Faith-Based Organizations and Their Relationship with State and Local Governments: Analysis of Recent Initiatives

Faith-Based Organizations and Their Relationship with State and Local Governments: Analysis of Recent Initiatives

Order Code RL31099
Report for Congress
Received through the CRS Web
Faith-Based Organizations and Their Relationship
with State and Local Governments:
Analysis of Recent Initiatives
Updated January 23, 2003
Ben Canada
Analyst in American National Government
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

Faith-Based Organizations and Their Relationship
with State and Local Governments:
Analysis of Recent Initiatives
Summary
Federal, state, and local governments have long collaborated with faith-based
organizations (FBOs) to provide services to needy citizens. The issue of government
funding for FBOs (charitable choice) is controversial and is receiving renewed public
attention for two main reasons. First, President George W. Bush made a faith-based
initiative a priority of his domestic agenda. His Administration hopes to expand tax
incentives for private donations to charities, and to eliminate statutory, regulatory,
and administrative barriers perceived to prevent FBOs from receiving federal funds.
In December 2002, the President issued Executive Order 13279, instructing selected
federal agencies to develop charitable choice policies. The second reason for
renewed public attention is the 107th Congress’s consideration of H.R. 7, and
specifically Title II, the “Charitable Choice Act of 2001.” Charitable choice rules are
intended to allow religious organizations to provide federally funded services from
designated programs on the same basis as any other nongovernmental provider,
without impairing the religious character of the FBOs or the religious freedom of
beneficiaries. Title II proposed expanding provisions of charitable choice law to nine
new program areas. H.R. 7 passed the House on July 19, 2001.
A Senate bill, the “Charity Aid, Recovery, and Empowerment Act of 2002"
(CARE bill), S. 1924, did not contain extensive charitable choice provisions like
those found in Title II in H.R. 7. It did, however, seek to prevent potential
discrimination against FBOs in the awarding of federal grants.
State initiatives for increasing FBO access to government funds vary
considerably. A limited number of states have enacted legislative and regulatory
changes to increase such access and educated state and local officials about charitable
choice rules. Others have concentrated their efforts on collaboration and awareness
campaigns, rather than legislative or regulatory changes. On the other hand, many
states have done little in response to charitable choice law. As with the state
experience, local efforts to better utilize FBO resources have also varied.
Supporters of the faith-based initiative offered anecdotal information that FBOs
can effectively deliver federally funded services in a wide range of program areas.
This initiative, however, raises institutional issues about potential FBO effectiveness,
accountability, and the working relationship of FBOs and state and local
governments. Effectiveness issues include: range of services; lack of evaluative data;
qualifications of FBO personnel; inclusion of religious content; and availability of
secular alternatives. Accountability issues include: FBO ability to report results;
vouchers and accountability; and separation of government funds. To an extent,
questions about FBOs’ working relationship with state and local governments are
based on some adverse impacts of past efforts to incorporate community-based
organizations into federally funded services. Some officials are concerned that new
charitable choice legislation could disrupt good working relationships between FBOs
and state and local governments. This report will be updated as circumstances
warrant.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Overview of State and Local Faith-Based Initiatives . . . . . . . . . . . . . . . . . . . 3
Analysis of Selected Institutional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Effectiveness of FBOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Range of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Lack of Evaluative Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Qualifications of FBO Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Inclusion of Religious Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Availability of Secular Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Accountability for Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
FBO Ability to Report Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Vouchers and Accountability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Separation of Government Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Working Relationship Between FBOs and State and Local Governments 21
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Related CRS Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Resources on Charitable Choice Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Faith-Based Organizations and
Their Relationship with State and Local
Governments: Analysis of Recent Initiatives
Introduction
Federal, state, and local governments have long collaborated with faith-based
organizations (FBOs) to provide services to needy citizens. FBOs can include a
range of organizational types, but they generally fall into three categories: church
congregations, national networks, and nonprofit religious organizations.1 Some
FBOs receive a significant amount of federal funding. In FY2001, for example,
Catholic Relief Services received $88 million in federal funds,2 and World Vision
Inc. received $124 million.3 Most FBOs provide traditional social services, such as
homeless programs and substance abuse programs, while others administer economic
and community development programs.
Congress enacted the first charitable choice provision in the 1996 welfare
reform law, authorizing states to “... administer and provide services under [certain
federal] programs ... through contracts with charitable, religious, or private
organizations.”4 Charitable choice rules are intended to allow religious
organizations5 to provide federally funded services from designated programs on the
same basis as any other nongovernmental provider without impairing the religious
character of the organizations or the religious freedom of beneficiaries.
The issue of government funding for FBOs has received renewed public
attention for two main reasons. First, President George W. Bush has made a faith-
based initiative a priority of his domestic agenda. In January 2001, the President
1 John McCarthy and Jim Castelli, Religion-Sponsored Social Services: The Not-So-
Independent Sector, Nonprofit Sector Research Fund (NSRF), The Aspen Institute, 1999,
pp. 53-54. See NSRF web site: [http://www.nonprofitresearch.org/], visited Dec. 18, 2002.
2 Catholic Relief Services, 2001 Financial Summary, see web site at:
[http://www.catholicrelief.org/about_us/financial_information/summary.cfm],visited
Dec.18, 2002.
3 World Vision Inc., 2001 Audited Financial Statement, see web site at:
[http://www.worldvision.org/worldvision/comms.nsf/2001ar_home], visited Dec. 18, 2002.
4 P.L. 104-193, sec. 104(a)(1); 110 stat. 2161. The 1996 welfare law applied charitable
choice rules to program areas under Temporary Assistance to Needy Families (TANF), food
stamps, Medicaid, Supplemental Security Income, and child support enforcement.
5 Charitable choice legislation uses the term “religious organization.” This report, however,
uses the term “faith-based organization” (FBO), a more commonly used term.

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issued a blueprint for his initiative, Rallying the Armies of Compassion.6 In the
report, the Administration discussed the components of its faith-based initiative,
including expanding tax incentives for private donations to charities, and eliminating
statutory, regulatory, and administrative barriers that prevent FBOs from receiving
federal funds. The President further established an Office of Faith-Based and
Community Initiatives in the White House to coordinate the initiative.7 The
Administration also instructed the Departments of Education, Justice, Labor, Health
and Human Services, and Housing and Urban Development to establish faith-based
offices. These departmental offices have sought to increase FBO access to federal
grants by reducing regulatory, contractual, and other potential administrative
obstacles.8
The second reason for renewed public attention is the 107th Congress’s
consideration of legislation with faith-based components. The most assertive
proposal was in H.R. 7 (sponsored by Representatives Hall and Watts), and
specifically Title II, the “Charitable Choice Act of 2001.” The bill would have
expanded FBO access to federal funds in nine program areas addressing crime
prevention, juvenile delinquency, substance abuse, housing, job training, elderly
services, child abuse, and hunger. It also contained a number of protections for
FBOs, as well as for recipients of government-funded services. H.R. 7 passed the
House on July 19, 2001.9
Faith-based legislation was also introduced in the Senate by Senators Lieberman
and Santorum. The Charity Aid, Recovery, and Empowerment Act of 2002 (CARE
bill), S. 1924, omitted some of the more contentious charitable choice elements in the
House bill. As introduced, it contained tax incentives for charitable giving and
provisions addressing equal treatment of all nongovernmental service providers,
including FBOs.10 Unlike Title II of H.R. 7, the CARE bill did not seek to expand
FBO access in specific federal programs. The equal treatment provisions were
subsequently dropped from the Senate bill. In September 2002, however, the Senate
Finance Committee filed a “consensus” manager’s amendment (S.Amdt. 4719 to
H.R. 5005) that restored the equal treatment provisions.11 Although H.R. 5005, the
“Homeland Security Act” was enacted, the Amendment did not pass. (All references
to the CARE bill in this report refer to S.Amdt. 4719, unless otherwise noted.)
6 U.S. President (George W. Bush), Rallying the Armies of Compassion, Jan. 21, 2001. See
White House web site: [http://www.whitehouse.gov/news/reports/faithbased.html], visited
Dec. 18,2002.
7 The Office’s web site is: [http://www.whitehouse.gov/government/fbci/].
8 U.S. President (George W. Bush), “Agency Responsibilities With Respect to Faith-Based
and Community Initiatives,” Executive Order 13198, Federal Register, vol. 66, p. 8497, Jan.
31, 2001.
9 For an overview of the charitable choice provisions in H.R. 7, see CRS Report RS20948,
Charitable Choice Provisions in H.R. 7, by Vee Burke.
10 S. 1924 (as introduced), Title III.
11 S.Amdt. 4719 to H.R. 5005, Title VII.

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Title II of H.R. 7, as well as the proposed CARE bill, raised issues about the
relationship between FBOs and state and local governments whose agencies
administer federally assisted services. Many state and local officials view the faith-
based initiative as an opportunity to enhance services to needy citizens. On the other
hand, other public officials have concerns about potential FBO effectiveness,
accountability, and their working relationship with FBOs.
In December 2002, the Administration, citing the lack of legislation addressing
its faith-based proposals, issued Executive Order 13279 instructing agencies to
develop policies that ensure equal treatment and protection for faith-based and
community organizations. The order seeks to increase FBO access to federal funds
in programmatic areas similar to those addressed in H.R. 7 and the CARE Act, such
as children’s services, job training, counseling and mentoring, literacy, housing, and
substance abuse.12 A subsequent order also established two additional faith-based
offices in the Department of Agriculture and the U.S. Agency for International
Development.
Scope of This Report. This report analyzes selected institutional issues that
arose as Congress considered Title II of H.R. 7 and the CARE bill. These issues are
likely to resurface as federal agencies seek to implement E.O. 13279. Congress
would also likely address these issues should it decide to authorize expanded FBO
access to federal funds. This report does not address constitutional issues of
separation of church and state. Readers interested in legal issues related to FBOs
should see CRS Report RL31043, Public Aid to Faith-Based Organizations
(Charitable Choice): Background and Selected Legal Issues, by David M. Ackerman.
Overview of State and Local Faith-Based Initiatives
State and local governments, in general, have a long tradition of collaborating
with FBOs to provide services. Since the 1996 charitable choice provisions were
enacted, state and local initiatives for increasing FBO-delivered services have varied
greatly.
State-level Initiatives. Some states have actively sought to use available FBO
resources. These states have undertaken faith-based initiatives by making legislative
and regulatory changes to promote FBO access to government funds. Other states
have concentrated their efforts on collaboration and awareness campaigns, rather than
legislative or regulatory changes. On the other hand, a significant number of states
have not acted on existing charitable choice provisions for expanding FBO access to
government funds.
By 2000, a few states, such as Arizona, Indiana, Ohio, Texas, Virginia, and
Wisconsin, had passed legislation or changed regulations as part of a faith-based
12 U.S. President (George W. Bush), “Equal Protection of the Laws for Faith-based and
Community Organizations,” Executive Order 13279, Federal Register, vol. 67, p. 77141,
Dec. 16, 2002.

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initiative.13 Indiana has actively worked to incorporate FBOs in service delivery. In
late 1999, Governor Frank O’Bannon initiated the “FaithWorks Indiana” program in
the state Family and Social Services Administration, designed to promote outreach
to the faith community. The primary form of assistance consists of workshops and
consultations for FBOs in such areas as understanding charitable choice provisions,
improving service delivery, grant writing, and financial management. FaithWorks
also operates a toll-free number and web site that answers questions from FBO
personnel. The initiative has provided some form of assistance to hundreds of FBOs
in Indiana and is attempting to develop ongoing partnerships in all of the state’s 92
counties. Since its creation, the program reports that the state has awarded roughly
$4.5 million in contracts to FBOs.14
Some states have sought to increase FBO access to government funds through
awareness campaigns and collaboration, rather than legislative or regulatory changes.
At least 15 states have appointed liaisons to the faith community to promote greater
communication and collaboration among government agencies, FBOs, and other
community-based organizations.15 Most of these states have appointed liaisons
within state departments administering social services or workforce development
programs. Oklahoma and New Jersey have created special offices for faith-based
initiatives to promote greater awareness of funding opportunities, and to serve as a
single-point-of-contact for FBOs to communicate their views to the state.16 Some
states have appointed local faith liaisons to supplement state-level outreach efforts.
For example, Virginia has appointed faith-based contacts in each local social services
agency and Texas has appointed regional faith-based liaisons, each of which serves
several counties.17
These liaisons and other state officials carry out a variety of activities to
facilitate government cooperation with FBOs, including:
! workshops on program development, availability of government funds,
charitable choice provisions;
! technical assistance with grant administration;
! help with compliance with federal and state regulations;
! identification of best practices and model programs;
! identification of service gaps; and,
! advocacy on behalf of FBOs to state officials and legislators.
13 Center for Public Justice, “Charitable Choice Compliance: A National Report Card,” Sept.
2000, [http://www.in.gov/fssa/faithworks/PDFs/Report_6_02.PDF], visited Dec. 18, 2002.
14 FaithWorks Indiana, Report on first two years activities, 2002. Available at:
[http://www.IN.gov/fssa/faithworks/index.html], visited Dec. 18, 2002.
15 States with official faith liaisons include, but are not limited to: Arizona, Arkansas,
California, Colorado, Georgia, Indiana, Maryland, New Jersey, New York, North Carolina,
Ohio, Oklahoma, Pennsylvania, Texas, and Virginia.
16 See Oklahoma State Office of the Faith-Based Liaison web site: [http://www.oklaosf.state.
ok.us/~faithlinks/], visited Dec. 18, 2002; and New Jersey Office of Faith-Based Initiatives
web site: [http://www.state.nj.us/dca/dhcr/faith.htm], visited Dec. 18, 2002.
17 Telephone conversations with selected state and local officials, June-July 2001.

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In 2000, the Center for Public Justice, a self-described Christian research and
advocacy group, rated each state on its efforts to exercise charitable choice provisions
in existing legislation. The center gave all but 12 states a “F” rating because it felt
they had not passed legislation or changed regulations to fully implement existing
charitable choice provisions.18 On the other hand, some research suggests that states
are generally increasing their outreach to FBOs and incorporating them in service
delivery.19
Local-level Initiatives. Although the role of FBOs in service delivery has only
recently received public attention, local governments have long collaborated with
FBOs to serve needy citizens. At the local level, just as at the state level,
implementation of existing charitable choice provisions has varied. Localities that
have sought to employ FBOs in service delivery have done so in a variety of ways,
including formal faith-based initiatives, awareness campaigns, and appointment of
liaisons.
Proponents of the increased use of FBOs frequently point to Philadelphia as an
example of a city that has successfully collaborated with the faith community. Some
suggest that Philadelphia has used the resources of FBOs in a greater quantity and
variety of services than any other American city.20 Since taking office in January
2000, Mayor John F. Street has made his faith-based initiative a core component of
his plan to improve city services. The mayor and his administration view FBOs as
potentially effective partners for delivering specific services, including literacy
programs, faith counseling for prison inmates, and counseling for children of
inmates, among other things. Mayor Street also hopes to employ FBOs in an effort
to reduce the level of truancy in city schools. He has asked FBOs to “adopt” a
Philadelphia school and contact the families of truant students. The mayor’s
initiative has come mostly through collaboration with FBOs, rather than through
public funding of their efforts. Reportedly, most of Philadelphia’s FBOs receive
funding from such charitable foundations as The Pew Charitable Trusts.21
While most local governments may not have been as active as Philadelphia in
collaborating with FBOs, a number of localities has designated liaisons to the faith
community. According to a 2001 survey sponsored by the U.S. Conference of
Mayors, at least 121 mayors had appointed liaisons to the faith community, and 37
more were planning to appoint liaisons.22 These liaisons are typically charged with
facilitating communication between the local government and FBOs, advertising the
availability of government grants, and assisting FBOs with grant administration.
18 Center for Public Justice, “Charitable Choice Compliance: A National Report Card.”
19 John C. Green and Amy L. Sherman, Fruitful Collaborations: A Survey of Government-
Funded Faith-Based Programs in 15 States (Charlottesville, VA: Hudson Institute, Sept.
2002).
20 Andrea Billups, “Keeping the Faith, Philadelphia’s Mayor Helps Make a Difference,”
Washington Times, Apr. 15, 2001, p. A1.
21 Ibid.
22 Laurie Goodstein, “States Steer Religious Charities Toward Aid,” New York Times, July
21, 2001, p. A10.

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Analysis of Selected Institutional Issues
Many state and local officials view the faith-based initiative as an opportunity
to enhance services. Other officials express have concerns about potential FBO
effectiveness and accountability, and the working relationship between state and local
governments and FBOs. The remainder of this report discusses institutional issues
in the relationship between FBOs and state and local governments. It analyzes issues
raised in Title II of H.R. 7, the CARE bill, and E.O. 13279, and explores options that
might be considered to address them.
Effectiveness of FBOs
Proponents of using FBOs and other nonprofit groups to deliver services to
needy citizens believe these organizations can effectively partner with state and local
governments. They argue FBOs are able to effectively utilize the resources of their
members and the community, and have greater flexibility over program design than
government agencies.
Anecdotal Accounts of Successful Partnerships. Proponents of FBOs have
offered much anecdotal evidence about the effectiveness of FBO-delivered programs.
A highly publicized example of an effective partnership between a city and its faith
community is the Indianapolis Front Porch Alliance, begun in early 1998 by then-
Mayor Stephen Goldsmith. Public officials, private citizens, and leaders of FBOs
and other community-based organizations serve on the alliance board. Its main
function has been to act as a “civic switchboard,” facilitating communication among
different service providers and providing referrals on service providers to citizens.
The Front Porch Alliance also acts as a liaison between the city government and the
faith community. It has claimed several successful instances in which it facilitated
the removal of administrative hurdles for FBO-delivered projects. In addition to its
role as a community facilitator, the alliance issues grants of up to $5,000 to FBOs and
other community-based organizations that provide crime prevention programs and
other community services.23
Another example of a FBO cited as effectively serving a community is the
Metropolitan Housing and Community Development Corporation (MHCDC) in
Washington, North Carolina. Public officials and observers of FBOs have credited
MHCDC with developing programs to address Washington’s most pertinent
problems, including economic depression and a high rate of HIV/AIDS patients.24
Reverend David Moore founded the FBO, which provides a range of services to
needy citizens, including a soup kitchen and shelter, classes for prospective
entrepreneurs interested in starting their own businesses, and subsidized housing for
23 David Holmstrom, “Front Porch Alliance Fosters Church-City Cooperation in
Indianapolis, City Government Connects with Religious and Community Groups,” Christian
Science Monitor, May 13, 1998, p. 12.
24 John Manuel, “Building with Vision,” Duke Magazine, Vol. 88, July-August 2002.
Available at: [http://www.dukemagazine.duke.edu/dukemag/issues/070802/building3.html],
visited Dec. 13, 2002.

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elderly persons. The MHCDC also offers counseling and case management services
to individuals with HIV/AIDS and their families.25
Many state and local officials see FBOs as particularly effective in serving rural
areas. Some supporters claim they can be crucial for providing services in rural areas
where they believe FBOs can supplement the financially limited resources of local
government. North Carolina is one state working with FBOs to address the needs of
citizens living in rural areas. The state has partnered with a nonprofit, the North
Carolina Rural Economic Development Center (REDC), to improve the effectiveness
of FBOs serving rural areas. The REDC focuses its outreach efforts on improving
FBO financial and administrative capacity, including performance measurement
capabilities. The organization is also offering demonstration grants for child care
services and programs that assist welfare-to-work participants. To promote
effectiveness, and to encourage further collaboration among different FBOs, the
REDC awards grants only to coalitions of FBOs involving different religious
denominations. Further, the coalitions must serve more than one county.26
Despite these reports, other policy makers and observers have a number of
concerns about the effectiveness of FBOs, including the following:
! range of services FBOs can provide;
! lack of evaluative data on FBOs;
! qualifications of FBO personnel;
! inclusion of religious content in federally funded programs; and,
! availability of secular alternatives.
Range of Services. The Administration and other supporters have cited FBO
potential to effectively deliver services in a broad range of service areas.27 One study
of FBO activities, however, found that they predominantly deliver services that
address immediate, short-term needs of beneficiaries. Such services include the
provision of food, housing, and clothing. The study also found that few FBOs deliver
services requiring long-term face-to-face contact with beneficiaries. These more
labor-intensive services include programs for health care, education (excluding
religious education), substance abuse, and workforce development. Further, among
the limited number of FBOs delivering long-term services, only a small fraction
devote a significant amount of money and manpower to those services. The study
found that FBOs delivering long-term services do not involve all their members, but
rather, have a small group of volunteers that provide the service on a regular basis.28
25 Dave Peterson, “Community Leadership: How One Person Can Make a Difference,” June
2001, unpublished article: Raleigh, NC.
26 Diana Jones Wilson, Director of Workforce Development, N.C. Rural Economic
Development Center, telephone conversation, July 2, 2001. Also see N.C. REDC web site:
[http://www.ncruralcenter.org/research/faith.htm], visited Dec. 18, 2002.
27 White House Office of Faith-Based and Community Initiatives, Rallying the Armies of
Compassion.
28 Mark Chaves and William Tsitsos, Congregations and Social Services: What They Do,
(continued...)

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Legislative Analysis and Policy Options. Currently, charitable choice
provisions apply to programs in the areas of Temporary Assistance for Needy
Families (TANF), substance abuse services, the Community Services Block Grant,
and (to the extent they use contracts or grants) food stamps, Medicaid, and child
support enforcement. The House-passed version of H.R. 7 would have expanded
charitable choice options to include nine program areas, including juvenile justice,
crime prevention and victim assistance, domestic violence, GED equivalency
programs,29 after-school programs, and transit commuter programs, as well as
programs funded through the Community Development Block Grant program
(CDBG), Workforce Investment Act (WIA), and Older Americans Act (OAA).30
The CARE bill took a different approach to establishing a range of activities for
FBOs. Rather than specifying federal programs, the bill sought to prevent possible
discrimination against FBOs in virtually all social service programs (except
education programs). The bill would have prevented federal agencies from rejecting
a grant application from community-based organizations, including FBOs, because
they had not previously been awarded a grant. It would also have prevented federal
agencies from requiring FBOs to remove religious symbols, or alter religious
provisions in charters.31
Given research suggesting that most FBOs deliver only short-term services,
namely food, housing, and clothing, it is possible that many FBOs do not have the
capacity to plan and deliver the labor-intensive, long-term services that H.R. 7 and
the CARE bill proposed, and which E.O. 13279 covers. It is possible that only larger
FBOs with experience administering federal grants would immediately participate
in delivery of services in newly authorized program areas. Smaller FBOs with little
or no experience handling federal grants might need time to gain the administrative
capacity necessary to apply for and deliver federally funded services under any new
program.
Both H.R. 7 and the CARE bill contained proposals for technical assistance and
grants aimed at increasing the administrative capacity of FBOs. H.R. 7 would have
directed the Justice Department to provide technical assistance to small
nongovernmental organizations, including FBOs.32 Similarly, the CARE bill would
have authorized funds to four departments for grants and technical assistance aimed
at enhancing the administrative capacity of FBOs. The CARE bill specified such
activities as providing assistance with grant writing, legal assistance with
28 (...continued)
How They Do It, and With Whom, Nonprofit Sector Research Fund, The Aspen Institute,
Spring 2001, pp. 12-15. Also, see generally, Avis C. Vidal, Faith-Based Organizations in
Community Development, The Urban Institute, Prepared for the U.S. Department of Housing
and Urban Development (Washington: Aug. 2001).
29 GED programs (General Equivalency Degree) are state and local education programs
offering a degree equivalent to a high school diploma.
30 H.R. 7, Title II, sec. 1991(c)(4).
31 S.Amdt. 4719, sec. 701.
32 H.R. 7, Title II, sec. 1991(o).

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incorporation and obtaining tax-exempt status, and information on best practices.33
Proponents believe that technical assistance grants could enable smaller FBOs to gain
the necessary capacity to deliver long-term services.
An alternative approach could be to distribute funds to state and local
governments for the purpose of offering training and technical assistance to FBOs.
State and local officials typically have experience administering a wide range of
federal grants, which they could draw upon to train FBO personnel. In addition, if
states and localities had to apply for grants, then federal assistance could potentially
be directed to those jurisdictions most interested in expanding the participation of
FBOs and other small nongovernmental organizations. With either approach the
definition of faith-based organization could become a contentious issue.
Lack of Evaluative Data. It is sometimes said in the debate on charitable
choice that there have been no rigorous, comprehensive studies on the effectiveness
of services provided by FBOs, resulting in a lack of objective, quantitative evidence
proving or disproving FBO effectiveness.34 In a 1999 report on religiously affiliated
nonprofits sponsored by The Aspen Institute, a nonpartisan research organization,
two analysts were, “... unable to locate a single credible study assessing the relative
effectiveness of religion-sponsored social services that meets the minimum
requirements for evaluations.” The scholars listed several potential reasons for the
lack of evaluative studies, including:
! relatively little study of the nonprofit sector and its size and impact on social
services;
! difficulty in evaluating performance due to the wide range of FBO-provided
services and lack of service providers to compare against the FBOs;
! emergency nature of FBO-provided services, such as food and shelter
programs, which may be cost-effective but are difficult to evaluate; and,
! prohibitive cost of meeting the minimum requirements for a credible program
evaluation.35
Other scholars who specialize in the effect of religion on social problems have
echoed the lack of evaluative data on FBO effectiveness. For example, Byron R.
Johnson, from the Center for Research on Religion and Urban Civil Society at the
University of Pennsylvania, has stated there is little reliable research proving the
effectiveness of FBO-delivered programs. He further stated that there is also little
evidence showing how FBO-delivered programs measure up against government-
delivered programs.36
33 S.Admt. 4719,, Title VIII.
34 This observation refers to the lack of comparative evaluations and is not meant to imply
that governmental agencies do not audit and evaluate FBOs and other nongovernmental
providers delivering publicly funded services.
35 McCarthy and Castelli, Religion-Sponsored Social Services, pp. 53-54. Also see Vidal,
Faith-Based Organizations in Community Development, pp. 3-5.
36 Laurie Goodstein, “Church-based projects lack data on results,” New York Times, April
(continued...)

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The Bush Administration has suggested that a lack of evaluative data should not
be a reason for limiting FBO access to federal funds. In its report Unlevel Playing
Field, it argues that there is a lack of evaluative data for all nongovernmental
providers receiving federal funds, not just FBOs:
Some critics of expended 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.37
Legislative Analysis and Policy Options. The first stated purpose in Title
II of H.R. 7 was “to enable assistance to be provided to individuals and families in
need in the most effective and efficient manner.”38 The Administration and
supporters of H.R. 7 have presented a substantial amount of anecdotal information
that FBOs can effectively deliver services. There have, apparently, been no
comprehensive studies of FBO effectiveness or of how FBO-delivered services
compare to government-delivered services. As passed by the House, Title II did not
require any comprehensive evaluation of the effectiveness of FBOs. This is also true
of the CARE bill and E.O. 13279.
Should Congress wish to initiate an evaluation of FBOs, one possible option
would be to commission a study by an independent commission or the General
Accounting Office (GAO). Congress could direct that the study, to the extent
possible, produce quantitative results on FBO program effectiveness, and on how
FBO programs compare to government programs. Federal agencies, including those
implementing the Executive Order, could be directed to report on the progress of
FBO-delivered programs after a specified amount of time. An evaluation that
produced objective, quantitative results might confirm or refute the anecdotal
information already provided to policy makers or help to isolate and define broader
problem areas.
Qualifications of FBO Personnel. Some state and local officials have
expressed concern about the qualifications of FBO personnel. These officials believe
that, while FBO personnel might have good intentions, they may not have the
experience and skills possessed by government service providers.39 Federal grants
that provide welfare services typically include training requirements for service
providers. Some public officials want to ensure that any charitable choice legislation
36 (...continued)
24, 2001.
37 White House Office of Faith-Based and Community Initiatives, Unlevel Playing Field:
Barriers to Participation by Faith-Based and Community Organizations in Federal Social
Service Programs (Washington: GPO, Aug. 2001), p. 9.
38 H.R. 7, Title II, sec. 1991(b)(1).
39 Avis C. Vidal, Faith-Based Organizations in Community Development, pp.16-20.

CRS-11
applies the same training and skills requirements to FBOs that are applied to
government agencies. The National Association of Social Workers (NASW)
expressed this concern in a policy statement on the faith-based initiative: “NASW
believes that all social service agencies, particularly those receiving public funding,
must adhere to accreditation standards, licensing, laws, and other regulatory
mechanisms that protect consumers and ensure quality service delivery.”40
Some state and local governments actively seek to improve the qualifications
of FBOs by providing training opportunities to FBOs and other community-based
organizations. For example, the city of Roanoke, Virginia, coordinates a training
program for organizations serving the area’s homeless. The program, Homeless
Educators Linking Providers and Services (HELPS), states its mission is, “To
provide a forum for communication, collaboration, and coordination of services
among providers for homeless and impoverished individuals and families in the
Roanoke Valley.” The program offers training opportunities to all interested service
providers. Roanoke’s program also focuses on raising community awareness,
legislative advocacy, and improving program administration.41
Supporters of FBOs have suggested the use of “intermediary organizations” to
assist FBO personnel in administering grant programs. These can assist FBOs with
program development, grant management, financial accounting, legal services, and
intergovernmental coordination. Intermediaries could also help FBOs screen and
assist beneficiaries. Large nonprofit organizations most often serve as intermediaries
because they typically have experience administering government funds. For-profit
organizations, educational institutions, or other FBOs with grant experience may also
serve as intermediaries. Some supporters of FBOs advocate using intermediaries
because they can improve the capacity of smaller FBOs to deliver services.42 With
a similar goal in mind, FBOs may form coalitions to share resources and jointly
provide services.43 Virginia’s faith-based liaison noted that, in its outreach programs,
the state has encouraged smaller FBOs to partner with larger ones with grant
experience and a greater administrative capacity.44 Some federal agencies, including
the Departments of Labor and Heath and Human Services, have made grants to
intermediary groups to help FBOs improve their programs.45
40 National Association of Social Workers, NASW Position on Faith-Based Human Services
Initiatives, [http://www.socialworkers.org/advocacy/positions/faith.htm], visited Jan. 3,
2002.
41 Carol Wright, Human Services Coordinator, Roanoke City, VA, telephone conversation,
July 2, 2001.
42 See Oklahoma Faith-Based Liaison: [http://www.oklaosf.state.ok.us/~faithlinks/
intermed.html], visited Dec. 18, 2002. Also see Kristin E. Holmes, “Faith-based Hispanic
Group Has a Pioneering Role,” Philadelphia Inquirer, Oct. 20, 2002.
43 Paula F. Pipes and Helen Rose Ebaugh, “Faith-based Coalitions, Social Services, and
Government Funding,” Sociology of Religion, Spring 2002, pp. 49-68.
44 Jane B. Brown, Community and Faith-Based Liaison, VA Department of Social Services,
telephone conversation, July 2, 2001.
45 Bill Broadway, “Faith-Based Groups Benefit from New Federal Grants,” Washington
(continued...)

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Besides potentially improving FBOs’ capacity, intermediaries can also be useful
to state and local governments that wish to solicit help from the faith community, but
are uncertain of how to recruit them. Some state and local governments award large
grants to an intermediary, which then distributes smaller grants to FBOs to directly
provide services. For example, the Department of Social Services in Los Angeles
awarded a $5 million contract to Goodwill Industries, a nonprofit serving as an
intermediary. Goodwill Industries then awarded grants to community-based
organizations, including FBOs. One such FBO was Mobilization for the Human
Family, which recruits, trains, and supervises volunteers who serve as mentors to
recently employed TANF recipients.46
Legislative Analysis and Policy Options. H.R. 7 and the CARE bill did not
contain provisions addressing the educational or skill level of FBO personnel that
would provide services. Welfare reform legislation enacted in 1996 also contained
no educational or skill requirements.47 The only example of such a requirement in
charitable choice legislation is found in the Community Renewal Tax Relief Act of
2000, which prevents states and localities from discriminating against FBOs that
have received appropriate training from other FBOs.48
Should the 108th Congress address this issue, it might explore whether this is a
problem and could clarify whether FBOs must satisfy any and all educational and
skill requirements stipulated in individual grant programs. H.R. 7 and the CARE bill
did not specifically instruct federal agencies, or state and local governments, to
consider the qualifications of FBO personnel when evaluating FBO applications.
E.O. 13279 also does not address this issue. More explicit guidance might encourage
FBOs interested in applying for federal grants to improve the qualifications of their
staff. On the other hand, FBOs might view such a requirement as overly stringent
and might therefore be dissuaded from applying for federal funds.
Some observers were concerned that H.R. 7 provisions that exempted FBOs
from Title VII of the Civil Rights Act of 1964 could affect FBOs ability to attract
qualified personnel.49 This would allow FBOs with federal funding to use religion
as a factor in hiring, firing, and other personnel actions. A concern is that FBOs
would place a much higher priority on religious factors than other qualifications.
45 (...continued)
Post, Aug. 3, 2002, p. B9.
46 Amy L. Sherman, “Churches as Government Partners: Navigating ‘Charitable Choice,”
The Christian Century, vol. 17, July 5, 2000, p. 716.
47 P.L. 104-193, “Personal Responsibility and Work Opportunity Reconciliation Act of
1996.”
48 P.L. 106-554, sec. 584(b).
49 H.R. 7, Title II, sec. 1991(d). For a discussion of constitutional issues and civil rights
related to this exemption, see CRS Report RL31043, Public Aid and Faith-Based
Organizations (Charitable Choice): Background and Selected Legal Issues, by David M.
Ackerman.

CRS-13
Inclusion of Religious Content. One frequently debated issue in
Congress’s consideration of expanding FBO access to federal funds was whether or
not to allow religious content in federally funded programs.50 Some advocates of
FBOs contend that the religious component of FBO programs is the reason for their
success in helping people with personal problems.51 Charitable choice provisions
prohibit FBOs from requiring beneficiaries to participate in a religious program,
leading some FBO supporters to fear that accepting federal funds may diminish their
effectiveness. FBOs that accept federal funds and remove religious content from
programs might also face challenges, possibly including diminished religious
enthusiasm of FBO staff and reduction in voluntary contributions.52 One proponent
has encouraged federally funded FBOs to offer religious activities such as Bible
studies and discipleship training, but to make it clear to beneficiaries that such
activities are voluntary. FBOs offering voluntary religious activities must use private
funds to finance those activities. This commentator further states that beneficiaries
must know they can decline to participate in religious activities without penalty.53
Some interest groups representing elected and appointed public officials have
established policies on faith-based initiatives that express concern over this issue.
Many interest groups have suggested that charitable choice legislation should include
safeguards prohibiting FBOs from including religious content in federally funded
programs. The National Association of Social Workers (NASW), for example,
states, “Within the faith-based initiative, safeguards must be implemented to assure
that services are appropriately coordinated, provided by qualified individuals and
without requirements for religious observance.”54
Legislative Analysis and Policy Options. H.R. 7 addressed the religious
content issue by prohibiting FBOs from requiring beneficiaries to participate in
religious activities, which some FBO supporters believe is an essential component
of their programs.55 E.O. 13279 also includes such a requirement.56 It is uncertain
whether this requirement would encourage or discourage FBOs from applying for
federal funds. On the one hand, some FBO leaders have stated that, if government
50 Policy makers and observers of this issue debate the constitutionality of including
religious material in federally funded programs. For a discussion of constitutional
applications, please see the related CRS reports listed at the end of this report.
51 See generally, Byron R. Johnson, “Objective Hope: Assessing the Effectiveness of Faith-
Based Organizations: A Review of the Literature,” Center for Research on Religion and
Urban Civil Society, March 2002. Available at: [http://www.manhattan-institute.org/html/
crrucs-obj_hope_press.htm], visited Dec. 18, 2002.
52 Lewis D. Solomon and Matthew J. Vlissides, Jr., In God We Trust? Assessing the
Potential of Faith-Based Social Services, Policy Report, Progressive Policy Institute
(Washington: Feb. 2001), p. 13. See [http://www.ppionline.org/documents/FBOs_v2.pdf],
visited Jan. 3, 2002.
53 Amy L. Sherman, The Charitable Choice Handbook for Ministry Leaders, Center for
Public Justice, 2001, p. 11.
54 NASW, Position on Faith-Based Human Services Initiatives, 2001.
55 H.R. 7, Title II, sec. 1991(j).
56 E.O. 13279, sec. (2)(e).

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funds include such provisions, they will not apply for them.57 On the other hand,
there is evidence that many FBO leaders are enthusiastic about the opportunity to
apply for federal funds. Oklahoma’s Office of the State Faith-Based Liaison
sponsored a survey of FBOs and their willingness to collaborate with government
agencies. In its survey of over 800 Oklahoma FBOs, 68% favored “receiving
government funds.”58 Additionally, FBO leaders have testified before Congress that
increasing FBO access to government funds will potentially improve FBO
programs.59
There is some evidence, however, that many FBO leaders are unfamiliar with
charitable choice rules. The Oklahoma survey revealed that 87% of FBO leaders
considered themselves unfamiliar with charitable choice legislation and over 70% of
respondents expressed concern about “possible [government] intrusion into the
affairs of the congregation.”60 Another study of FBOs in Harris County, Texas,
suggested that many faith-based groups are unaware of charitable choice
opportunities in federal grant programs, and that many FBOs are not interested in
obtaining government funds.61
Many supporters and opponents of the faith-based initiative have emphasized
the need for FBOs to separate secular services from religious services. FBO
proponent Amy Sherman, in a publication intended to explain charitable choice to
ministry leaders, emphasized that, “... [F]aith-based organizations must not use
government funds for purposes of ‘sectarian worship, instruction, or proselytization,’
and they must not require service recipients to participate in religious practices.”62
A combined statement by charitable choice scholars and observers, issued by the
American Jewish Committee, echoed this belief, stating, “Whenever social service
programs are funded by government, or participation in such programs is mandated
by government, beneficiaries have the right not to participate in religious activities.”63
57 Nancy Johnson and Jessica Temple, “Faith-based Charities See Pros and Cons in Bush
Proposal,” South Bend Tribune, Feb. 4, 2001, p. 1.
58 David P. Knudson, FaithLinks Survey, Summary of Responses, College of Continuing
Education, University of Oklahoma, April 16, 2001. See the Oklahoma State Faith-Based
Liaison web site: [http://www.oklaosf.state.ok.us/~faithlinks/surveyresults.pdf], visited Dec.
18, 2002.
59 House Committee on Ways and Means, Subcommittees on Human Resources and Select
Revenue Measures, Hearing on H.R. 7, The Community Solutions Act, hearing, 107th
Congress, 1st sess., June 14, 2001. Statements of Rev. Luis Cortes, President, Nueva
Esperanza Inc. and Bill Reighard, President, Food Donation Connection,(From here on
referred to as Hearing).
60 David P. Knudson, FaithLinks Survey.
61 Pipes and Ebaugh, “Faith-based Coalitions, Social Services, and Government Funding,”
pp. 49-68.
62 Amy L. Sherman, The Charitable Choice Handbook, p. 11.
63 American Jewish Committee and Feinstein Center for American Jewish History at Temple
University, In Good Faith: A Dialogue on Government Funding of Faith-Based Social
Services, p. 8. See Pew Forum on Religion and Public Life web site:
(continued...)

CRS-15
If FBOs wish to deliver federally funded programs that satisfy constitutional
requirements, it is likely that they will need to develop programs that separate
federally funded services from voluntary religious activities. In this regard, a study
to identify “best practices” of FBO programs might be useful. By identifying and
distributing information on FBO programs that have successfully separated federally
funded services from voluntary religious activities, such a study could assist other
FBOs in developing programs that meet this potential requirement. Additionally,
illustrating such programs might address some of the concerns of FBO leaders who
are reluctant to apply for federal grants because they are uncertain how to structure
their programs to comply with such a requirement.
Availability of Secular Alternatives. Another concern of some state and
local policymakers is charitable choice provisions that would require governments
to provide secular alternatives for services administered by FBOs, but do not provide
additional federal funds for those alternative services. This requirement could
potentially strain local financial resources, since governments might be placed in a
position of awarding a contract to an FBO, as well as funding a secular alternative.
Others have expressed concern that future reductions in federal revenues, due to tax
reductions or a slowing economy, may result in less funding to social service
programs, further straining the financial resources available to state and local
governments to provide secular alternatives.64 From the opposing perspective, some
policy analysts and legislators believe the provision of a secular alternative to FBO-
delivered services is a minimum requirement necessary to allay constitutional and
political concerns.65 One Member of Congress testified that, if legislation requires
state and local governments to provide secular alternatives to services, but does not
provide new funds, this could constitute an unfunded mandate.66 Few state and local
officials, however, have voiced strong concern about federal faith-based legislation
resulting in unfunded mandates.
Legislative Analysis and Policy Options. Title II of H.R. 7, as introduced,
would have required governments to provide a secular alternative for services. In the
House-passed version, beneficiaries who object to the religious character of an FBO
must have access to an alternate provider which is not objectionable on religious
grounds.67 By making this change, Title II arguably gave state and local governments
more flexibility in providing alternative services to beneficiaries who object to the
religious character of certain FBOs. If a beneficiary objects to the religious character
63 (...continued)
[http://www.pewforum.org/publications], visited Dec. 18, 2002.
64 House Committee on Ways and Means, hearing, Statement of Representative Jerrold
Nadler of New York.
65 OMB Watch, “Analysis of Bush Administration’s Charitable Choice Initiatives,” April
23, 2001, p. 7.
66 House Committee on Ways and Means, hearing, Statement of Representative Jerrold
Nadler of New York, hearing, June 14, 2001. See also U.S. Congress, House Committee on
the Judiciary, Community Solutions Act of 2001, Report to Accompany H.R. 7, 107th Cong.,
1st sess., H.Rept. 107-138, Part I (Washington: GPO, 2001), p. 300.
67 H.R. 7, Title II, sec. 1991(g)(1) and (3).

CRS-16
of a FBO, the government would not necessarily have to finance an alternative
service, so long as there was another service provider in the community willing and
able to serve the beneficiary and whom the beneficiary did not find religiously
objectionable. If a community had only religious service providers, however, and a
beneficiary requested a secular one, then the government would be responsible for
meeting this requirement. The CARE bill and E.O. 13279 did not address secular
alternatives.
Large communities with a number of community-based organizations providing
services might not have difficulty meeting such a requirement. They may be able to
satisfy all beneficiaries by dividing a contract for a specific service among several
service providers. Larger communities may also be able to subsidize the transport
of beneficiaries to adjacent communities with acceptable providers.68
Although this provision may have given states and localities a degree of
flexibility in providing alternative services, smaller localities with limited
government resources and few community-based organizations might still have
difficulty meeting such a requirement. For example, a rural locality might award
federal funds to a FBO to provide a specific service. If beneficiaries had an objection
and requested an alternative provider, the local government might have difficulty
financing or procuring that provider.
Policy options would be available to assist small localities with limited
resources who may have difficulty meeting a requirement to provide alternative
services. For the programs to which Title II of H.R. 7 would have applied, Congress
could instruct federal agencies to reserve a portion of program funds to assist small
communities in meeting this requirement. While such a measure might help small
localities meet the requirement, it could result in a disproportionate amount of federal
funds being directed to communities that contract with FBOs. Reserving program
funds for this specific purpose could subtract from the overall funds used in formula
allocation programs. It could also affect the cost and efficiency of service delivery.
Another option would be to leave responsibility for providing alternative
services to state and local governments. Some policy-makers have expressed concern
that this might be considered an unfunded mandate. The House Ways and Means
Committee states in its accompanying report, however, that H.R. 7 does not impose
an unfunded mandate on state and local governments.69 Although state and local
governments have not expressed concern about this issue, should legislation similar
to H.R. 7 become law, state and local governments might call on Congress for
assistance in satisfying the alternative services requirement.
68 Stanley Carlson-Thies, Charitable Choice for Welfare and Community Services: An
Implementation Guide for State, Local, and Federal Officials, Center for Public Justice,
Dec., 2000, p. 21.
69 U.S. Congress, House Committee on Ways and Means, Community Solutions Act of 2001,
Report to Accompany H.R. 7, 107th Cong., 1st sess., H.Rept. 107-138, Part II (Washington:
GPO, 2001), p. 38.

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Regarding the notification of beneficiaries of their right to alternative providers,
Title II would have placed the responsibility with the appropriate federal, state, or
local government.70 If there were concern with ensuring this right, a provision could
be included in statutes, regulations, or grant-making provisions requiring FBOs to
notify beneficiaries. This might improve beneficiaries’ awareness of the right to an
alternative provider, since FBO personnel would have direct contact with the
beneficiary, while government officials may not have direct contact, depending on
program structure. On the other hand, monitoring such a requirement would be
difficult and could lead to what some consider undue intrusion into FBO activities.

Accountability for Results
In addition to providing services in an effective manner, service providers using
public funds must be able to account for their results. Some public officials and
observers of FBOs have concerns about the ability of FBOs to report financial and
programmatic results. Some observers have suggested that a voucher system could
lead to better accountability. Other observers have suggested that if FBOs separate
government funds from other revenues, they would not only improve accountability,
but could also better assure a separation between secular and religious activities.
FBO Ability to Report Results. Some public officials and observers of
FBOs have concerns about FBOs’ ability to report financial and programmatic
results. One analyst stated generally of nonprofit organizations that they, “typically
lack meaningful bases for demonstrating the value of what they do.”71 The National
Association of Counties (NACO) addressed this concern in its resolution on the
President’s faith-based initiative: “There must be sufficient accountability for the use
of funding, and any such programs must be coordinated within counties to maintain
efficient delivery of services to the client population.”72 Historically, nonprofit
organizations have sometimes resisted government efforts to modify their operations,
arguing that such efforts might decrease their autonomy and ability to deliver
services.73
Some observers of nonprofit organizations suggest that government could build
public trust in nonprofit-delivered services if they are held accountable for
programmatic and financial results.74 Some state and local governments are
attempting to improve the accountability of government funded FBOs in their
jurisdiction. For example, North Carolina’s Rural Economic Development Center,
which acts as an intermediary between the state and rural FBOs, has made
70 H.R. 7, Title II, sec. 1991(g)(2).
71 Lester M. Salamon, America’s Nonprofit Sector (Washington: The Foundation Center,
1999), pp. 173-175.
72 National Association of Counties, General Resolution on the President’s Initiative on
Faith and Community-Based Organizations, NACO web site: [http://www.naco.org/leg/
platform/resfaith01.cfm], visited Dec. 18, 2002.
73 Salamon, America’s Nonprofit Sector, pp. 173-175.
74 Charles L. Glenn, The Ambiguous Embrace: Government and Faith-Based Schools and
Social Agencies (Princeton, NJ: Princeton U. Press, 2000), p. 285.

CRS-18
accountability a major criterion in its grant-making decisions. A discussion among
REDC’s staff and participants resulted in the following observation:
It is essential for faith-based organizations to have the capacity to take on
countywide human services, the competency to handle eligibility and case
management functions, plus track their outcomes through an established
monthly/annual reporting system. This means that faith-based organizations
should apply for funds only if they have existing services or have spent an
adequate amount of time in capacity/competency/collaborative building before
launching into new territory.75
Other state and local governments, however, do not highly emphasize
accountability. Many governments impose only minimal requirements, such as an
annual report from grant recipients.76
Almost all federal grants have reporting requirements that include programmatic
and financial results. Most long-term grants require monthly reports, while short-
term project grants may only require a report upon the project’s completion. All
grant recipients who expend $300,000 or more in federal funds in a year undergo an
audit and must satisfy the accountability standards established by OMB Circular A-
133. These general reporting requirements apply to all grant recipients, whether
state, local, or nonprofit agencies.77
Legislative Analysis and Policy Options. Title II of H.R. 7 addressed the
issue of accountability by stating that FBOs receiving federal funds would be held to
the same standards of accountability as secular nonprofits. The bill specifically
stated “... a religious organization providing assistance under any program ... shall be
subject to the same regulations as other nongovernmental organizations to account
in accord with generally accepted accounting principles ....”78 Title II further
required FBOs to conduct annual self-audits and report findings to the appropriate
federal, state, or local official.79 Members of Congress who supported H.R. 7,
including Representative Watts, one of the bill’s sponsors, emphasized that charitable
choice legislation must focus on results and insist on accountability. Some of the
bill’s supporters also stated that, if the federal government gives FBOs equal
opportunity to compete for grants, then it must hold them equally accountable for
results.80
75 N.C. Rural Economic Development Center, Discussion Summary, Faith-Based Initiatives
Conference Call, Feb. 2, 2001.
76 Telephone conversations with selected state and local officials, June-July 2001.
77 U.S. General Services Administration, Catalog of Federal Domestic Assistance
(Washington: GPO, 2001), p. xviii.
78 H.R. 7, Title II, sec. 1991(i)(1).
79 H.R. 7, Title II, sec. 1991(i)(3).
80 Office of Rep. Watts, Jr., H.R. 7 Community Solutions Act, Information Packet, June
2001.

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H.R. 7 would have instructed the Attorney General to allocate funds for
technical assistance grants to “small non-governmental organizations,” including
FBOs. Among the list of eligible activities for these grants, the House included
information and referrals to nongovernmental organizations to provide training in
accounting and program development.81 Similarly, the CARE bill would have
authorized a total of $150 million, divided among four federal departments, for grants
and technical assistance to FBOs to enhance their administrative capacity. The
Senate bill specified such activities as grant management training and information
on best practices.82 One option would be to add specific activities to such legislation
to clarify that programmatic and financial accountability would be eligible activities
under technical assistance grants. E.O. 13279 does not address reporting
requirements or accountability.
Vouchers and Accountability. Some advocates of FBOs suggest using a
voucher system of payment, maintaining that vouchers would allow beneficiaries to
choose an organization that best suits their preferences, whether a public agency,
FBO, or private agency.83 A voucher system could also potentially improve
accountability, since the organization that provides services to the most beneficiaries
would receive the most federal assistance. Besides providing a surrogate
performance measure, proponents believe that vouchers could offer other potential
benefits, such as giving recipients greater choice in service providers and preserving
the independence of FBOs. One analyst stated:
Voucher arrangements are better than contracting for preserving the
independence of faith-based organizations and giving recipients choice. Where
possible, [public officials should] redesign services and procurement policies so
that a range of organizations can provide services and each recipient has the
chance to select the most effective and compatible provider.84
Opponents of the voucher approach counter that vouchers still raise concerns
under the establishment clause of the Constitution, notwithstanding that government
assistance is not provided directly to the FBO.85 They also argue that a voucher
assumes there is a competitive marketplace for social services, when in most
localities there are few, and sometimes no, providers of services. Opponents also
believe vouchers hinder an organization’s ability to budget effectively and plan for
services.86
81 H.R. 7, Title II, sec. 1991(o)(1) and (o)(2).
82 S. 1924, Title V.
83 Charles L. Glenn, The Ambiguous Embrace, p. 285.
84 Stanley Carlson-Thies, “Charitable Choice: Top 10 Tips for Public Officials,” Center for
Public Justice, 1999. See web site at: [http://downloads.weblogger.com/gems/cpj/138.pdf],
visited Dec. 18, 2002.
85 For more information, see CRS Report RL31043, Public Aid and Faith-Based
Organizations (Charitable Choice): Background and Selected Issues, by David M.
Ackerman.
86 OMB Watch, “Analysis of Bush Administration’s Charitable Choice Initiatives,” p. 9.

CRS-20
Legislative Analysis and Policy Options. The Senate’s CARE bill and E.O.
13279 did not address vouchers. Title II in H.R. 7, however, would have given
discretion to cabinet secretaries to determine when vouchers are a suitable payment
method in particular programs.87 Voucher payment systems, when authorized by the
department secretary, might have more potential to improve accountability in more
populous communities where there is a large number of service providers. In such
areas, beneficiaries would have a choice of provider, which theoretically would direct
the most federal funds to the most popular provider. This assumes that beneficiaries
would have adequate information to make such choices, which may or may not be
the case. A voucher system would have less potential to improve accountability in
small communities where there may be only one service provider.
One option to address concerns would be to provide department secretaries with
specific criteria for deciding when to use voucher systems. For example, Congress
could craft language instructing secretaries to consider the number of service
providers (both secular and religiously-affiliated) in the service area.
Separation of Government Funds. Both supporters and opponents of
using FBOs have suggested that FBOs can satisfy accountability requirements and
better preserve their independence and religious identity by keeping all government
funds in a separate account. Religious organizations have historically been exempt
from many IRS reporting requirements, unlike secular nonprofits, which are not
exempt. Some observers contend that FBOs that did not separate grant funds would
open themselves to public scrutiny of their religious activities, and not just their
social service activities. Separated grant accounts offer a potential means of
enhancing accountability while preserving the independence of FBOs.88 The
Commonwealth of Virginia points out this option to FBOs, stating:
Religious organizations contracting to provide assistance are subject to the same
regulations as other service providers and will be subject to audits. If these
organizations segregate Federal funds into separate accounts, only those funds
will be audited. Finally, programs must be operated in compliance with federal
and state laws, and funds may not be used for worship, religious instruction, or
proselytizing.89
Legislative Analysis and Policy Options. The CARE bill did not, and E.O.
13279 does not, address separation of funds. H.R. 7, however, would have required
FBOs to separate government funds they receive through grants and contracts. Only
the separated government funds would be subject to audit. Further, if an FBO
received government funds through vouchers it could separate the funds, and only
separated government funds would be subject to audit.90 These provisions would
likely have enhanced the ability of federal officials to audit FBO programs.
87 H.R. 7, Title II, sec. 1991(l).
88 OMB Watch, “Analysis of Bush Administration’s Charitable Choice Initiatives,”p. 7.
89 Virginia Community and Faith-Based Initiatives web site:
[http://www.dss.state.va.us/community/291.html], visited Dec. 18, 2002.
90 H.R. 7, Title II, sec. 1991(i)(2).

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Additionally, these provisions could help allay the concerns of those officials and
citizens who believe FBOs might use government funds for religious activities.
Some concerned observers stated that Congress should further improve
accountability in voucher systems by requiring FBOs to separate funds received
through vouchers, rather than giving them the option to separate them, as provided
in H.R. 7. The point was that if the funds are not separated, then they are not subject
to government audit. Requiring these funds to be separated and subject to audit
would improve the ability of federal officials to audit the program. Such a
requirement could result in quantitative evidence (financial records) showing that
FBOs do separate federally funded services from religious activities.
The House included a provision in H.R. 7 giving states and localities discretion
in co-mingling their funds with federal funds when the state or locality is contributing
to a program. When states and localities co-mingle funds, all the government funds
are subject to federal audit.91 Another approach would have been to encourage those
state and local governments that keep their funds separated, to undertake their own
audits of state and local funds.
Working Relationship Between FBOs and
State and Local Governments
There is a long history of FBOs receiving funds from all levels of government
to provide services. For example, in the 19th century, the federal government worked
through FBOs to assist Native Americans and refugees. The “Great Society”
programs of the 1960s expanded the variety of programs administered by FBOs to
such areas as welfare services and community development. During the early 1980s,
grants-in-aid funding was substantially reduced, but President Ronald Reagan’s
“New Federalism” initiative still emphasized the use of FBOs and other nonprofit
organizations. One observer of FBOs and nonprofits wrote: “[They] retain a
significant foothold in virtually every sphere of human service, and in many cases
have been able to expand their activities as a direct by-product of government
involvement.”92
New federal legislation or initiatives to expand FBO access to federal funds
could potentially disrupt good working relationships between FBOs and state and
local governments. Past efforts to use community-based organizations in federal
programs, whether religious or not, have sometimes produced competitive
relationships between state and local governments and those community-based
organizations.
This occurred, for example, in the 1960s when Congress authorized private,
nonprofit agencies called Community Action Agencies (CAAs) to receive and
91 H.R. 7, Title II, sec. 1991(j).
92 Stephen V. Monsma, When Sacred and Secular Mix (Lanham, MD: Rowman & Littlefield
Publishers, Inc., 1996), pp. 6-7.

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administer federal anti-poverty funds.93 CAAs were charged with achieving
“maximum feasible participation” of community residents in the use of federal funds.
During those years, some CAA officials said that their role as advocates for the poor
led to adversarial relationships with local governments. Some local elected officials
argued that it was inappropriate to channel federal funds away from elected
governments to community organizations that were not politically accountable to the
entire local electorate. As a result, CAAs and local governments sometimes
competed for authority over the distribution of funds and benefits in federal
programs.94 In some cities, there were reports of mistrust between citizens and local
officials, which led to arguably ineffective implementation of programs. For
example, a CAA in Philadelphia reported:
We only succeeded when we insisted that the politicians live up to their
promises, and when we demonstrated that we had some power .... If you allow
yourself to be kept busy reacting to the government’s ... mountain of bureaucratic
requirements, you get diverted from the really important task of initiating,
refining, and acting on your community’s agenda.95
Congress considered the views of local government officials when it created the
Model Cities program in 1966, which gave local elected officials increased
responsibility for certain federally funded programs.96 Local officials, however,
were required to provide “citizen participation structures [with] ‘... clear and direct
access to the decision-making process ....’” Legislation further required local officials
to provide technical assistance to community organizations administering community
services.97
Although funding the activities of FBOs is not a new proposal, some state and
local officials are concerned that increasing FBO access to federal funds could result
in a similar environment of competition between FBOs and state and local
governments. One community services official in Michigan also questioned whether
using more FBOs could disrupt existing productive relationships between FBOs and
state and local governments, as well as relationships among FBOs.98 A
representative of the American Federation of State, County and Municipal
Employees (AFSCME), a public employees’ union, expressed concern that the faith-
based initiative, when combined with the federal tax cuts, “... will pit religious,
93 Economic Opportunity Act of 1964, P.L. 88-452; 78 Stat. 516.
94 John H. Strange, “Citizen Participation in Community Action and Model Cities
Programs,” Public Administration Review, vol. 32, Oct. 1972., p. 660.
95 As told to Sherry R. Arnstein, “Maximum Feasible Manipulation,” Public Administration
Review, vol. 32, Sept., 1972, p. 388.
96 Demonstration Cities and Metropolitan Development Act of 1966, P.L. 89-754; 80 Stat.
1255.
97 John H. Strange, “Citizen Participation,” pp. 655-657.
98 Steve Walker, Executive Director, Genesee County Community Action, quoted in Gary
Heinlein, “GOP Wants Religious Groups to Take Over Welfare Tasks,” Detroit News, Feb.
26, 2001.

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secular nonprofit, and public agencies against each other for a declining share of
federal funds ....”99
On the other hand, one analyst asserted that, “[c]ompetition for funds may
happen, but I don’t necessarily see that as a bad thing. We want the money to go to
the most efficient [organizations].”100 Several officials from the federal, state, and
local levels of government have stated that while harmful competition is possible,
they are unaware of any instances in which FBOs and state and local governments
have had conflicts over competition for funds or program authority.101
Some public officials are reporting that state-level faith-based initiatives are
enhancing the relationship between FBOs and government. One Indiana state official
testified to Congress that her state’s FaithWorks program, “... has not created any
new burden on the system or the state—rather it has helped create broadened
partnerships in providing services that bring new perspectives and approaches to
supporting individuals in need.”102 Other states, like Virginia, have launched
awareness campaigns to communicate to FBOs the state’s willingness to coordinate
programs with them.
Legislative Analysis. Neither H.R. 7, the CARE bill, nor the more recent E.O.
13279, contained provisions addressing competition between FBOs and state and
local governments. Charitable choice provisions like those in H.R. 7, if enacted,
would likely affect the working relationship through its effectiveness and
accountability provisions.
Friction between the institutions could develop if FBOs that accept government
funds feel government regulations have a secularizing effect on their organization.
Some FBO leaders have expressed concern over secularization, because of
requirements that religious content be separated from programs receiving direct
federal funding. Conversely, FBO proponent Amy L. Sherman testified before
Congress that, in her interviews with FBO leaders and public officials, she found no
evidence that FBOs “... felt their religious expression had been ‘squelched’ in their
collaborative relationship with government.”103
99 House Committee on Ways and Means, hearing, Statement of Nanine Meiklejohn,
AFSCME.
100 Steven Lazarus, Senior Policy Associate, Center for Public Justice, quoted in Gary
Heinlein, “GOP Wants Religious Groups to Take Over Welfare Tasks” Detroit News, Feb.
26, 2001.
101 Telephone conversations with selected federal, state, and local officials, June 2001.
102 House Committee on Ways and Means, hearing, Statement of Katherine Humphreys,
Secretary, Indiana Family and Social Services Administration.
103 U.S. Congress, House Committee on the Judiciary, Subcommittee on the Constitution,
Oversight Hearing on State and Local Implementation of Existing Charitable Choice
Programs, hearing, 107th Cong., 1st sess., April 24, 1976. See House Judiciary Committee
web site: [http://www.house.gov/judiciary/sherman_042401.htm], visited Jan. 3, 2001.

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It is also possible that expanding charitable choice could lead to competition
among FBOs. Rev. J. Brent Walker, a scholar and executive director of the Baptist
Joint Committee on Public Affairs, testified before Congress that charitable choice
“encourages unhealthful rivalry and competition among religious groups.” He further
expressed concern that by expanding FBO access to federal funds, the federal
government could potentially be forced to choose one religious denomination over
others, or at least give the impression of doing so.104 Such a scenario is possible
because U.S. citizens hold a wide range of religious beliefs. If the number of FBOs
applying for federal funds increased, then federal, state, and local governments may
give the perception of awarding grants to one particular denomination or FBO.
Those FBOs who are not awarded funds may believe they were discriminated against
on a religious basis.
Conclusion
In announcing his faith-based initiative, President Bush declared that
“Government cannot be replaced by such organizations, but it can and should
welcome them as partners.”105 A significant number of state and local government
officials agree with the President that FBOs can be effective partners. On the other
hand, others argue there are a number of complex institutional issues Congress
should consider and resolve legislatively or through oversight of an expanded role
for FBOs in the delivery of federally assisted services.
Related CRS Products
CRS Report RL31042, Charitable Choice: House-Passed Version of H.R. 7
Compared With Existing Charitable Choice Laws, by Vee Burke.
CRS Report RS20948, Charitable Choice Provisions of H.R. 7, by Vee Burke.
CRS Report RL31043, Public Aid to Faith-Based Organizations (Charitable
Choice): Background and Selected Legal Issues, by David M. Ackerman.
Resources on Charitable Choice Issues
White House Office of Faith-Based and Community Initiatives
[http://www.whitehouse.gov/government/fbci/]
American Civil Liberties Union
[http://www.aclu.org/ReligiousLiberty/ReligiousLibertyMain.cfm]
104 House Committee on Ways and Means, hearing, Statement of J. Brent Walker, Executive
Director, Baptist Joint Committee on Public Affairs.
105 U.S. President (George W. Bush), “Establishment of White House Office of Faith-Based
and Community Initiatives,” E.O. 13199, Federal Register, vol. 66, p. 8499, Jan. 31, 2001.

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Aspen Institute—Nonprofit Sector Research Fund
[http://www.nonprofitresearch.org/index.htm]
Hudson Institute
[http:/www.hudsonfaithincommunities.org/]
Pew Forum on Religion and Public Life
[http://pewforum.org/]
The Roundtable on Religion and Social Welfare Policy
[http://www.religionandsocialpolicy.org/]