Most federal funding for these programs is administered by state or local government entities, which have the ability to contract with social service providers, including religious organizations. FBOs Received a Small Proportion of Contracted Funds and Most Had Previously Contracted with the Government

Overall, FBOs contracted for a small proportion of the government funding available to nongovernmental contractors under the four programs we examined. Contracts with FBOs accounted for 8 percent (or about $80 million) of the $1 billion in federal and state TANF funds spent by state governments on contracts with nongovernmental entities in 2001, and 2 percent (or about $16 million) of the $712 million Welfare-to-Work competitive grant funds in fiscal years 1998 and 1999. FBOs contracting for SAPT funds provided prevention and treatment of substance abuse. These factors include FBOs’ limited awareness of funding opportunities, limited administrative and financial capacity, inexperience with government contracting, and beliefs about the separation of church and state. Because of confusion over whether the state constitution also applied to federal funds, Georgia adopted a law that specified that charitable choice allowed religious organizations to receive federal funding. For example, some faith-based providers do not want to separate their religion from their delivery of services. Understanding and Implementation of Charitable Choice Safeguards Vary and Incidence of Violations Is Unknown

In the five states we visited, understanding and implementation of charitable choice safeguards differed, and the incidence of problems involving safeguards is unknown. Officials Implementing Charitable Choice Provisions Differed in Their Understanding of Certain Safeguards

Most state and local officials we interviewed knew that charitable choice provisions were meant to allow FBOs to participate in the contracting process on the same basis as other organizations and understood that the law prohibits the use of public funds for religious worship, instruction, or proselytizing; however, they often differed in their understanding of allowable religious activities. Indiana’s Family and Social Services Administration implemented a similar practice. FBOs Are Held Accountable for Performance in the Same Way As Non- FBOs, but Comparative Performance Information Is Unavailable

FBOs are held accountable for performance in the same way as other organizations that contract with the government, according to state and local officials in the five states we visited. Research efforts are currently under way to provide information on the performance of FBOs in delivering social services. We selected these states to obtain a range in the levels of both state government activities with regard to faith-based initiatives and contracting with faith-based organizations, as well as geographic dispersion.
Why GAO Did This Study

The federal government spends billions of dollars annually to provide services to the needy directly, or through contracts with a large network of social service providers. Faith-based organizations (FBO), such as churches and religiously affiliated entities, are a part of this network and have a long history of providing social services to needy families and individuals. In the past, religious organizations were required to secularize their services and premises, so that their social service activities were distinctly separate from their religious activities, as a condition of receiving public funds. Beginning with the passage of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Congress enacted "charitable choice" provisions, which authorized religious organizations to compete on the same basis as other organizations for federal funding under certain programs without having to alter their religious character or governance. The statutory provisions cover several programs, including Temporary Assistance for Needy Families (TANF) and Welfare to Work. Similar provisions also apply to the Community Services Block Grant and the substance abuse prevention and treatment programs.

What GAO Found

GAO found that faith-based organizations receive a small proportion of the government funding provided to nongovernmental contractors. Contracts with faith-based organizations accounted for 8 percent of the $1 billion in federal and state TANF funds spent by state governments on contracts with nongovernmental entities in 2001. Although charitable choice was intended to allow FBOs to contract with government in these programs, several factors continue to constrain the ability of small FBOs to contract with the government. These factors include FBO's lack of awareness of funding opportunities, limited administrative and financial capacity, inexperience with government contracting, and beliefs about the separation of church and state. State and local officials differed in their understanding and implementation of certain charitable choice safeguards, such as the prohibition on the use of federal funds for religious worship or instruction; however, the incidence of problems involving safeguards is unknown. Faith-based organizations are held accountable for performance in the same way as other organizations contracting with the government. However, little information is available to compare the performance of FBOs to that of other organizations.