OMB has issued guidance to agencies on carrying out a 2017 executive order on protecting religious liberty, including how that plays into the awarding of federal grants.
Rules or grant terms that penalize or disqualify a religious person or organization from a right to compete for a public benefit including a grant or contract because of the person’s religious character “violate the Constitution’s Free Exercise Clause, unless the government can prove that such rules or terms are the least restrictive means of achieving a compelling government interest,” says memo M-20-09.
Grant-awarding agencies “shall ensure that the terms of the federal grants they award make clear that states or other public grantees may not condition sub-awards of federal grant money in a manner that would disadvantage grant applicants based on their religious character,” it says.
It adds that agencies “have meaningful tools to address public recipients’ unlawful discrimination on the basis of religious character in the issuance of sub-awards of federal grant funds up to and including terminating the grant and initiating proceedings to debar the recipient from being eligible in the future to receive federal grants, contracts, or subsidies.
Agencies administering a federal grant program shall take all appropriate action, in a manner consistent with applicable law, to ensure that public grantees do not discriminate against applicants for sub-grants on the basis of their religious character.”