Beginning in April of 2008, The U.S. Agency of International Development's Inspector General conducted an audit to answer two questions regarding taxpayer funding for foreign aid: 1) Were any funds used for religious activity? and 2) Were the funds distributed in accordance with federal policy as outlined in President Bush's Executive Order establishing the White House's Faith-Based Office?
Without making a claim about the legality of such funding – the ensuing report, issued earlier this month, but I finally just got around to reading, explicitly remarks that this constitutional question is "highly complex" – the conclusion is clear that some funding of religious activity through foreign assistance has occurred, to the tune of at least $325,000.
[T]he audit found that USAID had funded some religious activities, such as the employment of laborers to rehabilitate mosques in Iraq and programs for African youth that provided curriculums on abstinence and behavior change containing Biblical stories and religious messages.
The report reasons that some such funding may be permissible due to overriding secular goals in foreign policy which may happen to engage religious activity. Perhaps more importantly, the survey indicates that administrators are unsure of the legal limits of such funding, or what standards to apply in gauging propriety, questions that remain despite appeals to the Justice Department for guidance.
Agency lawyers in Washington also raised questions about the applicability of the Establishment Clause overseas, especially in light of compelling foreign policy priorities. USAID’s Community Stabilization Program in Iraq is just such a priority. These legal questions need to be answered to properly determine the allowability of the activities.
…
USAID’s Office of General Counsel requested guidance from the Department of Justice in the summer of 2007 with respect to Federal funding for activities with religious references domestically and overseas and whether foreign policy priorities justify the Agency’s funding of program activities containing religious references….Almost 2 years have passed since USAID sought guidance from the Department of Justice on the clarification of standards for assessing the permissible role of religion within USAID-funded programs. The uncertainty created by the lack of guidance has broader negative implications for Agency programming, going beyond the curriculums. The Agency faces recurring questions about the applicability of the Establishment Clause overseas. Accordingly, the following finding discusses the need to obtain guidance from the White House.
Read the whole report (pdf) here.