PHILADELPHIA - Sidestepping Congress, President Bush took action Thursday to help churches and other religious groups better compete for federal dollars to provide social services.

He said he wanted to "clear away a legacy of discrimination" against such organizations, even those that refuse to hire people of a different faith.

"If a charity is helping the needy, it should not matter if there is a rabbi on the board or a cross or a crescent on the wall or a religious commitment in the charter," Bush told a White House-sponsored conference of religious and charitable leaders.

"The days of discriminating against religious groups just because they are religious are coming to an end."

His announcement pleased conservatives who want more support for the charitable efforts of religious groups. It was greeted with dismay and skepticism by liberals and moderates who worry that government funding of overtly religious endeavors violates the constitutional separation of church and state.

With Congress stalled on the "faith-based" initiative he had pushed since the beginning of his administration, the president bypassed lawmakers to put in place some of his ideas. He used executive orders and other administrative actions in an effort to give religious organizations the same chance as other groups in winning federal contracts.

For example, federal contractors no longer can be denied taxpayer money if they display religious icons. He also made clear that no money "will be used to directly support inherently religious activities."

The president believes groups with religious affiliations can be as or more effective than others in caring for the poor, hungry, drug-addicted and homeless.

"Government must recognize the power and unique contribution of faith-based groups in every part of our country," Bush said.

The most contentious change allows religious organizations to make hiring decisions based on an applicant's faith and still win federal contracts.

The president did not have the authority to make that policy change when it comes to federal grants. Sen. Rick Santorum, R-Pa., said he plans to try to address that next year when lawmakers reconsider a 1996 welfare reform bill.

For his announcement, Bush picked a state that will be critical in the 2004 presidential race. Speaking before an audience filled with minorities who work in religious groups and other charities across the mid-Atlantic; it also was an element in the White House's effort to reach out to black and Hispanics.

His remarks were met with repeated "Amens" and applause. Bush was clearly buoyed by the energy in the room, as well as, aides said, by a private visit beforehand with some children of prisoners and their mentors from a local church-sponsored program.

The Rev. Barbara Farmer, pastor of Faith Tabernacle Church of the Living God in Camden, N.J., said Bush calmed her church's fears about applying for federal money to back its food pantry, child care services and drug addiction counseling.

Nonetheless, there was plenty of criticism.

"All Americans should find abhorrent a government policy that allows for a religious or racial litmus test when hiring with taxpayer money a person to serve soup," said Rep. John Conyers, D-Mich. "Cooking soup and giving it to the poor can be done equally well by persons of all religious beliefs."

Added Ira N. Forman, executive director of the National Jewish Democratic Council: "It is simply wrong for federal contractors to discard the resumes of people with names that sound 'too Jewish' or 'too Muslim' when hiring substance abuse counselors and other professionals with government money."

But Jay Sekulow, chief counsel for the American Center for Law and Justice, a public interest law firm founded by televangelist Pat Robertson, said Bush's approach is "perfectly permissible" and constitutional.

Jim Towey, the director of the White House office of faith-based and community initiatives, said similar regulations governing private groups providing government-funded welfare-to-work services have functioned without problems since 1996.

Bush's initiative was largely successful in the House. But the Senate would not give him even a watered-down version that mainly increased tax breaks for charitable giving. Santorum said he plans to resurrect that scaled-back legislation when the new Congress, now controlled by Republicans, reconvenes in early January.