[Federal Register Volume 80, Number 151 (Thursday, August 6, 2015)]
[Proposed Rules]
[Pages 47254-47269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18263]



[[Page 47253]]

Vol. 80

Thursday,

No. 151

August 6, 2015

Part VII





 Department of Education





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2 CFR Part 3474

 34 CFR Parts 75 and 76





Uniform Administrative Requirements, Cost Principles, and Audit 
Requirements for Federal Awards; Direct Grant Programs; and State-
Administered Programs; Proposed Rule

Federal Register / Vol. 80 , No. 151 / Thursday, August 6, 2015 / 
Proposed Rules

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DEPARTMENT OF EDUCATION

2 CFR Part 3474

34 CFR Parts 75 and 76

[ED-2014-OS-0131]
RIN 1895-AA01


Uniform Administrative Requirements, Cost Principles, and Audit 
Requirements for Federal Awards; Direct Grant Programs; and State-
Administered Programs

AGENCY: Center for Faith-Based and Neighborhood Partnerships, Office of 
the Secretary, Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to amend the Education Department 
General Administrative Regulations (EDGAR) governing direct grant 
programs and State-administered programs as they relate to faith-based 
organizations. The Secretary also proposes to amend the regulations 
governing uniform administrative requirements, cost principles, and 
audit requirements for Federal awards. The amendments are designed to 
implement Executive Order 13279, as amended by Executive Order 13559. 
Executive Order 13279 established fundamental principles to guide the 
policies of Federal agencies, including the Department of Education, 
regarding the participation of faith-based and other community 
organizations in programs that they administer. Executive Order 13559 
amended Executive Order 13279 to clarify those principles and add 
certain protections for beneficiaries of Federal social service 
programs who are served by faith-based organizations.

DATES: We must receive your comments on or before October 5, 2015.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via postal mail, commercial delivery, or hand delivery. We will not 
accept comments submitted by fax or by email or those submitted after 
the comment period. To ensure that we do not receive duplicate copies, 
please submit your comments only once. In addition, please include the 
Docket ID at the top of your comments.
     Federal eRulemaking Portal: Go to www.regulations.gov to 
submit your comments electronically. Information on using 
Regulations.gov, including instructions for accessing agency documents, 
submitting comments, and viewing the docket, is available on the site 
under ``Are you new to the site?''.
     Postal Mail, Commercial Delivery, or Hand Delivery: If you 
mail or deliver your comments about these proposed regulations, address 
them to Rev. Brenda Girton-Mitchell, Director, Center for Faith-Based 
and Neighborhood Partnerships, Office of the Secretary, U.S. Department 
of Education, 400 Maryland Avenue SW., Room 1E110-A, Washington, DC 
20202-6132.
    Privacy Note: The Department's policy is to make all comments 
received from members of the public available for public viewing in 
their entirety on the Federal eRulemaking Portal at 
www.regulations.gov. Therefore, commenters should be careful to include 
in their comments only information that they wish to make publicly 
available.

FOR FURTHER INFORMATION CONTACT: Rev. Brenda Girton-Mitchell, Director, 
Center for Faith-Based and Neighborhood Partnerships, Office of the 
Secretary, U.S. Department of Education, 400 Maryland Avenue SW., Room 
1E110-A, Washington, DC 20202-6132. Telephone: (202) 401-1876.
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION: 
    Invitation to Comment: We invite you to submit comments regarding 
these proposed regulations. To ensure that your comments have maximum 
effect in developing the final regulations, we urge you to identify 
clearly the specific section or sections of the proposed regulations 
that each of your comments addresses and to arrange your comments in 
the same order as the proposed regulations.
    We invite you to assist us in complying with the specific 
requirements of Executive Orders 12866 and 13563 and their overall 
requirement of reducing regulatory burden that might result from these 
proposed regulations. Please let us know of any further ways we could 
reduce potential costs or increase potential benefits while preserving 
the effective and efficient administration of the Department's programs 
and activities.
    During and after the comment period, you may inspect all public 
comments about these proposed regulations by accessing Regulations.gov. 
You may also inspect the comments in person in Room 1E110-A, 400 
Maryland Avenue SW., Washington, DC 20202-6132, between 8:30 a.m. and 
4:00 p.m. Washington, DC time, Monday through Friday of each week 
except Federal holidays. Please contact the person listed under FOR 
FURTHER INFORMATION CONTACT.
    Assistance to Individuals with Disabilities in Reviewing the 
Rulemaking Record: On request, we will provide an appropriate 
accommodation or auxiliary aid to an individual with a disability who 
needs assistance to review the comments or other documents in the 
public rulemaking record for these proposed regulations. If you want to 
schedule an appointment for this type of accommodation or auxiliary 
aid, please contact the person listed under FOR FURTHER INFORMATION 
CONTACT.

Background

    On December 12, 2002, President George W. Bush signed Executive 
Order 13279, Equal Protection of the Laws for Faith-Based and Community 
Organizations (67 FR 77141). Executive Order 13279 set forth the 
principles and policymaking criteria to guide Federal agencies in 
formulating and developing policies with implications for faith-based 
organizations and other community organizations, to ensure equal 
protection of the laws for these organizations, and to expand 
opportunities for, and strengthen the capacity of, these organizations 
to meet the need for social services in America's communities. In 
addition, Executive Order 13279 directed specified agency heads, 
including the Secretary of Education, to review and evaluate existing 
policies relating to Federal financial assistance for social services 
programs and, where appropriate, to implement new policies that were 
consistent with, and necessary to further, the fundamental principles 
and policymaking criteria that have implications for faith-based and 
community organizations.
    To comply with this Executive Order, on June 4, 2004, the 
Department amended Parts 74, 75, 76, and 80 of EDGAR (69 FR 31708). 
These amendments clarified that faith-based organizations are eligible 
to participate in programs administered by the Department on the same 
basis as any other private organization, with respect to programs for 
which those other organizations are eligible. See 34 CFR 74.44(f), 
75.52, 76.52, and 80.36(j) (CFR 2014 edition). The Department also has 
regulations, predating the regulations implementing Executive Order 
13279, that prohibit the use of Federal funds to support religious 
activities. See 34 CFR 75.532 and 76.532.
    Shortly after taking office, on February 9, 2009, President Obama 
signed Executive Order 13498, Amendments to Executive Order 13199 and 
Establishment of the President's Advisory Council for Faith-Based and

[[Page 47255]]

Neighborhood Partnerships (74 FR 6533). Executive Order 13498 changed 
the name of the White House Office of Faith-Based and Community 
Initiatives to the White House Office of Faith-Based and Neighborhood 
Partnerships and established the President's Advisory Council on Faith-
Based and Neighborhood Partnerships (Advisory Council). The President 
created the Advisory Council to bring together experts to, among other 
things, make recommendations to the President for changes in policies, 
programs, and practices that affect the delivery of services by faith-
based and other neighborhood organizations.
    The Advisory Council issued its recommendations in a report 
entitled ``A New Era of Partnerships: Report of Recommendations to the 
President'' in March 2010. Available at http://www.whitehouse.gov/sites/default/files/microsites/ofbnp-council-final-report.pdf. The 
Advisory Council Report included recommendations to amend Executive 
Order 13279 in order to clarify the legal foundation of partnerships 
and offered a new set of fundamental principles to guide agency 
decision-making in administering Federal financial assistance and 
support to faith-based and neighborhood organizations.
    President Obama signed Executive Order 13559, Fundamental 
Principles and Policymaking Criteria for Partnerships with Faith-Based 
and Other Neighborhood Organizations, on November 17, 2010 (75 FR 
71319). Available at http://www.gpo.gov/fdsys/pkg/FR-2010-11-22/pdf/2010-29579.pdf. Executive Order 13559 incorporated the Advisory 
Council's recommendations by amending Executive Order 13279 to:
     Require agencies that administer or award Federal 
financial assistance for social service programs to implement 
protections for the beneficiaries or prospective beneficiaries of those 
programs. These protections include: (1) Providing referrals to 
alternative providers if the beneficiary objects to the religious 
character of the organization providing services; and (2) ensuring that 
written notice of these and other protections is provided to 
beneficiaries before they enroll in, or receive services from, the 
program;
     Affirm that decisions about awards of Federal financial 
assistance must be free from political interference or even the 
appearance of that interference, and must be made on the basis of 
merit, not on the basis of the religious affiliation, or lack of 
affiliation, of the recipient organization;
     Affirm that the Federal government has an obligation to 
monitor and enforce all standards regarding the relationship between 
religion and government in ways that avoid excessive entanglement 
between religious bodies and governmental entities;
     Clarify (1) the principle that organizations engaging in 
explicitly religious activity must separate these activities in time or 
location from programs supported with direct Federal financial 
assistance (the prior Executive Order stated this requirement as 
applying to ``inherently religious'' activity); (2) that participation 
in any explicit religious activity cannot be subsidized with direct 
Federal financial assistance; and (3) that participation in those 
activities must be voluntary for the beneficiaries of the social 
service program supported with such Federal financial assistance;
     Emphasize that religious providers are welcome to compete 
for government social service funding and maintain a religious identity 
as described in the Executive order;
     Require agencies that provide Federal financial assistance 
for social service programs to post on their Web sites regulations, 
guidance documents, and policies that have implications for faith-based 
and neighborhood organizations, as well as a list of entities receiving 
that assistance;
     Clarify that the standards in the current and proposed 
agency regulations apply to sub-awards as well as to prime awards; and
     Direct agencies to adopt regulations and guidance that 
distinguish between ``direct'' and ``indirect'' Federal financial 
assistance for the purpose of implementing this Executive order.
    In addition, Executive Order 13559 created the Interagency Working 
Group on Faith-Based and Other Neighborhood Partnerships (Working 
Group) to review and evaluate existing regulations, guidance documents, 
and policies.
    The Executive order also required that, following receipt of the 
Working Group's report, the Office of Management and Budget (OMB), in 
coordination with the U.S. Department of Justice, issue guidance to 
agencies on the implementation of the Executive order. In August 2013, 
OMB issued such guidance. In this guidance, OMB instructed specified 
agency heads, including the Secretary of Education, to adopt 
regulations and guidance that will fulfill the requirements of the 
Executive order and to amend regulations and guidance to ensure that 
they are consistent with Executive Order 13559. These proposed new 
regulations and amendments are part of the Department's efforts to 
comply with the Executive order.

Significant Proposed Regulations

    We discuss substantive issues under the sections of the proposed 
regulations to which they pertain. Generally, we do not address 
proposed regulatory provisions that are technical or otherwise minor in 
effect.

    Note:  While the actual proposed amendments to title 2 will 
appear in the Federal Register before the amendments to title 34, we 
discuss the amendments to title 34 first, because that order 
provides the context needed to better understand the amendments the 
Department is proposing to title 2.

Title 34--Education

Subtitle A--Office of the Secretary, Department of Education

PART 75--DIRECT GRANT PROGRAMS; PART 76--STATE ADMINISTERED 
PROGRAMS

Sections 75.52 Eligibility of Faith-Based Organizations for a Grant and 
76.52 Eligibility of Faith-Based Organizations for a Subgrant

    Current Regulations: Current Sec. Sec.  75.52 and 76.52 govern the 
eligibility of faith-based organizations to apply for and receive 
funding under Department programs on the same basis as any other 
private organizations. Current paragraph (a) of these provisions makes 
clear that faith-based organizations are eligible to participate in the 
Department's grant programs on the same basis as any other private 
organization. Current paragraph (b) provides that a faith-based 
organization that receives a grant under a program of the Department is 
subject to the provisions in Sec. Sec.  75.532 and 76.532, as 
applicable. These sections prohibit use of Federal funds for religious 
purposes. Under current Sec. Sec.  75.52(c) and 76.52(c), an 
organization that engages in inherently religious activities, such as 
religious worship, instruction, or proselytization, must offer those 
services separately in time or location from services under a program 
of the Department and participation in those activities must be 
voluntary. However, under current paragraph (d), a faith-based 
organization that applies for or receives a grant may retain its 
religious identity. Current paragraph (e) prohibits a private 
organization that receives a grant or subgrant under a program of the 
Department from discriminating against beneficiaries or prospective 
beneficiaries on the basis of religion. Current paragraph (f) addresses 
a grantee's or subgrantee's contribution of its funds in excess of what 
is required and current paragraph (g) addresses a religious 
organization's exemption from

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the Federal prohibition on employment discrimination on the basis of 
religion.
    Proposed Regulations: The Secretary proposes to revise paragraph 
(a)(2) of Sec. Sec.  75.52 and 76.52 to require the Department to 
ensure that all decisions about grant awards are free from political 
interference, or even the appearance of such interference, and are made 
on the basis of merit, not on the basis of religion or religious 
belief. Consistent with Executive Order 13559, this paragraph would 
further clarify that a faith-based organization is eligible to 
participate in the Department's direct and State-administered grant 
programs on the same basis as any other private organization.
    The Secretary proposes to revise paragraph (c) of Sec. Sec.  75.52 
and 76.52. The current paragraph (c) would be redesignated as paragraph 
(c)(1) and, in that paragraph, the term ``inherently religious'' would 
be replaced with the term ``explicitly religious.'' This change will 
provide greater clarity and more closely match constitutional standards 
as they have developed in case law.
    The Secretary also proposes to add paragraphs (c)(2) and (c)(3) to 
the revised paragraph (c). Paragraph (c)(2) would clarify that a faith-
based organization that provides services to a beneficiary under a 
program of the Department supported only by ``indirect Federal 
financial assistance'' is not subject to the restrictions under newly 
redesignated paragraph (c)(1). To clarify the distinction between 
``indirect Federal financial assistance'' and ``direct Federal 
financial assistance'' as used under these proposed regulations, 
paragraph (c)(3) would add definitions of those terms.
    Finally, the Secretary proposes to revise paragraph (e) of 
Sec. Sec.  75.52 and 76.52 to clarify that all private organizations 
that receive funds under a program of the Department are prohibited 
from discriminating against a beneficiary in the provision of program 
services on the basis of religion or religious belief.
    Reasons: Consistent with Executive Order 13279, current regulations 
prohibit nongovernmental organizations from using direct Federal 
financial assistance (such as government grants, subgrants, contracts, 
and subcontracts) for ``inherently religious activities, such as 
worship, religious instruction, and proselytization.'' The term 
``inherently religious'' has proven confusing, however. In 2006, for 
example, the Government Accountability Office (GAO) found that, while 
all 26 of the religious social service providers it interviewed said 
they understood the prohibition on using direct Federal financial 
assistance for ``inherently religious activities,'' four of the 
providers described acting in ways that appeared to violate that rule. 
See Faith-Based and Community Initiative: Improvements in Monitoring 
Grantees and Measuring Performance Could Enhance Accountability, GAO-
06-616, at 34-35 (June 2006) (available at http://www.gao.gov/new.items/d06616.pdf).
    While the Supreme Court has sometimes used the term ``inherently 
religious,'' it has not used it to indicate the boundary of what the 
Government may subsidize with direct Federal financial assistance. If 
the term is interpreted narrowly, it could permit actions that the 
Constitution prohibits. On the other hand, one could also argue that 
the term ``inherently religious'' is too broad rather than too narrow. 
For example, some might consider their provision of a hot meal to a 
needy person to be an ``inherently religious'' act when it is 
undertaken from a sense of religious motivation or obligation, even 
though it has no overt religious content.
    The Court has determined that the Government cannot subsidize ``a 
specifically religious activity in an otherwise substantially secular 
setting.'' Hunt v. McNair, 413 U.S. 734, 743 (1973)). It has also said 
that a direct aid program impermissibly advances religion when the aid 
results in governmental indoctrination of religion. See Mitchell v. 
Helms, 530 U.S. 793, 808 (2000) (Thomas, J., joined by Rehnquist, C.J., 
Scalia, and Kennedy, JJ., plurality); id. at 845 (O'Connor, J., joined 
by Breyer, J., concurring in the judgment); Agostini v. Felton, 521 
U.S. 203, 223 (1997). This terminology is fairly interpreted to 
prohibit the Government from directly subsidizing any ``explicitly 
religious activity,'' including activities that involve overt religious 
content. Thus, direct Federal financial assistance should not be used 
to pay for activities such as religious instruction, devotional 
exercises, worship, proselytizing or evangelism; production or 
dissemination of devotional guides or other religious materials; or 
counseling in which counselors introduce religious content. Similarly, 
direct Federal financial assistance may not be used to pay for 
equipment or supplies to the extent that they are allocated to those 
activities. Activities that are secular in content, such as serving 
meals to the needy or using a nonreligious text to teach someone to 
read, are not ``explicitly religious activities'' merely because the 
provider is religiously motivated to provide those services. The 
teaching or acknowledgement of religion as a historical or cultural 
reality is also not an explicitly religious activity.
    We note that, notwithstanding the general prohibition on the use of 
direct Federal financial assistance to support explicitly religious 
activities, there are times when religious activities may be federally 
financed under the Establishment Clause of the First Amendment to the 
U.S. Constitution and not subject to the direct Federal financial 
assistance restrictions; for instance, in situations where Federal 
financial assistance is provided to chaplains to work with inmates in 
prisons, detention facilities, or community correction centers through 
social service programs. This is because, where there is extensive 
government control over the environment of the federally financed 
social service program, program officials may sometimes need to take 
affirmative steps to provide an opportunity for beneficiaries of the 
social service program to exercise their religion. See Cruz v. Beto, 
405 U.S. 319, 322 n.2 (1972) (per curiam) (``reasonable opportunities 
must be afforded to all prisoners to exercise the religious freedom 
guaranteed by the First and Fourteenth Amendment without fear of 
penalty''); Katcoff v. Marsh, 755 F.2d 223, 234 (2d Cir. 1985) (finding 
it ``readily apparent'' that the Government is obligated by the First 
Amendment ``to make religion available to soldiers who have been moved 
by the Army to areas of the world where religion of their own 
denominations is not available to them''). Without such efforts, 
religious freedom might not exist for these beneficiaries. Accordingly, 
services such as chaplaincy services are not explicitly religious 
activities that are subject to direct financial aid restrictions.
    Likewise, it is important to emphasize that the restrictions on 
explicit religious content apply to content generated by the 
administrators of the program receiving direct Federal financial 
assistance, not to spontaneous comments made by individual 
beneficiaries about their personal lives in the context of these 
programs. For example, if a person administering a federally funded job 
skills program uses neutral language to ask beneficiaries to describe 
how they gain the motivation necessary for their job searches and some 
beneficiaries refer to their faith or membership in a faith community, 
these kinds of comments do not violate the restrictions and should not 
be censored. In this context, it is clear that the administrator of the 
government

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program did not orchestrate or encourage such comments.
    Under current regulations, the Department characterizes 
``inherently religious activities'' as including ``religious worship, 
instruction, or proselytization.'' The scope of activities encompassed 
by the term ``inherently religious activities'' is the same as the 
scope of activities encompassed under the proposed definition of 
``explicitly religious activities,'' so the proposed regulations would 
not change or diminish existing regulatory protections for the 
religious identity of faith-based organizations. However, by proposing 
to change ``inherently religious activities'' to ``explicitly religious 
activities,'' the proposed regulations would provide greater clarity 
regarding the scope of the regulations and more closely match 
constitutional standards as they have developed in case law. Thus, the 
proposed regulations would not affect, for example, an organization's 
ability to use religious terms in its organizational name, select board 
members on a religious basis, include religious references in its 
mission statement and other organizational documents, and use its 
facilities without removing or altering religious art, icons, 
scriptures, and other symbols as provided under current Sec. Sec.  
75.52(d) and 76.52(d).
    Executive Order 13559 also directed agencies to establish 
regulations that distinguish between ``direct'' and ``indirect'' 
Federal financial assistance. This is necessary because the limitations 
on explicitly religious activities under Sec. Sec.  75.52 and 76.52 
apply to programs that are supported with ``direct'' Federal financial 
assistance but do not apply to programs supported only by ``indirect'' 
Federal financial assistance. These definitions also are needed because 
the new notice and referral requirements under Sec. Sec.  75.712-75.713 
and 76.712-76.713, apply only to faith-based organizations that provide 
services under a program of the Department supported by ``direct'' 
Federal financial assistance, either through a grant, subgrant, or 
contract, and do not apply to programs supported by only ``indirect'' 
Federal financial assistance.
    Programs are supported with ``direct'' Federal financial assistance 
when a grantee, subgrantee or contractor selected by the Department (or 
a grantee or subgrantee, as applicable) provides services under a 
program of the Department to a beneficiary. Under these circumstances, 
there are no intervening steps in which the beneficiary's choice 
determines the provider's identity.
    ``Indirect'' Federal financial assistance is distinguishable 
because it places the choice of service provider in the hands of a 
beneficiary. For example, if the government allowed a beneficiary to 
secure needed services on his or her own from among any available 
service providers using a mechanism such as a government-backed voucher 
or certificate to pay for the services, it would be a program of 
indirect Federal financial assistance.
    Alternatively, a governmental agency, operating under a neutral 
program of aid, could present each beneficiary or prospective 
beneficiary with a list of all qualified providers from which the 
beneficiary could obtain services using a government-provided 
certificate. Either way, the government empowers the beneficiaries to 
choose for themselves where to receive the needed services, including 
those locations where explicitly religious activities also occur, 
through a faith-based or other neighborhood organization. The 
government could then pay for the beneficiary's choice of provider by 
giving the beneficiary a voucher or similar document. In some indirect 
Federal financial assistance transactions, the government could choose 
to pay the provider directly after asking the beneficiary to indicate 
the beneficiary's choice. See Freedom From Religion Found. v. McCallum, 
324 F.3d 880, 882 (7th Cir. 2003).
    The Supreme Court has held that if a program meets certain 
criteria, the government may fund the program if, among other things, 
it places the benefit in the hands of individuals, who in turn have the 
freedom to choose the provider to which they take their benefit and 
``spend'' it, whether that provider is public or private, non-religious 
or religious. See Zelman v. Simmons-Harris, 536 U.S. 639, 652-53 
(2002). In these instances, the government does not encourage or 
promote any explicitly religious programs that may be among the options 
available to beneficiaries. Notably, the voucher ``scheme'' at issue in 
the Zelman decision, which was described by the Court as one of ``true 
private choice,'' id. at 653, was also neutral toward religion and 
offered beneficiaries adequate secular options. Accordingly, these 
criteria also are included in the text of the proposed definition of 
``indirect Federal financial assistance.''
    We note that the definitions of ``direct Federal financial 
assistance'' and ``indirect Federal financial assistance apply only to 
the regulations that implement the Executive order found in 34 CFR 
parts 75 and 76, and 2 CFR part 3474. These proposed regulations would 
not change the extent to which an organization is considered a 
``recipient of Federal financial assistance'' for the purposes of the 
Department's civil rights regulations in 34 CFR parts 100, 104, 106, 
and 110.
    Under the proposed regulations, a program shall be treated as 
supported by direct Federal financial assistance unless it meets the 
definition of ``indirect Federal financial assistance.'' Accordingly, 
most of the Department's programs would fall within the definition of a 
program supported by ``direct Federal financial assistance'' under the 
proposed regulations.
    There are exceptions, however. For example, in most cases a 
supplemental educational service (SES) provider that contracts with a 
local educational agency (LEA) pursuant to section 1116 of Title I, 
Part A of the Elementary and Secondary Education Act of 1965, as 
amended, would be providing services under a program supported only by 
``indirect Federal financial assistance'' because, by statute, the 
government program is neutral toward religion and it is the parents who 
choose from among approved providers of SES. Only after a parent 
selects an approved provider does the LEA enter into a contract with 
the provider to facilitate payment. As long as a parent has at least 
one adequate secular option for an SES provider, then the payment to 
the SES provider would fall within the definition of ``indirect Federal 
financial assistance.''
    The District of Columbia School Choice Incentive Program (DC Choice 
Program), sections 3001-3014 of the Scholarships for Opportunity and 
Results Act (Division C of Pub. L. 112-10, 125 Stat. 199-212 (April 15, 
2011), as amended by Public Law 112-92, 125 Stat. 6-7 (Feb. 1, 2012)), 
which was modeled after the school voucher program upheld by the 
Supreme Court in Zelman, also would be considered to provide services 
under a program supported only by ``indirect Federal financial 
assistance'' under the proposed regulations. Under the DC Choice 
Program, nonprofit organization(s) receive federal funds to administer 
a scholarship program that makes scholarship payments to the parent of 
an eligible student from a low-income household in a manner which 
ensures that such payments will be used for the payment of tuition, 
fees, and transportation expenses for a participating private school. 
Similar to SES, a parent of a scholarship student selects from among 
the participating schools, which include both secular and non-secular 
options, with the school receiving payment based upon the

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parent's decision, not a decision of the government.
    Although in most cases both SES providers and participating private 
schools in the DC Choice Program would be providing services under a 
program supported only by ``indirect Federal financial assistance'' 
under the proposed definition, they still would be required to satisfy 
all applicable statutory requirements. For example, the requirement 
under section 1116(e)(5)(D) of the ESEA (20 U.S.C. 6316(e)(5)(D)) that 
an SES provider ensure that instruction is ``secular, neutral, and 
nonideological'' would not be altered by the proposed regulations. 
Similarly, under the DC Choice Program, the requirement that 
participating private schools ``shall not discriminate against program 
participants or applicants on the basis of race, color, national 
origin, religion or sex'' would continue to apply. Moreover, both the 
LEA that contracts with the SES provider and the eligible nonprofit 
organization(s) that makes scholarship payments would continue to be 
recipients of ``direct Federal financial assistance.''
    Finally, Executive Order 13559 clarified that all organizations 
that receive Federal financial assistance under a social service 
program should be prohibited from discriminating against beneficiaries 
or potential beneficiaries on the basis of religion, a religious 
belief, a refusal to hold a religious belief, or a refusal to attend or 
participate in a religious practice. Consistent with the Executive 
order, these proposed regulations would clarify that the scope and 
coverage of the existing non-discrimination provisions in paragraphs 
(e) of Sec. Sec.  75.52 and 76.52 encompass all private organizations 
that receive funds under a program of the Department and not only those 
organizations that receive grants or subgrants.

Sections 75.712 and 76.712 Beneficiary Protections: Written Notice; 
Appendix A to Part 75

    Current Regulations: None.
    Proposed Regulations: Consistent with Executive Order 13559, the 
Secretary proposes new regulations requiring grantees and subgrantees 
that are faith-based organizations, and that provide services under a 
program of the Department, to provide a written notice of certain 
protections to beneficiaries of the program. Specifically, an 
organization that receives direct Federal financial assistance, as 
defined in these proposed regulations, would be required to give notice 
to beneficiaries that--
    (1) The organization may not discriminate against a beneficiary on 
the basis of religion or religious belief;
    (2) The organization may not require a beneficiary to attend or 
participate in any explicitly religious activities that are offered by 
the organization, and any participation by the beneficiaries in those 
activities must be purely voluntary;
    (3) The organization must separate in time or location any 
privately funded explicitly religious activities from activities 
supported by direct Federal financial assistance;
    (4) If a beneficiary objects to the religious character of the 
organization, the organization will undertake reasonable efforts to 
identify and refer the beneficiary to an alternative provider to which 
the beneficiary does not object; and
    (5) A beneficiary may report violations of these protections to the 
Department or the grantee administering the program.
    The Secretary also proposes to add Appendix A to part 75 that 
provides the notice that faith-based organizations must give to 
beneficiaries. If a beneficiary requests referral to another service 
provider, the required notice includes a clear method for a beneficiary 
to request that referral. This part of the notice, if provided to the 
beneficiary on paper, may be detached so the faith-based service 
provider can keep a record of the requested referral. Under the 
proposed regulations, grantees, subgrantees, and contractors that are 
subject to the regulation are authorized to translate the notice into 
other languages and formats to communicate with the entire population 
of beneficiaries and prospective beneficiaries that can receive 
services under a Department program. Federal civil rights laws, 
including Title VI of the Civil Rights Act and Section 504 of the 
Rehabilitation Act, will often require that the written notice be 
provided in other languages to those who have limited proficiency in 
English and provided in accessible formats to individuals with 
disabilities.
    To account for unique circumstances that could arise under some 
programs, the proposed regulations also provide that, when the nature 
of the service provided or exigent circumstances make it impracticable 
to provide the written notice in advance of the actual service, service 
providers must advise beneficiaries of their protections at the 
earliest available opportunity.
    Reasons: Executive Order 13559 affirms a variety of valuable 
protections for the religious liberty rights of social service 
beneficiaries. These protections are aimed at ensuring that Federal 
financial assistance is not used to coerce or pressure beneficiaries 
along religious lines, and to make beneficiaries aware of their rights, 
through appropriate notice, when considering obtaining services from 
providers with a religious affiliation.
    The Executive order makes it clear that all organizations that 
receive Federal financial assistance for the purpose of delivering 
social welfare services are prohibited from discriminating against 
beneficiaries or potential beneficiaries of those programs on the basis 
of religion, a religious belief, refusal to hold a religious belief, or 
a refusal to attend or participate in a religious practice. It also 
states that organizations offering explicitly religious activities 
(including activities that involve overt religious content such as 
worship, religious instruction, or proselytization) must not use direct 
Federal financial assistance to subsidize or support those activities, 
and that any explicitly religious activities must be offered outside of 
programs that are supported with direct Federal financial assistance 
(including through grants and subgrants). In other words, to the extent 
that an organization provides explicitly religious activities, those 
activities must be offered separately in time or location from programs 
or services supported with direct Federal financial assistance and 
participation in those religious activities must be completely 
voluntary for beneficiaries of those programs.
    Executive Order 13559 also requires that, if a beneficiary or 
prospective beneficiary of a social service program supported by direct 
Federal financial assistance objects to the religious character of an 
organization that provides services under the program, the organization 
must refer that individual to an alternative provider (addressed more 
fully in the discussion of proposed Sec. Sec.  75.713 and 76.713). 
Relative to this requirement, the Executive order further requires a 
faith-based organization that is administering a program that is 
supported by direct Federal financial assistance to give written notice 
in a manner prescribed by the Federal agency to beneficiaries and 
prospective beneficiaries of their right to be referred to an 
alternative provider, when an alternative provider is available.

Sections 75.713 and 76.713 Beneficiary Protections: Referral 
Requirements

    Current Regulations: None.
    Proposed Regulations: The Secretary proposes regulations that would 
require grantees and subgrantees that are faith-

[[Page 47259]]

based organizations, and that provide services under a program of the 
Department, to undertake reasonable efforts to identify, and refer a 
beneficiary or prospective beneficiary to, an alternative provider if 
the beneficiary objects to the religious character of the faith-based 
organization.
    The proposed regulations further provide that, in satisfying the 
referral requirement, a faith-based organization may make a referral to 
another faith-based organization if the beneficiary does not object. 
However, if a beneficiary requests a secular provider, and one is 
available, the organization must make a referral to that provider.
    With respect to referrals, we recognize that there are limits on 
the universe of providers that would be appropriate for a beneficiary. 
Therefore, the proposed regulations also provide that, except where 
services are provided by telephone, internet, or other similar means, a 
faith-based organization must refer the beneficiary to an alternative 
provider that--
    (1) Is in reasonable proximity to the location where the 
beneficiary is receiving or would receive services;
    (2) Offers services that are similar in substance and quality to 
those offered by the organization; and
    (3) Has the capacity to accept additional beneficiaries.
    Finally, the proposed regulations would require that, when a faith-
based organization makes a referral to an alternative provider, or when 
the organization determines that it is unable to identify an 
alternative provider, the organization must notify the awarding entity 
(i.e., either the Department under a direct grant program or the State 
under a State-administered program). If the organization is unable to 
identify an alternative provider, the awarding entity must determine 
whether there is any other suitable alternative provider to which the 
beneficiary may be referred. We recognize, however, that in some 
instances the awarding entity may also be unable to identify a suitable 
provider.
    Reasons: As noted in the discussion of proposed Sec. Sec.  75.712 
and 76.712, Executive Order 13559 requires that, if a beneficiary or 
prospective beneficiary of a social service program supported by direct 
Federal financial assistance objects to the religious character of an 
organization that provides services under the program, the organization 
must promptly undertake reasonable efforts to refer that individual to 
an alternative provider to which the beneficiary has no objection.
    We note that, if a federally supported alternative provider meets 
these requirements and is acceptable to the beneficiary, the faith-
based organization would be required to make a referral to that 
provider. If, however, there is no federally supported alternative 
provider that meets these requirements and is acceptable to the 
beneficiary, the organization would make a referral to a provider that 
does not receive Federal financial assistance and meets the 
requirements.

Sections 75.714 and 76.714 Subgrants, Contracts, and Other Agreements 
With Faith-Based Organizations

    Current Regulation: None.
    Proposed Regulations: The Secretary proposes regulations to require 
that, if a grantee or subgrantee under a program of the Department has 
the authority to select a private organization to provide services 
under the program by subgrant, contract, or other agreement, the 
grantee must ensure compliance with applicable Federal requirements 
governing contracts, grants, and other agreements with faith-based 
organizations.
    Reasons: This requirement recognizes that, although grantees and 
subgrantees may have the authority to distribute Federal financial 
assistance to other organizations, they remain accountable for the use 
of those funds and must fulfill their traditional responsibility to 
effectively manage the day-to-day operations of grant- and subgrant-
supported activities and monitor those activities to ensure compliance 
with applicable Federal requirements.

Title 2--Grants and Agreements

Chapter 34

PART 3474--UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, 
AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS

Section 3474.15 Contracting With Faith-Based Organizations

    Current Regulations: Sections 74.44 (Procurement Procedures) and 
80.36 (Procurement) established the policies and procedures grantees 
must follow when procuring property and services under a grant or 
subgrant. Sections 74.44(f) and 80.36(j) established specific 
requirements applicable to procurements involving faith-based 
organizations. Former 34 CFR parts 74 and 80 can be viewed at the 
following site: http://www.gpo.gov/fdsys/browse/collectionCfr.action?collectionCode=CFR&searchPath=Title+34%2FSubtitle+A%2FChapter%2FPart+80&oldPath=Title+34%2FSubtitle+A%2FChapter&isCollapsed=true&selectedYearFrom=2014&ycord=2000.
    These two sections were removed from title 34 when the Department 
adopted the ``Uniform Administrative Requirements, Cost Principles, and 
Audit Requirements For Federal Awards'' (Uniform Guidance) established 
by OMB in title 2, part 200, which OMB published as Interim Final 
Guidance on December 26, 2013. See 78 FR 78590. That guidance has been 
adopted by the Department and establishes requirements applicable to 
all grantees of the Department, covering a number of subjects that were 
formerly located in numerous OMB Circulars, common rules, and other 
directives, including the Department's regulations in 34 CFR parts 74 
and 80. See 79 FR 75871, December 19, 2014.\1\ Therefore, the Secretary 
does not propose to amend the regulations in parts 74 and 80 but, 
instead, proposes to amend part 3474, which was recently established by 
the Department to adopt the Uniform Guidance in 2 CFR part 200. The 
Department does not intend that the proposed amendments to title 2 of 
the CFR establish any policies inconsistent with the uniform 
regulations proposed by other agencies implementing E.O. 13559; the 
requirements regarding contracting with faith-based organizations in 
proposed 2 CFR 3474.15 merely restate current policy as formerly 
expressed in 34 CFR parts 74 and 80 while adding proposed notice and 
referral requirements to implement E.O. 13559.
---------------------------------------------------------------------------

    \1\ Preamble language specific to the Department begins on page 
75873 and the Department's amendments to titles 2 and 34 of the CFR 
start on page 76091.
---------------------------------------------------------------------------

    The Department is authorized, after consultation with OMB, to 
establish grant-related requirements in addition to those established 
in part 200. Review of this notice of proposed rulemaking (NPRM) by OMB 
under Executive Order 12866 and 2 CFR 3474.10 constitutes the required 
review.
    Proposed Regulations: The proposed amendments to part 3474 would 
add new Sec.  3474.15 to require that grantees and subgrantees that 
contract with faith-based organizations to provide services under a 
program of the Department must impose certain requirements, as 
described in the proposed regulations, on faith-based contractors.
    The regulations in former parts 74 and 80 that included 
requirements related to faith-based organizations establish the 
procedures that grantees and subgrantees must use to procure goods and 
services. See former 34 CFR 74.44(f)

[[Page 47260]]

and 80.36(j) in the 2014 edition of title 34, CFR.
    The guidance in part 200 that most closely aligns with Sec. Sec.  
74.44(f) and 80.36(j) is now contained in 2 CFR 200.318, General 
procurement standards. Therefore, the Secretary proposes to establish a 
new Sec.  3474.15 to supplement the procurement requirements in Sec.  
200.318. The new section would be based on the language in former 
Sec. Sec.  74.44(f) and 80.36(j) and would revise the content formerly 
in those sections to add requirements in 2 CFR 3474.15 that are needed 
to implement Executive Order 13559.
    These proposed revisions conform to the same requirements that 
would be imposed on grantees and subgrantees under the amendments 
proposed in this NPRM to parts 75 and 76, extending those requirements 
to faith-based contractors that provide services under a direct Federal 
assistance program of the Department.
    Reasons: These proposed amendments are intended to ensure the 
consistency of the Department's procurement regulations applicable to 
grantees and subgrantees with the requirements that would be in parts 
75 and 76 under these proposed regulations. The reasoning supporting 
the proposed amendments to title 34 of the Code of Federal Regulations, 
as set forth above, applies to these changes as well.

Executive Orders 12866 and 13563

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
this regulatory action is ``significant'' and, therefore, subject to 
the requirements of the Executive order and subject to review by OMB. 
Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action likely to result in a rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    This proposed regulatory action is not a significant regulatory 
action subject to review by OMB under section 3(f) of Executive Order 
12866.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only upon a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are issuing these proposed regulations only on a reasoned 
determination that their benefits would justify their costs. In 
choosing among alternative regulatory approaches, we selected those 
approaches that would maximize net benefits. Based on the analysis that 
follows, the Department believes that these proposed regulations are 
consistent with the principles in Executive Order 13563.
    We also have determined that this regulatory action would not 
unduly interfere with State, local, and tribal governments in the 
exercise of their governmental functions.
    In accordance with both Executive orders, the Department has 
assessed the potential costs and benefits, both quantitative and 
qualitative, of this regulatory action. The potential costs associated 
with this regulatory action are those resulting from the requirements 
of Executive Order 13559 and those we have determined as necessary for 
administering the Department's programs and activities.
    Executive Order 13559 requires grant-making agencies to adopt 
standard requirements regarding participation of faith-based 
organizations in assistance programs of the Federal government. The 
content of these proposed regulations was established in guidance to 
agencies prepared by the Working Group and the proposed regulations are 
consistent with that guidance. The Secretary proposes minor 
modifications necessary to maintain consistency with the Department's 
other regulations and to address unique elements of the Department's 
programs. The Working Group considered the least burdensome means for 
implementing Executive Order 13559 and those considerations were 
incorporated into the regulatory recommendations to agencies.
    Elsewhere in this section, under Paperwork Reduction Act of 1995, 
we identify and explain burdens specifically associated with 
information collection requirements.

Clarity of the Regulations

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

[[Page 47261]]

making the proposed regulations easier to understand? If so, how?
     What else could we do to make the proposed regulations 
easier to understand?
    To send any comments that concern how the Department could make 
these proposed regulations easier to understand, see the instructions 
in the ADDRESSES section.

Regulatory Flexibility Act Certification

    The Secretary certifies that these proposed regulations would not 
have a significant economic impact on a substantial number of small 
entities. The U.S. Small Business Administration Size Standards define 
institutions as ``small entities'' if they are for-profit or nonprofit 
institutions with total annual revenue below $15,000,000, and defines 
``non-profit institutions'' as small organizations if they are 
independently owned and operated and not dominant in their field of 
operation, or as small entities if they are institutions controlled by 
governmental entities with populations below 50,000. The Secretary 
invites comments from small entities as to whether they believe the 
proposed changes would have a significant economic impact on them and, 
if so, requests evidence to support that belief.

Paperwork Reduction Act of 1995

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department provides the general public and Federal agencies 
with an opportunity to comment on proposed and continuing collections 
of information in accordance with the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: The public 
understands the Department's collection instructions, respondents can 
provide the requested data in the desired format, reporting burden 
(time and financial resources) is minimized, collection instruments are 
clearly understood, and the Department can properly assess the impact 
of collection requirements on respondents.
    The Department must promulgate these proposed regulations to impose 
information collection and the third-party notice requirements which 
implement the requirements of Executive Order 13559. Proposed 34 CFR 
75.712, 75.713, Appendix A to part 75, 76.712, 76.713, and 2 CFR 
3475.15 contain third-party notice and information collection 
requirements. Under the PRA, the Department has submitted a copy of 
these sections and Appendix A to OMB for its review.
    A Federal agency may not conduct or sponsor a collection of 
information unless OMB approves the collection under the PRA and the 
corresponding information collection instrument displays a currently 
valid OMB control number. Notwithstanding any other provision of law, 
no person is required to comply with, or is subject to penalty for 
failure to comply with, a collection of information if the collection 
instrument does not display a currently valid OMB control number.
    In the final regulations, we will display the control number 
assigned by OMB to the information collection and third-party notice 
requirements proposed in this NPRM and adopted in the final 
regulations.

Beneficiary Protections: Written Notice

    34 CFR 75.712 and 76.712 would require faith-based organizations 
that provide services under a grant or subgrant from the Department to 
notify beneficiaries of certain requirements the organization must 
fulfill regarding beneficiaries. The content of the notice and the 
actions the faith-based organization must take if a beneficiary objects 
to the religious character of the organization are described in this 
preamble under discussion of the proposed amendments to Sec. Sec.  
75.612 and 76.612.
    These proposed regulations would also require all grantees and 
subgrantees that contract with FBOs to provide services under a program 
of the Department to impose on those contractors the same 
responsibility to provide notice to beneficiaries as is required of FBO 
grantees and subgrantees. We believe that most grantees and subgrantees 
do not contract out for the services they administer under their grants 
and subgrants because these recipients are required to directly 
administer or supervise the administration of the project or program. 
See 34 CFR 75.701 and 76.701. However, we think that at least a few 
grantees or subgrantees contract with nonprofit organizations to 
provide program services. See the discussion later in this PRA section 
of the preamble under the heading Notice and Referral Burden for Faith-
Based Contractors (2 CFR 3474.15).
    The notice that faith-based organizations must give beneficiaries 
is specified in the proposed Appendix A to 34 CFR part 75. The burden 
imposed on FBOs to provide the notice is estimated in this Paperwork 
section of the preamble.

Beneficiary Protections: Referral Requirements

    The proposed regulations in 34 CFR 75.713 and 76.713 and 2 CFR 
3474.15 also would impose burden on faith-based grantees, subgrantees, 
and contractors that provide services to beneficiaries under a program 
of the Department to make reasonable efforts to identify and refer 
requesting beneficiaries to alternative service providers. The burden 
of identifying and referring a beneficiary to an alternative service 
provider is estimated in this PRA section of the preamble under the 
heading How Do We Calculate the Burden the Proposed Regulations Would 
Have on Faith-Based Organizations?

Recordkeeping Requirements

    Faith-based organizations that would be subject to these 
requirements would have to keep records to show that they have met the 
referral requirements in the proposed regulations. See 34 CFR 75.730-
75.732 and 76.730-76.732. As discussed earlier in this preamble, we 
believe that faith-based organizations could meet the recordkeeping 
requirements in these proposed regulations by keeping, in the case of 
paper notices, the bottom portion of the notice required under the 
proposed Appendix A to part 75. For those faith-based organizations 
that provide notice electronically, the notices would have to include a 
means for beneficiaries to request an alternative placement--and 
follow-up, if desired--that is recorded so the faith-based grantee, 
subgrantee, or contractor may retain evidence of compliance with these 
proposed regulations. However, as explained in the following 
paragraphs, we do not include an estimate of the burden of maintaining 
the records needed to demonstrate compliance with the requirements 
imposed on faith-based organizations.
    The Department has recordkeeping requirements included in 
information collection instruments for Department programs. Those 
collection instruments cover burdens imposed by program and 
administrative requirements that exist under current, OMB-approved, 
information collection instruments and each of those collections has an 
OMB-assigned information collection control number.
    The recordkeeping burden that these proposed regulations would add 
to those program-specific information collection instruments is so 
small that, under most programs, it would not measurably increase the 
burden that already exists under current program and administrative 
requirements. If, due to the unique nature of a particular program, the 
recordkeeping burden associated with these proposed regulations is 
large enough to be

[[Page 47262]]

measurable, that burden will be calculated under the recordkeeping and 
reporting requirements of the affected program and identified in 
information collection requests that are submitted to OMB for PRA 
approval. Therefore, we have not included any estimate of recordkeeping 
burden in this PRA analysis.

How do we calculate the burden the proposed regulations would have on 
faith-based organizations?

    We estimate that, for a student or other beneficiary served under a 
program of the Department, a faith-based organization would need two 
minutes to distribute to each beneficiary the notice required in 
proposed 34 CFR 75.712 and 76.712. This estimate takes into 
consideration the likelihood that, in one-on-one interactions between a 
staff member and a beneficiary, providing the notice might take longer 
than two minutes. Conversely, providing notice to a group of 
beneficiaries at the same time might take significantly less than two 
minutes for each beneficiary because a few beneficiaries would pass the 
notice to the remaining beneficiaries in a group. This estimate of the 
time needed to distribute the notice required under the Appendix A to 
part 75 also includes the time needed for a beneficiary to read the 
notice and decide if she or he wants to request a referral.
    To determine the total time burden that would be imposed on faith-
based organizations to distribute the notice required under these 
proposed regulations, we multiplied the time required to distribute the 
notice by the estimated number of beneficiaries served by faith-based 
organizations.

Notice Burden Under Discretionary Grant Programs (Sec.  75.712)

    Calculating the number of faith-based organizations that provide 
services under programs of the Department poses challenges. Our 
estimate of the number of faith-based organizations that receive 
discretionary grants from the Department is not exact because we do not 
collect information that directly identifies whether a grantee is a 
faith-based organization. We do collect information identifying whether 
a grantee is a nonprofit, private organization and have used that 
information as a starting point to estimate of the number of 
discretionary grants awarded to faith-based organizations. We reviewed 
the names of our nonprofit, private grantees to determine whether they 
use religious terms in their names and used the number so identified as 
a the basis for our determination of the number of faith-based 
organizations that receive discretionary grants from the Department.
    We understand that the use of a religious term in the name of an 
organization does not necessarily mean that the organization is a 
faith-based organization. Some organizations that use religious terms 
in their names may no longer pursue religious objectives and some 
organizations that do not have religious terms in their names may 
pursue religious objectives. Thus, our estimate may either over-count 
or under-count the number of discretionary grants made to faith-based 
organizations. This method of identification, while not exact, is the 
only way we could estimate the number of grantees that are faith-based 
organizations and we have relied on a number calculated using this 
method to estimate the burden imposed on faith-based organizations 
under these proposed regulations.
    The Department determined, based on the calculation method 
described above, that it has approximately 6,152 active discretionary 
grants and approximately 280 of those active grants are held by faith-
based organizations. Using these numbers, we calculated that 4.5% of 
our discretionary grants are awarded to faith-based organizations. To 
determine the time required to provide the notices under all 
discretionary grant programs that provide services to beneficiaries, we 
then multiplied 4.5% by the number of beneficiaries served under the 
discretionary grant programs and multiplied that result by the time 
needed to give notice to each beneficiary (two minutes).
    We estimate that the discretionary grant programs of the Department 
serve a total population of 10,003,323 students and other 
beneficiaries. Based on our estimate of the percentage of grants 
awarded to faith-based organizations, we estimate that the total number 
of beneficiaries served under these programs by faith-based 
organizations is 450,150 students and other beneficiaries (10,003,323 x 
4.5% = 450,150). Thus, we estimate that the total time burden imposed 
to provide notice to beneficiaries is 15,005 hours (450,150 
[beneficiaries] x 2 [minutes per beneficiary] / 60 [to convert minutes 
to hours] = 15,005 hours).

Notice Burden Under State-Administered Programs (Sec.  76.712)

    Under a State-administered program for which nonprofit 
organizations are eligible to receive subgrants, estimating the number 
of faith-based organizations that receive subgrants is particularly 
difficult. We do not have a direct relationship with subgrantees and 
asking the States to estimate the number of subgrantees that are faith-
based organizations would impose significant burden on the States, 
which would require approval of an information collection request of 
its own. We believe that conducting an information collection for the 
sole purpose of estimating the burden that these proposed regulations 
would impose on faith-based organizations is more burden than can be 
justified under the PRA. This is especially true considering that, even 
for those programs where faith-based organizations are eligible, many 
States are not likely to track whether subgrantees are faith-based 
organizations. Thus, the accuracy of State estimates of the number or 
faith-based organizations that receive subgrants would be subject to 
the same difficulties as we faced in determining the number of 
discretionary grants awarded directly to faith-based organizations.
    Given these difficulties, we have decided that, for those State-
administered programs that authorize subgrants to nonprofit 
organizations, we will estimate the number of those subgrantees that 
are faith-based organizations by using the same percentage that we used 
to estimate the percentage faith-based organizations that receive 
direct grants from the Department.
    The vast majority of beneficiaries served under Department programs 
receive services under State-administered programs, and those services 
are provided by local educational agencies (LEAs) under most of the 
State-administered programs. Based on data available to the Department 
regarding fiscal years 2012 and 2013, the Department estimates that it 
served more than 35,000,000 students and children under State-
administered programs, including those authorized under the Elementary 
and Secondary Education Act of 1965 (ESEA) and the Individuals with 
Disabilities Education Act (IDEA). Because subgrants under these 
programs cannot be made to faith-based organizations, we have concluded 
that none of the students and children served under these programs 
receives services from subgrantees that are faith-based organizations. 
We note that faith-based organizations are eligible to be SES providers 
under Title I, Part A of the ESEA; however, those services generally 
are provided under a program of indirect Federal financial assistance, 
as discussed earlier in this preamble. Thus, we believe that, under 
most State-administered programs of the

[[Page 47263]]

Department, no beneficiaries are served by subgrantees that are faith-
based organizations.
    The only State-administered program that authorizes subgrants to 
nonprofit, private organizations, including faith-based organizations, 
is the Twenty-First Century Community Learning Centers program (TCCLC). 
We estimate that the TCCLC program served, in fiscal year 2013, 
approximately 1,733,000 students. Using the same percentage that we 
used to estimate the number of students served by discretionary 
grantees, we estimate that approximately 77,985 (1,733,000 x 4.5% = 
77,985) students are served by faith-based subgrantees under the TCCLC. 
We estimate the total burden that would be imposed on faith-based 
organizations to provide notices under TCCLC by these proposed 
regulations is 2,600 hours (77,985 [students] x 2 [minutes per 
beneficiary] / 60 [to convert minutes to hours] = 2,600 hours).

Total Notice Burden Under TCCLC and Discretionary Grant Programs

    Adding the discretionary grant and TCCLC subgrant burden hours 
together, the total notice burden under all service programs of the 
Department is 17,605 (15,005 [discretionary grant notice burden] + 
2,600 [TCCLC notice burden] = 17,605).

Basis for Estimating Referral Burden

    We estimate that, in those cases where a beneficiary objects to the 
religious character of a faith-based organization, the time required 
for the faith-based organization to make a reasonable effort to 
identify an alternative provider and refer a beneficiary to that 
provider would average about two hours. This estimate includes the time 
required to identify service providers that provide similar services, 
preferably under the same or similar programs to the one under which 
the beneficiary is being served by the faith-based organization. The 
estimate also includes the time required to determine whether one of 
the alternative providers has the capacity to serve the beneficiary and 
whether that provider is acceptable to the beneficiary. Also, depending 
on whether the beneficiary asked the faith-based organization to follow 
up either with the beneficiary or the alternative service provider to 
determine whether the referral is successful, this estimate includes 
the time required to do the follow-up.
    We are not aware of any instances in which a student or other 
beneficiary of a program of the Department has objected to receiving 
services from a faith-based organization. There is a possibility that, 
when students and other beneficiaries start receiving notices of their 
right to request referral to an alternative service provider, more of 
them may raise objections. However, our estimate of the number of 
referrals is also informed by the experience of the Department of 
Health and Human Services, Substance Abuse and Mental Health Services 
Administration (SAMHSA), which administers beneficiary substance abuse 
service programs under titles V and XIX of the Public Health Service 
Act, 42 U.S.C. 290aa, et seq. and 42 U.S.C. 300x-21 et seq.
    Specifically, 42 U.S.C. 290kk-1 and 300x-65 require faith-based 
organizations that receive assistance under the Act to provide notice 
to beneficiaries of their right under statute to request an alternative 
service provider. Recipients of assistance must also report all 
referrals to the appropriate Federal, state, or local government agency 
that administers the program. To date, SAMHSA has not received any 
reports of referral by recipients or subrecipients.
    Based on that experience, we estimate that, at most, 0.10% of 
students and other beneficiaries would request alternative placements. 
We will monitor our programs to assess whether this estimate is 
accurate.
    To determine the burden on faith-based organizations to provide 
referrals, we multiplied the number of students and other beneficiaries 
served by faith-based organizations by our estimated percentage of 
beneficiaries that would request alternative placements and multiplied 
that result by the two hour burden we estimated for making those 
referrals.

Referral Burden Under Discretionary Grant Programs (Sec.  75.713)

    Under the discretionary grant programs of the Department that 
provide services to beneficiaries, we estimate that faith-based 
organizations will have to make reasonable efforts to refer 451 
students and other beneficiaries (450,150 [students served by faith-
based organizations x 0.10% [percent of students that would request 
referrals] = 451 referrals) and faith-based organizations will need 902 
hours to identify alternative providers and make referrals to those 
providers (451 x 2 [hours per referral] = 902).

Referral Burden Under the TCCLC Program (Sec.  76.713)

    Under the TCCLC State-administered program, faith-based subgrantees 
would have to make reasonable efforts to refer 78 students (77,985 
[students served by faith-based organizations] x 0.10% [percent of 
students requesting referral] = 78 referrals) and faith-based 
organizations would take 156 hours (78 x 2 [hours per referral] = 156 
hours) to make reasonable efforts to refer students to alternative 
service providers.

Total Referral Burden Under TCCLC and Discretionary Grant Programs

    Adding the referral burden under both discretionary grant programs 
(902 hours) and the TCCLC program (156 hours) the total hourly burden 
on faith-based grantees and subgrantees of making reasonable efforts to 
refer students and other beneficiaries to alternative service providers 
is 1,058 hours.

Costs To Provide Notice and Make Referrals

    To determine the cost to grantee and subgrantee faith-based 
organizations to provide the notices and make the referrals that would 
be required under these proposed regulations we used data compiled by 
the Labor Department, Bureau of Labor Statistics, regarding the 
employer costs for employee compensation for workers in the private 
educational services industry through September 2014.\2\
---------------------------------------------------------------------------

    \2\ See Table 26, Employer Costs for Employee Compensation 
Supplementary Tables Historical Data December 2006--September 2014, 
available at http://www.bls.gov/ncs/ect/sp/ecsuphst.pdf. The most 
recent table was downloaded January 12, 2015.
---------------------------------------------------------------------------

    The total costs per hour worked for all workers in the private 
educational services industry through September, 2014, are $41.57. 
Using this as our cost multiplier, we estimate that these proposed 
regulations would cost faith-based grantees and subgrantees--
    $731,840 per year to provide notice to beneficiaries (17,605 [hours 
to provide notice under the TCCLC and discretionary grant programs] x 
$41.57 = $731,840); and
    $43,982 per year to refer beneficiaries to alternative service 
providers (1,058 [referral hours under the TCCLC and discretionary 
grant programs] x $41.57 = $43,982).
    Thus, the total dollar burden on faith-based grantees and 
subgrantees to notify students ($731,840) and make reasonable referral 
efforts ($43,982) under the TCCLC and discretionary grant programs of 
the Department would be $775,822 per year ($731,840 + $43,982).

Notice and Referral Burden for Faith-Based Contractors (2 CFR 3474.15)

    These proposed regulations would impose a duty on grantees and

[[Page 47264]]

subgrantees to include conditions in contracts with faith-based 
organizations that provide program services to students and other 
beneficiaries of Department programs. These conditions would require 
faith-based organizations to notify beneficiaries of their rights under 
the Executive Order and to make reasonable efforts to refer 
beneficiaries to alternative service providers. The Department has no 
credible information upon which it could estimate the number of 
contracts that grantees would have to award to faith-based 
organizations to provide program services under the programs of the 
Department. We are aware that many research grantees of the Department 
contract with other organizations to conduct some of the research 
required under a grant. However, research programs do not provide 
services to beneficiaries of Department programs. Our understanding is 
that, under the Department programs that authorize grantees and 
subgrantees to provide services to beneficiaries, most grantees and 
subgrantees provide those services directly to the beneficiaries. To 
determine whether our understanding is correct, we are interested in 
learning whether grantees and subgrantees contract to provide program 
services and, if so, how many contracts are made with faith-based 
organizations to serve beneficiaries. While we do not have the 
information needed to estimate the number of faith-based organizations 
that provide program services to beneficiaries, we believe that at 
least a few such contracts exist. Therefore, we made a preliminary 
estimate that 14,151 students and other beneficiaries are served by 
faith-based contractors under the Department's programs. Using that 
number and, based on the same two-minute estimate of distribution time, 
we estimate that providing notice would take 472 hours (14,151 x 2 
[minutes per beneficiary] / 60 [to convert to hours] = 472). Based on 
the estimate that 0.10% of beneficiaries would request referral, we 
estimate that 14 beneficiaries (14,151 [beneficiaries] x 0.1% = 14) 
would request referrals and that faith-based organizations would take 
28 hours (14 [beneficiaries] x 2 [hours referral time]) to make 
reasonable efforts to refer beneficiaries. Thus, we estimate that the 
total burden that these proposed regulations would imposed on faith-
based contractors would be 500 hours (472 [notice burden hours] + 28 
[referral burden house] = 500).
    The total cost to faith-based contractors to provide notice and 
make referrals would be $20,785 (500 x $41.57 = $20,785). Because this 
dollar burden is based on our preliminary estimate that faith-based 
contractors serve 14,151 students and other beneficiaries, we are 
interested in whether there is any factually-based, reasoned support 
for this estimate.

      Collection of Information and Third-Party Notice Burden Hours
------------------------------------------------------------------------
                                                        OMB Control No.
       Regulatory section             Information        and estimated
                                      collection            burden
------------------------------------------------------------------------
34 CFR 75.712 and 76.712........  These proposed      OMB 1895-New
                                   sections would     The burden under
                                   impose on faith-    these proposed
                                   based grantees      notice
                                   and subgrantees     requirements
                                   that provide        would be 17,605
                                   services under an   hours.
                                   Department
                                   program a
                                   requirement to
                                   notify
                                   beneficiaries of
                                   the program of
                                   certain
                                   responsibilities
                                   that the grantee
                                   or subgrantee has
                                   toward the
                                   beneficiaries.
34 CFR 75.713 and 76.713........  These proposed      OMB 1895-New
                                   sections would     The burden under
                                   impose on faith     these proposed
                                   based grantees      referral
                                   and subgrantees     requirements
                                   that provide        would be 1,058
                                   services under a    hours.
                                   Department
                                   program a
                                   requirement to
                                   make reasonable
                                   efforts to refer
                                   a beneficiary
                                   that objects to
                                   the religious
                                   character of the
                                   grantee or
                                   subgrantee to an
                                   alternative
                                   service provider.
34 CFR part 75, appendix A......  This proposed new   OMB 1895-New
                                   Appendix would     The burden under
                                   prescribe the       this proposed
                                   form of the         form would be
                                   notice that faith-  17,605 hours.
                                   based grantees,
                                   subgrantees and
                                   contractors must
                                   use to notify
                                   beneficiaries of
                                   the
                                   responsibilities
                                   imposed under 34
                                   CFR 75.712,
                                   75.713, 76.712,
                                   76.713, and 2 CFR
                                   3474.15.
2 CFR 3474.15...................  This new section    OMB 1895-New
                                   would require      The burden under
                                   grantees and        these proposed
                                   subgrantees of      notice and
                                   the Department to   referral
                                   impose on faith-    requirements
                                   based contractors   would be 500
                                   that provide        hours.
                                   services under a
                                   program of the
                                   Department an
                                   obligation to
                                   notify
                                   beneficiaries of
                                   the program of
                                   certain
                                   responsibilities
                                   that the
                                   contractors have
                                   toward the
                                   beneficiaries and
                                   to make
                                   reasonable
                                   efforts to refer
                                   a beneficiary who
                                   objects to the
                                   religious
                                   character of a
                                   contractor to an
                                   alternative
                                   service provider.
------------------------------------------------------------------------

    If you want to comment on the proposed information collection 
requirements, please send your comments to the Office of Information 
and Regulatory Affairs, OMB, Attention: Desk Officer for U.S. 
Department of Education. Send these comments by email to 
[email protected] or by fax to (202) 395-6974. You may also send 
a copy of these comments to the Department contact named in the 
ADDRESSES section of this preamble or submit electronically through the 
Federal eRulemaking Portal at http://www.regulations.gov by selecting 
Docket ID number ED-2014-OS-0131.
    We have prepared an Information Collection Request (ICR) for this 
collection. In preparing your comments you may want to review the ICR, 
which is available at www.reginfo.gov. Click on

[[Page 47265]]

``Information Collection Review.'' This proposed collection is 
identified as proposed collection 1895-New.
    We consider your comments on this proposed collection of 
information in--
     Deciding whether the proposed collections are necessary 
for the proper performance of our functions, including whether the 
information will have practical use;
     Evaluating the accuracy of our estimate of the burden of 
the proposed collections, including the validity of our methodology and 
assumptions;
     Enhancing the quality, usefulness, and clarity of the 
information we collect; and
     Minimizing the burden on those who must respond. This 
includes exploring the use of appropriate automated, electronic, 
mechanical, or other technological collection techniques.
    OMB is required to make a decision concerning the collection of 
information requirements contained in these proposed regulations 
between 30 and 60 days after publication of this document in the 
Federal Register. Therefore, to ensure that OMB gives your comments 
full consideration, it is important that OMB receives your comments by 
September 8, 2015. This does not affect the deadline for your comments 
to us on the proposed regulations.

Intergovernmental Review

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

Assessment of Educational Impact

    In accordance with section 411 of the General Education Provisions 
Act, 20 U.S.C. 1221e-4, the Secretary particularly requests comments on 
whether these proposed regulations would require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to the person listed under FOR 
FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. Free 
Internet access to the official edition of the Federal Register and the 
Code of Federal Regulations is available via the Federal Digital System 
at: www.gpo.gov/fdsys. At this site you can view this document, as well 
as all other documents of this Department published in the Federal 
Register, in text or Adobe Portable Document Format (PDF). To use PDF 
you must have Adobe Acrobat Reader, which is available free at the 
site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

(Catalog of Federal Domestic Assistance Number does not apply.)

List of Subjects

2 CFR Part 3474

    Accounting, Auditing, Colleges and universities, State and local 
governments, Grant programs, Grants administration, Hospitals, Indians, 
Nonprofit organizations, Reporting and recordkeeping requirements.

34 CFR Part 75

    Accounting, Copyright, Education, Grant programs--Education, 
Inventions and patents, Private schools, Reporting and recordkeeping 
requirements.

34 CFR Part 76

    Accounting, Administrative practice and procedure, American Samoa, 
Education, Grant programs--education, Guam, Northern Mariana Islands, 
Pacific Islands Trust Territory, Private schools, Reporting and 
recordkeeping requirements, Virgin Islands.

    Dated: May 28, 2015.
Arne Duncan,
Secretary of Education.
    For the reasons discussed in the preamble, the Secretary proposes 
to amend part 3474 of title 2 of the Code of Federal Regulations (CFR) 
and parts 75 and 76 of title 34 of the CFR as follows:

Title 2--Grants and Agreements

Chapter XXXIV--Department of Education

PART 3474--UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, 
AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS

0
1. The authority citation for part 3474 continues to read as follows:

    Authority:  20 U.S.C. 1221e-3, 3474, and 2 CFR part 200, unless 
otherwise noted.

0
2. Add Sec.  3474.15 to read as follows:


Sec.  3474.15  Contracting with faith-based organizations.

    (a) This section establishes responsibilities that grantees and 
subgrantees have in selecting contractors to provide direct Federal 
services under a program of the Department. Paragraphs (c)(1) and 
(d)(1) of this section establish procurement requirements that 
supplement those in 2 CFR 200.313-200.326. Every contract between a 
grantee or subgrantee and a faith-based organization under a program of 
direct Federal financial assistance must include conditions to 
implement the requirements in paragraphs (c)(1) and (d)(1) of this 
section.
    (b)(1) A faith-based organization is eligible to contract with 
grantees and subgrantees, including States, on the same basis as any 
other private organization, with respect to contracts for which such 
other organizations are eligible.
    (2) In selecting providers of goods and services, grantees and 
subgrantees, including States, may not discriminate for or against a 
private organization on the basis of the organization's religious 
character or affiliation and must ensure that the award of contracts is 
free from political interference, or even the appearance of such 
interference, and is done on the basis of merit, not on the basis of 
religion or religious belief.
    (c)(1) The provisions of 34 CFR 75.532 and 76.532 (Use of funds for 
religion prohibited), 75.712 and 76.712 (Beneficiary protections: 
Written notice), and 75.713 and 76.713 (Beneficiary protections: 
Referral requirements) that apply to a faith-based organization that is 
a grantee or subgrantee also apply to a faith-based organization that 
contracts with a grantee or subgrantee, including a State.
    (2) The requirements referenced under paragraph (c)(1) of this 
section do not apply to a faith-based organization that provides goods 
or services to a beneficiary under a program supported only by indirect 
Federal financial

[[Page 47266]]

assistance, as defined in 34 CFR 75.52(c)(3) and 76.52(c)(3).
    (d)(1) A private organization that engages in explicitly religious 
activities, such as religious worship, instruction, or proselytization, 
must offer those activities separately in time or location from any 
programs or services supported by a contract with a grantee or 
subgrantee, including a State, and attendance or participation in any 
such explicitly religious activities by beneficiaries of the programs 
and services supported by the contract must be voluntary.
    (2) The limitations on explicitly religious activities under 
paragraph (d)(1) of this section do not apply to a faith-based 
organization that provides services to a beneficiary under a program 
supported only by indirect Federal financial assistance, as defined in 
34 CFR 75.52(c)(3) and 76.52(c)(3).
    (e)(1) A faith-based organization that contracts with a grantee or 
subgrantee, including a State, may retain its independence, autonomy, 
right of expression, religious character, and authority over its 
governance.
    (2) A faith-based organization may, among other things--
    (i) Retain religious terms in its name;
    (ii) Continue to carry out its mission, including the definition, 
development, practice, and expression of its religious beliefs;
    (iii) Use its facilities to provide services without removing or 
altering religious art, icons, scriptures, or other symbols from these 
facilities;
    (iv) Select its board members and otherwise govern itself on a 
religious basis; and
    (v) Include religious references in its mission statement and other 
chartering or governing documents.
    (f) A private organization that contracts with a grantee or 
subgrantee, including a State, may not discriminate against a 
beneficiary or prospective beneficiary in the provision of program 
goods or services on the basis of religion or religious belief.
    (g) A religious organization's exemption from the Federal 
prohibition on employment discrimination on the basis of religion, in 
section 702(a) of the Civil Rights Act of 1964, 42 U.S.C. 2000e-1(a), 
is not forfeited when the organization contracts with a grantee or 
subgrantee.

(Authority: 20 U.S.C. 1221e-3 and 3474; 2 CFR Part 200)

Title 34--Education

Subtitle A--Office of the Secretary, Department of Education

PART 75--DIRECT GRANT PROGRAMS

0
3. The authority citation for part 75 continues to read as follows:

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

0
4. Section 75.52 is amended by:
0
A. Revising paragraph (a)(2).
0
B. Revising paragraph (c).
0
C. Revising paragraph (e).
    The revisions read as follows:


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

    (a) * * *
    (2) In the selection of grantees, the Department may not 
discriminate for or against a private organization on the basis of the 
organization's religious character or affiliation and must ensure that 
all decisions about grant awards are free from political interference, 
or even the appearance of such interference, and are made on the basis 
of merit, not on the basis of religion or religious belief.
* * * * *
    (c)(1) A private organization that engages in explicitly religious 
activities, such as religious worship, instruction, or proselytization, 
must offer those activities separately in time or location from any 
programs or services supported by a grant from the Department, and 
attendance or participation in any such explicitly religious activities 
by beneficiaries of the programs and services supported by the grant 
must be voluntary.
    (2) The limitations on explicitly religious activities under 
paragraph (c)(1) of this section do not apply to a faith-based 
organization that provides services to a beneficiary under a program 
supported only by ``indirect Federal financial assistance.''
    (3) For purposes of 2 CFR 3474.15, 34 CFR 75.52, 75.712, 75.714, 
and Appendix A to this part, the following definitions apply:
    (i) Direct Federal financial assistance means that the Department, 
a grantee, or a subgrantee selects a provider and either purchases 
goods or services from that provider (such as through a contract) or 
awards funds to that provider (such as through a grant, subgrant, or 
cooperative agreement) to carry out services under a program of the 
Department. Federal financial assistance shall be treated as direct 
unless it meets the definition of ``indirect Federal financial 
assistance.''
    (ii) Indirect Federal financial assistance means that the choice of 
a service provider under a program of the Department is placed in the 
hands of the beneficiary, and the cost of that service is paid through 
a voucher, certificate, or other similar means of government-funded 
payment. Federal financial assistance provided to an organization is 
``indirect'' under this definition if--
    (A) The government program through which the beneficiary receives 
the voucher, certificate, or other similar means of government-funded 
payment is neutral toward religion;
    (B) The organization receives the assistance as the result of the 
decision of the beneficiary, not a decision of the government; and
    (C) The beneficiary has at least one adequate secular option for 
use of the voucher, certificate, or other similar means of government-
funded payment.

    Note to paragraph (c)(3): The definitions of ``direct Federal 
financial assistance'' and ``indirect Federal financial assistance'' 
do not change the extent to which an organization is considered a 
``recipient'' of ``Federal financial assistance'' as those terms are 
defined under 34 CFR parts 100, 104, 106, and 110.

* * * * *
    (e) A private organization that receives any Federal financial 
assistance under a program of the Department shall not discriminate 
against a beneficiary or prospective beneficiary in the provision of 
program services on the basis of religion or religious belief.
* * * * *
0
5. Add Sec. Sec.  75.712, 75.713, and 75.714 to subpart F before the 
undesignated center heading ``Reports'' to read as follows:


Sec.  75.712  Beneficiary protections: Written notice.

    (a) A faith-based organization that receives a grant under a 
program of the Department supported by direct Federal financial 
assistance must give written notice to a beneficiary or prospective 
beneficiary of certain protections. This notice must state that:
    (1) The organization may not discriminate against a beneficiary or 
prospective beneficiary on the basis of religion or religious belief;
    (2) The organization may not require a beneficiary to attend or 
participate in any explicitly religious activities that are offered by 
the organization, and any participation by the beneficiaries in such 
activities must be purely voluntary;
    (3) The organization must separate in time or location any 
privately funded explicitly religious activities from activities 
supported by direct Federal financial assistance;

[[Page 47267]]

    (4) If a beneficiary or prospective beneficiary objects to the 
religious character of the organization, the organization will 
undertake reasonable efforts to identify and refer the beneficiary to 
an alternative provider to which the beneficiary has no objection; and
    (5) A beneficiary or prospective beneficiary may report violations 
of these protections to the Department.
    (b) A faith-based organization that receives a grant under a 
program of the Department must provide beneficiaries or prospective 
beneficiaries with the written notice required under paragraph (a) of 
this section prior to the time they enroll in or receive services from 
the organization. When the nature of the services provided or exigent 
circumstances make it impracticable to provide the written notice in 
advance of the actual services, the organization must advise 
beneficiaries of their protections at the earliest available 
opportunity.
    (c) The notice that a faith-based organization must use to notify 
beneficiaries or prospective beneficiaries of their rights under 
paragraph (a) of this section is specified in Appendix A to this part.

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

Sec.  75.713  Beneficiary protections: Referral requirements.

    (a) If a beneficiary or prospective beneficiary of a program of the 
Department supported by direct Federal financial assistance objects to 
the religious character of a faith-based organization that provides 
services under the program, that organization must promptly undertake 
reasonable efforts to identify and refer the beneficiary to an 
alternative provider to which the beneficiary or prospective 
beneficiary has no objection.
    (b)(1) A faith-based organization may satisfy the requirement in 
paragraph (a) of this section by referring a beneficiary or prospective 
beneficiary to another faith-based organization if the beneficiary or 
prospective beneficiary does not object to that provider.
    (2) If the beneficiary or prospective beneficiary requests a 
secular provider, and one is available, the faith-based organization 
must make a referral to that provider.
    (c) The faith-based organization must make a referral to an 
alternative provider that--
    (1) Is in reasonable geographic proximity to the location where the 
beneficiary or prospective beneficiary is receiving or would receive 
services (except for services provided by telephone, internet, or 
similar means);
    (2) Offers services that are similar in substance and quality to 
those offered by the organization; and
    (3) Has the capacity to accept additional beneficiaries.
    (d) When a faith-based organization makes a referral to an 
alternative provider, or when the organization determines that it is 
unable to identify an alternative provider, the organization must 
notify the Department. If the organization is unable to identify an 
alternative provider, the Department assists the organization by 
identifying whether there is any other suitable alternative provider to 
which the beneficiary or prospective beneficiary may be referred.

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

Sec.  75.714  Subgrants, contracts, and other agreements with faith-
based organizations.

    If a grantee under a program of the Department has the authority 
under the grant to select a private organization to provide services 
supported by direct Federal financial assistance under the program by 
subgrant, contract, or other agreement, the grantee must ensure 
compliance with applicable Federal requirements governing contracts, 
grants, and other agreements with faith-based organizations, including, 
as applicable, Sec. Sec.  75.52, 75.532, and 75.712-75.713, Appendix A 
to this part, and 2 CFR 3474.15.

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


0
6. Part 75 is amended by adding Appendix A to read as follows:

Appendix A to Part 75--Form of Required Notice to Beneficiaries

    A faith-based organization that serves beneficiaries under a 
program funded at least in part by direct Federal financial 
assistance from the U.S. Department of Education must provide the 
following notice, or an accurate translation of this notice, to a 
beneficiary or prospective beneficiary of the program.
    (OMB number will be provided in the final regulations)

NOTICE OF BENEFICIARY RIGHTS

    Name of Organization:
    Name of Program:
    Contact Information for Program Staff (name, phone number, and 
email address, if appropriate):
    Because this program is supported in whole or in part by direct 
Federal financial assistance from the U.S. Department of Education, 
we are required to let you know that--
    (1) We may not discriminate against you on the basis of religion 
or religious belief;
    (2) We may not require you to attend or participate in any 
explicitly religious activities that are offered by us, and any 
participation by you in such activities must be purely voluntary;
    (3) We must separate in time or location any privately funded 
explicitly religious activities from activities supported by direct 
Federal financial assistance under this program;
    (4) If you object to the religious character of our 
organization, we will undertake reasonable efforts to identify and 
refer you to an alternative provider to which you have no objection; 
however, we cannot guarantee that, in every instance, an alternative 
provider will be available; and
    (5) You may report violations of these protections to [Insert 
the name of the entity that awarded the grant or subgrant or, in the 
case of services provided under a contract, the name of the grantee 
or subgrantee that awarded the contract.].
    We must give you this written notice before you enroll in our 
program or receive services from the program.

BENEFICIARY REFERRAL REQUEST

    If you object to receiving services from us based on the 
religious character of our organization, please complete this form 
and return it to the program contact identified above. If you 
object, we will make reasonable efforts to refer you to another 
service provider. With your consent, we will follow up with you or 
the organization to which you were referred to determine whether you 
contacted that organization.
    Please check if applicable:
    ( ) I want to be referred to another service provider.
    If you checked above that you wish to be referred to another 
service provider, please check one of the following:
    ( ) Please follow up with me.
    Name:
    Best way to reach me (phone/address/email):
    ( ) Please follow up with the service provider to which I was 
referred.
    ( ) Please do not follow up.

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

PART 76--STATE-ADMINISTERED PROGRAMS

0
7. The authority citation for part 76 continues to read as follows:

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

0
8. Section 76.52 is amended by:
0
A. Revising paragraph (a)(2).
0
B. Revising paragraph (c).
0
C. Revising paragraph (e).
    The revisions read as follows:


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

    (a) * * *
    (2) In the selection of subgrantees, States may not discriminate 
for or against a private organization on the basis of the 
organization's religious character or affiliation and must ensure that 
all decisions about subgrants are free from political interference, or 
even the appearance of such interference, and

[[Page 47268]]

are made on the basis of merit, not on the basis of religion or 
religious belief.
* * * * *
    (c)(1) A private organization that engages in explicitly religious 
activities, such as religious worship, instruction, or proselytization, 
must offer those activities separately in time or location from any 
programs or services supported by a subgrant from a State under a 
State-administered program of the Department, and attendance or 
participation in any such explicitly religious activities by 
beneficiaries of the programs and services supported by the subgrant 
must be voluntary.
    (2) The limitations on explicitly religious activities under 
paragraph (c)(1) of this section do not apply to a faith-based 
organization that provides services to a beneficiary under a program 
supported only by ``indirect Federal financial assistance.''
    (3) For purposes of 2 CFR 3474.15, 34 CFR 76.52, 76.712 and 76.714, 
the following definitions apply:
    (i) Direct Federal financial assistance means that the Department, 
grantee, or subgrantee selects a provider and either purchases services 
from that provider (such as through a contract) or awards funds to that 
provider (such as through a grant, subgrant, or cooperative agreement) 
to carry out services under a program of the Department. Federal 
financial assistance shall be treated as direct unless it meets the 
definition of ``indirect Federal financial assistance.''
    (ii) Indirect Federal financial assistance means that the choice of 
a service provider under a program of the Department is placed in the 
hands of the beneficiary, and the cost of that service is paid through 
a voucher, certificate, or other similar means of government-funded 
payment. Federal financial assistance provided to an organization is 
``indirect'' under this definition if--
    (A) The government program through which the beneficiary receives 
the voucher, certificate, or other similar means of government-funded 
payment is neutral toward religion;
    (B) The organization receives the assistance as the result of the 
decision of the beneficiary, not a decision of the government; and
    (C) The beneficiary has at least one adequate secular option for 
use of the voucher, certificate, or other similar means of government-
funded payment.

    Note to paragraph (c)(3):  The definitions of ``direct Federal 
financial assistance'' and ``indirect Federal financial assistance'' 
do not change the extent to which an organization is considered a 
``recipient'' of ``Federal financial assistance'' as those terms are 
defined under 34 CFR parts 100, 104, 106, and 110.

* * * * *
    (e) A private organization that receives any Federal financial 
assistance under a program of the Department shall not discriminate 
against a beneficiary or prospective beneficiary in the provision of 
program services on the basis of religion or religious belief.
* * * * *
0
9. Add Sec. Sec.  76.712, 76.713, and 76.714 to subpart G before the 
undesignated center heading ``Reports'' to read as follows:


Sec.  76.712  Beneficiary protections: Written notice.

    (a) A faith-based organization that receives a grant or subgrant 
under a State-administered program of the Department supported by 
direct Federal financial assistance must give written notice to a 
beneficiary or prospective beneficiary of certain protections. This 
notice must state that:
    (1) The organization may not discriminate against a beneficiary or 
prospective beneficiary on the basis of religion or religious belief;
    (2) The organization may not require a beneficiary to attend or 
participate in any explicitly religious activities that are offered by 
the organization, and any participation by the beneficiaries in such 
activities must be purely voluntary;
    (3) The organization must separate in time or location any 
privately funded explicitly religious activities from activities 
supported by direct Federal financial assistance;
    (4) If a beneficiary or prospective beneficiary objects to the 
religious character of the organization, the organization will 
undertake reasonable efforts to identify and refer the beneficiary to 
an alternative provider to which the beneficiary has no objection; and
    (5) A beneficiary or prospective beneficiary may report violations 
of these protections to the State agency administering the program.
    (b) A faith-based organization that receives a subgrant under a 
State-administered program of the Department must provide beneficiaries 
with the written notice required under paragraph (a) of this section 
prior to the time they enroll in or receive services from the 
organization. When the nature of the services provided or exigent 
circumstances make it impracticable to provide the written notice in 
advance of the actual services, the organization must advise 
beneficiaries of their protections at the earliest available 
opportunity.
    (c) The notice that a faith-based organization must use to notify 
beneficiaries or prospective beneficiaries of their rights under 
paragraph (a) of this section is specified in Appendix A to part 75.

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

Sec.  76.713  Beneficiary protections: Referral requirements.

    (a) If a beneficiary or prospective beneficiary of a State-
administered program of the Department supported by direct Federal 
financial assistance objects to the religious character of a faith-
based organization that provides services under the program, that 
organization must promptly undertake reasonable efforts to identify and 
refer the beneficiary to an alternative provider to which the 
beneficiary or prospective beneficiary has no objection.
    (b)(1) A faith-based organization may satisfy the requirement in 
paragraph (a) of this section by referring a beneficiary or prospective 
beneficiary to another faith-based organization if the beneficiary or 
prospective beneficiary does not object to that provider.
    (2) If the beneficiary or prospective beneficiary requests a 
secular provider, and one is available, the faith-based organization 
must make a referral to that provider.
    (c) The faith-based organization must make a referral to an 
alternative provider that--
    (1) Is in reasonable geographic proximity to the location where the 
beneficiary or prospective beneficiary is receiving or would receive 
services (except for services provided by telephone, internet, or 
similar means);
    (2) Offers services that are similar in substance and quality to 
those offered by the organization; and
    (3) Has the capacity to accept additional beneficiaries.
    (d) When a faith-based organization makes a referral to an 
alternative provider, or when the organization determines that it is 
unable to identify an alternative provider, the organization must 
notify the State agency administering the program. If the organization 
is unable to identify an alternative provider, the State agency must 
determine whether there is any other suitable alternative provider to 
which the beneficiary or prospective beneficiary may be referred.

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

Sec.  76.714  Subgrants, contracts, and other agreements with faith-
based organizations.

    If a grantee under a State-administered program of the Department 
has the authority under the

[[Page 47269]]

grant or subgrant to select a private organization to provide services 
supported by direct Federal financial assistance under the program by 
subgrant, contract, or other agreement, the grantee must ensure 
compliance with applicable Federal requirements governing contracts, 
grants, and other agreements with faith-based organizations, including, 
as applicable, Sec. Sec.  76.52, 76.532, and 76.712-76.713 and 2 CFR 
3474.15.

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


[FR Doc. 2015-18263 Filed 8-5-15; 8:45 am]
 BILLING CODE 4000-01-P