Report to the Chairman, Subcommittee 

on Human Resources, Committee on 

Ways and Means, House of 

Representatives 

United States Government Accountability Office

GAO

August 2005 WELFARE REFORM

HHS Should Exercise 

Oversight to Help 

Ensure TANF Work 

Participation Is 

Measured Consistently 

across States 

GAO-05-821 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-821.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact David Bellis at 

(415) 904-2272 or bellisd@gao.gov. 

Highlights of GAO-05-821, a report to the 

Chairman, Subcommittee on Human 

Resources, Committee on Ways and 

Means, House of Representatives 

August 2005

WELFARE REFORM

HHS Should Exercise Oversight to Help 

Ensure TANF Work Participation Is 

Measured Consistently across States 

Differences in how states define the 12 categories of work that count toward 

meeting TANF work participation requirements have resulted in some states 

counting activities that other states do not count and, therefore, in an 

inconsistent measurement of work participation across states. For example, 

5 of the 10 states we reviewed considered caring for a disabled household or 

family member to count toward the federal work participation requirement, 

while 5 did not consider hours spent in this activity to be countable (see 

table below). We also found that some states made significant changes in 

their definitions of the categories of work. As a result, the work participation 

rates for these states cannot be compared from year to year. 

Some of the states in our review have implemented internal controls to help 

report work participation hours in accordance with HHS guidance, while 

other states lack such internal controls. Some states have not issued 

guidance on how to verify that reported hours were actually worked, nor do 

they monitor data reported by their staff to help ensure that hours are 

reported correctly. In contrast, a few states have systematic approaches for 

verifying that hours reported were worked. 

HHS has provided limited oversight and guidance to states on appropriately 

defining work activities and reporting hours of work participation. 

According to HHS officials, HHS has the authority to regulate states’ 

definitions of work activities. However, to promote state flexibility, HHS 

chose not to issue regulations for this purpose. Further, HHS’s guidance 

lacks specific criteria for determining the appropriate hours to report. Given 

that HHS has not exercised oversight of states’ definitions and internal 

controls, states are making different decisions about what to measure. 

Therefore, there is no standard basis for interpreting states’ rates, and the 

rates cannot effectively be used to assess and compare states’ performance. 

Number of Reviewed States that Count Certain Activities toward Meeting the Federal Work 

Participation Rate and the Categories of Work in Which the States Counted the Activities 

Activity 

Number of 10 reviewed states 

that count the activity as 

federal work participation 

Federal categories of work in which the 

reviewed states counted the activity 

Caring for a 

disabled household 

or family member 

5 Community Service 

Substance abuse 

treatment 

6 Job Search/Readiness, Work Experience, 

Community Service 

Domestic violence 

counseling 

3 Job Search/Readiness, Work Experience, 

Community Service 

Other mental 

health counseling 

5 Job Search/Readiness, Work Experience, 

Community Service 

English as a 

second language 

7 Job Skills Training, Secondary School or 

Education Directly Related to Employment, 

Community Service, Vocational Education 

Source: GAO review of 10 states’ TANF documents and interviews with the states’ TANF officials. 

Note: An additional state counts substance abuse treatment, domestic violence counseling, and other mental health counseling 

toward meeting the federal work participation rate in limited circumstances. 

The debate over reauthorization of 

the Temporary Assistance for 

Needy Families (TANF) block grant 

has focused on work requirements 

and brought attention to the 

measure of TANF work 

participation. The measure is used 

to assess states’ performance and 

determine whether a state is 

subject to penalty for not meeting 

TANF work requirements. The 2003 

work participation rates ranged 

from 9 to 88 percent for the 50 

states based on data they submit to 

the U.S. Department of Health and 

Human Services (HHS). To help 

Congress understand these rates, 

GAO looked at (1) how selected 

states are defining the categories of 

work activities, (2) whether 

selected states have implemented 

internal controls over the work 

participation data, and (3) what 

guidance and oversight HHS has 

provided states. 

What GAO Recommends

GAO recommends that HHS enact 

regulations to provide oversight of 

states’ definitions and more 

guidance on counting hours of 

work activities and that HHS 

identify cost-effective internal 

control practices and disseminate 

information on these practices to 

states. In commenting on our draft 

report, HHS said it would consider 

making the recommended revisions 

in its regulations after TANF 

reauthorization and is exploring 

options for implementing the 

recommendation on internal 

controls. 
Page i GAO-05-821 Welfare Reform 

Letter 1

Results in Brief 3 

Background 6 

Differences in How States Define Work Activities Result in 

Inconsistent Measurement of Work Participation across States 

and over Time 10 

Some States Do Not Have Internal Controls Needed for Reporting 

Data in Accordance with HHS Guidance, while Other States Do 15 

HHS’s Oversight and Guidance on Appropriately Defining Work 

Activities and Reporting Hours of Work Participation Have Been 

Limited 18 

Conclusions 22 

Recommendations for Executive Action 23 

Agency Comments and Our Evaluation 24 

Appendix I Elements of the Work Participation Requirement and 

How the Work Participation Rate Is Calculated 27 

Appendix II States That Count Certain Activities toward Meeting 

the Federal Work Participation Rate 30 

Appendix III States Identified as Lacking Certain Internal 

Controls 31 

Appendix IV Fiscal Year 2003 Work Participation Rates 

Calculated by HHS Based on Data Provided by States 32 

Appendix V Comments from the Department of Health and 

Human Services 34 

Appendix VI GAO Contact and Staff Acknowledgments 39 

Contents 
Page ii GAO-05-821 Welfare Reform 

Related GAO Products 40 

Tables 

Table 1: 12 Categories of Federal Work Activities and Limitations 

on Counting Time in Those Activities 8 

Table 2: The Number of 10 Reviewed States That Count Certain 

Activities toward Meeting the Federal Work Participation 

Rate and the Categories of Work in Which the States 

Counted the Activities 11 

Table 3: Number of Reviewed States Lacking Internal Controls to 

Help Ensure Hours of Participation Are Reported in 

Accordance with HHS Guidance 16 

Table 4: Number of Hours Different Types of Recipients Must 

Participate in Allowed Work Activities to Count as 

Working in the TANF All-Family Work Participation Rate 27 

Table 5: Base Percentage of TANF Families That Must Be Engaged 

in Work for the All-Family and the Two-Parent Family 

Rates 27 

Table 6: States Covered by the Review That Count Certain 

Activities toward Meeting the Federal Work Participation 

Rate 30 

Table 7: States Covered by the Review That Lacked Internal 

Controls to Help Ensure Hours of Participation Are 

Reported in Accordance with HHS Guidance 31 

Table 8: Fiscal Year 2003 Work Participation Rates Calculated by 

HHS Based on Data Provided by States 32 

Figure 

Figure 1: Formula for Calculating the All-Family Work 

Participation Rate 28 
Page iii GAO-05-821 Welfare Reform 

Abbreviations

ACF Administration for Children and Families 

HHS U.S. Department of Health and Human Services 

MOE maintenance-of-effort 

NDNH National Directory of New Hires 

OMB Office of Management and Budget 

PRWORA Personal Responsibility and Work Opportunity 

 Reconciliation Act of 1996 

SSP separate state program 

TANF Temporary Assistance for Needy Families 

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other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
Page 1 GAO-05-821 Welfare Reform 

August 19, 2005 

The Honorable Wally Herger 

Chairman 

Subcommittee on Human Resources 

Committee on Ways and Means 

House of Representatives 

Dear Mr. Chairman: 

In fiscal year 2004, states spent $26 billion from the federal Temporary 

Assistance for Needy Families (TANF) block grant and related state funds 

to assist low-income parents and their children. The federal welfare 

reform law—the Personal Responsibility and Work Opportunity 

Reconciliation Act of 1996 (PRWORA)—that created the TANF block grant 

included the expectation that welfare recipients would participate in work 

activities. The law outlined 12 categories of work activities, such as 

“unsubsidized employment” and “community service programs,” in which 

recipients could participate to meet federal TANF requirements. Under the 

law, states have significant flexibility in designing their TANF programs, 

such as flexibility in defining specific activities to fall under the 12 

categories of work activities outlined in the law. Along with providing this 

flexibility, PRWORA required states to collect and report a specified set of 

data to the Department of Health and Human Services (HHS), including 

data on hours recipients spent in work activities. PRWORA also created a 

performance measure called the TANF work participation rate for 

determining the extent to which a state’s TANF families were engaged in 

work activities during the year. The 2003 work participation rates 

calculated for the 50 states based on the data they submitted to HHS 

ranged from 9 to 88 percent. HHS is responsible for reporting these rates 

to Congress and for using them to identify states that are not meeting the 

required level of work participation for their TANF recipients and, thus, 

may be subject to penalties. Given the importance of the work 

participation rates, they need to provide a consistent measure of work 

participation across states. Without a consistent measure, there will be no 

standard basis for interpreting each state’s rate or for comparing the 

performance of states. 

A key issue in the debate over TANF reauthorization has been whether to 

change work requirements, such as by requiring additional hours of work 

and allowing more types of work activities to be counted. For example, a 

United States Government Accountability Office

Washington, DC 20548 
Page 2 GAO-05-821 Welfare Reform 

Senate bill proposed adding substance abuse treatment and caring for a 

disabled family member to the list of activities that can be counted as 

work participation. Another issue in reauthorization has been how to 

revise the caseload reduction credit, which uses levels of TANF caseload 

declines to reduce the work participation rates states must have in order 

to avoid penalty. Because of significant declines in TANF caseloads 

following TANF implementation, the caseload reduction credit enabled 

many states to have very low work participation rates and still meet their 

required levels of work participation. Revisions in the caseload reduction 

credit could raise the required level of work participation for many states 

and may result in more states being penalized for not having high enough 

work participation rates. In considering welfare reauthorization, Congress 

has focused much attention on states’ current work participation rates. To 

help you understand these rates, we looked at (1) how selected states are 

defining the work activities that count toward meeting federal work 

participation requirements, (2) whether selected states have implemented 

internal controls to help ensure that the work participation data they 

report are in accordance with HHS guidance, and (3) what guidance and 

oversight HHS has provided states regarding appropriately defining work 

activities and reporting hours of work participation. 

Our review focused on HHS’s Administration for Children and Families 

(ACF), which administers the TANF block grant, and 10 selected states-– 

California, Georgia, Kansas, Maryland, Nevada, New York, Ohio, 

Pennsylvania, Washington, and Wisconsin. In 2003, the 10 states made up 

46 percent of the national TANF caseload. We selected these states to 

represent a mix of TANF 2003 work participation rates, according to data 

reported by states to ACF.1

 (These rates are shown in app. IV.) 

Specifically, we selected the 3 states with the lowest rates (9 percent to 11 

percent), 3 states with some of the highest rates (62 percent to 88 

percent), and 4 states with rates in the middle range (22 percent to 46 

percent). We also selected states to represent a variety of other 

characteristics, such as geographic location, benefit policies, and use of 

waivers that exempt the state from certain TANF requirements. We used a 

semistructured interview protocol in conducting telephone interviews 

with the 10 selected states’ TANF officials. 

 1

The fiscal year 2003 work participation rates were the most recent available rates at the 

time of our review. 
Page 3 GAO-05-821 Welfare Reform 

To learn how selected states are defining the work activities that count 

toward meeting federal work participation requirements, we interviewed 

the 10 selected states’ TANF officials about activities they count in work 

participation data. We also reviewed state documents, such as annual 

TANF reports and TANF manuals that show how states define the 12 

federal categories of work activities and how they classify recipients. 

Although our work allowed us to identify inconsistencies in definitions 

and classifications across states, we did not have data to evaluate the 

impact of different definitions and classifications on the rates. 

To learn whether selected states have implemented internal controls to 

help ensure the work participation data they report are in accordance with 

HHS guidance, we interviewed the 10 selected states’ TANF officials about 

their internal controls over collection and reporting of the data. We also 

reviewed the states’ guidance on collection and reporting of the data.2

Through these telephone interviews and document reviews, we learned 

about policies and processes established by the states to help ensure data 

reported are in accordance with HHS guidance, but we could not learn 

whether these policies and processes are effectively carried out by staff at 

the local level. Also for the 10 states, we interviewed state auditors and 

reviewed single audit reports for fiscal years 2000–2003 and any other 

state audit reports that addressed work participation data. 

To learn what guidance and oversight HHS has provided states regarding 

appropriately defining work activities and reporting hours of work 

participation, we interviewed ACF officials about their oversight of states’ 

definitions of work activities that count toward the work participation 

rates and states’ data on hours of work participation. We also interviewed 

officials from the HHS Office of Inspector General. In addition, we 

reviewed ACF’s regulations and other guidance for reporting work 

participation data. We conducted our work from November 2004 to June 

2005 in accordance with generally accepted government auditing 

standards. 

Differences in how states define the 12 categories of work that count 

toward meeting federal work participation requirements have resulted in 

some states counting activities that other states do not count and, 

 2

To help determine the elements of internal control to address in our review, we used GAO, 

Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 

(Washington, D.C.: November 1999). 

Results in Brief 
Page 4 GAO-05-821 Welfare Reform 

therefore, in an inconsistent measurement of work participation across 

states. For example, out of the 10 states we reviewed, 5 considered caring 

for a disabled family or household member to be part of the Community 

Service category of work activities, but 5 other states considered this 

activity as not countable. Also, 6 of the 10 selected states considered 

substance abuse treatment to be part of countable categories such as Job 

Search/Job Readiness, Work Experience, and Community Service, but 4 

states did not consider it a countable activity. We also found that some 

states made significant changes year to year in which activities they count 

in the work participation rate. As a result, the rates for these states cannot 

be compared from year to year to assess how the states’ performance 

changed. For example, after expiration of a waiver that had exempted it 

from restrictions on time spent in Job Search/Job Readiness, one state 

redefined many activities from Job Search/Job Readiness to other 

categories without time restrictions. After this change, the state’s work 

participation rate calculated based on nonwaiver requirements increased 

more than 50 percentage points. Another inconsistency among states—

which adult recipients are counted in work rates—occurs because states 

have flexibility in how they classify recipients. Four of the 10 states have 

used their funding flexibility to serve two-parent families through separate 

state-funded programs not covered by TANF work requirements, and 1 

state also served adults with significant barriers, such as medical 

problems, through a separate state program. Thus, in these states, all of 

these cases were removed from the work participation rate calculation, 

while these types of cases are included in other states’ rate calculations. 

In reviewing the 10 states’ internal controls for collecting and reporting 

hours TANF recipients spent in work activities (regardless of how the 

states defined the activities), we found that some states have implemented 

internal controls to help report work hours in accordance with HHS 

guidance, while other states are lacking such internal controls. For 

example, some states have not issued guidance for their staff on the 

support needed to verify that reported hours were worked. As a 

consequence, some states report hours that recipients are scheduled to 

work instead of hours actually worked, especially in the case of 

unsubsidized employment, for which, according to state officials, it is 

difficult to get documentation from employers and recipients to verify 

hours worked. Two states have guidance allowing hours that were missed 

to be reported as worked when case workers determine that the recipient 

had good cause for the absence. One state’s guidance instructs that 30 

hours of participation per week be reported for certain activities such as a 

parent’s involvement in her child’s Head Start program but does not 

require evidence that the parent was actually involved in 30 hours of the 
Page 5 GAO-05-821 Welfare Reform 

activity. In contrast, a few of the 10 states had systematic approaches for 

verifying that hours reported were worked. For example, according to 

officials in some states, their states review the documentation in each 

sampled file to ensure that hours reported are supported before 

submitting their data to HHS. 

HHS has provided limited oversight and guidance to states on 

appropriately defining work activities and reporting hours of work 

participation. According to HHS officials, HHS has authority under 

PRWORA to regulate states’ definitions of work activities. However, HHS 

has chosen not to issue regulations for this purpose in order to promote 

the flexibility PRWORA provided states and in response to calls from 

states for as much flexibility as possible in designing their TANF 

programs, according to HHS officials. The current TANF regulations 

repeat the 12 categories of work activities that are included in PRWORA 

and do not further specify activities that can and cannot be included under 

the 12 categories. Given the current regulatory structure, HHS officials 

said they cannot direct states to change their definitions if HHS believes 

the definitions are inappropriate. HHS’s guidance on the appropriate hours 

to report is also limited. HHS has specified in TANF regulations that the 

quarterly reports that contain work participation data be “complete and 

accurate.” In other guidance, HHS has further specified that states must 

report “actual” hours that recipients engage in work activities rather than 

hours for which the recipient is scheduled or expected to work. However, 

the guidance does not specify what support is needed to verify actual 

hours of work participation. HHS performs checks on the data that can 

identify inconsistencies but cannot determine whether hours reported 

were actually worked. According to HHS officials, HHS’s primary 

mechanism for identifying states that are not reporting data in accordance 

with HHS guidance is the state single audits that review internal controls 

and compliance with laws and regulations governing federal awards. 

Although HHS has identified data problems using state single audit 

reports, some of the internal control problems we identified in this review 

had not been found by single audits. To emphasize the importance of work 

participation data, HHS is adding to the single audit guidance for fiscal 

year 2005 more instructions on reviewing work participation data. 

To help improve the quality and comparability of the work participation 

data, we are recommending that HHS issue regulations to provide 

oversight of states’ definitions and more guidance on counting hours of 

work activities and that HHS work with states to identify cost-effective 

internal control practices and disseminate information on these practices 

to states. 
Page 6 GAO-05-821 Welfare Reform 

 In commenting on our draft report, HHS said it would consider making 

the recommended revisions in its regulations after TANF reauthorization 

and is exploring options for implementing the recommendation on internal 

controls.

Enactment of the TANF block grant significantly changed federal welfare 

policy and gave states more flexibility in designing their welfare programs. 

For example, states have flexibility in setting benefit levels, eligibility 

requirements,3

 work requirements, and policies for sanctioning 

noncompliant recipients (that is, reducing or discontinuing their benefits). 

Due to this flexibility, TANF programs differ substantially from state to 

state. These different state policies can affect the extent to which a state’s 

TANF recipients participate in work activities and the type of work 

activities they engage in. States also have flexibility in using TANF block 

grant funds and in using state funds—referred to as maintenance-of-effort 

(MOE) funds—that states were required to use toward TANF purposes in 

order to qualify for the block grant. For example, if states want to 

exclusively use MOE funds for a particular group of welfare recipients, 

such as those in two-parent families, they can use these funds through 

separate state programs (SSPs) for those recipients and remove them from 

the TANF requirements. 

Due to the importance of state flexibility under TANF, PRWORA limited 

HHS’s authority to regulate state TANF programs. PRWORA also 

substantially reduced HHS staff available to implement TANF. However, 

PRWORA established penalties for states, such as for not meeting required 

levels of work participation, and HHS has authority to regulate in 

situations where penalties are involved. TANF has two work participation 

rates—one that applies to all adult-headed families and another that 

applies to two-parent families.4

 A certain percentage of each state’s adultheaded TANF cases receiving cash assistance must participate in workrelated activities for a minimum number of hours each week or the state 

may face financial penalty.5

 The categories of work activities that can be 

 3

Eligibility requirements can include an amount of income that recipients can earn and still 

remain eligible for TANF benefits. Referred to as earned income disregards, these 

provisions affect whether recipients who get a paying job can remain eligible for TANF 

while they are working. 

4

The current House and Senate TANF reauthorization bills propose to eliminate the twoparent rate. 

5

For the purposes of this report, the term “adult” refers to TANF recipients age 20 or over 

or TANF recipients under age 20 who are head of a household receiving TANF. 

Background 
Page 7 GAO-05-821 Welfare Reform 

counted for the purpose of the performance measure are outlined in TANF 

law and regulations. If TANF recipients engage in other activities provided 

or permitted under the state’s TANF program, then those activities do not 

count toward meeting the federal work participation requirements. 

Further, if TANF recipients engage in work activities for less than the 

minimum required number of hours, then those recipients do not count as 

being engaged in work for purposes of the performance measure. 

When a state does not meet its required level of work participation, HHS 

will send the state a penalty notice. The state then has the opportunity to 

avoid a penalty by providing reasonable cause why it did not meet the 

work participation rate or by submitting a corrective compliance plan that 

will correct the violation and ensure continued compliance with work 

participation requirements. Since implementation of TANF, numerous 

states have received penalty notices from HHS for not meeting the 

required level of work participation. However, most of these states have 

avoided penalties by submitting corrective compliance plans. As of 

February 2005, 11 states6

 and the District of Columbia had paid penalties 

for not meeting the two-parent work participation rate.7

 Most of these 

penalties were for the first 4 years (fiscal years 1997-2000) of TANF 

implementation, and 5 states and the District of Columbia have paid 

penalties for more than 1 year. 

Each quarter, states are required to report to ACF monthly data on their 

TANF cases, including the number of hours each adult recipient spent in 

activities that count toward meeting federal work requirements. States 

have the option of reporting to ACF on all their TANF cases (the universe) 

or on a scientifically drawn sample of TANF cases. Using the data reported 

by states, ACF calculates an annual work participation rate for each state. 

A state’s annual work participation rate is based on the state’s average 

monthly rate for the year. See appendix I for information on elements of 

the work participation requirement and how the work participation rate is 

calculated by ACF. 

 6

The states that have paid a penalty for not meeting the two-parent work participation rate 

are Arkansas, Delaware, Iowa, Mississippi, Nebraska, New Jersey, New Mexico, North 

Carolina, Oklahoma, Virginia, and West Virginia. 

7

As of February 2005, Guam and the Virgin Islands, but no states, had paid penalties for not 

meeting the all-family work participation rate. 
Page 8 GAO-05-821 Welfare Reform 

The TANF legislation and regulations outline 12 categories of work 

activities that can count toward the federal work requirement. The TANF 

regulations name the categories and require each state to include its 

definition of each work activity in the annual report it must file each year 

with HHS. Hours spent in some activities (referred to as supplemental 

activities) generally cannot count toward the federal work requirement 

unless hours are also spent in other countable activities (referred to as 

core activities). Some activities have restrictions on the amount of time 

that can be spent in them. The 12 categories and their time restrictions are 

shown in table 1. 

Table 1: 12 Categories of Federal Work Activities and Limitations on Counting Time in Those Activities 

Activity Limitations on counting time (for all families) 

Core activities 

1. Unsubsidized employment None 

2. Subsidized private sector employment None 

3. Subsidized public sector employment None 

4. Work experience None 

5. On-the-job training None 

6. Job search and job readiness assistance 6-week time limit per client per year, no more than 4 weeks consecutively 

7. Community service programs None 

8. Caring for child of community service participant None 

9. Vocational education training 12-month total time limit per client 

Supplemental activities 

10. Job skills training directly related to employment Counts only after accumulating 20 hours in a core activity 

11. Education directly related to work Counts only after accumulating 20 hours in a core activity (except if under 

20 years old) 

12. Satisfactory attendance at high school or equivalent Counts only after accumulating 20 hours in a core activity (except if under 

20 years old) 

Source: GAO analysis of section 407 of PRWORA and HHS regulations. 

Note: This table does not show all the provisions that apply to the 12 categories. 

The Single Audit Act, as amended,8

 established the concept of having one 

audit of an entity as a whole instead of multiple audits of individual grants 

 8

Chapter 75 of Title 31, United States Code. 

12 Categories of Countable 

Work Activities 

Single Audits 
Page 9 GAO-05-821 Welfare Reform 

received by the entity.9 The act requires state and local governments and 

nonprofit organizations that expend $500,000 or more in federal funds 

during the year to undergo an organizationwide audit.10 These audits focus 

on the entity’s internal controls and compliance with laws and regulations 

governing federal awards and should be viewed as a tool that raises 

relevant or pertinent questions rather than a document that answers all 

questions. 

Office of Management and Budget (OMB) Circular A-133, Audits of States, 

Local Governments, and Non-Profit Organizations, provides the federal 

guidance for single audits. It contains a Compliance Supplement that 

summarizes key information about federal programs and identifies audit 

objectives and suggested procedures for auditors’ use in determining 

compliance with the requirements. The Compliance Supplement contains 

information on TANF, along with over a hundred other federal programs. 

The information on TANF includes some key line items, including those 

for reporting hours of work activity, from the TANF data report that states 

must submit to ACF. 

Internal controls comprise the plans, methods, and procedures an 

organization uses to meet its missions, goals, and objectives. Internal 

controls are a series of actions and activities that occur throughout an 

organization’s operations and on an ongoing basis. They provide 

reasonable assurance that an organization achieves its objectives of 

(1) effective and efficient operations, (2) reliable financial reporting, and 

(3) compliance with laws and regulations. An organization’s internal 

controls over collecting and reporting data could include numerous 

processes and procedures, such as guidance that defines the specific data 

to be collected and any documentation needed to support that data and 

monitoring to ensure that the reported data are complete and accurate. 

 9

For more information on the Single Audit Act, see GAO, Single Audit: Update on the 

Implementation of the Single Audit Act Amendments of 1996, GAO/AIMD-00-293

(Washington, D.C.: Sept. 29, 2000). 

10The dollar threshold, currently set at $500,000, for determining which entities are subject 

to a single audit is adjusted periodically by the Director of the Office of Management and 

Budget. 

Internal Controls 
Page 10 GAO-05-821 Welfare Reform 

We found that differences in how states define the 12 categories of federal 

work activities result in some states counting hours recipients spend in 

activities that other states do not consider allowable activities for meeting 

federal work participation requirements. Also, some states have made 

changes in their definitions of some categories of federal work activities, 

making what is measured by those states’ work participation rates 

inconsistent from year to year. Further, some differences across states in 

their classification of adult recipients can result in certain types of 

recipients being excluded from some states’ work participation rates but 

included in other states’ rates. 

Although PRWORA outlines 12 categories of work activities that can count 

toward meeting federal work participation requirements, states are able to 

define the specific activities that fall under each of the categories. We 

found that differences in how states define the 12 categories of work result 

in some states counting hours spent in certain activities toward meeting 

the work participation rate, while other states do not count hours spent in 

those activities. 

Although PRWORA outlined 12 categories of work activities that count 

toward meeting work participation rates, PRWORA does not prevent 

states from allowing their recipients to participate in other noncountable 

activities, such as activities that help the recipients overcome problems 

that prevent them from working. In our review of state TANF documents, 

we identified several activities that were commonly mentioned but that 

were treated differently by different states, such as substance abuse 

treatment. One state may include the activity under 1 of the 12 categories 

of work, while other states may consider that activity a state activity that 

does not count toward meeting the federal work requirement. 

Table 2 shows how many of the 10 reviewed states counted certain 

activities that were commonly mentioned in state TANF documents 

toward meeting federal work participation requirements. (See app. II for 

states included in the table). States were counting these activities toward 

meeting the work participation rate by defining one of the 12 categories of 

work as including the activities. 

Differences in How 

States Define Work 

Activities Result in 

Inconsistent 

Measurement of Work 

Participation across 

States and over Time 

Activities Are Defined 

Inconsistently across 

States 
Page 11 GAO-05-821 Welfare Reform 

Table 2: The Number of 10 Reviewed States That Count Certain Activities toward Meeting the Federal Work Participation Rate 

and the Categories of Work in Which the States Counted the Activities 

Activity 

Number of 10 reviewed states 

that count the activity as 

federal work participation 

Federal categories of work in which the 

reviewed states counted the activity 

Caring for a disabled household or 

family member 

5 Community Service 

Substance abuse treatment 6 Job Search/Readiness, Work Experience, 

Community Service 

Domestic violence counseling 3 Job Search/Readiness, Work Experience, 

Community Service 

Other mental health counseling 5 Job Search/Readiness, Work Experience, 

Community Service 

English as a second language 7 Job Skills Training, Secondary School or Education 

Directly Related to Employment, Community 

Service, Vocational Education 

Source: GAO review of 10 states’ TANF documents and interviews with the states’ TANF officials. 

Note: An additional state counts substance abuse treatment, domestic violence counseling, and other 

mental health counseling toward meeting the federal work participation rate in limited circumstances. 

Some states have a very broad definition for at least one federal category 

of work that allows the states to include many diverse activities under the 

category. For example, one state that defines Community Service as “an 

activity approved by your case manager which benefits you, your family, 

your community or your tribe” considered all five of the activities shown 

in table 2 to fall under the Community Service category. 

A few states had activities listed in the definition of a federal work activity 

that we did not see in other states’ definitions, such as 

• bed rest, short-term hospitalizations, and personal care activities a 

participant is engaged in as part of recovery from a medical problem 

(Job Search/Job Readiness); 

• physical rehabilitation, which could include massage, regulated 

exercise, or supervised activity with the intent of promoting recovery 

or rehabilitation (Job Search/Job Readiness); 

• activities to promote a healthier life style that will eventually assist the 

recipient in obtaining employment, such as personal journaling, 

motivational reading, exercise at home, smoking cessation, and weight 

loss promotion (Job Search/Job Readiness); 
Page 12 GAO-05-821 Welfare Reform 

• participating in your child’s Head Start or Early Head Start programs by 

participating in home visits, parent meeting presentations, and 

classroom volunteering (Community Service); and 

• helping a friend or relative with household tasks and errands 

(Community Service). 

Increasing the number of activities that it counts toward the federal work 

participation rate should help a state increase its work participation rate 

and avoid incurring penalties. Out of our 10 reviewed states, 2 states 

counted all five of the activities shown in table 2 above, while 1 state did 

not count any. Such variation in the number of activities that states count 

toward the federal work participation rate suggests that the states are 

subject to different standards for work participation. Because of the 

differences in states’ internal controls over their work participation data 

(discussed in the next section of this report), the data cannot be relied 

upon for making comparisons across states. Therefore, we did not analyze 

states’ work participation rates in relation to the number of activities they 

counted toward work participation. 

Three of the 10 states we reviewed had made changes in their definitions 

of work activities within the past 2 years that may have affected their work 

participation rates and that could result in work participation rates that 

are not comparable over time. Kansas had a dramatic change in its work 

participation rate after changing some of its definitions. This state had a 

waiver exempting it from the 6-week limit for counting hours recipients 

spent in Job Search/Job Readiness activities. For states with waivers, the 

effective work participation rate is calculated based on the conditions of 

the waiver. However, ACF also calculates a without-waiver rate for states 

with waivers. After the state lost its waiver, it redefined some of its 

categories of work by placing activities previously in the Job Search/Job 

Readiness category (the category that had been covered by the waiver) 

into other categories that do not have time restrictions, such as 

Community Service. For this state, the 2003 with-waiver rate was 

significantly higher than the without-waiver rate. If the without-waiver rate 

had been the effective rate, the state would have been subject to penalty 

for not meeting the required work participation rate. One month after the 

waiver expired and the definitions were changed, the state’s rate without 

the waiver rose over 50 percentage points to reach the level of the 2003 

with-waiver rate. 

Changes in State 

Definitions Result in 

Inconsistent Measurement 

from Year to Year 
Page 13 GAO-05-821 Welfare Reform 

Another state, Nevada, also moved some activities from Job Search/Job 

Readiness to Work Experience to avoid the 6-week time limit on counting 

hours spent in Job Search/Job Readiness. According to a state official, the 

change was made because, as a result of the 6-week time limit, field 

workers would sometimes make decisions that were not in the best 

interest of the recipients and move recipients out of activities too quickly. 

The state official believes that the change is likely to help raise the state’s 

work participation rate. 

Georgia added an additional activity (caring for a disabled relative who 

does not live with the recipient) to its Community Service category and 

broadened the definition of job skills training to allow for general training 

for a job, rather than just training for a specific job. According to a state 

official, these changes have helped the state increase its work 

participation rate. 

Some differences among states in their classification of recipients affect 

whether or not recipients are included in the work participation rate 

calculation. We found the following different approaches that remove 

recipients from the work participation rate calculation. 

• Creating separate state programs for two-parent families.

11 By 

serving two-parent families through separate state programs, states 

remove those families from the calculation of work participation 

rates.12 Four of the 10 states in our review (California, Georgia, 

Maryland, and Nevada) had created separate state programs for twoparent families. Officials from Georgia, Maryland, and Nevada said that 

they created the programs because they wanted to avoid having to 

meet the higher two-parent family work requirement.13 Officials from 

the states we reviewed with separate state programs for two-parent 

 11For more information on separate state programs for two-parent families, see GAO, 

Welfare Reform: With TANF Flexibility, States Vary in How They Implement Work 

Requirements and Time Limits, GAO-02-770 (Washington, D.C.: July 5, 2002). 

12States with separate state programs for two-parent families do not have two-parent 

families in their TANF program and, therefore, do not have a two-parent family work 

participation rate. Also, two-parent families in a separate state program are not included in 

the state’s all-family work participation rate. 

13Officials from California said that they created a separate state program for two-parent 

families in order “to study the unique characteristics and needs of this large and diverse 

population.” 

Other Differences in 

Classifications of Adult 

Recipients Result in 

Inconsistencies across 

States 
Page 14 GAO-05-821 Welfare Reform 

families said that although the states do not have to meet a federal 

work participation requirement for their two-parent families, they still 

require the adult recipients in the two-parent families to comply with 

the states’ work requirements. 

• Moving recipients with significant barriers into a separate state 

program. Nevada placed recipients who are less likely to meet the 

federal work participation requirements in a separate state program, 

thus removing them from the work participation rate calculation. These 

include recipients (1) with pending applications for Supplemental 

Security Income, (2) with medical difficulties confirmed by a physician, 

(3) in the third trimester of pregnancy, and (4) caring for a disabled 

family member. According to a state official, these recipients are still 

required to participate in work activities to the extent that they are 

able. 

• Reclassifying cases as child-only. California removes adults from 

TANF cases when they are sanctioned, thus changing the cases from 

adult-headed cases to child-only cases.14 Because child-only cases are 

not included in state work participation calculations, the 

reclassification allows the state to avoid counting noncomplying adults 

in the calculation, which in turn is likely to result in a higher work 

participation rate. According to a state official, the state’s practice of 

reclassifying cases this way preceded the implementation of TANF and 

therefore was not intended to influence the state’s TANF work 

participation rate. 

 14In California, when the adult is sanctioned, the family’s monthly benefit is reduced by the 

amount of the adult’s share. In other states, the case would be classified as partially 

sanctioned and would be removed from the work participation rate calculation for 3 

months. However, after those 3 months, the case would again be counted in the work 

participation rate calculation. 
Page 15 GAO-05-821 Welfare Reform 

Some of the states we reviewed did not have internal controls to help 

ensure that reported hours of participation in work activities are in 

accordance with HHS guidance. Other states have implemented systematic 

practices to help ensure that reported hours are in accordance with HHS 

guidance. Officials in some states cited challenges to obtaining support for 

hours of participation in unsubsidized employment. 

Some of the states we reviewed did not have internal controls to help 

ensure that reported hours of participation in work activities are in 

accordance with HHS guidance. The HHS guidance (as discussed more 

fully later in this report) requires that states report hours recipients 

actually participated in work activities rather than hours that the 

recipients were scheduled to participate. Internal control weaknesses 

among the states we reviewed include the following: 

• Guidance and/or standard processes allow reporting of 

scheduled hours. In some states, we found that the hours recorded to 

show how recipients plan to comply with state work requirements 

(scheduled hours) were reported to ACF as hours actually worked. 

Reporting hours scheduled instead of hours worked does not take into 

account unexpected events or noncompliance on the part of the 

recipient that would result in scheduled hours being different than the 

hours actually worked. Allowing scheduled hours to be reported was 

most common for unsubsidized employment, but in a few states, we 

found guidance allowing scheduled hours for other work activities, 

such as vocational education. In one state, guidance instructs that a set 

number of hours be recorded for certain activities, such as 30 hours per 

week for parents involved in their children’s Head Start program. 

However, the guidance does not indicate that the number of hours 

recorded should be verified to ensure that they were actual hours of 

participation. 

• Lack of guidance on the type of documentation needed to 

support reported hours of work activities. Without guidance, there 

is no assurance that the local staff collecting the data know what type 

of documentation is adequate to support hours reported or whether 

any documentation is required. The type of support needed would 

depend on the activity but could include pay stubs and time and 

Some States Do Not 

Have Internal 

Controls Needed for 

Reporting Data in 

Accordance with HHS 

Guidance, while Other 

States Do 

Some States Lack Internal 

Controls to Help Ensure 

Actual Hours of 

Participation Are Reported 
Page 16 GAO-05-821 Welfare Reform 

attendance reports. Without guidance, staff at different locations are 

more likely to use different standards for what support is needed. 

• Guidance allows for reporting hours missed for good cause. 

Some states have guidance specifying that when recipients are absent 

from a scheduled activity and the case worker determines that there is 

a good cause for the absence, the missed hours can be reported as 

worked. This results in hours that were not worked being reported to 

ACF as worked. 

• Insufficient monitoring to verify that hours were reported 

correctly. Some states do not have a monitoring process in place to 

perform timely reviews to verify that hours were reported correctly.15

Without sufficient monitoring, states cannot be assured that local staff 

are reporting hours that are supportable and complete. 

Table 3 shows the number of states with the internal control weaknesses 

described above for the states in our review. (See app. III for states 

included in the table). 

Table 3: Number of Reviewed States Lacking Internal Controls to Help Ensure 

Hours of Participation Are Reported in Accordance with HHS Guidance 

Internal control weakness 

Number of states (out 

of 9 reviewed) with the 

internal control 

weakness

Guidance and/or standard processes allow reporting of 

scheduled hours 3

Lack of guidance on the type of documentation needed to 

support reported hours of work activities 4

Guidance allows for reporting hours missed for good cause 2

Insufficient monitoring to verify that hours were reported 

correctly 3

Source: GAO review of 9 states’ TANF documents and interviews with their TANF officials. 

Notes: (1) The table only covers 9 states because we were unable to assess the internal controls of 

one of the 10 states we reviewed. (2) For states where the internal control activities were determined 

at the local level, we identified the state as having an internal control weakness if the state did not 

ensure that the local areas were implementing such internal controls. 

 15We considered the reviews to be timely if they were conducted at least once a year. 
Page 17 GAO-05-821 Welfare Reform 

Six of the states in our review have at least one of the internal control 

weaknesses shown in table 3, and 3 of these states have at least two 

internal control weaknesses. Two states that did not have any of the 

internal control weaknesses have issued appropriate guidance and begun 

monitoring as part of corrective action plans developed in response to 

state audit findings on data problems. The states we reviewed may have 

internal control weaknesses over the collection and reporting of work 

participation data that our review was not designed to assess. For 

example, a state may have issued appropriate guidance and established a 

monitoring process; however, the state’s staff may not follow the guidance 

or conduct monitoring according to the required process. 

While some of the states we reviewed lacked internal controls, other states 

have implemented systematic practices to help ensure that reported data 

are in accordance with HHS guidance. 

• Documentation requirements. Some states we reviewed had 

guidance outlining the specific documentation needed to verify actual 

hours for each work activity and specified when the documentation 

must be obtained and the hours recorded in the state’s database. 

• Monthly audits. Officials in some states we reviewed told us they 

conduct monthly audits of all cases sampled for reporting to ACF to 

verify that hours reported were actually worked. If there is not 

adequate support showing that hours reported were actually worked, 

the data are not reported to ACF, according to state officials. 

State officials cited challenges to obtaining support for hours of 

participation in unsubsidized employment. For some states, the standard 

process for obtaining hours of unsubsidized employment occurs every 6 

months when local staff reverify a recipient’s income and benefit 

eligibility. Income is typically verified with a recent pay stub, which is then 

used to project the hours the recipient will be working for the next 6 

months. Some officials told us that trying to obtain documentation for 

actual hours of unsubsidized employment from recipients or employers 

monthly would be onerous for case workers and recipients. Officials said 

they feared that contacting employers frequently to verify a recipient’s 

employment could jeopardize the recipient’s job. In states requiring 

monthly documentation, such as pay stubs, for hours of work reported to 

HHS, state officials told us they were likely underreporting hours because 

of the difficulty local staff face in obtaining the required documentation. 

Some States Have 

Systematic Approaches for 

Verifying Reported Data 

Unsubsidized Employment 

Has Been Especially 

Difficult to Track 
Page 18 GAO-05-821 Welfare Reform 

A new effort on the part of ACF may provide states with additional options 

for obtaining information on hours recipients spend in unsubsidized 

employment. ACF recently began an initiative using the National Directory 

of New Hires (NDNH)16 to help states identify whether or not recipients 

are eligible for TANF benefits. If a state chooses to participate, HHS will 

conduct data matches comparing NDNH employee data against the state’s 

list of TANF recipients. If the data matches identify recipients who are 

working and are still eligible for TANF, the data may provide states with a 

starting point for obtaining more complete work participation data, 

according to an ACF official. Because the NDNH does not contain hours 

worked, states would need to contact employers or recipients to obtain 

information on the actual hours the recipient worked, according to an ACF 

official. 

HHS has provided minimal oversight of how states define work activities. 

Further, HHS has limited guidance for states on reporting the appropriate 

hours of work activities. HHS does not have a sufficient mechanism to 

identify data not in accordance with ACF guidance. 

Under PRWORA, HHS has authority to regulate states’ definitions of work 

activities. However, HHS has chosen not to issue regulations for this 

purpose in order to promote the flexibility PRWORA provided states and 

in response to calls from states for as much flexibility as possible in 

designing their TANF programs, according to HHS officials. The current 

TANF regulations only repeat the 12 categories of work activities that are 

 16The purpose of the NDNH, maintained by HHS’s Office of Child Support Enforcement, is 

to provide a national directory of employment and unemployment insurance information to 

enable state child support enforcement agencies to be more effective in locating 

noncustodial parents who are responsible for paying child support. State directories of new 

hires, state employment security agencies, and federal agencies provide information to the 

NDNH. 

HHS’s Oversight and 

Guidance on 

Appropriately 

Defining Work 

Activities and 

Reporting Hours of 

Work Participation 

Have Been Limited 

HHS Has Provided Minimal 

Oversight of States’ 

Definitions of Work 

Activities 
Page 19 GAO-05-821 Welfare Reform 

included in PRWORA and do not further specify activities that can and 

cannot be included under the 12 categories. Further, the current TANF 

regulations do not state that HHS will review states’ definitions of work 

activities to determine if the definitions are appropriate. Accordingly, HHS 

officials said they are unable to direct states to change their definitions of 

work activities when they believe the states’ definitions are inappropriate, 

as has occurred in the past. 

Although HHS has provided states with general guidance on reporting 

actual hours of work participation, the guidance lacks specific criteria for 

determining the appropriate hours to report. The requirement for 

reporting actual hours of work participation is not specified in federal 

regulations but is instead described in other documents. The guidance on 

the type of hours are the following: 

HHS regulations17

• Quarterly reports containing work participation data must be 

“complete and accurate.” 

HHS responses to comments to proposed regulations18

• Hours for which the recipient was paid may be reported as hours 

worked, such as paid holidays. 

HHS Web site19

• States must report actual hours of participation for each work activity. 

• Reporting required (or scheduled) hours of participation is inconsistent 

with the “complete and accurate” standard and is not acceptable. 

 1745 C.F.R. 265.7(a). 

1864 Fed. Reg. 17779 (April 12, 1999). 

19U.S. Department of Health and Human Services, TANF Program Policy Questions and 

Answers, HHS Web site: http://www.acf.hhs.gov/programs/ofa/polquest/index.htm. 

HHS Has Provided Limited 

Guidance to States on the 

Appropriate Hours to 

Report 
Page 20 GAO-05-821 Welfare Reform 

Detailed reporting instructions for TANF data report (reporting 

instructions)20

• States are to report actual hours of participation. 

• It is not acceptable to report scheduled hours of participation. 

• States should validate actual participation in each work activity. 

While HHS guidance calls for states to report actual hours, ACF officials 

acknowledged it may be difficult or impossible to obtain information on 

actual hours for some activities. For example, the ACF officials cited 

problems states have in obtaining hours of actual participation for 

recipients enrolled in vocational education courses, community colleges, 

and universities for which attendance is not taken. 

ACF uses two mechanisms to identify problems with work participation 

data submitted by states--computer edit checks and reviews of single audit 

findings. However, neither mechanism provides ACF with reasonable 

assurance that data reported are in accordance with ACF guidance. 

Computer edit checks. ACF performs edit checks of the data submitted 

quarterly by states. The edit checks identify outliers, such as if a recipient 

is reported to have participated in 80 hours of work activities for 1 week. 

The edit checks also identify inconsistencies between data elements, such 

as if a recipient is reported as having earnings but is also reported as 

having zero hours of work. ACF notifies states of any problems identified 

by the edit checks so that states can correct and resubmit the data. The 

edit checks can help improve the data; however, they do not address the 

issue of verifying whether hours reported are actual hours of participation. 

State single audits. According to ACF officials, HHS’s primary vehicle 

for identifying problems with the states’ data is states’ single audit reports. 

Findings from the state single audits go through a review process at HHS 

to determine whether penalties are warranted. HHS has used findings from 

the single audit to take action against a state for reporting poor quality 

 20U.S. Department of Health and Human Services, TANF Data Report-Section One, 

Disaggregated Data Collection for Families Receiving Assistance under the TANF 

Program. 

HHS Does Not Have a 

Sufficient Mechanism to 

Identify Data Not in 

Accordance with ACF 

Guidance 
Page 21 GAO-05-821 Welfare Reform 

work participation data.21 However, ACF officials acknowledged that the 

work participation data reported by states may have problems that the 

single audits may not reveal. Our interviews with auditors in the 10 states 

we reviewed indicate that the level of attention given to work participation 

data varies greatly among the states. 

• State auditors from 5 states (California, Georgia, Maryland, Nevada, and 

Ohio) told us that their most recent single audits covering the TANF 

program22 did not review the data states report to HHS on hours of 

participation in work activities.23 

• Out of the 5 states in which state auditors reported that the most recent 

single audits did test hours of work participation: 

• Three states (Kansas, Washington, and Wisconsin) reported that the 

audits did not look for support of actual hours but instead compared 

hours shown in the state’s welfare database with the hours reported to 

HHS for a sample of cases. State auditors for the 3 states did not report 

any findings on work participation data from these reviews. 

• Two states (New York and Pennsylvania) looked for supporting 

documentation to verify that hours reported to ACF were hours of 

actual participation for a sample of cases. In New York, the audit had 

no finding regarding work participation hours.24 The audit for 

Pennsylvania found that some reported hours had no supporting 

documentation to verify that they were actually worked. According to 

state officials, Pennsylvania has implemented corrective actions in 

response to the single audit findings. 

 21HHS threatened to penalize Pennsylvania for reporting poor quality work participation 

data, and in response, Pennsylvania developed a corrective compliance plan to address its 

data problems. 

22Because all states’ single audits do not review TANF annually, we asked state auditors 

about the most recent single audit that did cover the TANF program. In some states, this 

audit was not the most recent single audit. 

23In Maryland, the single audit did not test the work participation data, but other audits did. 

The auditors identified internal control weaknesses over the work participation data that, 

according to state officials, have since been corrected. 

24While the most recent single audit for New York did not have findings related to work 

participation data, past single audits found that reported hours lacked documentation to 

verify that hours reported were actually worked. The state took corrective action as a 

result of these findings. 
Page 22 GAO-05-821 Welfare Reform 

Our review of the 10 states’ internal controls identified weaknesses both in 

states where state auditors told us that the most recent single audit did not 

test the data reported to HHS on hours of participation in work activities 

and in states that did. ACF officials acknowledged that because of the 

broad nature of the single audits, the quality and focus of the audits vary 

from state to state. The single audit, covering hundreds of federal 

programs, is designed as a tool that raises relevant questions about states’ 

internal controls and compliance with laws and regulations governing 

federal awards but is not intended to answer all questions. State auditors 

responsible for conducting the single audits are provided with federal 

guidance issued by OMB—known as the Compliance Supplement. 

Currently the Compliance Supplement contains reference to work 

participation data only as a key line item for auditors to look at in the 

TANF data report. According to ACF officials, the fiscal year 2005 

Compliance Supplement for the single audit will contain more guidance to 

help auditors identify whether work participation data are reported in 

accordance with HHS guidance. The addition to the Compliance 

Supplement will suggest that state auditors test a sample of cases to 

determine the completeness and accuracy of the data, including the proper 

documentation, used in calculating the work participation rate. 

By listing 12 categories of permissible work activities, Congress placed 

limits on the type of activities that states could count toward meeting 

federal work participation requirements. HHS regulations only restate the 

12 categories of work activities and do not further specify the types of 

activities that can and cannot count toward meeting the federal work 

requirements, nor do they provide for HHS’s oversight of states’ definitions 

of the 12 categories. HHS has taken the position that with the current 

limited regulations, it will not place restrictions on the activities states can 

count toward meeting TANF work requirements. As a result, states have 

been able to include any activity in their definitions of the 12 categories of 

work. Several states have broadly defined 1 or more of the categories to 

include activities, such as substance abuse treatment, that other states 

provide but do not consider countable toward meeting the federal work 

participation requirement. Another discrepancy among states occurs with 

the internal controls over the data they report to HHS. For example, some 

states only report hours that have been verified as having been actually 

worked, while others report hours without verification. Because of the 

differences among states in the activities that they count in calculating the 

work participation rate and in the internal controls over the data used in 

the calculation, states are being measured by different standards, and the 

work participation rates cannot be used to compare the performance of 

Conclusions 
Page 23 GAO-05-821 Welfare Reform 

states. Further, a high work participation rate does not necessarily 

indicate more engagement of TANF recipients in work activities than a 

lower rate. 

The current caseload reduction credit has greatly reduced the required 

level of work participation for most states. However, if TANF 

reauthorization results in lowering the caseload reduction credit and 

raising the work participation requirements, more states could be 

penalized, and states with strict definitions and effective internal controls 

may be the most susceptible to penalties. If the TANF work participation 

rate is to be an effective and equitable measure for assessing states’ 

performance and penalizing states, HHS needs to give more oversight to 

states’ definitions of federal work activities and internal controls over the 

data to help make the measure more consistent across states. We 

acknowledge that efforts to obtain more valid, accurate, and consistent 

information for this performance measure may have unintended 

consequences. For example, it may motivate states to use separate state 

programs or make other choices about the design of their TANF programs. 

However, a measure that is used to assess penalties needs to be clear and 

consistent for all those potentially subject to penalty; otherwise, the 

measure can result in misleading information and inequitable penalty 

assessments. 

HHS should issue regulations to 

• specify the types of activities that can and cannot be included under 

the 12 categories of work activities, 

• have HHS oversee states’ definitions of activities under the 12 

categories, and 

• set forth criteria for counting actual hours of activity and whether there 

are circumstances under which scheduled hours may be counted. 

We also recommend that HHS develop and implement a plan for working 

with states to improve internal controls over work participation data. This 

plan could make use of existing resources and include steps such as 

• working through its regional offices to identify cost-effective internal 

controls being used by states, 

Recommendations for 

Executive Action 
Page 24 GAO-05-821 Welfare Reform 

• using regional offices and existing sponsored conferences to share 

information with states on these internal controls and to emphasize 

the importance of internal controls, and 

• obtaining information from states about their experiences using the 

National Directory of New Hires to determine if it has potential for 

helping states collect more complete work participation data and if 

there are any useful practices to be shared with other states. 

HHS provided written comments on a draft of this report; these comments 

appear in appendix V. HHS said that the report provides it with new and 

useful information. HHS said it would consider making the recommended 

revisions in its regulations after TANF reauthorization and is exploring 

options for implementing the recommendation on internal controls. HHS 

also provided technical comments that we incorporated as appropriate. 

Concerning our recommendation that HHS issue regulations to provide 

oversight of states’ definition and more guidance on counting hours of 

work activities, HHS said that it will consider this recommendation when 

it develops the proposed rule after Congress enacts legislation to 

reauthorize the TANF program. We agree that addressing this 

recommendation during rule making after TANF reauthorization is 

appropriate, if TANF is reauthorized in the near future. However, TANF 

reauthorization has been delayed for 3 years and if it is delayed for much 

longer, HHS should take action to revise TANF regulations without waiting 

for reauthorization. Concerning our recommendation that HHS develop 

and implement a plan for working with states to improve internal controls 

over the work participation data, HHS said it recognized that more can be 

done to ensure increased consistency in the accuracy of the work 

participation data. HHS also stated that ACF is exploring options to 

increase oversight and provide technical assistance to states using its 

currently limited resources. Further, HHS noted that federal staff for 

TANF had been reduced by 75 percent several years ago. We added a 

statement about this staff reduction to the background section of the 

report. 

HHS expressed concern that the draft report did not sufficiently recognize 

the flexibility that Congress intended for the TANF program, and it stated 

that Congress did not intend that there be a consistent measure of work 

participation across states or that HHS make state-by-state comparisons 

for penalty purposes. We believe that the report does recognize the 

flexibility Congress provided to states. Also, we believe that the fact that 

Congress gave states the flexibility to design their TANF programs does 

Agency Comments 

and Our Evaluation 
Page 25 GAO-05-821 Welfare Reform 

not indicate that Congress did not want a meaningful measure to 

determine if states are meeting TANF requirements. While states have 

flexibility in determining what policies they will use to achieve TANF goals 

and requirements, the measure used to assess their performance should be 

defined the same way from state to state; otherwise, the rates produced by 

the measure cannot provide meaningful and understandable information 

for national policy makers and for assessing financial penalties. Further, 

although the use of waivers and separate state programs contributes to 

differences in which families are included in the work participation rate, 

HHS has made efforts, through its annual reporting, to ensure 

transparency about the rules governing these mechanisms and which 

states are using them. The lack of oversight of states’ definitions of 

categories of work activities results in inconsistencies in performance 

measurement, as discussed in this report, that are not transparent. 

HHS noted some imprecision in the draft report’s description of the work 

participation rate calculation. In response, we made revisions to the 

report. HHS also took issue with our discussion of how a state’s work 

participation rate changed after its waiver expired. We continue to believe 

that this example of how a state’s rate changed over 50 percentage points 

1 month after the waiver expired is a useful illustration of how changes in 

definitions can affect work participation rates. 

As agreed with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days after its 

issue date. At that time, we will send copies of this report to the Secretary 

of the Department of Health and Human Services, relevant congressional 

committees, and others who are interested. Copies will be made available 

to others upon request, and this report will also be available on GAO’s 

Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

on (415) 904-2272. Contact points for our Offices of Congressional 
Page 26 GAO-05-821 Welfare Reform 

Relations and Public Affairs may be found on the last page of this report. 

Additional GAO contacts and acknowledgments are listed in appendix VI. 

Sincerely, 

David Bellis, Director 

Education, Workforce, and Income Security 
Appendix I: Elements of the Work 

Participation Requirement and How the Work 

Participation Rate Is Calculated 

Page 27 GAO-05-821 Welfare Reform 

The Temporary Assistance for Needy Families (TANF) work participation 

requirement is composed of (1) a requirement for a minimum number of 

hours recipients must participate in order to be counted as engaged in 

work activities and (2) a requirement for the percentage of TANF families 

with an adult (or minor head of household) a state must have engaged in 

work activities. The Department of Health and Human Services’ 

Administration for Children and Families (ACF) uses a formula specified 

in the Personal Responsibility and Work Opportunity Reconciliation Act 

for calculating whether states are meeting the work participation 

requirement. 

The minimum number of hours TANF recipients must participate, on 

average, per week to be counted as engaged in work is shown in table 4. 

Table 4: Number of Hours Different Types of Recipients Must Participate in Allowed 

Work Activities to Count as Working in the TANF All-Family Work Participation Rate 

Type of recipient 

Required number of hours on average 

per week (or activity)

Single parent with a child under 6 years old 20

Other adult recipients 30

Single parent under 20 years old Satisfactory school attendance or 

equivalent 

Source: GAO analysis of TANF regulations. 

Note: Adults in two-parent families have different requirements for the number of hours of activity. 

Different base percentages were established for all families and for twoparent families. The required percentages rose over time until they 

reached their current levels shown in table 5. 

Table 5: Base Percentage of TANF Families That Must Be Engaged in Work for the 

All-Family and the Two-Parent Family Rates 

Type of participation rate Current required rate

All-family (single and two-parent combined) 50%

Two-parent families 90%

Source: GAO analysis of TANF regulations. 

Note: This base percentage is adjusted for each state using the caseload reduction credit. 

Appendix I: Elements of the Work 

Participation Requirement and How the Work 

Participation Rate Is Calculated 

The Minimum Number of 

Hours TANF Recipients 

Must Participate 

Base Percentage of a 

State’s TANF Families Who 

Must Be Engaged in Work 

Activities 
Appendix I: Elements of the Work 

Participation Requirement and How the Work 

Participation Rate Is Calculated 

Page 28 GAO-05-821 Welfare Reform 

For each percentage point that a state’s welfare caseload declined from its 

1995 level, the caseload reduction credit reduces the base percentage of 

TANF families who must be engaged in work in the state. For example, if a 

state’s welfare caseload declined 40 percent since 1995, then the all-family 

work participation rate that it must meet is 10 percent and the two-parent 

family work participation rate that it must meet is 50 percent. Because of 

significant declines in welfare caseloads that have occurred in most states 

since 1995, 33 of the 50 states were required to meet an all-family rate of 10 

percent or less in fiscal year 2003. 

Each quarter, states are required to report to ACF monthly data on their 

TANF cases, including the number of hours each adult recipient spent in 

countable work activities. States have the option of reporting to ACF on all 

their TANF cases (the universe) or on a scientifically drawn sample of 

TANF cases.1

 Using the data reported by states, ACF calculates an annual 

work participation rate for each state. A state’s annual work participation 

rate is based on the state’s average monthly rate for the year. The formula 

for the all-family rate is shown in figure 1. 

Figure 1: Formula for Calculating the All-Family Work Participation Rate 

Note: For the purposes of this formula, the term “adult” refers to TANF recipients age 20 or over or 

recipients under age 20 who are head of a household receiving TANF. 

Child-only TANF cases are not included in the calculation. States have the 

option of disregarding from the calculation of the all-family work 

participation rate families with a single custodial parent and a child under 

 1

About one-half the states report using the universe, and about one-half report using a 

sample. 

Caseload Reduction Credit 

That Reduces the Base 

Percentage 

Calculation of Each State’s 

Work Participation Rate 

Source: GAO analysis of TANF legislation and regulations.

Adult-headed cases who worked the required minimum number of hours in countable work activities

( ( A

B – C X 100

A =

B = All adult-headed cases

C = Cases sanctioned for 3 months or less during the year
Appendix I: Elements of the Work 

Participation Requirement and How the Work 

Participation Rate Is Calculated 

Page 29 GAO-05-821 Welfare Reform 

age one. Other families disregarded in the calculation of the all family rate 

include 

• families that are part of an ongoing research evaluation approved 

under Section 1115 of the Social Security Act; 

• families that are disregarded based on an inconsistency under an 

approved welfare reform waiver that exempts the family; and 

• families participating in a tribal family assistance plan or a Tribal work 

program (unless the state chooses to include the families in the 

calculation). 

The two-parent family rate is calculated the same way as the all-family 

rate, except that the calculation only includes two-parent families. Twoparent families with a disabled parent are not used in calculating the twoparent rate. 
Appendix II: States That Count Certain 

Activities toward Meeting the Federal Work 

Participation Rate 

Page 30 GAO-05-821 Welfare Reform 

Table 6: States Covered by the Review That Count Certain Activities toward Meeting 

the Federal Work Participation Rate 

Activity 

Reviewed states that count the activity 

as federal work participation 

Caring for a disabled household or family 

member 

Georgia, Maryland, New York, Washington, 

Wisconsin 

Substance abuse treatment Kansas, Maryland, Nevada, New York, 

Washington, Wisconsin 

Domestic violence counseling Nevada, Washington, Wisconsin 

Other mental health counseling Kansas, Nevada, New York, Washington, 

Wisconsin 

English as a second language Kansas, Nevada, New York, Ohio, 

Pennsylvania, Washington, Wisconsin 

Source: GAO review of 10 states’ TANF documents and interviews with the states’ TANF officials. 

Note: In the limited circumstance that counseling is related to employment and is given to a recipient 

along with employment services by the same service provider, Ohio counts hours spent in substance 

abuse treatment, domestic violence counseling, and other mental health counseling toward meeting 

the federal work participation rate, according to an Ohio official. 

Appendix II: States That Count Certain 

Activities toward Meeting the Federal Work 

Participation Rate 
Appendix III: States Identified as Lacking 

Certain Internal Controls 

Page 31 GAO-05-821 Welfare Reform 

Table 7: States Covered by the Review That Lacked Internal Controls to Help 

Ensure Hours of Participation Are Reported in Accordance with HHS Guidance 

Internal control weakness 

States (out of 9 

reviewed) with the 

internal control 

weakness 

Guidance and/or standard processes allow reporting of 

scheduled hours 

Georgia, Kansas, Ohio 

Lack of guidance on the type of documentation needed to 

support reported hours of work activities 

California, Kansas, New 

York, Wisconsin 

Guidance allows for reporting hours missed for good cause Wisconsin, New York 

Insufficient monitoring to verify that hours were reported 

correctly 

Kansas, New York, 

Wisconsin 

Source: GAO review of 9 states’ TANF documents and interviews with their TANF officials. 

Notes: (1) Washington is not included in this table because we were unable to assess its internal 

controls. (2) For states where the internal control activities were determined at the local level, we 

identified the state as having an internal control weakness if the state did not ensure that the local 

areas were implementing such internal controls. (3) We considered state monitoring of local offices 

to be insufficient if it occurred less than yearly and did not verify that hours in work activities were 

reported correctly. 

Appendix III: States Identified as Lacking 

Certain Internal Controls 
Appendix IV: Fiscal Year 2003 Work 

Participation Rates Calculated by HHS Based 

on Data Provided by States 

Page 32 GAO-05-821 Welfare Reform 

As discussed in this report, our review covering 10 states found that there 

were differences among states in the activities counted in the rates and, in 

some cases, weaknesses in internal controls over the data used to 

calculate the rates. Therefore, these rates may not reliably reflect work 

participation rates and should not be used to make comparisons between 

states. 

Table 8: Fiscal Year 2003 Work Participation Rates Calculated by HHS Based on 

Data Provided by States 

State All-families rate Two-parent families ratea

Alabama 37 N/A

Alaska 41 45

Arizona 13 55

Arkansas 22 32

California 24 N/A

Colorado 33 40

Connecticut 31 N/A

Delaware 18 N/A

Florida 33 N/A

Georgia 11 N/A

Hawaii 66 N/A

Idaho 44 42

Illinois 58 N/A

Indiana 40 N/A

Iowa 45 39

Kansas 88 87

Kentucky 33 46

Louisiana 35 39

Maine 28 29

Maryland 9 N/A

Massachusetts 61 74

Michigan 25 36

Minnesota 25 N/A

Mississippi 17 N/A

Missouri 28 N/A

Montana 86 96

Nebraska 33 N/A

Nevada 22 N/A

Appendix IV: Fiscal Year 2003 Work 

Participation Rates Calculated by HHS Based 

on Data Provided by States 
Appendix IV: Fiscal Year 2003 Work 

Participation Rates Calculated by HHS Based 

on Data Provided by States 

Page 33 GAO-05-821 Welfare Reform 

State All-families rate Two-parent families ratea

New Hampshire 28 N/A

New Jersey 35 N/A

New Mexico 42 52

New York 37 52

North Carolina 25 49

North Dakota 27 N/A

Ohio 62 68

Oklahoma 29 51

Oregon 60 53

Pennsylvania 10 9

Rhode Island 24 95

South Carolina 54 51

South Dakota 46 N/A

Tennessee 43 N/A

Texas 28 N/A

Utah 28 N/A

Vermont 24 38

Virginia 45 N/A 

Washington 46 44

West Virginia 14 25

Wisconsin 67 40

Wyoming 83 92

Source: Rates calculated by HHS based on data provided by states. 

a

Some states do not have two-parent families in their TANF programs. Thus, the two-parent families 

rate is not applicable for some states, as indicated by N/A. 
Appendix V: Comments from the Department 

of Health and Human Services 

Page 34 GAO-05-821 Welfare Reform 

Appendix V: Comments from the Department 

of Health and Human Services 
Appendix V: Comments from the Department 

of Health and Human Services 

Page 35 GAO-05-821 Welfare Reform 
Appendix V: Comments from the Department 

of Health and Human Services 

Page 36 GAO-05-821 Welfare Reform 
Appendix V: Comments from the Department 

of Health and Human Services 

Page 37 GAO-05-821 Welfare Reform 
Appendix V: Comments from the Department 

of Health and Human Services 

Page 38 GAO-05-821 Welfare Reform 
Appendix VI: GAO Contact and Staff 

Acknowledgments 

Page 39 GAO-05-821 Welfare Reform 

David Bellis (415) 904-2272 

The following staff members made major contributions to the report: 

Gale Harris (Assistant Director), Kathy Peyman (Analyst-in-Charge), 

Carolyn Blocker, Amanda Miller, Cady S. Panetta, Tovah Rom, 

Dan Schwimer, and Shana Wallace. 

Appendix VI: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 
Related GAO Products 

Page 40 GAO-05-821 Welfare Reform 

Welfare Reform: Rural TANF Programs Have Developed Many Strategies 

to Address Rural Challenges. GAO-04-921. Washington, D.C.: Sept. 10, 

2004. 

Supports For Low-Income Families: States Serve a Broad Range of 

Families through a Complex and Changing System. GAO-04-256. 

Washington, D.C.: Jan. 26, 2004. 

Welfare Reform: With TANF Flexibility, States Vary in How They 

Implement Work Requirements and Time Limits. GAO-02-770. 

Washington, D.C.: July 5, 2002. 

Welfare Reform: Federal Oversight of State and Local Contracting Can 

Be Strengthened. GAO-02-661. Washington, D.C.: June 11, 2002. 

Welfare Reform: States Are Using TANF Flexibility to Adapt Work 

Requirements and Time Limits to Meet State and Local Needs.

GAO-02-501T. Washington, D.C.: Mar. 7, 2002. 

Welfare Reform: More Coordinated Federal Effort Could Help States and 

Localities Move TANF Recipients with Impairments toward 

Employment. GAO-02-37. Washington, D.C.: Oct. 31, 2001. 

Welfare Reform: Progress in Meeting Work-Focused TANF Goals.

GAO-01-522T. Washington, D.C.: Mar. 15, 2001. 

Welfare Reform: Moving Hard-to-Employ Recipients Into the Workforce. 

GAO-01-368. Washington, D.C.: Mar. 15, 2001. 

Welfare Reform: Data Available to Assess TANF's Progress. GAO-01-298. 

Washington, D.C.: Feb. 28, 2001. 

Single Audit: Update of the Implementation of the Single Audit Act 

Amendments of 1996. GAO/AIMD-00-293. Washington, D.C.: Sept. 29, 

2000. 

Welfare Reform: Work-Site-Based Activities Can Play an Important Role 

in TANF Programs. GAO/HEHS-00-122. Washington, D.C.: July 28, 2000. 

Standards for Internal Control in the Federal Government.

GAO/AIMD-00-21.3.1. Washington, D.C.: Nov. 1999. 

Related GAO Products 
Related GAO Products 

Page 41 GAO-05-821 Welfare Reform 

Performance Plans: Selected Approaches for Verification and Validation 

of Agency Performance Information. GAO/GGD-99-139. Washington, 

D.C.: July 30, 1999. 

Block Grants: Issues in Designing Accountability Provisions. 

GAO/AIMD-95-226. Washington, D.C.: Sept. 1, 1995. 

Welfare to Work: JOBS Participation Rate Data Unreliable for Assessing 

States’ Performance. GAO/HRD-93-73. Washington, D.C.: May 5, 1993. 

(130418) 
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