CNN reports,

President Obama’s newly revamped Office of Faith Based Initiatives is reigniting a contentious debate across the ideological spectrum over whether religious organizations that accept funds from the government should be allowed to discriminate when hiring.
n one corner is a string of religion-backed organizations that have accepted federal funds from the 8-year-old program to advance their secular charity work. President Bush issued an executive order in 2002 that allowed these groups to continue their practice of discrimination with respect to hiring. Specifically, many of the organizations carry policies against hiring outside their religion or hiring homosexuals whose lifestyles conflict with church doctorines.
In the other corner are separation-of-church-and-state advocates and human-rights organizations that say the government must constitutionally compel these organizations to follow nondiscrimination laws if they accept federal funding. Anything less, they say, would at best be a violation of church-state separation and at worst an implicit endorsement of discrimination.
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In an executive order to be announced on Thursday, Obama does not rescind Bush’s provision to allow faith-based groups to discriminate in their hiring practices, but does provide a legal process for organizations to go through in order to that ensure hiring is legal and non-discriminatory.
Administration sources say the new legal safeguard is a “key step forward” in addressing the thorny issue of faith-based hiring.
But Dr. Joel Hunter, a senior pastor at Northland Church in Longwood, Florida, who will be part of a 25-member council of religious leaders in the faith-based office, said the issue is a particularly tricky one for religious leaders.
“We’re going to have to work that out, because on the one hand, you don’t want to use federal funds to discriminate. But on the other hand, we can’t have religious organizations taking money on the condition that they will hire people who live a lifestyle contrary to what they teach,” he said.

Full story here.