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Final Rule for Religious Organizations
[Federal Register: June 8, 2004 (Volume 69, Number 110)]
[Rules and Regulations]
[Page 31883-31889]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jn04-11]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 61
RIN 2900-AL63
VA Homeless Providers Grant and Per Diem Program; Religious
Organizations
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
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SUMMARY: This document adopts with changes the provisions of a proposed
rule that revised the regulations concerning the VA Homeless Providers
Grant and Per Diem Program (Program). Specifically, the proposed rule
revised provisions that apply to religious organizations that receive
Department of Veterans Affairs (VA) funds under the Program to ensure
that VA activities under the Program are open to all qualified
organizations, regardless of their religious character, and to clearly
establish the proper uses to which funds may be put, and the conditions
for the receipt of such funding.
Consistent with Title VII of the Civil Rights Act of 1964, the
proposed rule removed the regulatory prohibition against religious
organizations making employment decisions on a religious basis; as such
organizations do not forfeit that exemption when administering VA-
funded programs. Also, the proposed rule ensured that direct government
funds are not used for inherently religious activities.
DATES: Effective Date: This final rule is effective on July 8, 2004.
FOR FURTHER INFORMATION CONTACT: Guy A. Liedke, VA Homeless Providers
Grant and Per Diem Program, Mental Health Strategic Health Care Group
(116E), Department of Veterans Affairs, 810 Vermont Avenue, NW.,
Washington, DC 20420; (877) 332-0334. (This is a toll-free number.)
SUPPLEMENTARY INFORMATION:
I. Background
In a document published in the Federal Register on September 30,
2003 at 68 FR 56426, we promulgated a proposed rule that would amend
Sec. 61.64 of the regulations concerning the VA Homeless Providers
Grant and Per Diem Program as explained in the SUMMARY portion of this
document.
We provided a 30-day comment period that ended October 30, 2003. We
received comments from 13 commenters, of which nine were interest
groups or civil or religious liberties organizations, two were
individuals, one was a homeless veterans provider and one was a
Congressman. We considered all comments in developing this final rule.
Some of the comments generally supported the proposed rule; most were
critical. The following is a summary of the comments, and VA's
responses.
II. Comments and Reponses
Participation by Faith-Based Organizations in VA Programs
Several commenters expressed appreciation and support for the
Department's efforts to clarify the rules governing participation of
faith-based organizations in its programs, one stating that ``[a]s a
general matter we find the proposed regulations excellent and we
enthusiastically support them.' Another stated that it believed that
the Sec. 61.64(a) provision that faith-based organizations are
eligible on the same basis as any other organization to participate in
VA programs should be maintained in the final rule. Further, several
commenters were generally supportive of the President's Faith-Based and
Community Initiative.
However, some of those commenters, and others, disagreed with the
proposed rule on the basis that it would allow Federal funds to be
given to ``pervasively sectarian' organizations. They maintained that
the rule places no limitations on the kinds of religious organizations
that can receive funds, and they requested that ``pervasively
sectarian' organizations be barred from receiving Department funds.
Similarly, one commenter suggested that the proposed rule improperly
allows direct grants of public funds to religious organizations in
which religious missions overpower secular functions, and another
suggested that it be revised to bar VA funding of programs that result
in ``government-financed religious indoctrination.' Another commenter
``strongly oppose[d] all illegal and unconstitutional initiatives to
use tax dollars for any form of faith based initiative.'
We do not agree that the Constitution requires VA to distinguish
between different religious organizations in providing funding under
the Program. Religious organizations that receive direct VA funds may
not use such funds for inherently religious activities. These
organizations must ensure that such religious activities are separate
in time or location from services directly funded by VA and must also
ensure that participation in such religious activities is voluntary.
Further, they are prohibited from discriminating against a program
beneficiary on the basis of religion or a religious belief, and program
participants that violate these requirements will be subject to
applicable sanctions and penalties. The regulations thus ensure that
there is no direct government funding of inherently religious
activities, as required by current precedent. In addition, 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, joined by Justice Breyer, set forth reasoning that is
inconsistent with its underlying premises, see id. at 857-858
(O'Connor, J., concurring in judgment) (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 religious
institutions will invariably advance the institutions' religious
purposes, and that view is the foundation of the ``pervasively
sectarian' doctrine. VA therefore believes that under current
precedent, the Department may fund all service providers, without
regard to religion and free of criteria that require the provider to
abandon its religious expression or character.
One commenter stated that the rule bans discrimination against
faith-based providers who apply to participate in Department-funded
programs, but not discrimination ``in favor of' such providers. The
commenter suggested that we prohibit discrimination both ``in
[[Page 31884]]
favor of' and against faith-based providers. Similarly, another
commenter suggested that the rule not give favorable treatment to
religious organizations by exempting them from requirements applicable
to secular organizations.
We agree with the first commenter and have therefore modified the
language of the final rule to address this concern and to clarify that
the requirement of nondiscrimination applies to both VA and state or
local officials administering Department funds. Section 61.64(a) of the
final rule reads: ``Neither the Federal Government nor any state or
local government receiving funds under any Department program shall, in
the selection of service providers, discriminate for or against an
organization on the basis of the organization's religious character or
affiliation.' Far from favoring religious organizations, the same
subsection of the rule articulates that faith-based organizations are
``eligible, on the same basis as any other organization.' Rather the
intent of the rule is to ensure that both secular and faith-based
organizations receive equal treatment under the Program. We do note,
however, that while the final rule does not permit discrimination
either in favor of or against religious providers, nothing in the rule
precludes those administering VA-funded programs from accommodating
religious organizations in a manner consistent with the Establishment
Clause.
One commenter noted that by equating religious and non-religious
providers and seeking to treat them as equals, VA fails to recognize
the unique place that religion has in our society and in our
constitutional scheme, and that religion should be above the fray of
government funding, government regulation, and government auditing, not
reduced to it.
VA disagrees. This rule does not present any violation of the
Establishment Clause or Free Exercise Clause of the First Amendment of
the Constitution. Rather, this rule governs the conscious decision of a
religious organization to administer regulated activities, by accepting
public funds to do so. Therefore, 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.
Inherently Religious Activities
Some commenters suggested that the proposed rule does not
sufficiently detail the scope of religious content that must be omitted
from government-funded programs. For example, one commenter suggested
that the explanation given of ``inherently religious activities' as
``worship, religious instruction, or proselytization' is unclear or
incomplete. Relatedly, it was suggested that the proposed rule
authorizes conduct that will impermissibly convey the message that the
government endorses religious content. One commenter requested that the
proposed rule be changed to make clear that the government may not
disburse public funds to organizations that convey religious messages
or in any way advance religion.
VA disagrees with these comments. Concerning the rule's treatment
of ``inherently religious' activities, as the commenters' own
submissions suggest, it would be difficult to establish an acceptable
list of all inherently religious activities. Inevitably, the regulatory
definition would fail to include some inherently religious activities
or include certain activities that are not inherently religious. Rather
than attempt to establish an exhaustive regulatory definition, with the
exception of the editorial change noted below, VA has decided to retain
the language of the proposed rule, which provides examples of the
general types of activities that are prohibited by the regulations.
This approach is consistent with Supreme Court precedent, which
likewise has not comprehensively defined inherently religious
activities. For example, prayer and worship are inherently religious,
but VA-funded 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.' As
to the suggestion that the rule indicates that VA endorses religious
content, it again merits emphasis that the rule forbids the use of
direct government assistance for inherently religious activities and
states that any such activities must be voluntary and separated, in
time or location, from activities directly funded by VA. Finally, there
is no constitutional support for the view that the government must
exclude from its programs those organizations that convey religious
messages or advance religion with their own funds. As noted above, the
Supreme Court has held that the Constitution forbids the use of direct
government funds for inherently religious activities, but the Court has
rejected the presumption that religious organizations will inevitably
divert such funds and use them for their own religious purposes. VA
rejects the view that organizations with religious commitments cannot
be trusted to fulfill their written promises to adhere to grant
requirements.
One commenter noted that VA omitted the phrase ``inherently
religious activities' in Sec. 61.64(b)(1), which prohibits use of
direct VA financial assistance for certain religious activities, and
noted that similar provisions in other agency faith-based regulations
contained this language.
VA agrees and has revised Sec. 61.64(b)(1) to read:
(b)(1) No organization may use direct financial assistance from
VA under this part to pay for any of the following:
(i) Inherently religious activities such as, religious worship,
instruction or proselytization * * *.
Voucher-Style Programs Under the Rule
Some commenters claimed that the proposed rule authorizes a voucher
program for religious organizations without instituting adequate
constitutional safeguards and requested that the rule be revised to
comply with the framework instituted by Zelman v. Simmons Harris, 536
U.S. 639 (2002). These commenters stated that secular alternatives are
not available in the social service context, eliminating the
possibility of real choice by program beneficiaries. They requested
that the proposed rule clearly state that beneficiaries have the right
to object to a religious provider assigned to them, to receive a
secular provider, and that they be given notice of these rights.
VA respectfully declines to adopt the recommendations of the
commenters, but has revised the final rule to more explicitly reflect
the Court's holding in Zelman. First, VA does not currently operate any
voucher-style programs, so the application of any regulations in this
regard would be purely hypothetical. In addition, as the rule now
states, any voucher-style programs offered by the VA will comply with
Federal law, including current precedent. So that the rule better
reflects current precedent VA has modified the final rule to include a
new paragraph (g) that reads
(g) To the extent otherwise permitted by federal law, the
restrictions on inherently religious activities set forth in this
section do not apply where VA funds are provided to religious
organizations through indirect assistance as a result of a genuine
and independent private choice of a beneficiary, provided the
religious organizations otherwise satisfy the requirements of this
Part. A religious organization may receive such funds as the result
of a beneficiary's genuine and independent choice if, for example, a
beneficiary redeems a voucher, coupon, or certificate, allowing the
beneficiary to direct where funds are to be
[[Page 31885]]
paid, or a similar funding mechanism provided to that beneficiary
and designed to give that beneficiary a choice among providers.
VA thus believes that the final rule adequately addresses these
commenters' constitutional concerns.
The ``Separate, in Time or Location' Requirement
One commenter stated that the provisions of Sec. 61.64(c),
requiring inherently religious activities to be separate in time or
location, should be maintained in the final rule. Others maintained
that the proposed rule should be amended to clarify the ``separate, in
time or location' requirement. One commenter suggested that the
requirement be strengthened to require activities be ``separate by both
time and location.'
VA declines to adopt the suggested revisions. As an initial matter,
VA does not believe that the requirement is ambiguous or necessitates
additional regulation for proper adherence. Where a religious
organization receives direct government assistance, any inherently
religious activities that the organization offers must simply be
offered separately--in time or place--from the activities supported by
direct government funds. As to the suggestion that the rule must
require separation in both time and location, VA believes that such a
requirement is not legally necessary and would impose an unnecessarily
harsh burden on small faith-based organizations, which may have access
to only one location that is suitable for the provision of VA-funded
services.
Applicability of Rule to ``Commingled' Funds
One commenter noted that the term ``voluntarily contributes' as
used in proposed Sec. 61.64(f)--which stated that
[i]f a State or local government voluntarily contributes its own
funds to supplement Federally funded activities * * * if the funds
are commingled, this provision applies to all of the commingled
funds
--may lead to confusion over the applicability of the section to
matching funds. The commenter suggested that paragraph (f) specifically
provide that if a State or local government provides matching funds,
then the provisions of this section shall apply to all of the funds
whether or not commingled.
VA believes that this section of the rule is sufficiently clear. As
the rule states, when States and local governments have the option to
commingle their funds with Federal funds or to separate State and local
funds from Federal funds, Federal rules apply if they choose to
commingle their own funds with Federal funds. Some Department programs
explicitly require that Federal rules apply to state ``matching'
funds, ``maintenance of effort' funds, or other grantee contributions
that are commingled with Federal funds--i.e., are part of the grant
budget. In these circumstances, Federal rules of course remain
applicable to both the Federal and State or local funds that implement
the program.
Another commenter stated that under the proposed rule, a State or
local government has the option to segregate the Federal funds or
commingle them. The commenter requested that the Department mandate
that State and local funds should be kept separate from any Federal
funds.
VA disagrees with this comment. As an initial matter, VA believes
it would be inappropriate to require States and local governments to
separate their own funds from Federal funds in the absence of a
matching requirement or other required grantee contribution. Where no
matching requirement or other required grantee contribution is
applicable, whether to commingle State and Federal funds is a decision
for the States and local governments to make.
Faith-Based Organizations and State Action
One commenter claimed that there is a sufficient nexus between the
organizations covered by the proposed regulation and the government,
such that the organizations are state actors subject to constitutional
requirements.
VA disagrees with this comment. The receipt of government funds
does not convert a non-governmental organization into a state actor
subject to constitutional norms. See Rendell-Baker v. Kohn, 457 U.S.
830 (1982) (holding that the employment decisions of a private school
that receives more than 90 percent of its funding from the state are
not state actions).
State and Local Diversity Requirements and Preemption
Some commenters expressed concern that the proposed rule will
exempt religious organizations from State and local diversity
requirements or anti-discrimination laws. Further, commenters suggested
that the proposed rule be modified to state that State and local laws
will not be preempted by the rule.
The requirements that govern funding under the VA Homeless
Providers Grant and Per Diem Program (Program) do not address
preemption of State or local laws. Federal funds, however, carry
Federal requirements. No organization is required to apply for funding
under these programs, but organizations that apply and are selected for
funding must comply with the requirements applicable to the Program
funds.
Religious Organizations' Display of Religious Art or Symbols
Several commenters have disagreed with the provisions allowing
religious organizations conducting VA-funded programs in their
facilities to retain the religious art, icons, scriptures, or other
religious symbols found in their facilities. These commenters contend,
among other things, that such displays impermissibly foster the
impression of Government support for the religious mission and will
necessarily lead to indoctrination of beneficiaries.
VA disagrees with these comments. A number of Federal statutes
affirm the principle embodied in this rule. See, e.g., 42 U.S.C. 290kk-
1(d)(2)(B). In addition, a prohibition on the use of religious icons
would make it more difficult for many faith-based organizations to
participate in VA's Program than other organizations by forcing them to
procure additional space. It would thus be an inappropriate and
excessive restriction, typical of the types of regulatory barriers that
this final rule seeks to eliminate. Consistent with constitutional
church-state guidelines, a faith-based organization that participates
in the Program will retain its independence and may continue to carry
out its mission, provided that it does not use direct VA funds to
support any inherently religious activities. Accordingly, this final
rule continues to provide that faith-based organizations may use space
in their facilities to provide VA-funded services, without removing
religious art, icons, scriptures, or other religious symbols.
Religious Freedom Restoration Act
Another commenter requested that VA include language in the
regulation by way of notice that the Religious Freedom Restoration Act
(``RFRA'), 42 U.S.C. 2000bb et seq., may also provide relief from
otherwise applicable provisions prohibiting employment discrimination
on the basis of religion. The commenter noted that, for example, the
Department of Health and Human Services has recognized RFRA's ability
to provide relief from certain employment nondiscrimination
requirements in the final regulations it promulgated governing its
substance abuse and mental health programs.
VA notes that RFRA, which applies to all Federal law and its
implementation, 42 U.S.C. 4000bb-3, 4000bb-2(1), is
[[Page 31886]]
applicable regardless of whether it is specifically mentioned in these
regulations. Whether or not a party is entitled to an exemption or
other relief under RFRA simply depends upon whether the party satisfies
the requirements of that statute. VA therefore declines to adopt this
recommendation at this time.
Recognition of Religious Organizations' Title VII Exemption
A number of commenters expressed views on the proposed rule's
repeal of the current rule's prohibition against primarily religious
organizations discriminating in employment on the basis of religion.
Two commenters agreed with the repeal of this prohibition, and one
suggested that the proposed rule specifically provide that the Title
VII exemption is not forfeited as a result of receiving VA funds.
Others argued that it is unconstitutional for the government to
provide funding for provision of social services to an organization
that considers religion in its employment decisions. Some of these
commenters either requested that the current prohibition be maintained
or that the proposed rule be revised to prohibit employment
discrimination based on religion for positions funded with VA
assistance.
VA disagrees with these objections to the rule's recognition that a
religious organization does not forfeit its Title VII exemption when
administering VA-funded services. As an initial matter, applicable
statutory nondiscrimination requirements are not altered by this rule.
Congress establishes the conditions under which religious organizations
are exempt from Title VII; this rule simply recognizes that these
requirements, including their limitations, are fully applicable to
Federally funded organizations unless Congress says otherwise. As to
the suggestion that the Constitution restricts the government from
providing funding for social services to religious organizations that
consider faith in hiring, that view does not accurately represent the
law. As noted above, the employment decisions of organizations that
receive extensive public funding are not attributable to the state, see
Rendell-Baker v. Kohn, 457 U.S. 830 (1982), and it has been settled for
more than 100 years that the Establishment Clause does not bar the
provision of direct Federal grants to organizations that are controlled
and operated exclusively by members of a single faith. See Bradfield v.
Roberts, 175 U.S. 291 (1899); see also Bowen v. Kendrick, 487 U.S. 589,
609 (1988). Finally, the Department notes that allowing religious
groups to consider faith in hiring when they receive government funds
is much like allowing a Federally funded environmental organization to
hire those who share its views on protecting the environment--both
groups are allowed to consider ideology and mission, which improves
their effectiveness and preserves their integrity. Thus, the Department
declines to amend the final rule to require religious organizations to
forfeit their Title VII rights.
Discrimination on the Basis of Sexual Orientation
One commenter objected to the ability of religious organizations to
discriminate on the basis of sexual orientation.
Although Federal law prohibits persons from being excluded from
participation in VA services or subjected to discrimination based on
race, color, national origin, sex, age, or disability, it does not
prohibit discrimination on the basis of sexual orientation. We decline
to impose additional restrictions by regulation.
Organizations That Discriminate
One commenter stated that the proposed rule failed to take any
steps to prevent government money from flowing to anti-Semite, racist,
or bigoted organizations.
VA disagrees. As discussed above, Federal law prohibits persons
from being excluded from participation in VA services or subjected to
discrimination based on race, color, national origin, sex, age, or
disability.
Nondiscrimination in Providing Assistance
Commenters have requested that the proposed rule include a
provision protecting beneficiaries who object to the religious
character of a grantee and a requirement that the government provide a
secular alternative upon request. The commenters suggest language that
not only protects beneficiaries ``on the basis of religion and
religious belief,' but also ``on the basis of religion, religious
belief, a refusal to hold a religious belief, or a refusal to actively
participate in a religious practice.' One of these commenters
suggested that the proposed rule prohibit religious discrimination
against any person receiving assistance under the Program, either
direct (grants) or indirect (vouchers). That commentator also suggested
that the proposed rule prohibit providers from inquiring about a
beneficiary's religious beliefs. One commenter understood the proposed
regulation to forbid religious providers to compel participants to
participate in religious activities even in a passive way. Another
commenter recommended that the final rule specify that failure to
participate in religious activities should not result in
disqualification from, or reduction of one's chance to participate in,
program activities in the future, or public beratement to remedy this
lack of participation. One commenter requests that remedies and a
grievance process be included in the proposed regulation for
beneficiaries who do not voluntarily attend religious organization
programs or who are not provided an adequate alternative.
VA believes that the existing language prohibiting faith-based
organizations from discriminating against program beneficiaries on the
basis of ``religion or religious belief' is sufficiently explicit to
include beneficiaries who hold no religious belief. Such a prohibition
is straightforward and requires no further elaboration. In addition,
the rule provides that religious organizations may not use direct
Federal funding from VA for inherently religious activities and that
any such activities must be offered separately, in time or location,
and must be voluntary for program beneficiaries. These requirements
further protect the rights of program beneficiaries, for whom
traditional channels of airing grievances are generally available.
As to the rights of beneficiaries receiving indirect assistance,
per the discussion on voucher style programs, we believe that the
religious freedom of beneficiaries is protected by the guarantee of
genuine and independent choice among providers. Such choice will ensure
that any participation in religious activities is voluntary and that,
regardless of religion, beneficiaries have access to government-funded
services. Whether the context is direct or indirect assistance,
therefore, beneficiaries may not be required to receive religious
services to which they object: In the direct aid context, such
activities must be voluntary and separate from the government-funded
activities; in the indirect aid context, beneficiaries have a choice
among providers and may choose a provider that does not integrate
religion into its provision of services. We have modified the final
rule to make clear that the nondiscrimination provision of part (e) of
the rule applies to direct financial assistance.
Assurance/Notice Requirements
One commenter suggested that the proposed rule retain the current
requirement that religious organizations provide assurance that they
will
[[Page 31887]]
conduct activities for which assistance is provided in a manner free
from religious influences, while another suggested that all recipients,
secular and religious, should be required to make this assurance.
Further, several commenters suggested that the proposed rule require
recipients to provide notice to beneficiaries at the outset of their
receipt of services that participation in inherently religious
activities is voluntary, or that their receipt of benefits may not be
conditioned upon such participation.
The final rule remains unchanged from the proposed rule on this
matter. Each grantee must sign assurances certifying that the grantee
will comply with the various laws applicable to recipients of Federal
grants, including this final rule and its prohibition on the use of
direct financial assistance from VA for inherently religious
activities. Thus VA does not believe that the assurance, such as that
which is being removed, is necessary for any type of organization.
We also decline to require that religious organizations provide a
notice to a beneficiary or potential beneficiary assuring that
participation in religious activities would be entirely on a voluntary
basis. We recommend that States and participating organizations work
together to ensure that clients and potential clients have a clear
understanding of the services offered by the organization, including
any religious activities, as well as the organization's expectations
and requirements. The requirement that participation be voluntary,
however, is sufficient to address concerns about the religious freedom
of program beneficiaries.
VA believes that no additional requirements above and beyond those
imposed on all participating organizations are needed. In issuing this
rule, VA's general approach is that faith-based organizations are not a
category of applicants or recipients who need additional requirements
or oversight in order to ensure compliance with program regulations.
Rather, VA believes that faith-based organizations, like other
recipients of VA funds, fully understand the restrictions on the
funding they receive, including the restriction that inherently
religious activities cannot be undertaken with direct Federal funding
and must remain separate from Federally funded activities. The
requirements for use of funds under the Program apply to, and are
binding on, all participants.
Oversight and Corporate Structure
A few commenters also requested that the proposed rule require
monthly reports and periodic site visits of faith-based recipients to
ensure that Federal funds are not used to support inherently religious
activities. Commenters also suggested that the rule should require
religious organizations to establish separate 501(c)(3) corporations
and/or separate accounts to receive VA funds to allow for proper
oversight.
VA declines to adopt these changes. VA currently subjects all
grantee facilities and records to inspections ``at such times as are
deemed necessary to determine compliance with the provisions of this
part [61].' 38 CFR 61.65. Hence it is unnecessary to subject religious
organizations to additional inspections.
Further, VA finds no basis for requiring greater oversight and
monitoring of faith-based organizations than of other recipients simply
because they are faith-based organizations. All program participants
must be monitored for compliance with Program requirements, and no
grantee may use VA funds for any ineligible activity, whether that
activity is an inherently religious activity or a nonreligious activity
that is outside the scope of the Program. Many secular organizations
participating in the VA Program also receive funding from several
sources (private, State, or local) to carry out activities that are
ineligible for funding under the VA Program, e.g., permanent housing.
The non-eligible activities are often secular activities but not
activities eligible for funding under the VA Program. All recipients
receiving funding from various sources and carrying out a wide range of
activities must ensure through proper accounting principles that each
set of funds is applied only to the activities for which the funding
was provided. Applicable policies, guidelines, and regulations
prescribe the cost accounting procedures that are to be followed in
using VA funds. This system of monitoring is more than sufficient to
address the commenters' concerns, and the amount of oversight of
religious organizations necessary to accomplish these purposes is no
greater than that involved in other publicly funded programs that the
Supreme Court has upheld.
Likewise, VA finds no basis to require religious organizations to
establish separate corporations and/or separate accounts to receive VA
funds. Further, such requirements would make it more difficult for many
faith-based organizations to participate in VA's Program than other
organizations by creating additional corporate governance and/or
accounting burdens. They would thus be inappropriate and excessive
requirements, typical of the types of regulatory barriers that this
final rule seeks to eliminate.
One commenter suggested that the rule define ``religious
organization' and ``faith-based organization' by reference to the tax
code in order to create clarity and consistency, and facilitate
reporting rules for religious organizations receiving public funds that
establish the same public accountability applicable to secular non-
profits. The same commenter stated that all recipients, faith-based and
secular, should be required to qualify as 501(c)(3) corporations and to
comply with the accounting standards established in OMB Circulars A-122
and A-133.
VA declines to adopt these suggestions. One of the objectives of
this rule is to move away from unnecessary Federal inquiry into the
religious nature, or absence of religious nature, of an applicant for
VA funds. With respect to any applicant for VA funds, VA's focus should
always be that (1) the applicant is an eligible applicant for a
program, as ``eligible applicant' is defined for that program; (2) the
applicant meets any other eligibility criteria that the program may
require; and (3) the applicant commits to undertake only eligible
activities with VA funds and abide by all program requirements that
govern those funds. Regardless of how an organization labels itself, it
will be treated the same under the rule. As to public accountability,
as discussed, VA has the right to inspect recipients' records related
to assistance under the Program, and the public may obtain from VA
through the Freedom of Information Act any documentation obtained in
such investigations.
Further, the regulations at this Part already require nonprofit
recipients to qualify as 501(c)(3) or (c)(19) corporations, and require
all recipients to comply with accounting standards of OMB Circulars A-
122 and A-133. 38 CFR 61.1, 61.12(b), 61.66.
III. Findings and Certifications
Based on the rationale set forth in the proposed rule and our
responses to comments on that rule, we are adopting the provisions of
the proposed rule as a final rule with changes. This final rule is
issued under authority of 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064,
and 7721 note.
Paperwork Reduction Act
This final rule does not contain any new collections of information
under the Paperwork Reduction at Sec. Sec. 61.11, 61.15, 61.17, 61.20,
61.31, 61.41, 61.51, 61.55 and 61.80. The Office of Management and
Budget has assigned
[[Page 31888]]
control number 2900-0554 to the information collections. VA may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays this currently valid OMB
control number.
Executive Order 12866
Executive Order 12866 (as amended by Executive Order 13258) directs
agencies to assess all costs and benefits of available regulatory
alternatives and, if regulation is necessary, to select regulatory
approaches that maximize net benefits (including potential economic,
environmental, public health and safety effects, distributive impacts,
and equity). A regulatory impact analysis (RIA) must be prepared for
major rules with economically significant effects ($100 million or more
in any one year). Executive Order 12866 requires that regulations be
reviewed to ensure that they are consistent with the priorities and
principles set forth in the Executive Order. The Department has
determined that this rule is consistent with these priorities and
principles. This rule is considered a ``significant regulatory action'
under the Executive Order (although not an economically significant
regulatory action), and therefore has been reviewed by the Office of
Management and Budget.
Regulatory Flexibility Act
The Secretary hereby certifies that the final rule will not have a
significant economic impact on a substantial number of small entities
as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-
602. In all likelihood, only similar entities that are small entities
will participate in the Homeless Providers Grant and Per Diem Program.
The proposed rule would not impose any new costs, or modify existing
costs, applicable to Department grantees. Rather, the purpose of the
proposed rule is to remove policy prohibitions that currently restrict
the equal participation of religious or religiously affiliated
organizations in the Department's programs. Therefore, pursuant to 5
U.S.C. 605(b), this final rule is exempt from the initial and final
regulatory flexibility analysis requirement of sections 603 and 604.
Unfunded Mandates
The Unfunded Mandates Reform Act requires, at 2 U.S.C. 1532, that
agencies prepare an assessment of anticipated costs and benefits before
developing any rule that may result in an expenditure by State, local,
or tribal governments, in the aggregate, or by the private sector, of
$100 million or more in any given year. This rule would have no such
effect on State, local, or tribal governments, or the private sector.
Catalog of Federal Domestic Assistance Program
The Catalog of Federal Domestic Assistance program number is
64.024.
List of Subjects in 38 CFR Part 61
Administrative practice and procedure, Alcohol abuse, Alcoholism,
Day care, Dental health, Drug abuse, Government contracts, Grant
programs-health, Grant programs-veterans, Health care, Health
facilities, Health professions, Health records, Homeless, Mental health
programs, Per-diem program; Reporting and recordkeeping requirements,
Travel and transportation expenses, Veterans.
Approved: May 28, 2004.
Anthony J. Principi,
Secretary of Veterans Affairs.
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Accordingly, the proposed rule amending 38 CFR part 61 that was
published in the Federal Register at 68 FR 56426 on September 30, 2003,
is adopted as a final rule with the following changes.
PART 61--VA HOMELESS PROVIDERS GRANT AND PER DIEM PROGRAM
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1. The authority citation for part 61 continues to read as follows:
Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721
note.
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2. Revise Sec. 61.64 to read as follows:
Sec. 61.64 Religious organizations.
(a) Organizations that are religious or faith-based are eligible,
on the same basis as any other organization, to participate in VA
programs under this part. In the selection of service providers,
neither the Federal Government nor a state or local government
receiving funds under this part shall discriminate for or against an
organization on the basis of the organization's religious character or
affiliation.
(b)(1) No organization may use direct financial assistance from VA
under this part to pay for any of the following:
(i) Inherently religious activities such as, religious worship,
instruction, or proselytization; or
(ii) Equipment or supplies to be used for any of those activities.
(2) For purposes of this section, ``indirect financial assistance'
means Federal assistance in which a service provider receives program
funds through a voucher, certificate, agreement or other form of
disbursement, as a result of the independent and private choices of
individual beneficiaries. ``Direct financial assistance,' means
Federal aid in the form of a grant, contract, or cooperative agreement
where the independent choices of individual beneficiaries do not
determine which organizations receive program funds.
(c) Organizations that engage in inherently religious activities,
such as worship, religious instruction, or proselytization, must offer
those services separately in time or location from any programs or
services funded with direct financial assistance from VA, and
participation in any of the organization's inherently religious
activities must be voluntary for the beneficiaries of a program or
service funded by direct financial assistance from VA.
(d) A religious organization that participates in VA programs under
this part will retain its independence from Federal, State, or local
governments and may continue to carry out its mission, including the
definition, practice and expression of its religious beliefs, provided
that it does not use direct financial assistance from VA under this
part 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 VA-
funded services under this part, without removing religious art, icons,
scripture, or other religious symbols. In addition, a VA-funded
religious organization retains its authority over its internal
governance, and it may retain religious terms in its organization's
name, select its board members and otherwise govern itself on a
religious basis, and include religious reference in its organization's
mission statements and other governing documents.
(e) An organization that participates in a VA program under this
part shall not, in providing direct program assistance, discriminate
against a program beneficiary or prospective program beneficiary
regarding housing, supportive services, or technical assistance, on the
basis of religion or religious belief.
(f) If a State or local government voluntarily contributes its own
funds to supplement Federally funded activities, the State or local
government has the option to segregate the Federal funds or commingle
them. However, if the funds are commingled, this provision applies to
all of the commingled funds.
(g) To the extent otherwise permitted by Federal law, the
restrictions on inherently religious activities set forth in this
section do not apply where VA funds are provided to religious
[[Page 31889]]
organizations through indirect assistance as a result of a genuine and
independent private choice of a beneficiary, provided the religious
organizations otherwise satisfy the requirements of this Part. A
religious organization may receive such funds as the result of a
beneficiary's genuine and independent choice if, for example, a
beneficiary redeems a voucher, coupon, or certificate, allowing the
beneficiary to direct where funds are to be paid, or a similar funding
mechanism provided to that beneficiary and designed to give that
beneficiary a choice among providers.
(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note.)
[FR Doc. 04-12827 Filed 6-7-04; 8:45 am]
BILLING CODE 8320-01-P
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