations disqualify religious 
organizations from participating in USAID's programs because they are 
motivated or influenced by religious faith to provide social services, 
or because of their religious character or affiliation, the proposed 
rule removes that restriction, which is not required by governing law.
    7. National Security Waiver. The proposed rule also permits the 
Secretary of State to waive all or any part of the rule, on a case-by-
case basis, where the Secretary determines that such waiver is 
necessary to further the national security or foreign policy interests 
of the United States.

III. Findings and Certifications

Executive Order 12866--Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866, Regulatory Planning and Review. OMB determined 
that this rule is a ``significant regulatory action'' as defined in 
section 3(f) of the Order (although not an economically significant 
regulatory action under the Order) and, accordingly, has reviewed the 
rule.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments, and on the private sector. This proposed rule does not 
impose any Federal mandates on any State, local, or tribal governments, 
or the private sector, within the meaning of the Unfunded Mandates 
Reform Act of 1995.

Regulatory Flexibility Act

    The USAID Administrator, in accordance with the Regulatory 
Flexibility Act (5 U.S.C. 605(b)), has reviewed and approved this 
proposed rule and in so doing certifies that this rule will not have a 
significant economic impact on a substantial number of small entities. 
The proposed rule would not impose any new costs, or modify existing 
costs, applicable to USAID grantees. Rather, the purpose of the 
proposed rule is to remove prohibitions that currently restrict the 
equal participation of religious or religiously affiliated 
organizations (large and small) in USAID programs. Notwithstanding 
USAID's determination that this rule will not have a significant 
economic effect on a substantial number of small entities, USAID 
specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet USAID's objectives as 
described in this preamble.

Catalog of Federal Domestic Assistance Numbers

    The Catalog of Federal Domestic Assistance program numbers for the 
programs affected by this rule are 98.001, 98.002, 98.003, 98.004, 
98.005, 98.006, 98.007, 98.008, 98.009.

List of Subjects

22 CFR Part 202

    Foreign aid, Grant programs, Nonprofit organizations.

22 CFR Part 205

    Foreign aid, Grant programs, Nonprofit organizations.

22 CFR Part 211

    Agricultural commodities, Disaster assistance, Food assistance 
programs, Foreign aid, Grant programs, Nonprofit organizations, 
Reporting and recordkeeping requirements.

22 CFR Part 226

    Accounting, Colleges and universities, Foreign aid, Grant programs, 
Hospitals, Nonprofit organizations, Reporting and recordkeeping 
requirements.

    For the reasons stated in the preamble, USAID proposes to amend 
chapter II of title 22 of the Code of Federal Regulations as follows:

PART 202--OVERSEAS SHIPMENT OF SUPPLIES BY VOLUNTARY NON-PROFIT 
RELIEF AGENCIES

    1. The authority citation for part 202 revised to read as follows:

    Authority: 22 U.S.C. 2381(a).

    2. Add Sec.  202.10 to read as follows:


Sec.  202.10  Participation by faith-based organizations.

    The procedures established under this part shall be administered in 
compliance with the standards set forth in part 205, Participation by 
Religious Organizations in USAID Programs, of this chapter.
    3. Revise part 205 to read as follows:

PART 205--PARTICIPATION BY RELIGIOUS ORGANIZATIONS IN USAID 
PROGRAMS

    Authority: 22 U.S.C. 2381(a).


Sec.  205.1  Grants and cooperative agreements.

    (a) Religious organizations are eligible, on the same basis as any 
other Organization to participate in any

[[Page 31776]]

USAID program for which they are otherwise eligible. In the selection 
of service providers, neither USAID nor entities that make and 
administer sub-awards of USAID funds shall discriminate for or against 
an organization on the basis of the organization's religious character 
or affiliation. As used in this section, the term ``program'' refers to 
federally funded USAID grants and cooperative agreements, including 
sub-grants and sub-agreements. The term also includes grants awarded 
under contracts that have been awarded by USAID for the purpose of 
administering grant programs. As used in this section, the term 
``grantee'' includes a recipient of a grant or a signatory to a 
cooperative agreement, as well as sub-recipients of USAID assistance 
under grants, cooperative agreements and contracts.
    (b) Organizations that receive direct financial assistance from 
USAID under any USAID program may not engage in inherently religious 
activities, such as worship, religious instruction, or proselytization, 
as part of the programs or services directly funded with direct 
financial assistance from USAID. If an organization conducts such 
activities, the activities must be offered separately, in time or 
location, from the programs or services funded with direct financial 
assistance from USAID, and participation must be voluntary for 
beneficiaries of the programs or services funded with such assistance. 
These restrictions on inherently religious activities do not apply to 
programs where USAID funds are provided to chaplains to work with 
inmates in prisons, detention facilities, or community correction 
centers, or where USAID funds are provided to religious or other 
organizations for programs in prisons, detention facilities, or 
community correction centers, in which such organizations assist 
chaplains in carrying out their duties.
    (c) A religious organization that participates in USAID-funded 
programs or services will retain its independence and may continue to 
carry out its mission, including the definition, practice, and 
expression of its religious beliefs, provided that it does not use 
direct financial assistance from USAID to support any inherently 
religious activities, such as worship, religious instruction, or 
proselytization. Among other things, a religious organization that 
receives financial assistance from USAID may use space in its 
facilities, without removing religious art, icons, scriptures, or other 
religious symbols. In addition, a religious organization that receives 
financial assistance from USAID retains its authority over its internal 
governance, and it may retain religious terms in its organization's 
name, select its board members on a religious basis, and include 
religious references in its organization's mission statements and other 
governing documents.
    (d) USAID funds may not be used for the acquisition, construction, 
or rehabilitation of structures to the extent that those structures are 
used for inherently religious activities. USAID funds may be used for 
the acquisition, construction, or rehabilitation of structures only to 
the extent that those structures are used for conducting eligible 
activities under this part. Where a structure is used for both eligible 
and inherently religious activities, USAID funds may not exceed the 
cost of those portions of the acquisition, construction, or 
rehabilitation that are attributable to eligible activities in 
accordance with the cost accounting requirements applicable to USAID 
funds in this part. Sanctuaries, chapels, or other rooms that a USAID-
funded religious congregation primarily uses as a place of worship, 
however, are ineligible for USAID-funded improvements. Disposition of 
real property after the term of the grant, or any change in use of the 
property during the term of the grant, is subject to government-wide 
regulations governing real property disposition. (See 22 CFR Part 226).
    (e) An organization that participates in programs funded by 
financial assistance from USAID shall not, in providing services, 
discriminate against a program beneficiary or potential program 
beneficiary on the basis of religion or religious belief.
    (f) No grant document, contract, agreement, covenant, memorandum of 
understanding, policy, or regulation that is used by USAID shall 
require only religious organizations to provide assurances that they 
will not use monies or property for inherently religious activities. 
Any such restrictions shall apply equally to religious and secular 
organizations. All organizations that participate in USAID programs, 
including religious ones, must carry out eligible activities in 
accordance with all program requirements and other applicable 
requirements governing the conduct of USAID-funded activities, 
including those prohibiting the use of direct financial assistance from 
USAID to engage in inherently religious activities. No grant document, 
agreement, covenant, memorandum of understanding, policy, or regulation 
that is used by USAID shall disqualify religious organizations from 
participating in USAID's programs because such organizations are 
motivated or influenced by religious faith to provide social services, 
or because of their religious character or affiliation.
    (g) A religious organization's exemption from the Federal 
prohibition on employment discrimination on the basis of religion, set 
forth in Sec.  702(a) of the Civil Rights Act of 1964, 42 U.S.C. 2000e-
1, is not forfeited when the organization receives financial assistance 
from USAID.
    (h) Many USAID grant programs require an organization to be a 
``nonprofit organization'' in order to be eligible for funding. 
Individual solicitations that require organizations to have nonprofit 
status will specifically so indicate in the eligibility section of a 
solicitation. Grantees should consult with the appropriate USAID 
program office to determine the scope of any applicable requirements. 
In USAID programs in which an applicant must show that it is a 
nonprofit organization, other than programs which are limited to 
registered Private and Voluntary Organizations, the applicant may do so 
by any of the following means:
    (1) Proof that the Internal Revenue Service currently recognizes 
the applicant as an organization to which contributions are tax 
deductible under section 501(c)(3) of the Internal Revenue Code;
    (2) A statement from a state taxing body or the state secretary of 
state certifying that:
    (i) The organization is a nonprofit organization operating within 
the State; and
    (ii) No part of its net earnings may lawfully benefit any private 
shareholder or individual;
    (3) A certified copy of the applicant's certificate of 
incorporation or similar document that clearly establishes the 
nonprofit status of the applicant; or
    (4) Any item described in paragraphs (b)(1) through (3) of this 
section if that item applies to a state or national parent 
organization, together with a statement by the State or parent 
organization that the applicant is a local nonprofit affiliate.
    (i) The Secretary of State may waive the requirements of this 
section in whole or in part, on a case-by-case basis, where the 
Secretary determines that such waiver is necessary to further the 
national security or foreign policy interests of the United States.

[[Page 31777]]

PART 211--TRANSFER OF FOOD COMMODITIES FOR FOOD USE IN DISASTER 
RELIEF, ECONOMIC DEVELOPMENT, AND OTHER ASSISTANCE

    4. The authority citation for part 211 is revised to read as 
follows:

    Authority: 7 U.S.C. 1726a(c).

    5. Add Sec.  211.13 to read as follows:


Sec.  211.13  Participation by religious organizations.

    The funds provided under this part shall be administered in 
compliance with the standards set forth in part 205, Participation by 
Religious Organizations in USAID Programs, of this chapter.

PART 226--ADMINISTRATION OF ASSISTANCE AWARDS TO U.S. NON-
GOVERNMENTAL ORGANIZATIONS

    6. The authority citation for part 226 is revised to read as 
follows:

    Authority: 22 U.S.C. 2381(a).

    7. Amend Sec.  226.1 to add the following text at the end of the 
section:


Sec.  226.1  Purpose and applicability.

    * * * This part shall be administered in compliance with the 
standards set forth in part 205, Participation by Religious 
Organizations in USAID Programs, of this chapter.

    Dated: May 28, 2004.
Andrew S. Natsios,
USAID Administrator.
[FR Doc. 04-12654 Filed 6-4-04; 8:45 am]
BILLING CODE 6116-01-P