1
“The paramount goal is compassionate results, and private and charitable groups, 

including religious ones, should have the fullest opportunity permitted by law to compete 

on a level playing field, so long as they achieve valid public purposes.... The delivery of 

social services must be results-oriented and should value the bedrock principles of 

pluralism, nondiscrimination, evenhandedness, and neutrality.” 

--President George W. Bush 

January 29, 2001 

BACKGROUND 

On January 29, 2001, President George W. Bush issued Executive Order 13198, creating Centers 

for Faith-Based & Community Initiatives in five cabinet departments—Health and Human 

Services (HHS), Housing and Urban Development (HUD), Education (ED), Labor (DOL), and 

Justice (DOJ).1 The Executive Order charged each Center to conduct: 

a department-wide audit to identify all existing barriers to the participation of 

faith-based and other community organizations in the delivery of social services 

by the department, including but not limited to regulations, rules, orders, 

procurement, and other internal policies and practices, and outreach activities that 

either facially discriminate against or otherwise discourage or disadvantage the 

participation of faith-based and other community organizations in Federal 

programs. 

This report summarizes the initial findings from the five cabinet Centers on barriers impeding 

religious and grassroots organizations that seek to serve the common good in collaboration with 

the Federal Government. 

INTRODUCTION 

The role that faith-based and other local, neighborhood-serving groups should play in meeting 

social needs through Federal Government programs has been debated for decades. These 

debates have often produced more heat than light because of insufficient evidence on matters 

ranging from the extent of Federal social service spending and the breadth of existing Federal 

collaboration with faith- and community-based charities to the existence of specific legal 

restrictions on these organizations’ participation and legal questions about the constitutionality of 

government funding of faith-based service groups. 

1

 The Department of Justice has established a Faith-Based & Community Initiatives Taskforce. For convenience, 

the four Centers and the Justice Taskforce will all be called Centers in this report. 

1
This report provides an overview of problems uncovered by the first ever audit of Federal 

programs undertaken by the newly-created Centers for Faith-Based & Community Initiatives at 

HHS, HUD, Education, Labor, and Justice. Because of the Centers’ recent vintage and limited 

staff, the shortened turnaround time for the report, and the extensive range of affected agency 

programs, the audit could not cover every potentially affected program in depth. Thus, the 

Centers emphasized programs that receive major funding, programs that are covered by existing 

Charitable Choice laws, programs characteristic of the respective departments, and programs in 

which participation by faith-based and other community-serving groups would be natural or 

especially fruitful. 

Among the findings of the five Centers’ reports are the following: 

� A funding gap exists between the government and the grassroots. Smaller groups, faithbased and secular, receive very little Federal support relative to the size and scope of the 

social services they provide. 

� There exists a widespread bias against faith- and community-based organizations in Federal 

social service programs: 

� Restricting some kinds of religious organizations from applying for funding. 

� Restricting religious activities that are not prohibited by the Constitution. 

� Not honoring rights that religious organizations have in Federal law. 

� Burdening small organizations with cumbersome regulations and requirements. 

� Imposing anti-competitive mandates on some programs, such as requiring applicants to 

demonstrate support from government agencies or others that might also be competing 

for the same funds. 

� Legislation requires some restrictions on the full participation of faith-based organizations, 

but many of the regulations are needlessly burdensome administrative creations. 

� Congress’ remedy to barriers to faith-based organizations – the Federal law known as 

“Charitable Choice” – has been almost entirely ignored by Federal administrators, who have 

done little to help or require State and local governments to comply with the new rules for 

involving faith-based providers. 

� Despite these obstacles, some faith-based and community-based service groups receive 

financial support from the Federal Government, either by winning Federal discretionary 

grants or gaining a share of Federal formula grants used by State and local governments to 

deliver social services. 

� Few Federal funding programs have undergone a thorough evaluation with an eye to 

ensuring that expenditures yield the planned-for positive results in the lives of people who 

need help. 

2
� The Government Performance and Results Act (GPRA), enacted in 1993 to promote 

performance-based management of Federal programs, has had little discernible impact thus 

far on either procurement decisions or program outcomes. 

HOW MUCH FEDERAL SUPPORT FOR FAITH-BASED AND GRASSROOTS 

CHARITIES? 

The social safety net throughout the United States includes Federal, State, and local government 

programs, local affiliates of large national organizations (both secular and sacred) for-profit 

companies, and a great diversity of other groups. Although little attention has been paid to them 

until fairly recently, faith-based grassroots groups play large and vital roles everywhere. This 

network is composed of: local congregations offering literally scores of social services to their 

needy neighbors; small nonprofit organizations (both religious and secular) created to provide 

one program or multiple services; and neighborhood groups that spring up to respond to a crisis 

or to lead community renewal. As one study reports: 

These religious organizations represent a major part of the American welfare 

system. Tens of thousands of people in the Philadelphia area are being helped by 

all kinds of programs, from soup kitchens to housing services, from job training to 

educational enhancement classes. One can only imagine what would happen to 

the collective quality of life if these religious organizations would cease to exist.2 

Despite the vast, varied, and vital community-serving role of these diverse, sacred, and secular 

grassroots groups, when the Federal Government reaches out for partners to help fulfill the 

Nation’s social agenda, it mainly ignores them. The nonprofit organizations that administer 

social services funded by Washington are typically large and entrenched, in an almost 

monopolistic fashion. Even though “many smaller, community-based nonprofits aspire to secure 

public funding, they often face serious managerial and political obstacles to that goal.”3 Thus, at 

all levels of government and in inter-governmental social service programs as well, “a relatively 

select group of large social-service and health nonprofits have long received the bulk of public 

funding.”4 

What proportion of Federal funding goes to the faith- and community-based organizations that 

play such key roles in the lives of suffering people and in neighborhoods all across the nation? It 

2

 Ram A. Cnaan, with Robert J. Wineburg and Stephanie C. Boddie, The Newer Deal: Social Work and Religion in

Partnership (New York: Columbia Univ. Press, 1999), 275f. See, also, e.g., Mary Jo Bane, Brent Coffin, and

Ronald Thiemann, eds., Who Will Provide? The Changing Role of Religion in American Social Welfare (Bolder,

Col.: Westview Press, 2000); E. J. Dionne, Jr., ed., Community Works: The Revival of Civil Society in America

(Washington, DC: Brookings, 1998); Virginia Hodgkinson, et al., From Belief to Commitment: The Community

Service Activities and Finances of Religious Congregations in the United States, 1993 Edition: Findings from a

National Survey (Washington, DC: Independent Sector, 1992). 3

 Peter Frumkin, “After Partnership: Rethinking Public-Nonprofit Relations,” in Bane, et al., eds., Who Will

Provide?, 199. 4

 Id.

3
is impossible to know the exact percentage across Federal programs, but we have some 

indication of the share that such organizations receive from some Federal programs. 

At the request of the White House Office of Faith-Based & Community Initiatives, the Office of 

Management and Budget asked HHS, HUD, Justice, Education, and Labor two questions: (i) 

what percentage of grant funding in a range of programs goes to nonprofit organizations; and (ii) 

of that percentage, how much has gone to faith-based groups and how much to community-based 

groups? 

Data Collection Issues 

The Agencies found it difficult to answer these questions fully, because a significant proportion 

of funding in their respective departments is distributed by formula grants to State and local 

governments, rather than via direct allotment to faith-based or other service providers. Formula 

grant recipients generally do not report back to the Federal Government on how they distributed 

the money. If a State extensively involves community organizations, for example, Federal 

officials would not necessarily know that information. 

Federal Formula and Discretionary Grant Making 

Total Grants 

($ billions) 

Formula Grants 

($ billions) 

Discretionary Grants 

($ billions) 

DOJ (OJP) (FY 2001) 2.6 2.0 (77%) 0.6 (23%) 

DOL (FY 2000) 6.8 6.0 (88%) 0.8 (12%) 

HUD (FY 2001) 28.0 25.6 (91%) 2.4 (9%) 

ED (FY 2001) 29.0 23.9 (82%) 5.1 (18 %) 

HHS (FY 2000) 185.1 160.2 (87%) 24.9 (13%) 

To complicate matters, there are no standard Federal definitions of faith-based and communitybased organizations, and the databases on discretionary grants do not provide any such identifiers 

(another indicator of systemic discrimination). Officials can search the grants databases for 

grantees with “religious sounding” names, but that crude strategy mistakenly organizations that 

include terms like St. Louis or St. Petersburg, while missing religious organizations such as 

Georgetown University and ignoring grassroots groups altogether. 

4
A Glance at One Service Area — Child Care 

A recent look at faith-based child-care providers notes that nearly one of every six child-care 

centers is housed in a religious facility. The nation’s largest “chains” of child-care services are 

not KinderCare and La Petite but rather the Roman Catholic Church and the Southern Baptist 

Convention; and the number of centers in religious facilities is growing faster than the total 

number of centers (26% vs. 19% from 1997-99).5 

Congress acknowledged religious charities’ large role in this field when it approved Federal 

funding for child care for low-income families in 1990 and urged states to provide parents with 

certificates or vouchers that they could redeem at any approved center. rents can use these 

vouchers at explicitly religious centers without raising any genuine constitutional questions. 

By far, States prefer certificates and vouchers over contracts—in FY 1999, certificates were used 

to pay for care for 83% of the children helped with Federal funds. But what percentage of 

Federally funded child-care is provided in faith-based centers? No one knows. at 

percentage of Federal child-care funds are distributed in New York to congregations and other 

faith-based providers, the head of the program said she did not know—the State, rightly, does not 

ask centers seeking eligibility whether they are religious or secular. But she pointed out that she 

had often visited church-based child care facilities that serve parents with Federally funded 

certificates, so she knew faith-based groups were involved but was unaware of the extent. 

Pa

Asked wh

Discretionary Grants Directly to Providers 

Notwithstanding these fundamental data-keeping problems, some Federal discretionary grants 

programs do keep track of faith and community-based grantees: 

� The Office of Justice Programs at DOJ estimates that in FY 2001 it will award only 

about 0.3% of total discretionary grant funds—one-third of 1%—to faith-based 

organizations ($1.9 million of $626.7 million) and 7.5% to community-based 

providers ($47.2 million). 

� At the Department of Education, in FY 2000, faith- or community-based 

organizations received 25 of the 1091 discretionary grants given in 11 programs— 

about 2% of the grants. The percentage was the same in FY 1999 and slightly less in 

FY 1998 and FY 1997. 

5

 R. Neugebauer, Religious Organizations Taking a Proactive Role in Child Care, Child Care Information Exchange 

18 (May 2000). 

5
� In multiple rounds of competitive funding for Welfare-to-Work services (FY 1998 

and 1999), Labor sought to include groups not traditionally involved in its programs. 

More than 1,800 applications arrived—2% of which were from faith-based 

organizations. Those groups eventually won 2% of the competitive grant funds (3% 

of the awards). 

� HUD’s Continuum of Care process for the homeless has collected information to 

identify faith-based providers and reports that 399 such groups won about 16% of the 

funds ($139 million of a total of $896 million) in the FY 2000 competition. 

� In the HHS Adolescent Family Life grants program that funds abstinence education, 

21% of the funds going to nonprofits went in FY 2000 to faith-based groups. 

� In Labor’s Youth Opportunity Grant Program that underwrites employment and job 

preparation services, in FY 2000, 20% of the funds went to community-based 

organizations ($43 million of $220 million total) and 3% ($6.7 million) to faith-based 

groups. 

Formula Grants to State and Local Governments 

The few solid indicators available concerning formula grant funds that pass through State and 

local governments suggest that the share received by faith-based and other grassroots groups is 

equally small. 

� The Office of Justice Programs at DOJ estimates that in FY 2001 only about 0.3% of 

the formula grant funds—or one-third of 1%—will go to faith-based providers ($8.1 

million of $2.7 billion total) and only about 0.2% to community-based groups ($5.4 

million). 

� A special DOL study of the role of faith-based organizations in providing 

employment and training services in five cities discovered that the workforce 

investment boards (which receive Federal formula grants under the Workforce 

Investment Act) in all five cities contracted with faith-based organizations, but the 

amounts were not large: in Milwaukee, Baltimore, and Ft. Worth, 1% of contract 

funds went to religious groups; in San Diego 6% went to such organizations; and 10% 

in Pittsburgh. 

� Last year, in Wisconsin, which is one of the relatively few states that have sought to 

create equal opportunity for faith-based providers, as required by the 1996 Charitable 

Choice rules that govern the TANF (welfare) block grant, in the various 

administrative regions, faith-based groups received from a low of less than 1% to a 

6
high of 16% of total contract funds, which are a combination of Federal and State 

welfare funds.6 

All of the figures reported should be used cautiously; they are fragmentary and not wholly 

reliable due to the various data problems identified above. Nevertheless, the numbers are highly 

suggestive: there is a striking disjunction between the service organizations that Federal grant 

funds predominately support and the organizations that actually provide most of the critical 

social services. 

Why this disjunction? One reason is that some religious and grassroots organizations are not 

interested in seeking Federal funds for the services they provide. They may have theological 

objections to getting Government money for activities that they believe adherents should 

support, worries about becoming dangerously dependent on a distant funding source that may 

dry up tomorrow, or concerns about implementing government policies with which they might 

partially disagree. Most notably, many faith-based groups are concerned that the cost of Federal 

funds is the putative divestiture of much or all of their religious character. 

Despite these concerns, numerous national, regional, and local coalitions of community-serving 

religious groups have expressed an eagerness to participate more fully in public/private 

partnerships that deliver social services, if the conditions are right. Likewise, systematic survey 

data suggest that a large proportion of urban community-serving congregation leaders would 

welcome a fair chance to help administer Federal social service programs in their 

neighborhoods.7 

The neighborhood-based charities, both secular and religious, that daily supply so much 

indispensable help to needy families and neighborhoods, receive little support from the Federal 

Government in part because the Federal grants system is inhospitable to their involvement. A 

careful analysis of the rules and practices in a large sample of programs in the five Cabinet 

departments shows that these organizations face myriad barriers in seeking Federal support for 

their vital good works. 

6

 Amy Sherman, Testimony to the Oversight Hearing on “State and Local Implementation of Existing Charitable 

Choice Programs,” Committee on the Judiciary, Subcommittee on the Constitution, U. S. House of Representatives, 

April 24, 2001. 7

 For example, see Ram A. Cnaan and Stephanie C. Boddie, Black Church Outreach, Center for Research on 

Religion and Urban Civil Society, Philadelphia, PA, CRRUCS Report 2001-1, p. 19, reporting that 60% of all 

community-serving congregation leaders in Philadelphia viewed public collaboration with the Federal government 

under Charitable Choice as an option they would like to consider. That would mean some 1,200 prospective 

applicants in Philadelphia alone. See also Mark Chaves, “Religious Congregations and Welfare Reform: Who Will 

Take Advantage of ‘Charitable Choice’?,” American Sociological Review, 64 (1999), who reports that 45% of 

congregations sampled in a national survey would apply for government funds, and 64% of predominantly African 

American congregations were interested in government funds. 

7
BARRIERS: A FEDERAL SYSTEM INHOSPITABLE TO FAITH-BASED AND 

COMMUNITY ORGANIZATIONS 

The Federal grants system is intended to put taxpayer dollars to the most effective use by 

enlisting the best nongovernmental groups to provide various social services, either through 

discretionary grants (also called competitive grants) awarded directly by Federal officials or 

through formula grants (including block grants) administered by State and local governments. 

The funds should go to the providers who can provide the most effective assistance and who can 

boast the best civic outcomes. 

The Federal Government, however, has little idea of the actual effect of the billions of social 

service dollars it spends directly or sends to State and local governments. The policies and 

practices of Federal grants programs too often make it difficult or impossible for faith-based and 

grassroots groups to gain support, even though they may have superior results in lifting lives and 

healing distressed neighborhoods. 

Billions of Federal Dollars Spent, Little Evidence of Results 

The Federal Government spends billions of dollars annually to assist needy families, individuals, 

and communities, often using the funds to support services provided by nongovernmental 

organizations. Although Federal program officials monitor nonprofit organizations, State and 

local governments, and other groups that receive the funds to ensure that they spend Federal 

money for designated purposes and without fraud, Federal officials have accumulated little 

evidence that the grants make a significant difference on the ground. 

Routinized Granting Without Performance Monitoring 

In some Federal discretionary programs, a small number of organizations perennially win large 

grants, even though there is little empirical evidence substantiating the success of their services. 

For example, in the Labor Department’s Senior Community Service Employment Program, the 

same 11 large organizations have ranked among the top-10 grant recipients over the past five 

years. In addition, since 1984 the Department’s Women’s Bureau has annually awarded a solesource grant to the same organization. Similarly, in HHS’s Consolidated Health Centers 

program, the same 12 organizations appear on the lists of the 10 largest grantees over the past 

five fiscal years; in the Runaway and Homeless Youth Program, only 17 organizations appear on 

the top-10 lists over the same period. 

These apparent Federal Grant monopolists may rank head and shoulders above the rest in terms 

of quality and performance, but only rarely are Federal programs and grantees examined to 

determine whether taxpayer funds achieve the desired results. Large grantees are audited 

annually for their use of Government funds (if they receive more than $300,000 annually from 

all Federal sources); and some programs, such as Head Start and Community Services Block 

Grants, require some form of impact evaluation. Although the Federal Government can ensure 

that funds are not spent on unauthorized purposes, it cannot ensure that the expenditures have the 

intended results. According to the OMB survey, despite the billions of dollars the sample of 

programs has distributed in discretionary and formula grants over the past 5 years, fewer than 

one in five of the programs has received a General Accounting Office or Agency Inspector 

General’s review to analyze actual performance and results. Moreover, virtually none of the 

8
programs has ever been subjected to a systematic evaluation of their performance that meets 

rigorous (or, in most cases, even rudimentary) evaluation research standards. 

These Federal programs may be doing significant good; and the grantees that routinely win 

renewed support may be the best available. However, in the absence of meaningful performance 

reviews, agencies have no concrete basis for concluding so. Although routinized grant-making is 

administratively easier than competitive grant-making, such a grant-making process poses a high 

barrier to potential new entrants who, in fact, may be better at serving needy citizens and their 

neighborhoods. 

Some critics of expanded Federal collaboration with faith-based and community-based 

organizations complain that there is little proof that these organizations are effective or have the 

capacity to manage large-scale social service programs. However, as the OMB survey ironically 

reveals, the Federal Government routinely awards billions in taxpayer support to organizations 

whose own efficacy and cost-effectiveness have not been validated by careful studies. This 

record indicates the need for an across-the-board emphasis on demonstrating actual efficiency of 

the programs that government funds. 

The Impotence of GPRA in Determining Whether Programs Fly or Flop 

Nearly a decade ago, Congress mandated a reform of Federal Government operations to produce 

on-the-ground changes. The 1993 Government Performance and Results Act (GPRA) requires 

Federal departments to prepare strategic plans and annual performance reports that look beyond 

mere gross measures of agency activity (i.e., grants awarded, hours of training given) to 

measures that examine actual changes in the circumstances of communities and families toward 

whom the Government activity is directed. The goal of this reform is to identify which Federal 

programs actually make a meaningful difference. 

To date, GPRA has had little positive impact on Government programs, and the reports from the 

Centers confirm this gloomy evaluation with respect to the measuring of social service grants to 

faith-based organizations. 

� DOJ: The Office of Justice Programs has yet to establish adequate performance goals 

and measures. Of the discretionary grants programs examined, 12 had no 

performance measures, 7 had measures but could not or did not say what they were, 4 

had only informal measures, and only 4 had specific targets — but these were 

indicators of mere activity and not results. 

� ED: At Education, most program offices were unfamiliar with their programs’ GPRA 

objectives and could not even locate the GPRA reports. 

� HHS: The Department’s programs use various performance measures, but the HHS 

report says it is unclear how the results of such analyses are connected to decisions 

about program design or grantee accountability. 

� HUD: The Office of the Inspector General recently completed a thorough review of 

the department’s compliance with GPRA during the previous administration, and 

9
determined that, while HUD is making significant progress, the Department has not 

achieved full compliance with GPRA requirements. 

� DOL: The report notes that, while the Department uses outcome-oriented goals and 

regards GPRA as an important tool, the process is hampered because officials cannot 

independently verify information received from grantees. 

Despite GPRA and its promise of outcome-based grant-making, the Federal Government has 

made scant progress in showcasing program performance and managing for results. Too often, 

GPRA has devolved into a rote paperwork assignment that leverages little real change and 

influences few officials. GPRA’s paramount goal – to herald high-performing programs and 

spotlight low-performing ones – has barely moved the needle in affecting the real world of 

making Federal programs work better. Indeed, a recent GAO report examining GPRA 

compliance showed that, in the 28 Federal agencies surveyed, only in 7 did a majority of 

managers say they used performance information in setting program priorities, adopting new 

approaches, allocating resources, coordinating program efforts, or setting job expectations for 

employees. It gets worse: the GAO survey shows that results-based management under GPRA 

has actually decreased in recent years.8 

BARRIERS TO FAITH-BASED ORGANIZATIONS SEEKING FEDERAL SUPPORT 

The First Amendment to the United States Constitution both secures religious liberty and 

protects against governmental establishment of religion. When it comes to Federal support for 

nongovernmental providers of social services, however, officials have focused much more on 

avoiding the prohibition than on honoring the protection. Congress and Government officials 

occasionally limit the participation of religious organizations on sound constitutional grounds. 

But many Federal policies and practices—including regulations, guidelines, program materials, 

decision-making criteria, awards-committee viewpoints, etc.—go well beyond sensible 

constitutional restrictions and what the courts have required, sharply restricting the equal 

opportunity for faith-based charities to seek and receive Federal support to serve their 

communities. The Government’s restrictive policies and practices usually are good-faith efforts 

to keep within constitutional boundaries. But often they have gone too far, even as the courts 

adopt less restrictive constitutional guidelines. 

Barrier 1: A Pervasive Suspicion About Faith-Based Organizations 

There is one overarching impediment to full and equal opportunity for religious service 

organizations to receive Federal financial support: an overriding perception by Federal officials 

that close collaboration with religious organizations is legally suspect. 

Officials know that there have long been many and varied Federal collaborations with religiously 

affiliated providers of social services. Some Federal departments, over the past few years, have 

reached out to faith-based organizations. The Department of Justice’s Office of Juvenile Justice 

8

 Stephen Barr, “Survey of Supervisors Finds Little Movement Toward ‘Managing for Results’,” The Washington 

Post (June 10, 2001), p. C-2; GAO, “Managing for Results: Federal Managers’ Views on Key Management Issues 

Vary Widely Across Agencies,” May 2001 (GAO-01-592). 

10
and Delinquency Prevention, for example, works with the National Center for Neighborhood 

Enterprise in a national campaign to reduce youth violence and with the Congress of National 

Black Churches to provide training and technical assistance to projects that curb substance abuse 

and prevent violence. Recent U.S. Supreme Court decisions have shifted markedly over the past 

few decades toward a neutrality framework that honors evenhandedness and pluralism, allowing 

the Government to treat all potential providers equally without singling out some as being “too 

religious” for Government support.9 

But Federal officials, and State and local officials participating in Federal formula grant 

programs, often seem stuck in a “no-aid,” strict separationist framework that permitted Federal 

funding only of religiously affiliated organizations offering secular services in a secularized 

setting, and deny equal treatment to organizations with an obvious religious character. As the 

Labor Department’s report notes, reviewers of grant applications assume that Jefferson’s “wall 

of separation” metaphor automatically disqualifies all but the most secularized providers, leading 

to Federal resistance to collaborating with religious groups, and thus the actual exclusion of 

faith-based organizations despite the absence of any constitutional or statutory basis. One 

Education Department official asserted that the Constitution flatly forbids the use of grant funds 

even for activities that merely have a religious component. Such restrictive attitudes beget an 

administrative bias against religion and religious organizations where the Constitution requires 

that there be none. 

HUD reports that no faith-based organization received any of the Self-Help Homeownership 

Opportunity Program’s $20 million funding in FY 2000. In fact, Habitat for Humanity, 

International, won just over half of the total funding, and Habitat, of course, is a faith-based 

organization (it calls itself “a nonprofit, ecumenical Christian organization”). ith mindbending logic, HUD officials apparently reasoned that since the government may not aid 

religion, and yet HUD funds Habitat, then Habitat must not be a faith-based organization. In 

HUD’s own scheme, since Habitat provides “essentially secular housing services,” it is not a 

“primarily religious” organization and thus is not excluded from Federal funding). 

W

(

9

 See, e.g., Douglas Laycock, testimony before the Committee on the Judiciary, Subcommittee on the Constitution, 

U.S. House of Representatives, June 7, 2001; Carl H. Esbeck, testimony before the Committee on the Judiciary, 

Subcommittee on the Constitution, U. S. House of Representatives, June 7, 2001; Report 107-138, Part 1, to H.R. 7, 

“Community Solutions Act of 2001” (Committee on the Judiciary, Chairman F. James Sensenbrenner, Jr., U.S. 

House of Representatives, 107th Congress, 1st Session), 11-40; Douglas Laycock, “The Underlying Unity of 

Separation and Neutrality,” Emory Law Journal, 46 (1997); Ira C. Lupu, “Government Messages and Government 

Money: Santa Fe, Mitchell v. Helms, and the Arc of the Establishment Clause,” William and Mary Law Review, 42 

(2001); Eric W. Treene, “Religion, The Public Square, and the Presidency,” Harvard Journal of Law & Public 

Policy, 24 (Spring 2001), 573-621; Stephen V. Monsma and J. Christopher Soper, eds., Equal Treatment of Religion 

in a Pluralistic Society (Grand Rapids, Mich.: Eerdmans, 1998). 

11
Barrier 2: Faith-Based Organizations Excluded from Funding 

Some Federal programs ban outright all religious organizations from applying for funding. For 

instance, HUD’s Section 202 and 811 programs that fund supportive residences for the elderly 

and for persons with disabilities, respectively, do not permit “religious organizations or ones that 

have religious purposes” to be project owners, although they may be sponsors who initiate a 

project. This ownership restriction is stated explicitly in the program handbooks and is portrayed 

as a constitutional requirement, but it has neither a constitutional nor a statutory basis. 

(Ironically, over the more than 35-year history of the Section 202 program, more than two-thirds 

of the sponsors of the housing for the elderly have been religious organizations). 

The problem, however, is usually more subtle: religious organizations face an unwelcoming 

environment or are required not to be overtly religious to be eligible for funding. Given the 

widespread presumption that funding faith-based groups is constitutionally suspect, the absence 

of affirmative language in program rules and funding announcements listing religious 

organizations as eligible easily can be taken by program officials and by potential religious 

applicants as mandating their exclusion. This impression is strengthened when the silence about 

eligibility is accompanied by a lengthy list of prohibited religious activities. The Department of 

Education’s general grants regulations include an extended list of prohibited religious practices. 

Some Labor solicitations for grant applications similarly say nothing about the eligibility of 

religious organizations but itemize various prohibited activities. 

It is, of course, possible that the listed activities may in fact be constitutionally prohibited uses of 

government grant funds, in which case they must be forbidden and the restrictions should be 

brought to the attention of potential applicants. However, when restrictions on religious 

activities are listed without an equally strong affirmation of eligibility and equally emphatic 

positive guidance about how faith-based providers can legitimately collaborate to deliver 

assistance, correct information about restricted practices may have the effect of chilling 

participation by religious service groups. 

Some Federal programs divide religious organizations into two categories and then exclude 

groups in one category from funding. Organizations considered “pervasively sectarian” or “too 

religious” are suspect; those that are ruled “secular enough” can apply. Such invidious 

categorizations, gleaned from trolling through an institution’s religious beliefs, is pervasive at 

HUD, which uses the term “primarily religious” for faith-based organizations considered to be 

problematic. 

HUD’s regulations—though not the enabling statutes—for Community Development Block 

Grants, which provide Federal funds to localities to support nongovernmental services, and for 

the HOME program, which gives funds to localities that in turn enlist community groups to 

rehabilitate housing, prohibit funding “as a general rule” from going to “primarily religious” 

organizations, “for any activities, including secular activities(emphasis added).” Under the 

HOME program, a “primarily religious” organization can establish a “wholly secular entity” that 

may then take part in the program. In the CDBG program, a further regulation provides that a 

“primarily religious” organization may take part, if it agrees to a long list of restrictions— 

12
including forfeiting its well-established freedom under Federal law as a religious organization to 

staff on a religious basis. 

Such HUD regulations were developed in response to now obsolete Supreme Court cases with 

the intention of increasing involvement by religious organizations. Faith-based charities do get 

some funding under these programs when the rules are flexibly applied. However, the 

convoluted provisions cast doubt on the eligibility of faith-based groups with a distinct and overt 

religious character and put them under pressure to marginalize or eliminate various aspects of 

their religious character and autonomy. 

Some faith-based organizations, uncertain of their welcome and latitude within HUD programs, 

have requested written lists of acceptable and unacceptable practices. HUD staff have refused to 

provide such guidance. fficials’ own uncertainty is such that one official, when asked on 

the phone by a religious group to give specific guidance about restricted practices, asked if the 

conversation was being recorded, fearing a permanent record of guidance that might turn out not 

to conform to HUD religious policy. 

The o

The division into acceptable and problematic religious organizations is not required by current 

Supreme Court precedent.

10 Lacking a clear and fixed meaning, the categorization requires an 

intrusive case-by-case determination by HUD staff, who are forced to delve into the authenticity 

of religious beliefs, an inquiry that a recent Supreme Court plurality derided as “not only

unnecessary but also offensive.”

11 Because there is no clear guidance, HUD field officials and 

their State and local government partners apply the rules inconsistently even within a single

program, creating additional complications for faith-based applicants. 

Similar problems occur in the Department of Education’s “Even Start Family Literacy Program,” 

that gives formula grants to States to fund local partnerships between schools and other local 

entities, including nonprofit organizations. The authorizing statute does not exclude religious 

nonprofit organizations. However, the Agency addresses that “pervasively sectarian” 

organizations may not be directly funded by government. Thus they can become part of a 

Federally funded partnership only if they are subordinate to “nonsectarian” partners. Other 

Department staff, while not ruling out funding for “pervasively sectarian” organizations in 

general, believe that eligibility can only be established after a case-by-case assessment of a 

group’s religious character. 

Barrier 3: Excessive Restrictions on Religious Activities 

Some government rules require faith-based providers to endure something akin to an 

organizational strip-search. Certainly, some restrictions on how religious organizations can 

spend government grants are plainly required by the Constitution. But given the general 

wariness about the constitutional propriety of funding faith-based organizations, and the 

10 See the sources listed in footnote 9 for discussion of the concept and of the Supreme Court’s changing interpretive

framework. 11 Mitchell v. Helms, 530 U.S. 793, 828 (2000).

13
heightened suspicion about collaboration with “pervasively sectarian” or obviously religious 

groups, Federal grant programs can be inappropriately restrictive. 

Under the Workforce Investment Act, core or basic worker training activities are provided at 

Federally funded One-Stop Centers, with additional Federally funded services provided by 

independent vendors through a voucher-like system in which the individual selects the program 

or provider that suits him or her best. Notwithstanding the indirect nature of the funding, DOL 

requires States to agree to not permit Federal workforce development funds to be used to train or 

employ a participant in “sectarian” jobs or activities. However, the U. S. Supreme Court has 

made it clear that when a program or provider is chosen by a private citizen and not designated 

by Government, such a restriction is not justified. In the landmark 1986 case, Witters v. 

Washington Dep’t of Services for the Blind, 474 U.S. 481 (1986), the unanimous Supreme Court 

ruled that a blind student could use State vocational funds to obtain seminary training. Despite 

this 9-0 decision from the Nation’s highest court, the Department of Labor has resisted the 

notion that voucher-funded employment training as a church janitor, mosque receptionist, or 

landscaper for a synagogue is constitutionally acceptable. 

Head Start programs are often located in houses of worship, that are sometimes locally pressured 

to remove or cover up religious art, symbols, and other items, although there is no such 

requirement in the statute, regulations, or official HHS guidance. HUD regulations for 

Community Development Block Grants, among other programs, expressly require religious 

organizations not only to agree to avoid giving “religious instruction or counseling” but even to 

affirm that they will “exert no religious influence” at all in providing the Federally funded 

assistance. Such exceedingly vague language chills the participation of many faith-based 

providers, who have no intention of conducting government-funded worship services, but who 

fervently believe that their social services should be informed and prompted by their religious 

impulse and that the lives of staff members should set a good example and influence others 

positively. Some faith-based organizations applying at the local level for CDBG funds have 

been informed that they would qualify for the support only if they first removed references to 

“God” from their mission statements or stripped their walls clean of religious symbols. 

The Education Department’s “Even Start” program, as noted above, permits a “primarily 

religious” organization to collaborate via a partnership, but not to administer the Federal funds. 

Only the partnership as a whole (if it is incorporated) or a non-sectarian partner—any 

nonsectarian partner—can be entrusted with the funds. 

It is not Congress, but these overly restrictive Agency rules that are repressive, restrictive, and 

which actively undermine the established civil rights of these groups. Such excessive restrictions 

unnecessarily and improperly limit the participation of faith-based organizations that have 

profound contributions to make in civil society’s efforts to serve the needy. 

Barrier 4: Inappropriate Expansion of Religious Restrictions to New Programs 

Relying on outdated application of obsolete case law, HHS has not only restricted participation 

of faith-based organizations in the Adolescent Family Life Program that funds abstinence 

education ($24.3 million in FY 2001), but has also extended guidance beyond that program to 

other abstinence programs by HHS’s Maternal and Child Health Bureau (MCHB). 

14
In enacting the AFL program (Title XX of the Public Health Services Act) in 1982, Congress 

specifically authorized the participation of religious groups to address problems of teenage 

promiscuity and nonmarital pregnancy. When the Supreme Court ruled, in 1988, on a challenge 

to the Program’s constitutionality, it upheld the statute; but, using reasoning it has now backed 

away from, the Court ruled that providers determined to be “pervasively sectarian” could not 

receive funding (Bowen v. Kendrick). A subsequent court settlement agreement imposed 

specific limitations on the program. The Office of Public Health and Science at HHS, which 

runs the AFL program, developed a checklist to ensure that grantees were not “pervasively 

sectarian,” asking, for example, to what extent an applicant was controlled by a church or other 

religious body, whether clergy or other religious leaders served as staff or volunteers, and 

whether the applicant’s mission statement was religious. Applicants received a statement, 

“Guidance to AFL Grantees,” detailing the restrictions on religious providers, such as an 

instruction to remove or cover up, if possible, religious symbols in the places where social 

services were to be offered. 

The AFL settlement agreement expired in 1998. The Court has now all but abandoned the 

“pervasively sectarian” standard it used in the AFL case, and it has loosened other restrictions on 

religious activity. Nevertheless, OPHS has maintained many of the restrictions on faith-based 

involvement in the AFL program. The Maternal and Child Health Block Grant (MCHB) 

references many of those AFL restrictions as guidance in two entirely separate, though related, 

abstinence education programs that it runs. The Abstinence Education Grant Program (Title V 

of the Social Security Act) was authorized under the 1996 Federal welfare reform law and 

provides $50 million per year in formula grants to States to support abstinence education by 

community groups. Community-Based Abstinence Education projects received $20 million for 

FY 2001 under the SPRANS allocation of the MCHB to States. States and potential grantees 

that request guidance from MCHB receive restrictive advice for religious involvement modeled 

on the now-outdated AFL settlement, sometimes including the “Guidance to AFL Grantees.” 

By maintaining the settlement restrictions in the AFL program beyond the deadline and 

expanding them without statutory or court justification to two completely separate programs—in 

the face of several intervening Supreme Court decisions embracing a theory of neutrality and 

nondiscrimination—HHS unnecessarily chills faith-based participation in some $94 million of 

funding for programs that have a strong values orientation that might best be provided by groups 

rooted in the wide diversity of America’s religious and values communities. 

Barrier 5: Denial of Faith-Based Organizations’ Established Right to Take Religion Into 

Account in Employment Decisions 

Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, 

color, national origin, gender, and religion, while simultaneously permitting religious 

organizations to staff on a religious basis. This provision, which allows covered religious groups 

to take religion into account in hiring, is itself a vital civil rights safeguard enshrined in Federal 

law for more than a generation. Congress passed this protection 37 years ago, and reaffirmed 

and extended it in the Equal Employment Opportunity Act of 1972 to cover not only core 

religious staff but also those engaged in a ministry’s non-religious service activities. In a 

15
unanimous 1987 ruling, Corporation of the Presiding Bishop v. Amos, 483 U.S., 327 (1987), the 

U.S. Supreme Court upheld the constitutionality of this core safeguard. 

Moreover, from 1964 forward, this statutory religious staffing protection has been available 

irrespective of whether a charity receives Government funds. Several courts, both State and 

Federal, have considered this precise issue and ruled that a religious group’s ability under Title 

VII to foster what the Supreme Court in Amos called a “shared religious vision” isn’t forfeited 

just because it delivers Government-funded social services.12 (Title VII does not, however, 

exempt religious charities from the ban on employment discrimination based on race, color, 

national origin, or sex. Moreover, if delivering Federally funded social services, faith-based 

groups must serve clients of any background). 

Unless the specific statute authorizing a Federal funding program includes different rules on 

employment discrimination, the time-honored freedom to staff on a religious basis afforded by 

Title VII remains the baseline for covered religious groups and is the controlling Federal law. 

Nevertheless, Federal agencies sometimes require faith-based social service charities interested 

in partnering with Government to surrender their long-held freedom to define their religious 

mission by hiring like-minded, like-hearted staff, even when Congress, when enacting the 

program, refused to limit the Title VII religious staffing protection of participating faith-based 

groups. 

The consequence of this administrative misapplication of the law is, at best, widespread 

confusion about requirements on the part of officials and religious organizations. All too often, 

religious applicants for Government funding are required to sacrifice their well-established right 

to select staff in a manner that upholds their religious vision even though Congress (affirmed by 

a unanimous Supreme Court) has assured them of that right through venerable civil rights laws. 

The result is a climate of tremendous legal uncertainty, that ultimately harms our most needy and 

neglected citizens and those grassroots Samaritans, both sacred and secular, who serve them. 

Additionally, charities’ employment rights and religious liberty are violated; faith-based 

providers are tentative and operate in fear of losing funding; many groups are discouraged 

altogether from opening up new social-welfare initiatives or expanding their good works; and 

people in distress are deprived of effective and enhanced service options. 

In not a single one of the five Departments under review do the statutes for all of the 

Department’s funding programs require religious organizations to relinquish their statutory 

ability to staff on a religious basis in order to take part. But officials are often very careless 

about the law’s actual requirements. For example, none of the Education Department’s grant 

programs that were reviewed, whether formula or discretionary, statutorily limits the Title VII 

12 Nothing in the congressional debate over Title VII, either in 1964 or when Congress expanded it in 1972, suggests 

that the religious staffing protection is forfeited when a religious charity receives Federal financial assistance. See 

Carl H. Esbeck, testimony before the Committee on the Judiciary, Subcommittee on the Constitution. See also, e.g., 

Hall v. Baptist Memorial Health Care Corp., 215 F.3d 618, 625 (6th Cir. 2000); Siegel v. Truett-McConnell College, 

13 F. Supp.2d 1335, 1343-45 (N.D. Ga. 1994), aff’d, 73 F.3d 1108 (11th Cir. 1995); Little v. Wuerl, 929 F.2d 944, 

951 (3d Cir. 1991); Ward v. Hengle, 706 N.E.2d. 392, 395 (Ohio App. 1997), app’l denied, 692 N.E.2d 617 (Ohio 

1998). A wide variety of religious hospitals, colleges, even K-12 schools, can and do assert their Title VII safeguard 

when hiring faculty, professional, and administrative staff, even though the entity receives Federal assistance. 

16
hiring ability of religious organizations. Nevertheless, many program officials have the mistaken 

impression that religious groups do not have this Title VII protection. Program application 

materials and the Department’s standard form for most grantees nowhere reference the Title VII 

religious staffing safeguard for faith-based groups but instead include general statements about 

nondiscrimination in services and employment that sow confusion about the rights of faith-based 

charities. 

The Workforce Investment Act, administered by the Department of Labor, requires that 

programs funded under the Act may not discriminate on religious or other grounds in providing 

services or in employment. OL interprets this requirement broadly to cover every provider that 

is in any way “assisted” by the new One-Stop employment centers. t seems that a faith-based 

employment service that is co-located at a One-Stop might have give up its right to hire on a 

religious basis, even if the organization’s funding is from the Welfare-to-Work program or the 

TANF welfare program, both of which include Charitable Choice language that explicitly 

preserves the Title VII protection. orse, it is certain that the DOL policy means a faith-based 

training program that is offered totally without charge loses its right to select staff on a religious 

basis if it merely agrees to locate at the One-Stop so that trainees can have maximum access to 

its free services. 

D

I

W

Barrier 6: Thwarting Charitable Choice: Congress’ New Provision for Supporting Faithbased Organizations 

The Charitable Choice concept was crafted in the mid-1990s to remedy overly restrictive rules

and confusion about the constitutional requirements for Government collaboration with faithbased providers. It aims to challenge and eliminate perverse bureaucratic rules and regulations

that have often hampered civic-minded, public-spirited partnerships between Government and

faith-based social service providers.

Under the old rules, community-serving religious groups seeking support often had to conceal,

and sometimes even compromise, their distinct religious character – the very quality that sparked

and sustained their success in mobilizing volunteers and achieving uncommon results.

Charitable Choice was written to respond point-by-point to various inappropriate restrictions by

explicitly protecting religious charities from pressures to secularize their programs, abandon their

religious character, or sacrifice their autonomy. At the same time, it includes specific provisions

to uphold the religious liberty of clients and to fulfill the constitutional requirements concerning

Government funding of religious activities.

In sum, Charitable Choice attacks the anti-religious bias that pervades too many statutes,

regulations, and practices, ensures that groups use Government funds for public purposes, and

provides a clear set of guidelines to discipline and structure these needed collaborations. Further,

it accomplishes the following:

� It clarifies and codifies the right of faith-based groups to participate by clearing away 

misperceptions and doubts about whether religious groups may deliver Federallyfunded social services; 

17
� It replaces government suspicion of religious providers with a welcoming 

environment by giving a “green light” to expanded collaboration with Government 

and making such partnerships plausible and possible; 

� It ratifies and gives a legal foundation to current flexible practice by clarifying that 

the Constitution does not require 100% secularism, but neutrality and equal 

opportunity instead; 

� It overcomes anti-faith barriers in Federal programs by overturning restrictions on 

participation and activities that are not necessitated by the Constitution; 

� It has enriched the mix of service providers where it has been implemented by States, 

like Democrat-led Indiana and Republican-led Texas that have been able to offer 

people a wider variety of providers; 

� It enables formerly excluded groups to offer their effective services by freeing local 

officials to create new collaborations that involve faith-based charities that had earlier 

been wary of partnering with Government;13 

� It helps current religiously affiliated providers to better fulfill their service mission by 

permitting established groups like Lutheran Social Services to get rid of the excessive 

Government-imposed limits that have wrongly hobbled services offered by religious 

groups and thus kept them from better integrating a moral dimension into their 

programs; and 

� It builds on successful principles in other areas of Federal funding – including 

internationally – by borrowing fruitful lessons from other Federal models where the 

Charitable Choice principles of accountability, performance, pluralism, and religious 

liberty are valued and applied. 

By stressing evenhandedness and prizing performance over process, Charitable Choice 

eliminates the anti-religious bias and the secularizing pressures aimed at religious charities. It 

requires officials to ask not “Who are you?” but rather “What can you do, and how well can you 

do it?” It guarantees that faith-based groups have an equal opportunity – no better, no worse – to 

deliver Government-funded social services. It does not grant religious charities any special 

favors but ends the special burdens that have often hampered them. Charitable Choice prohibits 

the Government from using religion as a line-drawing criterion for receiving Federal funds. 

Administrative prejudice is forbidden; and so is administrative favoritism. 

Repeatedly since 1996, and always by bipartisan majorities, Congress has acted multiple times to 

bring Federal grants programs under these new rules. For example, Congress: 

13 Amy Sherman, The Growing Impact of Charitable Choice: A Catalogue of New Collaborations Between 

Government and Faith-Based Organizations in Nine States (Washington, DC: Center for Public Justice, March 

2000). 

18
� Enacted Charitable Choice as part of the 1996 Federal welfare reform law 

(PRWORA) to cover state and local spending of TANF funds to obtain services; 

� Placed the new specialized Welfare-to-Work program for hard-to-employ recipients 

under the same provision in 1997; 

� Added Charitable Choice language in 1998, when it reauthorized Community 

Services Block Grants, which provide core funding for Community Action Agencies 

and; 

� Extended Charitable Choice in 2000 to cover SAMHSA’s Federally funded substance 

abuse prevention and treatment services. 

The literal language of the statutes makes it clear that these new rules are not optional for 

Federal, State, or local officials using the covered funds. These are mandatory rules to be 

followed, whenever these funds are used to purchase services from nongovernmental providers. 

However, save for one limited exception, Charitable Choice has been essentially ignored by 

Federal administrators. 

The exception is Welfare-to-Work (WtW) competitive grants, a 2-year, mandatory grant 

program operated by the Department of Labor. In keeping with the intent of Charitable Choice, 

Labor worked hard to inform faith-based (and community-based) organizations that they were 

eligible for the funding, to facilitate their applications, and to ensure that they were able to fulfill 

grant requirements and provide effective assistance. An unusually large number of applications 

were received and six faith-based organizations received a total of about $16 million dollars 

(about 2% of the total competitive grant funds). 

However, except for noting the eligibility of faith-based groups, DOL did not elaborate on the 

requirements of Charitable Choice in its WtW competitive grants. And in administering WtW 

formula grants to States, DOL merely noted that Charitable Choice was part of the governing 

legislation, otherwise leaving it up to State and local governments to comply with or to ignore 

the new rules, at their own discretion. Application of Charitable Choice to the Labor program 

did not result in any thorough examination of how the landmark rules should affect grant 

standards or the Department’s interpretation of constitutional requirements. 

The other three programs covered by Charitable Choice are administered by HHS. The new 

rules for funding substance abuse services were adopted relatively recently and SAMHSA is still 

working out the consequences for its discretionary and formula grant programs. But Charitable 

Choice has been the governing law for TANF block grants since 1996 and for Community 

Service Block Grants and CSBG discretionary grants since 1998. Yet HHS has done very little 

to apply the rules to its own grant making or to ensure that the State and local governments that 

received covered funds adjusted their own procurement rules to comply with the congressional 

directives. 

In the case of TANF funds, Congress limited the authority of HHS to promulgate regulations and 

did not authorize Charitable Choice regulations. Nevertheless, although HHS routinely provides 

19
other forms of information and advice to guide the expenditure of formula grants, it has supplied 

virtually no guidance at all to States about the landmark Charitable Choice requirements. Some 

attention was paid to Charitable Choice as an element of welfare reform through a few 

conferences and in other minimal ways. However, the only specific guidance given on this 

significant topic was a single-paragraph reply to an e-mail query from one State. When States 

submitted their welfare reform plans they were not asked how they would comply with 

Charitable Choice and States are not asked now whether they have created the required level 

playing field for faith-based providers, when they annually spend their billions of Federal dollars 

to contract for services from nongovernmental organizations. 

After Charitable Choice was added to the CSBG formula grant program, HHS issued some 

guidance to States about the new rules, but the guidance left out key provisions, such as the 

affirmation of the right of religious organizations to take religion into account in their 

employment decisions and the prohibition on the use of Government funds for inherently 

religious practices such as worship and proselytization. Although HHS does monitor State 

compliance with CSBG requirements, it has not evaluated implementation of Charitable Choice. 

In the absence of clear HHS guidance, misleading information about the requirements has been 

disseminated by special interest groups. Only within the last few weeks has HHS, with the 

assistance of the HHS Center, started to provide specific guidance on the implications of 

Charitable Choice for CSBG formula grant recipients. 

BARRIERS TO COMMUNITY-BASED ORGANIZATIONS AND OTHER SMALL AND 

NEWCOMER ORGANIZATIONS 

The routine design and operation of Federal competitive and formula grant programs are 

overwhelming and off-putting to smaller-scale organizations, both sacred and secular, and to 

those considering collaborating with Government for the first time. Some aspects of the 

programs are intimidating or create nearly insuperable barriers for small or new groups. To be 

sure, the ability of applicants to fulfill requirements ought to be strengthened. At the same time, 

burdensome requirements that cannot be sufficiently justified, or whose aims can be 

accomplished in other, less onerous, ways, should be eliminated or modified. 

Barrier 7: The Limited Accessibility of Federal Grants Information 

Federal discretionary grant programs typically announce the availability of funds in the Federal 

Register and on the program’s or the respective Department’s Website. These sources are not 

everyday reading for small faith-based and community groups; these places are regular 

information sources only for organizations that have already decided that they might have a 

chance to win Federal funds and that can dedicate staff attention to monitoring funding 

announcements. Moreover, grant information organized by Department and program is fully 

accessible only to seekers who have figured out in advance which Department, and thus which 

Website—or rather, which several Departments, and thus which several Websites—might be 

funding a service that their organization offers or is interested in developing. (There is a joint 

Website, the Federal Commons (www.cfda.gov/federalcommons/) which provides help by 

serving as a single point of entry, listing broad subject categories that in turn lead to programs in 

the various Departments with links to further information). 

20
Most Federal social service funding is distributed via formula grants to State and local 

governments rather than directly to nongovernmental organizations through Federal 

discretionary grants. Thus, groups that somehow hear of a major new Federal funding initiative 

should usually look to State and local officials to discover how to compete for the funds, rather 

than trying to figure out which Federal program has control of the funds. However, news about 

Federal spending does not usually explain the difference between formula and discretionary 

grants and the resulting difference in application pathways. 

Even without this additional complexity it is difficult for newcomers to move from the sidelines 

to the frontlines. The audit of Education programs noted that there is no natural starting point for 

newcomers on the Department’s Website and that the Department’s guide to its grants process 

could be located only with difficulty. 

An experienced Pittsburgh faith-based organization with a $3 million dollar annual budget to 

serve the poor has found the Federal grants application process to be so complex that it was 

forced to resort to a professional grant consultant to identify and apply for likely Federal grants. 

Barrier 8: The Heavy Weight of Regulations and Other Requirements 

Applicants for Federal support encounter a dizzying array of statutory and regulatory 

requirements. Each program has its own specifications and guidelines. Departments have 

additional rules. In addition, some 50 separate Federal requirements apply across the board to 

Federal grants. Each of these regulations and requirements reflects important social, 

environmental, legal, and health concerns. However, the collective weight of these can make it 

exceedingly difficult for smaller, community-based, and grassroots organizations to compete for 

Federal social service dollars. While many of these requirements are irrelevant to many social 

service providers, all applicants are nonetheless required to affirm compliance with all of them. 

In the case of formula grants, one crosscutting Federal rule authorizes state and local 

governments to add to the Federal regulations their own usual procurement rules, so long as 

these do not conflict with specific Federal requirements. Thus, applicants may find themselves 

subjected to an additional layer of requirements beyond those authorized by the Federal program 

statute and regulations and the additional across-the-board Federal mandates referenced above. 

Barrier 9: Requirements to Meet Before Applying for Support 

The Labor Department’s Employment and Training Administration discretionary grants are 

typically multi-million dollars in size. To ensure that funds are appropriately spent, DOL 

requires grantees to have an extensive financial and administrative management system. This 

means that, in order to compete to win a grant, an organization must already have the systems in 

place to handle the additional income that will come from winning a DOL grant. 

For an Education grantee to be able to charge to a Federal grant indirect costs that it incurs to 

provide the services, it must have negotiated an approved indirect cost rate with the Department. 

Without knowing what that rate is, an applicant for funding cannot figure out whether it will be 

able to provide the services within the offered grant funds. But establishing the indirect cost rate 

21
takes at least 90 days while the typical time between publication of an Education application 

notice and the deadline for applications is only 60 days. In other words, before ever competing 

for an Education Department grant, an organization must first have negotiated with the 

Department to get an approved indirect cost rate. 

Barrier 10: The Complexity of Grant Applications and Grant Agreements 

Solicitations for grant applications at Labor are repetitive and overly long, stating eligibility and 

other requirements more than once, lifting technical language directly from the authorizing 

statute, and including information from the legislative history that is only marginally pertinent 

and contributes to the complexity of the document. 

Grant agreements at HUD and other Departments typically only cross-reference many of the 

applicable regulations and statutes, leaving it up to the grantee to track down, order, and 

assimilate a huge number of documents. 

At DOJ, the application kit for the Edward Byrne Memorial State and Local Assistance 

Discretionary Program totals 58 pages. roximately 1,000 pages of Federal statutes are 

referenced in the application process. For the DOJ’s Weed and Seed Grant Program, the 

application kit for new applicants is 74 pages long, and it references some 1,300 pages of Federal 

statutes—a stack of paper nearly 6 inches tall. 

Education has prepared a user-friendly, non-technical explanation of its discretionary grants 

application process, a 33-page document. However, the guide emphasizes that applicants must 

not rely on it as their sole source of information and it directs them to the department’s general 

regulations—some 300 pages of legal details. 

App

Barrier 11: Questionable Favoritism for Faith-Based Organizations 

Despite the general Federal wariness about Government funding of religious organizations, 

occasionally Federal programs veer sharply in the opposite direction, specifying that only faithbased providers are eligible to participate. Earlier this year, for example, the Center for 

Substance Abuse Prevention, part of SAMHSA at HHS, announced funding to expand capacity 

for groups battling substance abuse and HIV in minority communities. Because of the “welldocumented acceptance and trust” of faith-based organizations in minority communities, the 

announcement limited eligibility to faith-based organizations and to youth-serving organizations 

in collaboration with faith-based groups. Notwithstanding the good intentions, such a 

requirement raises constitutional questions and, of course, it creates a barrier for secular 

programs, some of which themselves have won “acceptance and trust” in their communities. 

Barrier 12: An Improper Bias in Favor of Previous Grantees 

It is natural for experienced grant applicants to have a competitive edge in applying for funds. 

They more readily find out about funding opportunities, know the application process, and are 

familiar with the grants management requirements. They also have an edge because of their 

relationship with program and grants managers. 

22
Some Federal programs deliver further unfair advantage to previous Government grantees by 

building a bias into the application process. DOL’s “Susan Harwood Training Grant” program 

funds groups to train employers and employees to recognize, avoid, and prevent workplace 

safety and health hazards. The program requires applicants to demonstrate not only topical and 

managerial experience but also either past receipt of a Government grant or a firm commitment 

of collaboration from an organization that has managed Government funds previously. The 

awards process for the Education Department’s “Fund for the Improvement of Education” gives 

extra prior experience points to applicants who operated a program during the previous funding 

cycle. 

Barrier 13: An Inappropriate Requirement to Apply in Collaboration with Likely Competitors 

Requiring grantees to coordinate their services with other service providers can be an important 

way to ensure that Federal funding achieves maximum results. But a requirement that grant 

applicants must demonstrate support from other providers who may be competitors can instead 

result in the exclusion of effective organizations. But this peculiar requirement exists in some 

Federal programs. Each Center identified at least one program with such an anti-competitive 

application requirement: 

� HHS: The National Family Caregiver Support Program required applicants to gain the 

support of the respective Area Agency on Aging, which is simultaneously a coordinating 

mechanism and a competitor for the same grants. (The Administration on Aging at HHS 

has now removed the condition). 

� DOJ: OJP grants in many cases require an applicant or grantee to cooperate with other 

non-governmental organizations, which can leave a faith-based or community-based 

provider at the mercy of groups, whether faith-based or secular, who do not share its 

unique vision or concept of service. 

� DOL: The Welfare-to-Work formula grants required nongovernmental applicants to 

submit their applicants in conjunction with the local workforce investment board, which 

was a competitor. (However, if the local board refused to cooperate, the applicant could 

sidestep the requirement by showing it had made a reasonable request in a timely 

manner). 

� HUD: The Continuum of Care process to comprehensively address homelessness 

requires extensive coordination. The government agencies and larger providers that may 

need to be involved in order to administer the system may not have much interest in 

involving smaller and newer organizations. In addition, a successful application by any 

one group depends on the quality of the proposed or existing overall system over which 

the applicant may have little or no control. 

� ED: The GEAR UP program (Gaining Early Awareness and Readiness for 

Undergraduate Programs) and two bilingual education programs limit eligibility for 

grants to nongovernmental groups that can demonstrate a partnership with the local 

23
education authority—which may, be unwilling to work with a qualified community-based 

or faith-based organization. 

Barrier 14: Requiring Formal 501(c)(3) Status without Statutory Authority 

By statute, many Federal discretionary and formula grant programs require applicants to be 

nonprofit organizations. Some programs permit applicants to prove nonprofit status by giving 

evidence of nonprofit incorporation under State law (or even by demonstrating that the 

organization provides services in the public interest and uses its net proceeds to improve or 

expand such services). Incorporation under State law is relatively uncomplicated and 

inexpensive. However, many Federal programs routinely require applicants not merely to 

demonstrate nonprofit status but also to demonstrate formal 501(c)(3) status under the Internal 

Revenue Code. This is a heavier burden, often requiring hundreds of dollars in filing and 

attorney’s fees and requiring a number of months to prepare the application and then win 

approval from the IRS. This heavy burden is often imposed unilaterally by Federal officials 

despite the absence of any statutory authorization for it. 

At HHS, many programs require 501(c)(3) status, despite the lack of a statutory requirement, 

because program managers treat an IRS status letter as a verifier of nonprofit status. Despite 

silence in both statutes and regulations, some HUD programs require applicants for discretionary 

grants to prove 501(c)(3) status, and other HUD programs impose the requirement through the 

formula grant system on applicants seeking Federal funding through State or local governments. 

Program officials and attorneys for the Community Technology Centers program at Education 

insist that applicants must prove 501(c)(3) status, although there is no such statutory or 

regulatory requirement. At DOJ, applicants routinely are required to demonstrate 501(c)(3) 

status to prove that they are nonprofits, even though only the Juvenile Justice and Delinquency 

Prevention Act does not contain that specific statutory requirement. 

Barrier 15: Inadequate Attention to Faith-Based and Community Organizations in the 

Federal Grants Streamlining Process 

Because all of the Federal Government’s service partners, including large nonprofit 

organizations and even State Governments, encounter significant difficulties in applying for and 

managing Federal grants, Congress directed all of the major Federal grant-making organizations 

work together to simplify and improve in 1999, that the grants process. The Initial Plan required 

by the Federal Financial Assistance Management Improvement Act was sent to Congress in May 

2001. It outlines a detailed plan to determine how the various grants programs work and how 

they can be improved. The report also includes a summary of comments received from grantees 

and other interested parties. The grants reform process—the Federal Grant Streamlining 

Program—holds considerable promise to eliminate or minimize barriers that particularly hobble 

smaller and newcomer organizations. 

However, without reform of the reform process itself, it is unlikely that the Federal grants 

process can be made as welcoming to faith-based and community-based organizations as it 

should be. HHS, the lead Department in the reform process, solicited comments about problems 

of the grant process and the draft reform plan through typical Federal channels—publication in 

24
the Federal Register, information on the HHS Website, and five consultation meetings with grant 

constituencies. Although faith-based and community-based organizations face the highest 

barriers in the Federal grants process, they seem not to have been full participants in the 

comments process: Of the comments received from 77 sources and summarized in the Interim 

Plan, only a handful, at most, came from such organizations. Almost all of the comments are 

from larger, traditional recipients, such as State Governments and their associations, Indian 

tribes, universities, and large nonprofit service organizations. 

Similarly, the workgroup structure for the streamlining process includes only two grantee 

subgroups—one subgroup for “universities and research nonprofits,” and a second one, for 

“State, local, and tribal governments and other non-profits.” But the faith-based and communitybased organizations that face the highest hurdles in seeking Federal support have distinct 

concerns not likely to be given sufficient attention if collapsed into an “other nonprofits” residual 

category. 

CONCLUSION 

No faith-based service group has an automatic right to obtain Federal funding either through 

direct discretionary grants or through State and local governments’ provision of Federal formula 

grants. Similarly, community-based organizations have no automatic right to Federal funding. 

But both faith-based and community organizations should have an equal opportunity to obtain 

such funding, if they choose to seek it. A sensible, results-driven policy requires the 

Government to examine outcomes—that is, what an organization achieves with the funds— 

rather than to the character of the organization. That is, whether it is too religious, “too 

religious,” or “secular enough.” Federal agencies should use grants to underwrite the most 

effective programs. Because grassroots organizations, sacred and secular, are close to, and 

trusted by, communities, families, and individuals in need, the Federal grants process should 

welcome rather than discourage the contributions of such groups that offer effective programs. 

The Federal Grants process, despite a few exceptions and a growing sensitivity to and openness 

toward both faith-based and community groups, does more to discourage than to welcome the 

participation of faith-based and community groups. That is the overwhelming message 

trumpeted in the reports of the Centers for Faith-Based & Community Initiatives at HUD, HHS, 

Justice, Education, and Labor. Too much is done that discourages or actually excludes good 

organizations that simply appear “too religious”; too little is done to include groups that meet 

local needs with vigor and creativity but are not as large, established, or bureaucratic as the 

traditional partners of the Federal government. This is not the best way for government to fulfill 

its responsibilities to come to the aid of needy families, individuals, and communities. 

Government must do a far better job at equipping and empowering America’s social 

entrepreneurs—the quiet heroes, from North Central Philadelphia to South Central Los Angeles, 

that are conquering social ills in every corner of America. 

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