The Homeland Security Advisory Council report also recommended that the department focus on American milliennials by allocating up to USD 100 million in new funding.
It also urged greater private sector cooperation, including with Muslim communities, to counter what is described as a "new generation of threats to the Homeland related to the threat of violent extremism."
The funds would be used for hiring experts and new social media programmes and technology to influence young people not to join terror groups, The Washington Free Beacon reported, citing the report.
Under a section on recommended actions on terminology, the report said Department of Homeland Security (DHS) should "reject religiously-charged terminology and problematic positioning by using plain-meaning American English."
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Government agencies should employ, "American English instead of religious, legal and cultural terms like 'jihad', 'sharia' (islamic law), 'takfir' (apostasy) or 'umma' (entire Muslim community)," stated the June 2016 report by the Council's countering violent extremism subcommittee.
"The department's CVE (countering violent extremism) efforts are an attempt to protect our nation's young people from extremists who prey upon the Millennial generation," the report was quoted as saying.
"The department must reframe the conversation to reflect this reality and design a robust programme around the protection of our youth, which must include predator awareness and an understanding of radicalisation. In doing so, our citizens will be better equipped for this threat," it said.