59–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 114–644 

TANF ACCOUNTABILITY AND INTEGRITY IMPROVEMENT 

ACT 

JUNE 28, 2016.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. BRADY of Texas, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL AND DISSENTING VIEWS 

[To accompany H.R. 2959] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 2959) to prevent States from counting certain expenditures as State spending to reduce TANF work requirements, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended do pass. 

CONTENTS 

Page 

I. SUMMARY AND BACKGROUND ............................................................... 2 

A. Purpose and Summary ..................................................................... 2 

B. Background and Need for Legislation ............................................. 2 

C. Legislative History ............................................................................ 3 

II. EXPLANATION OF THE BILL ................................................................... 4 

Section 1: Short Title ............................................................................. 4 

Section 2: No Counting of Third-Party Spending to Meet State 

Spending .......................................................................................... 4 

Section 3: Effective Date ....................................................................... 6 

III. VOTES OF THE COMMITTEE .................................................................... 6 

IV. NEW BUDGET AUTHORITY AND TAX EXPENDITURES ..................... 6 

V. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET 

OFFICE ....................................................................................................... 6 

VI. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 8 

A. Committee Oversight Findings and Recommendations ................. 8 

B. Statement of General Performance Goals and Objectives ............. 8 


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C. Applicability of House Rule XXI 5(b) .............................................. 8 

D. Congressional Earmarks, Limited Tax Benefits, and Limited 

Tariff Benefits ................................................................................. 8 

E. Duplication of Federal Programs ..................................................... 8 

F. Disclosure of Directed Rule Makings .............................................. 9 

VII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED 9 

A. Text of Existing Law Amended or Repealed by the Bill, as 

Reported .......................................................................................... 9 

B. Changes in Existing Law Proposed by the Bill, as Reported ........ 19 

VIII. ADDITIONAL AND DISSENTING VIEWS ................................................ 30 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘TANF Accountability and Integrity Improvement 

Act’’. 

SEC. 2. LIMIT ON COUNTING OF NONGOVERNMENTAL THIRD-PARTY CONTRIBUTIONS AS 

QUALIFIED STATE SPENDING TO MEET STATE SPENDING REQUIREMENT. 

(a) LIMIT ON COUNTING THIRD-PARTY CONTRIBUTIONS.—Section 409(a)(7)(B)(i) of 

the Social Security Act (42 U.S.C. 609(a)(7)(B)(i)) is amended by adding at the end 

the following: 

‘‘(VI) LIMIT ON COUNTING OF THIRD-PARTY CONTRIBUTIONS.—Such 

term shall not include the amount (if any) by which— 

‘‘(aa) the value of all goods and services provided by a source 

other than the State or a local government during the fiscal 

year; exceeds 

‘‘(bb) the value of all such goods and services claimed by the 

State as qualified State expenditures for fiscal year 2016.’’. 

(b) EXCLUSION OF EXPENDITURES FOR THE PROVISION OF MEDICAL SERVICES.—Section 409(a)(7)(B)(i) of such Act (42 U.S.C. 609(a)(7)(B)(i)), as amended by subsection 

(a) of this section, is amended by adding at the end the following: 

‘‘(VII) EXCLUSION OF EXPENDITURES FOR THE PROVISION OF MEDICAL SERVICES.—Such term shall not include any amount expended 

for the provision of medical services.’’. 

SEC. 3. EFFECTIVE DATE. 

The amendments made by this Act shall take effect on October 1, 2016. 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

H.R. 2959 as amended, the ‘‘TANF Accountability and Integrity 

Improvement Act,’’ as ordered reported by the Committee on Ways 

and Means on May 11, 2016, would prevent states from increasing 

their counting of outside spending as state TANF spending. 

B. BACKGROUND AND NEED FOR LEGISLATION

In 1996, Republicans reformed the safety net to better support 

and reward work. As part of these reforms, the failed New Dealera Aid to Families with Dependent Children (AFDC) program was 

replaced with today’s Temporary Assistance for Needy Families 

program (TANF), which established strong requirements for states 

to help welfare recipients prepare for work and find jobs. 

The number of families receiving cash assistance under the 

TANF program fell by more than 50 percent, and has generally remained low over time. Employment rates of single mothers with 

children increased by 15 percent through 2007 compared with 

1995; while their work rates declined as a result of the 2007–09 recession, they have risen again since 2011 and remain 10 percent 

higher than before. Child poverty also declined dramatically during 

this period as more people went to work and earnings increased, 


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and poverty among African American households with children 

reached record lows. Poverty among female-headed households 

with children remains lower today than before the 1996 reforms— 

despite two intervening recessions. 

The TANF program has helped shield American families from 

sinking deeper into poverty by providing temporary assistance that 

is also linked to stable employment. But it’s been at least a decade 

since any meaningful changes have been made to this law. 

Current law requires that states must spend a certain amount of 

state money (based on past state spending on low-income programs) to receive full federal TANF block grant funds, which is 

called the state ‘‘maintenance of effort’’ or MOE requirement. 

States also must engage 50 percent of adults in TANF families in 

work activities, such as employment, job training, job search, and 

vocational education. However, recent reports from the nonpartisan 

Government Accountability Office indicate a rising number of 

states appear to be counting non-state third-party spending as 

TANF MOE spending. 

For example, a number of states now count volunteer hours as 

TANF MOE by multiplying volunteer hours by an estimated wage 

rate and then reporting this as ‘‘spending’’ in the TANF program. 

This evolution has also resulted in some states reporting significant ‘‘excess MOE’’ spending, which under a 1999 regulation allows 

states to reduce the share of TANF recipients expected to work in 

exchange for TANF benefits. This practice also means some states 

are reducing their state investment in TANF, gaming the intent of 

the law’s requirements that states continue to invest in the program as a condition of receiving federal funds. 

C. LEGISLATIVE HISTORY

Background 

H.R. 2959, the ‘‘TANF Accountability and Integrity Improvement 

Act,’’ was introduced on July 7, 2015, by Representative Kristi L. 

Noem, and was referred to the Committee on Ways and Means. 

Committee hearings 

The Committee began a bipartisan, comprehensive review of the 

TANF program at the beginning of the Congress, in early January 

2015. Over the last fifteen months, the Human Resources Subcommittee held a series of hearings with witnesses ranging from 

current and former recipients to service providers to employers to 

researchers. Members of the Human Resources Subcommittee introduced a series of bills focused on smaller provisions within 

TANF, and then they were compiled into a larger, more comprehensive reauthorization draft bill. That bipartisan draft was distributed for public comment and dozens of stakeholders provided 

invaluable feedback, some incorporated in H.R. 2959. 

On April 30, 2015, the Human Resources Subcommittee held a 

hearing entitled, Next Steps for Welfare Reform: Ideas to Improve 

TANF to Help More Families Find Work and Escape Poverty. Specifically, witnesses discussed the need to reform the way states 

used third party spending to count as state spending. 


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Throughout the Congress, the Human Resources Subcommittee 

held a series of hearings on reforms to TANF, including discussions 

on third party spending by states. Those hearings included: • Challenges Facing Low-Income Individuals and Families 

in Today’s Economy, February 11, 2015 • Expanding Opportunity by Funding What Works: Using 

Evidence to Help Low-Income Individuals and Families Get 

Ahead, March 17, 2015 • Protecting the Safety Net from Waste, Fraud, and Abuse, June 3, 2015 • Joint Subcommittee Hearing on How Our Welfare System 

Can Discourage Work, June 25, 2015 • Welfare Reform Proposals, July 15, 2015 • Better Coordinating Welfare Programs to Serve Families in 

Need, November 3, 2015 • Moving America’s Families Forward: Lessons Learned from 

Welfare Reform in Other Countries, November 17, 2015 • Getting Incentives Right: Connecting Low-Income Individuals with Jobs, March 1, 2016 

Committee action 

The Committee on Ways and Means marked up H.R. 2959, the 

‘‘TANF Accountability and Integrity Improvement Act,’’ on May 11, 

2016. The bill, H.R. 2959, was ordered favorably reported to the 

House of Representatives as amended by a voice vote (with a 

quorum being present). 

II. EXPLANATION OF THE BILL 

SECTION 1: SHORT TITLE

Present law 

No provision. 

Explanation of provision 

This section contains the short title of the bill, the ‘‘TANF Accountability and Integrity Improvement Act.’’ 

Reason for change 

The Committee believes that the short title reflects the policy actions included in the legislation. 

Effective date 

The provision is effective on October 1, 2016. 

SECTION 2: NO COUNTING OF THIRD-PARTY SPENDING TO MEET

STATE SPENDING

Present law 

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA, P.L. 104–193) created the Temporary Assistance for Needy Families (TANF) block grant by ending and consolidating funding from several predecessor programs. The predecessor 

programs were matching grant programs with their costs shared by 

the federal and state governments. The TANF block grant is based 

on federal funding under the predecessor programs. Under TANF, 


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1See: U.S. Department of Health and Human Services, Administration for Children and Families, Office of Family Assistance, Clarification that third party cash or in-kind may count toward 

a State’s or Territory’s TANF maintenance-of-effort (MOE) Requirement, TANF–ACF–PA–2004– 

01, December 1, 2004. 2See: 45 C.F.R. § 92.24. 

states were required to continue spending a minimum amount 

under a maintenance of effort (MOE) requirement. The amount 

states must spend to meet the MOE requirement is based on the 

state share of expenditures in TANF’s predecessor programs. 

Under the MOE requirement, states are required to expend from 

their own funds at least 75 percent of spending in predecessor programs in FY1994. If a state fails to meet TANF work participation 

standards, the state spending requirement is increased to 80 percent of historic state expenditures. 

Expenditures counted toward the MOE requirement must be for 

‘‘eligible families,’’ with the following types of expenditures countable toward the requirement: cash assistance, including child support passed-through to the family; child care assistance; educational activities, but restricted to such expenditures on eligible 

families and not available to the general population; and administrative costs. Additionally, states may count toward the MOE any 

other expenditure that can be reasonably calculated toward meeting TANF’s statutory goals. 

The Department of Health and Human Services (HHS) has interpreted the TANF MOE as a cost-sharing requirement, subject to 

general rules of what expenditure counts toward meeting cost-sharing requirements.1 These rules are not in TANF statute or regulations, but are in general HHS regulations regarding grant management.2 Under the general rules for cost sharing, states may count 

both cash donations by non-federal third parties as well as the 

value of third party, in-kind contributions. To be counted toward 

the TANF MOE, such third-party donations must meet the general 

rules of TANF MOE expenditures: be to or on behalf of eligible 

families and be of the type of expenditure generally countable toward the MOE. 

Federal law also prohibits states from using federal TANF funds 

to provide medical services. Excluded from this prohibition are prepregnancy family planning services. While federal TANF funds 

cannot be used for medical services, there is no corresponding prohibition on counting medical services toward the TANF state 

spending MOE requirement. Medical services may be counted if 

they are for eligible families and otherwise meet the requirements 

that apply to expenditures accounted toward the MOE. 

Explanation of provision 

Beginning with Fiscal Year 2017, H.R. 2959 as amended would 

‘‘freeze’’ the amount of third-party contributions that a state may 

claim toward meeting its MOE requirement. It would exclude from 

the definition of qualified state expenditures counted toward the 

MOE any third party contributions that exceed the value of third 

party contributions claimed by the state as MOE expenditures in 

fiscal year 2016. 

The Committee bill would also prohibit states from counting 

medical services toward the TANF MOE requirement. 


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Reason for change 

The Committee believes that, while state practice of claiming 

third party spending toward the TANF MOE requirement is not 

technically in violation of current law, states at a minimum should 

not be able to increase the amount of third party spending they can 

claim towards the MOE requirement. 

Effective date 

The provision is effective on October 1, 2016. 

SECTION 3: EFFECTIVE DATE

Present law 

No provision. 

Explanation of provision 

This section includes an effective date of October 1, 2016. 

Reason for change 

The Committee believes it is appropriate to have an effective 

date of October 1, 2016, i.e. the start of the next fiscal year. 

Effective date 

The provision is effective on October 1, 2016. 

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of H.R. 2959, the ‘‘TANF Accountability and Integrity 

Improvement Act,’’ on May 11, 2016. 

The Committee on Ways and Means marked up H.R. 2959, the 

‘‘TANF Accountability and Integrity Improvement Act,’’ on May 11, 

2016. The bill, H.R. 2959, was ordered favorably reported to the 

House of Representatives as amended by a voice vote (with a 

quorum being present). 

IV. NEW BUDGET AUTHORITY AND TAX EXPENDITURES 

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the bill involves no new budget authority or tax expenditure budget authority. 

V. COST ESTIMATE PREPARED BY THE CONGRESSIONAL 

BUDGET OFFICE 

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the Committee sets forth the following estimate and comparison prepared by the Director of the Congressional Budget Office. 


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U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, May 17, 2016. 

Hon. KEVIN BRADY, 

Chairman, Committee on Ways and Means, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 2959, the TANF Accountability and Integrity Improvement Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Susanne S. Mehlman. 

Sincerely, 

KEITH HALL. 

Enclosure. 

H.R. 2959—TANF Accountability and Integrity Improvement Act 

Under the Temporary Assistance for Needy Families (TANF) program, states are required to spend a minimum amount of state 

money under the maintenance of effort (MOE) requirement in 

order to receive TANF grants. States that meet certain economic 

criteria and that spend more than the minimum amount can receive additional funding from the TANF contingency fund. Cash donations and the value of in-kind contributions by nonfederal third 

parties may be counted as state spending for purposes of the MOE. 

Beginning in 2017, H.R. 2959 would freeze the amount of thirdparty contributions that a state may claim toward meeting its 

MOE requirement at the level spent in 2016. This legislation also 

would prohibit states from counting spending on medical services 

toward the MOE. 

Based on information from the Department of Health and 

Human Services, CBO assumes that any state that would be affected by the changes under the bill would find other ways to meet 

its MOE requirement. Furthermore, to the extent that a state could 

no longer draw down funds from the TANF contingency fund, CBO 

expects that other states would use those funds instead. Thus, CBO 

estimates that enacting the legislation would have no significant effect on direct spending. Because enacting this bill could affect direct spending, pay-as-you-go procedures apply. Enacting H.R. 2959 

would not affect revenues. 

CBO estimates that enacting H.R. 2959 would not increase net 

direct spending or on-budget deficits in any of the four consecutive 

10-year periods beginning in 2027. 

The limitations on the ability of states to use cash and in-kind 

resources from third parties as well as spending for medical services to meet MOE requirements would not be intergovernmental 

mandates as defined in the Unfunded Mandates Reform Act 

(UMRA). UMRA includes special rules for identifying conditions of 

aid in large entitlement programs as mandates, but only when 

states lack authority to amend their financial or programmatic responsibilities. States have significant flexibility in TANF to adjust 

the structure of the program and meet the requirements of the bill. 

The bill would not prohibit the use of third-party expenditures, but 

would limit them to the amount used in 2016. According to the 

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penditures toward their MOE requirements in 2015, and in recent 

years as many as 11 states used such expenditures to cover more 

than 10 percent of their MOE requirement. 

The bill contains no private-sector mandates as defined in 

UMRA. 

The CBO staff contact for this estimate is Susanne S. Mehlman 

(for federal costs) and Leo Lex (for state impacts). This estimate 

was approved by H. Samuel Papenfuss, Deputy Assistant Director 

for Budget Analysis. 

VI. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the findings 

and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the description portions of this report. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to the requirement of clause 3(c)(4) of rule XIII of 

the Rules of the House of Representatives, the performance goals 

and objectives of this legislation are to prevent states from increasing their counting of outside spending as state TANF spending. 

C. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the bill, and 

states that the bill does not involve any Federal income tax rate 

increases within the meaning of the rule. 

D. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

E. DUPLICATION OF FEDERAL PROGRAMS

In compliance with Sec. 3(g)(2) of H. Res. 5 (114th Congress), the 

Committee states that no provision of the bill establishes or reauthorizes: (1) a program of the Federal Government known to be duplicative of another Federal program; (2) a program included in any 

report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111–139; or (3) a program related 

to a program identified in the most recent Catalog of Federal DoVerDate Sep 11 2014 06:27 Jul 01, 2016 Jkt 059006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR644.XXX HR644

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mestic Assistance, published pursuant to the Federal Program Information Act (Pub. L. No. 95–220, as amended by Pub. L. No. 98– 

169). 

F. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), the 

following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires no directed rule makings within the meaning of such section. 

VII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

A. TEXT OF EXISTING LAW AMENDED OR REPEALED BY THE BILL, AS

REPORTED

In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of 

the House of Representatives, the text of each section proposed to 

be amended or repealed by the bill, as reported, is shown below: 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of 

the House of Representatives, the text of each section proposed to 

be amended or repealed by the bill, as reported, is shown below: 

SOCIAL SECURITY ACT 

* * * * * * * 

TITLE IV—GRANTS TO STATES FOR AID AND SERVICES TO 

NEEDY FAMILIES WITH CHILDREN AND FOR CHILD-WELFARE SERVICES 

PART A—BLOCK GRANTS TO STATES FOR TEMPORARY ASSISTANCE FOR NEEDY FAMILIES 

* * * * * * * 

SEC. 409. PENALTIES. 

(a) IN GENERAL.—Subject to this section: 

(1) USE OF GRANT IN VIOLATION OF THIS PART.— 

(A) GENERAL PENALTY.—If an audit conducted under 

chapter 75 of title 31, United States Code, finds that an 

amount paid to a State under section 403 for a fiscal year 

has been used in violation of this part, the Secretary shall 

reduce the grant payable to the State under section 

403(a)(1) for the immediately succeeding fiscal year quarter by the amount so used. 

(B) ENHANCED PENALTY FOR INTENTIONAL VIOLATIONS.— 

If the State does not prove to the satisfaction of the Secretary that the State did not intend to use the amount in 

violation of this part, the Secretary shall further reduce 

the grant payable to the State under section 403(a)(1) for 

the immediately succeeding fiscal year quarter by an 

amount equal to 5 percent of the State family assistance 

grant. 


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(C) PENALTY FOR MISUSE OF COMPETITIVE WELFARE-TOWORK FUNDS.—If the Secretary of Labor finds that an 

amount paid to an entity under section 403(a)(5)(B) has 

been used in violation of subparagraph (B) or (C) of section 

403(a)(5), the entity shall remit to the Secretary of Labor 

an amount equal to the amount so used. 

(2) FAILURE TO SUBMIT REQUIRED REPORT.— 

(A) QUARTERLY REPORTS.— 

(i) IN GENERAL.—If the Secretary determines that a 

State has not, within 45 days after the end of a fiscal 

quarter, submitted the report required by section 

411(a) for the quarter, the Secretary shall reduce the 

grant payable to the State under section 403(a)(1) for 

the immediately succeeding fiscal year by an amount 

equal to 4 percent of the State family assistance grant. 

(ii) RESCISSION OF PENALTY.—The Secretary shall rescind a penalty imposed on a State under clause (i) 

with respect to a report if the State submits the report 

before the end of the fiscal quarter that immediately 

succeeds the fiscal quarter for which the report was 

required. 

(B) REPORT ON ENGAGEMENT IN ADDITIONAL WORK ACTIVITIES AND EXPENDITURES FOR OTHER BENEFITS AND

SERVICES.— 

(i) IN GENERAL.—If the Secretary determines that a 

State has not submitted the report required by section 

411(c)(1)(A)(i) by May 31, 2011, or the report required 

by section 411(c)(1)(A)(ii) by August 31, 2011, the Secretary shall reduce the grant payable to the State 

under section 403(a)(1) for the immediately succeeding 

fiscal year by an amount equal to not more than 4 percent of the State family assistance grant. 

(ii) RESCISSION OF PENALTY.—The Secretary shall rescind a penalty imposed on a State under clause (i) 

with respect to a report required by section 

411(c)(1)(A) if the State submits the report not later 

than— 

(I) in the case of the report required under section 411(c)(1)(A)(i), June 15, 2011; and 

(II) in the case of the report required under section 411(c)(1)(A)(ii), September 15, 2011. 

(iii) PENALTY BASED ON SEVERITY OF FAILURE.—The 

Secretary shall impose a reduction under clause (i) 

with respect to a fiscal year based on the degree of 

noncompliance. 

(3) FAILURE TO SATISFY MINIMUM PARTICIPATION RATES.— 

(A) IN GENERAL.—If the Secretary determines that a 

State to which a grant is made under section 403 for a fiscal year has failed to comply with section 407(a) for the fiscal year, the Secretary shall reduce the grant payable to 

the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to the applicable 

percentage of the State family assistance grant. 


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(B) APPLICABLE PERCENTAGE DEFINED.—As used in subparagraph (A), the term ‘‘applicable percentage’’ means, 

with respect to a State— 

(i) if a penalty was not imposed on the State under 

subparagraph (A) for the immediately preceding fiscal 

year, 5 percent; or 

(ii) if a penalty was imposed on the State under subparagraph (A) for the immediately preceding fiscal 

year, the lesser of— 

(I) the percentage by which the grant payable to 

the State under section 403(a)(1) was reduced for 

such preceding fiscal year, increased by 2 percentage points; or 

(II) 21 percent. 

(C) PENALTY BASED ON SEVERITY OF FAILURE.—The Secretary shall impose reductions under subparagraph (A) 

with respect to a fiscal year based on the degree of noncompliance, and may reduce the penalty if the noncompliance is due to circumstances that caused the State to become a needy State (as defined in section 403(b)(5)) during 

the fiscal year or if the noncompliance is due to extraordinary circumstances such as a natural disaster or regional recession. The Secretary shall provide a written report to Congress to justify any waiver or penalty reduction 

due to such extraordinary circumstances. 

(4) FAILURE TO PARTICIPATE IN THE INCOME AND ELIGIBILITY

VERIFICATION SYSTEM.—If the Secretary determines that a 

State program funded under this part is not participating during a fiscal year in the income and eligibility verification system required by section 1137, the Secretary shall reduce the 

grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not 

more than 2 percent of the State family assistance grant. 

(5) FAILURE TO COMPLY WITH PATERNITY ESTABLISHMENT AND

CHILD SUPPORT ENFORCEMENT REQUIREMENTS UNDER PART D.— Notwithstanding any other provision of this Act, if the Secretary determines that the State agency that administers a 

program funded under this part does not enforce the penalties 

requested by the agency administering part D against recipients of assistance under the State program who fail to cooperate in establishing paternity or in establishing, modifying, or 

enforcing a child support order in accordance with such part 

and who do not qualify for any good cause or other exception 

established by the State under section 454(29), the Secretary 

shall reduce the grant payable to the State under section 

403(a)(1) for the immediately succeeding fiscal year (without 

regard to this section) by not more than 5 percent. 

(6) FAILURE TO TIMELY REPAY A FEDERAL LOAN FUND FOR

STATE WELFARE PROGRAMS.—If the Secretary determines that a 

State has failed to repay any amount borrowed from the Federal Loan Fund for State Welfare Programs established under 

section 406 within the period of maturity applicable to the 

loan, plus any interest owed on the loan, the Secretary shall 

reduce the grant payable to the State under section 403(a)(1) 

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gard to this section) by the outstanding loan amount, plus the 

interest owed on the outstanding amount. The Secretary shall 

not forgive any outstanding loan amount or interest owed on 

the outstanding amount. 

(7) FAILURE OF ANY STATE TO MAINTAIN CERTAIN LEVEL OF

HISTORIC EFFORT.— (A) IN GENERAL.—The Secretary shall reduce the grant 

payable to the State under section 403(a)(1) for a fiscal 

year by the amount (if any) by which qualified State expenditures for the then immediately preceding fiscal year 

are less than the applicable percentage of historic State expenditures with respect to such preceding fiscal year. 

(B) DEFINITIONS.—As used in this paragraph: 

(i) QUALIFIED STATE EXPENDITURES.— 

(I) IN GENERAL.—The term ‘‘qualified State expenditures’’ means, with respect to a State and a 

fiscal year, the total expenditures by the State 

during the fiscal year, under all State programs, 

for any of the following with respect to eligible 

families: 

(aa) Cash assistance, including any amount 

collected by the State as support pursuant to 

a plan approved under part D, on behalf of a 

family receiving assistance under the State 

program funded under this part, that is distributed to the family under section 

457(a)(1)(B) and disregarded in determining 

the eligibility of the family for, and the 

amount of, such assistance. 

(bb) Child care assistance. 

(cc) Educational activities designed to increase self-sufficiency, job training, and work, 

excluding any expenditure for public education in the State except expenditures which 

involve the provision of services or assistance 

to a member of an eligible family which is not 

generally available to persons who are not 

members of an eligible family. 

(dd) Administrative costs in connection with 

the matters described in items (aa), (bb), (cc), 

and (ee), but only to the extent that such 

costs do not exceed 15 percent of the total 

amount of qualified State expenditures for the 

fiscal year. 

(ee) Any other use of funds allowable under 

section 404(a)(1). 

(II) EXCLUSION OF TRANSFERS FROM OTHER

STATE AND LOCAL PROGRAMS.—Such term does not 

include expenditures under any State or local program during a fiscal year, except to the extent 

that— 

(aa) the expenditures exceed the amount expended under the State or local program in 

the fiscal year most recently ending before the 

date of the enactment of this section; or 


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(bb) the State is entitled to a payment 

under former section 403 (as in effect immediately before such date of enactment) with 

respect to the expenditures. 

(III) EXCLUSION OF AMOUNTS EXPENDED TO RE- PLACE PENALTY GRANT REDUCTIONS.—Such term 

does not include any amount expended in order to 

comply with paragraph (12). 

(IV) ELIGIBLE FAMILIES.—As used in subclause 

(I), the term ‘‘eligible families’’ means families eligible for assistance under the State program funded under this part, families that would be eligible 

for such assistance but for the application of section 408(a)(7) of this Act, and families of aliens 

lawfully present in the United States that would 

be eligible for such assistance but for the application of title IV of the Personal Responsibility and 

Work Opportunity Reconciliation Act of 1996. 

(V) COUNTING OF SPENDING ON CERTAIN PROFAMILY ACTIVITIES.—The term ‘‘qualified State expenditures’’ includes the total expenditures by the 

State during the fiscal year under all State programs for a purpose described in paragraph (3) or 

(4) of section 401(a). 

(ii) APPLICABLE PERCENTAGE.—The term ‘‘applicable 

percentage’’ means 80 percent (or, if the State meets 

the requirements of section 407(a), 75 percent). 

(iii) HISTORIC STATE EXPENDITURES.—The term ‘‘historic State expenditures’’ means, with respect to a 

State, the lesser of— 

(I) the expenditures by the State under parts A 

and F (as in effect during fiscal year 1994) for fiscal year 1994; or 

(II) the amount which bears the same ratio to 

the amount described in subclause (I) as— 

(aa) the State family assistance grant, plus 

the total amount required to be paid to the 

State under former section 403 for fiscal year 

1994 with respect to amounts expended by 

the State for child care under subsection (g) 

or (i) of section 402 (as in effect during fiscal 

year 1994); bears to 

(bb) the total amount required to be paid to 

the State under former section 403 (as in effect during fiscal year 1994) for fiscal year 

1994. 

Such term does not include any expenditures under 

the State plan approved under part A (as so in effect) 

on behalf of individuals covered by a tribal family assistance plan approved under section 412, as determined by the Secretary. 

(iv) EXPENDITURES BY THE STATE.—The term ‘‘expenditures by the State’’ does not include— 

(I) any expenditure from amounts made available by the Federal Government; 


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(II) any State funds expended for the medicaid 

program under title XIX; 

(III) any State funds which are used to match 

Federal funds provided under section 403(a)(5); or 

(IV) any State funds which are expended as a 

condition of receiving Federal funds other than 

under this part. 

Notwithstanding subclause (IV) of the preceding sentence, such term includes expenditures by a State for 

child care in a fiscal year to the extent that the total 

amount of the expenditures does not exceed the 

amount of State expenditures in fiscal year 1994 or 

1995 (whichever is the greater) that equal the nonFederal share for the programs described in section 

418(a)(1)(A). 

(v) SOURCE OF DATA.—In determining expenditures 

by a State for fiscal years 1994 and 1995, the Secretary shall use information which was reported by 

the State on ACF Form 231 or (in the case of expenditures under part F) ACF Form 331, available as of the 

dates specified in clauses (ii) and (iii) of section 

403(a)(1)(D). 

(8) NONCOMPLIANCE OF STATE CHILD SUPPORT ENFORCEMENT

PROGRAM WITH REQUIREMENTS OF PART D.— (A) IN GENERAL.—If the Secretary finds, with respect to 

a State’s program under part D, in a fiscal year beginning 

on or after October 1, 1997— 

(i)(I) on the basis of data submitted by a State pursuant to section 454(15)(B), or on the basis of the results of a review conducted under section 452(a)(4), 

that the State program failed to achieve the paternity 

establishment percentages (as defined in section 

452(g)(2)), or to meet other performance measures that 

may be established by the Secretary; 

(II) on the basis of the results of an audit or audits 

conducted under section 452(a)(4)(C)(i) that the State 

data submitted pursuant to section 454(15)(B) is incomplete or unreliable; or 

(III) on the basis of the results of an audit or audits 

conducted under section 452(a)(4)(C) that a State 

failed to substantially comply with 1 or more of the requirements of part D (other than paragraph (24), or 

subparagraph (A) or (B)(i) of paragraph (27), of section 

454); and 

(ii) that, with respect to the succeeding fiscal year— 

(I) the State failed to take sufficient corrective 

action to achieve the appropriate performance levels or compliance as described in subparagraph 

(A)(i); or 

(II) the data submitted by the State pursuant to 

section 454(15)(B) is incomplete or unreliable; 

the amounts otherwise payable to the State under this 

part for quarters following the end of such succeeding fiscal year, prior to quarters following the end of the first 

quarter throughout which the State program has achieved 


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the paternity establishment percentages or other performance measures as described in subparagraph (A)(i)(I), or is 

in substantial compliance with 1 or more of the requirements of part D as described in subparagraph (A)(i)(III), as 

appropriate, shall be reduced by the percentage specified 

in subparagraph (B). 

(B) AMOUNT OF REDUCTIONS.—The reductions required 

under subparagraph (A) shall be— 

(i) not less than 1 nor more than 2 percent; 

(ii) not less than 2 nor more than 3 percent, if the 

finding is the 2nd consecutive finding made pursuant 

to subparagraph (A); or 

(iii) not less than 3 nor more than 5 percent, if the 

finding is the 3rd or a subsequent consecutive such 

finding. 

(C) DISREGARD OF NONCOMPLIANCE WHICH IS OF A TECHNICAL NATURE.—For purposes of this section and section 

452(a)(4), a State determined as a result of an audit— 

(i) to have failed to have substantially complied with 

1 or more of the requirements of part D shall be determined to have achieved substantial compliance only if 

the Secretary determines that the extent of the noncompliance is of a technical nature which does not adversely affect the performance of the State’s program 

under part D; or 

(ii) to have submitted incomplete or unreliable data 

pursuant to section 454(15)(B) shall be determined to 

have submitted adequate data only if the Secretary 

determines that the extent of the incompleteness or 

unreliability of the data is of a technical nature which 

does not adversely affect the determination of the level 

of the State’s paternity establishment percentages (as 

defined under section 452(g)(2)) or other performance 

measures that may be established by the Secretary. 

(9) FAILURE TO COMPLY WITH 5-YEAR LIMIT ON ASSISTANCE.— 

If the Secretary determines that a State has not complied with 

section 408(a)(7) during a fiscal year, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for 

the immediately succeeding fiscal year by an amount equal to 

5 percent of the State family assistance grant. 

(10) FAILURE OF STATE RECEIVING AMOUNTS FROM CONTINGENCY FUND TO MAINTAIN 100 PERCENT OF HISTORIC EFFORT.— 

If, at the end of any fiscal year during which amounts from the 

Contingency Fund for State Welfare Programs have been paid 

to a State, the Secretary finds that the qualified State expenditures (as defined in paragraph (7)(B)(i) (other than the expenditures described in subclause (I)(bb) of that paragraph)) under 

the State program funded under this part for the fiscal year 

are less than 100 percent of historic State expenditures (as defined in paragraph (7)(B)(iii) of this subsection), excluding any 

amount expended by the State for child care under subsection 

(g) or (i) of section 402 (as in effect during fiscal year 1994) for 

fiscal year 1994, the Secretary shall reduce the grant payable 

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ceeding fiscal year by the total of the amounts so paid to the 

State that the State has not remitted under section 403(b)(6). 

(11) FAILURE TO MAINTAIN ASSISTANCE TO ADULT SINGLE CUSTODIAL PARENT WHO CANNOT OBTAIN CHILD CARE FOR CHILD

UNDER AGE 6.— 

(A) IN GENERAL.—If the Secretary determines that a 

State to which a grant is made under section 403 for a fiscal year has violated section 407(e)(2) during the fiscal 

year, the Secretary shall reduce the grant payable to the 

State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not more than 

5 percent of the State family assistance grant. 

(B) PENALTY BASED ON SEVERITY OF FAILURE.—The Secretary shall impose reductions under subparagraph (A) 

with respect to a fiscal year based on the degree of noncompliance. 

(12) REQUIREMENT TO EXPEND ADDITIONAL STATE FUNDS TO

REPLACE GRANT REDUCTIONS; PENALTY FOR FAILURE TO DO SO.— 

If the grant payable to a State under section 403(a)(1) for a fiscal year is reduced by reason of this subsection, the State 

shall, during the immediately succeeding fiscal year, expend 

under the State program funded under this part an amount 

equal to the total amount of such reductions. If the State fails 

during such succeeding fiscal year to make the expenditure required by the preceding sentence from its own funds, the Secretary may reduce the grant payable to the State under section 

403(a)(1) for the fiscal year that follows such succeeding fiscal 

year by an amount equal to the sum of— 

(A) not more than 2 percent of the State family assistance grant; and 

(B) the amount of the expenditure required by the preceding sentence. 

(13) PENALTY FOR FAILURE OF STATE TO MAINTAIN HISTORIC

EFFORT DURING YEAR IN WHICH WELFARE-TO-WORK GRANT IS RECEIVED.—If a grant is made to a State under section 

403(a)(5)(A) for a fiscal year and paragraph (7) of this subsection requires the grant payable to the State under section 

403(a)(1) to be reduced for the immediately succeeding fiscal 

year, then the Secretary shall reduce the grant payable to the 

State under section 403(a)(1) for such succeeding fiscal year by 

the amount of the grant made to the State under section 

403(a)(5)(A) for the fiscal year. 

(14) PENALTY FOR FAILURE TO REDUCE ASSISTANCE FOR RECIPIENTS REFUSING WITHOUT GOOD CAUSE TO WORK.— 

(A) IN GENERAL.—If the Secretary determines that a 

State to which a grant is made under section 403 in a fiscal year has violated section 407(e) during the fiscal year, 

the Secretary shall reduce the grant payable to the State 

under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not less than 1 percent and 

not more than 5 percent of the State family assistance 

grant. 

(B) PENALTY BASED ON SEVERITY OF FAILURE.—The Secretary shall impose reductions under subparagraph (A) 


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with respect to a fiscal year based on the degree of noncompliance. 

(15) PENALTY FOR FAILURE TO ESTABLISH OR COMPLY WITH

WORK PARTICIPATION VERIFICATION PROCEDURES.— (A) IN GENERAL.—If the Secretary determines that a 

State to which a grant is made under section 403 in a fiscal year has violated section 407(i)(2) during the fiscal 

year, the Secretary shall reduce the grant payable to the 

State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not less than 1 

percent and not more than 5 percent of the State family 

assistance grant. 

(B) PENALTY BASED ON SEVERITY OF FAILURE.—The Secretary shall impose reductions under subparagraph (A) 

with respect to a fiscal year based on the degree of noncompliance. 

(16) PENALTY FOR FAILURE TO ENFORCE SPENDING POLI- CIES.— (A) IN GENERAL.—If, within 2 years after the date of the 

enactment of this paragraph, any State has not reported 

to the Secretary on such State’s implementation of the 

policies and practices required by section 408(a)(12), or the 

Secretary determines, based on the information provided 

in State reports, that any State has not implemented and 

maintained such policies and practices, the Secretary shall 

reduce, by an amount equal to 5 percent of the State family assistance grant, the grant payable to such State under 

section 403(a)(1) for— 

(i) the fiscal year immediately succeeding the year 

in which such 2-year period ends; and 

(ii) each succeeding fiscal year in which the State 

does not demonstrate that such State has implemented and maintained such policies and practices. 

(B) REDUCTION OF APPLICABLE PENALTY.—The Secretary 

may reduce the amount of the reduction required under 

subparagraph (A) based on the degree of noncompliance of 

the State. 

(C) STATE NOT RESPONSIBLE FOR INDIVIDUAL VIOLA- TIONS.—Fraudulent activity by any individual in an attempt to circumvent the policies and practices required by 

section 408(a)(12) shall not trigger a State penalty under 

subparagraph (A). 

(b) REASONABLE CAUSE EXCEPTION.— 

(1) IN GENERAL.—The Secretary may not impose a penalty on 

a State under subsection (a) with respect to a requirement if 

the Secretary determines that the State has reasonable cause 

for failing to comply with the requirement. 

(2) EXCEPTION.—Paragraph (1) of this subsection shall not 

apply to any penalty under paragraph (6), (7), (8), (10), (12), or 

(13) of subsection (a) and, with respect to the penalty under 

paragraph (2)(B) of subsection (a), shall only apply to the extent the Secretary determines that the reasonable cause for 

failure to comply with a requirement of that paragraph is as 

a result of a one-time, unexpected event, such as a widespread 

data system failure or a natural or man-made disaster. 


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(c) CORRECTIVE COMPLIANCE PLAN.— (1) IN GENERAL.— (A) NOTIFICATION OF VIOLATION.—Before imposing a penalty against a State under subsection (a) with respect to a 

violation of this part, the Secretary shall notify the State 

of the violation and allow the State the opportunity to 

enter into a corrective compliance plan in accordance with 

this subsection which outlines how the State will correct or 

discontinue, as appropriate, the violation and how the 

State will insure continuing compliance with this part. 

(B) 60-DAY PERIOD TO PROPOSE A CORRECTIVE COMPLI- ANCE PLAN.—During the 60-day period that begins on the 

date the State receives a notice provided under subparagraph (A) with respect to a violation, the State may submit 

to the Federal Government a corrective compliance plan to 

correct or discontinue, as appropriate, the violation. 

(C) CONSULTATION ABOUT MODIFICATIONS.—During the 

60-day period that begins with the date the Secretary receives a corrective compliance plan submitted by a State in 

accordance with subparagraph (B), the Secretary may consult with the State on modifications to the plan. 

(D) ACCEPTANCE OF PLAN.—A corrective compliance plan 

submitted by a State in accordance with subparagraph (B) 

is deemed to be accepted by the Secretary if the Secretary 

does not accept or reject the plan during 60-day period 

that begins on the date the plan is submitted. 

(2) EFFECT OF CORRECTING OR DISCONTINUING VIOLATION.— The Secretary may not impose any penalty under subsection 

(a) with respect to any violation covered by a State corrective 

compliance plan accepted by the Secretary if the State corrects 

or discontinues, as appropriate, the violation pursuant to the 

plan. 

(3) EFFECT OF FAILING TO CORRECT OR DISCONTINUE VIOLA- TION.—The Secretary shall assess some or all of a penalty imposed on a State under subsection (a) with respect to a violation if the State does not, in a timely manner, correct or discontinue, as appropriate, the violation pursuant to a State corrective compliance plan accepted by the Secretary. 

(4) INAPPLICABILITY TO CERTAIN PENALTIES.—This subsection 

shall not apply to the imposition of a penalty against a State 

under paragraph (2)(B), (6), (7), (8), (10), (12), (13), or (16) of 

subsection (a). 

(d) LIMITATION ON AMOUNT OF PENALTIES.— (1) IN GENERAL.—In imposing the penalties described in subsection (a), the Secretary shall not reduce any quarterly payment to a State by more than 25 percent. 

(2) CARRYFORWARD OF UNRECOVERED PENALTIES.—To the extent that paragraph (1) of this subsection prevents the Secretary from recovering during a fiscal year the full amount of 

penalties imposed on a State under subsection (a) of this section for a prior fiscal year, the Secretary shall apply any remaining amount of such penalties to the grant payable to the 

State under section 403(a)(1) for the immediately succeeding 

fiscal year. 

* * * * * * * 


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B. CHANGES IN EXISTING LAW PROPOSED BY THE BILL, AS REPORTED

In compliance with clause 3(e)(1)(B) of rule XIII of the Rules of 

the House of Representatives, changes in existing law proposed by 

the bill, as reported, are shown as follows (existing law proposed 

to be omitted is enclosed in black brackets, new matter is printed 

in italics, existing law in which no change is proposed is shown in 

roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e)(1)(B) of rule XIII of the Rules of 

the House of Representatives, changes in existing law proposed by 

the bill, as reported, are shown as follows (new matter is printed 

in italics and existing law in which no change is proposed is shown 

in roman): 

SOCIAL SECURITY ACT 

* * * * * * * 

TITLE IV—GRANTS TO STATES FOR AID AND SERVICES TO 

NEEDY FAMILIES WITH CHILDREN AND FOR CHILD-WELFARE SERVICES 

PART A—BLOCK GRANTS TO STATES FOR TEMPORARY ASSISTANCE FOR NEEDY FAMILIES 

* * * * * * * 

SEC. 409. PENALTIES. 

(a) IN GENERAL.—Subject to this section: 

(1) USE OF GRANT IN VIOLATION OF THIS PART.— (A) GENERAL PENALTY.—If an audit conducted under 

chapter 75 of title 31, United States Code, finds that an 

amount paid to a State under section 403 for a fiscal year 

has been used in violation of this part, the Secretary shall 

reduce the grant payable to the State under section 

403(a)(1) for the immediately succeeding fiscal year quarter by the amount so used. 

(B) ENHANCED PENALTY FOR INTENTIONAL VIOLATIONS.— 

If the State does not prove to the satisfaction of the Secretary that the State did not intend to use the amount in 

violation of this part, the Secretary shall further reduce 

the grant payable to the State under section 403(a)(1) for 

the immediately succeeding fiscal year quarter by an 

amount equal to 5 percent of the State family assistance 

grant. 

(C) PENALTY FOR MISUSE OF COMPETITIVE WELFARE-TOWORK FUNDS.—If the Secretary of Labor finds that an 

amount paid to an entity under section 403(a)(5)(B) has 

been used in violation of subparagraph (B) or (C) of section 

403(a)(5), the entity shall remit to the Secretary of Labor 

an amount equal to the amount so used. 

(2) FAILURE TO SUBMIT REQUIRED REPORT.— 

(A) QUARTERLY REPORTS.— 


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(i) IN GENERAL.—If the Secretary determines that a 

State has not, within 45 days after the end of a fiscal 

quarter, submitted the report required by section 

411(a) for the quarter, the Secretary shall reduce the 

grant payable to the State under section 403(a)(1) for 

the immediately succeeding fiscal year by an amount 

equal to 4 percent of the State family assistance grant. 

(ii) RESCISSION OF PENALTY.—The Secretary shall rescind a penalty imposed on a State under clause (i) 

with respect to a report if the State submits the report 

before the end of the fiscal quarter that immediately 

succeeds the fiscal quarter for which the report was 

required. 

(B) REPORT ON ENGAGEMENT IN ADDITIONAL WORK ACTIVITIES AND EXPENDITURES FOR OTHER BENEFITS AND

SERVICES.— 

(i) IN GENERAL.—If the Secretary determines that a 

State has not submitted the report required by section 

411(c)(1)(A)(i) by May 31, 2011, or the report required 

by section 411(c)(1)(A)(ii) by August 31, 2011, the Secretary shall reduce the grant payable to the State 

under section 403(a)(1) for the immediately succeeding 

fiscal year by an amount equal to not more than 4 percent of the State family assistance grant. 

(ii) RESCISSION OF PENALTY.—The Secretary shall rescind a penalty imposed on a State under clause (i) 

with respect to a report required by section 

411(c)(1)(A) if the State submits the report not later 

than— 

(I) in the case of the report required under section 411(c)(1)(A)(i), June 15, 2011; and 

(II) in the case of the report required under section 411(c)(1)(A)(ii), September 15, 2011. 

(iii) PENALTY BASED ON SEVERITY OF FAILURE.—The 

Secretary shall impose a reduction under clause (i) 

with respect to a fiscal year based on the degree of 

noncompliance. 

(3) FAILURE TO SATISFY MINIMUM PARTICIPATION RATES.— 

(A) IN GENERAL.—If the Secretary determines that a 

State to which a grant is made under section 403 for a fiscal year has failed to comply with section 407(a) for the fiscal year, the Secretary shall reduce the grant payable to 

the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to the applicable 

percentage of the State family assistance grant. 

(B) APPLICABLE PERCENTAGE DEFINED.—As used in subparagraph (A), the term ‘‘applicable percentage’’ means, 

with respect to a State— 

(i) if a penalty was not imposed on the State under 

subparagraph (A) for the immediately preceding fiscal 

year, 5 percent; or 

(ii) if a penalty was imposed on the State under subparagraph (A) for the immediately preceding fiscal 

year, the lesser of— 


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(I) the percentage by which the grant payable to 

the State under section 403(a)(1) was reduced for 

such preceding fiscal year, increased by 2 percentage points; or 

(II) 21 percent. 

(C) PENALTY BASED ON SEVERITY OF FAILURE.—The Secretary shall impose reductions under subparagraph (A) 

with respect to a fiscal year based on the degree of noncompliance, and may reduce the penalty if the noncompliance is due to circumstances that caused the State to become a needy State (as defined in section 403(b)(5)) during 

the fiscal year or if the noncompliance is due to extraordinary circumstances such as a natural disaster or regional recession. The Secretary shall provide a written report to Congress to justify any waiver or penalty reduction 

due to such extraordinary circumstances. 

(4) FAILURE TO PARTICIPATE IN THE INCOME AND ELIGIBILITY

VERIFICATION SYSTEM.—If the Secretary determines that a 

State program funded under this part is not participating during a fiscal year in the income and eligibility verification system required by section 1137, the Secretary shall reduce the 

grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not 

more than 2 percent of the State family assistance grant. 

(5) FAILURE TO COMPLY WITH PATERNITY ESTABLISHMENT AND

CHILD SUPPORT ENFORCEMENT REQUIREMENTS UNDER PART D.— Notwithstanding any other provision of this Act, if the Secretary determines that the State agency that administers a 

program funded under this part does not enforce the penalties 

requested by the agency administering part D against recipients of assistance under the State program who fail to cooperate in establishing paternity or in establishing, modifying, or 

enforcing a child support order in accordance with such part 

and who do not qualify for any good cause or other exception 

established by the State under section 454(29), the Secretary 

shall reduce the grant payable to the State under section 

403(a)(1) for the immediately succeeding fiscal year (without 

regard to this section) by not more than 5 percent. 

(6) FAILURE TO TIMELY REPAY A FEDERAL LOAN FUND FOR

STATE WELFARE PROGRAMS.—If the Secretary determines that a 

State has failed to repay any amount borrowed from the Federal Loan Fund for State Welfare Programs established under 

section 406 within the period of maturity applicable to the 

loan, plus any interest owed on the loan, the Secretary shall 

reduce the grant payable to the State under section 403(a)(1) 

for the immediately succeeding fiscal year quarter (without regard to this section) by the outstanding loan amount, plus the 

interest owed on the outstanding amount. The Secretary shall 

not forgive any outstanding loan amount or interest owed on 

the outstanding amount. 

(7) FAILURE OF ANY STATE TO MAINTAIN CERTAIN LEVEL OF

HISTORIC EFFORT.— (A) IN GENERAL.—The Secretary shall reduce the grant 

payable to the State under section 403(a)(1) for a fiscal 

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penditures for the then immediately preceding fiscal year 

are less than the applicable percentage of historic State expenditures with respect to such preceding fiscal year. 

(B) DEFINITIONS.—As used in this paragraph: 

(i) QUALIFIED STATE EXPENDITURES.— 

(I) IN GENERAL.—The term ‘‘qualified State expenditures’’ means, with respect to a State and a 

fiscal year, the total expenditures by the State 

during the fiscal year, under all State programs, 

for any of the following with respect to eligible 

families: 

(aa) Cash assistance, including any amount 

collected by the State as support pursuant to 

a plan approved under part D, on behalf of a 

family receiving assistance under the State 

program funded under this part, that is distributed to the family under section 

457(a)(1)(B) and disregarded in determining 

the eligibility of the family for, and the 

amount of, such assistance. 

(bb) Child care assistance. 

(cc) Educational activities designed to increase self-sufficiency, job training, and work, 

excluding any expenditure for public education in the State except expenditures which 

involve the provision of services or assistance 

to a member of an eligible family which is not 

generally available to persons who are not 

members of an eligible family. 

(dd) Administrative costs in connection with 

the matters described in items (aa), (bb), (cc), 

and (ee), but only to the extent that such 

costs do not exceed 15 percent of the total 

amount of qualified State expenditures for the 

fiscal year. 

(ee) Any other use of funds allowable under 

section 404(a)(1). 

(II) EXCLUSION OF TRANSFERS FROM OTHER

STATE AND LOCAL PROGRAMS.—Such term does not 

include expenditures under any State or local program during a fiscal year, except to the extent 

that— 

(aa) the expenditures exceed the amount expended under the State or local program in 

the fiscal year most recently ending before the 

date of the enactment of this section; or 

(bb) the State is entitled to a payment 

under former section 403 (as in effect immediately before such date of enactment) with 

respect to the expenditures. 

(III) EXCLUSION OF AMOUNTS EXPENDED TO REPLACE PENALTY GRANT REDUCTIONS.—Such term 

does not include any amount expended in order to 

comply with paragraph (12). 


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(IV) ELIGIBLE FAMILIES.—As used in subclause 

(I), the term ‘‘eligible families’’ means families eligible for assistance under the State program funded under this part, families that would be eligible 

for such assistance but for the application of section 408(a)(7) of this Act, and families of aliens 

lawfully present in the United States that would 

be eligible for such assistance but for the application of title IV of the Personal Responsibility and 

Work Opportunity Reconciliation Act of 1996. 

(V) COUNTING OF SPENDING ON CERTAIN PROFAMILY ACTIVITIES.—The term ‘‘qualified State expenditures’’ includes the total expenditures by the 

State during the fiscal year under all State programs for a purpose described in paragraph (3) or 

(4) of section 401(a). 

(VI) LIMIT ON COUNTING OF THIRD-PARTY CON- TRIBUTIONS.—Such term shall not include the 

amount (if any) by which— 

(aa) the value of all goods and services provided by a source other than the State or a 

local government during the fiscal year; exceeds 

(bb) the value of all such goods and services 

claimed by the State as qualified State expenditures for fiscal year 2016. 

(VII) EXCLUSION OF EXPENDITURES FOR THE

PROVISION OF MEDICAL SERVICES.—Such term 

shall not include any amount expended for the provision of medical services. 

(ii) APPLICABLE PERCENTAGE.—The term ‘‘applicable 

percentage’’ means 80 percent (or, if the State meets 

the requirements of section 407(a), 75 percent). 

(iii) HISTORIC STATE EXPENDITURES.—The term ‘‘historic State expenditures’’ means, with respect to a 

State, the lesser of— 

(I) the expenditures by the State under parts A 

and F (as in effect during fiscal year 1994) for fiscal year 1994; or 

(II) the amount which bears the same ratio to 

the amount described in subclause (I) as— 

(aa) the State family assistance grant, plus 

the total amount required to be paid to the 

State under former section 403 for fiscal year 

1994 with respect to amounts expended by 

the State for child care under subsection (g) 

or (i) of section 402 (as in effect during fiscal 

year 1994); bears to 

(bb) the total amount required to be paid to 

the State under former section 403 (as in effect during fiscal year 1994) for fiscal year 

1994. 

Such term does not include any expenditures under 

the State plan approved under part A (as so in effect) 

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sistance plan approved under section 412, as determined by the Secretary. 

(iv) EXPENDITURES BY THE STATE.—The term ‘‘expenditures by the State’’ does not include— 

(I) any expenditure from amounts made available by the Federal Government; 

(II) any State funds expended for the medicaid 

program under title XIX; 

(III) any State funds which are used to match 

Federal funds provided under section 403(a)(5); or 

(IV) any State funds which are expended as a 

condition of receiving Federal funds other than 

under this part. 

Notwithstanding subclause (IV) of the preceding sentence, such term includes expenditures by a State for 

child care in a fiscal year to the extent that the total 

amount of the expenditures does not exceed the 

amount of State expenditures in fiscal year 1994 or 

1995 (whichever is the greater) that equal the nonFederal share for the programs described in section 

418(a)(1)(A). 

(v) SOURCE OF DATA.—In determining expenditures 

by a State for fiscal years 1994 and 1995, the Secretary shall use information which was reported by 

the State on ACF Form 231 or (in the case of expenditures under part F) ACF Form 331, available as of the 

dates specified in clauses (ii) and (iii) of section 

403(a)(1)(D). 

(8) NONCOMPLIANCE OF STATE CHILD SUPPORT ENFORCEMENT

PROGRAM WITH REQUIREMENTS OF PART D.— 

(A) IN GENERAL.—If the Secretary finds, with respect to 

a State’s program under part D, in a fiscal year beginning 

on or after October 1, 1997— 

(i)(I) on the basis of data submitted by a State pursuant to section 454(15)(B), or on the basis of the results of a review conducted under section 452(a)(4), 

that the State program failed to achieve the paternity 

establishment percentages (as defined in section 

452(g)(2)), or to meet other performance measures that 

may be established by the Secretary; 

(II) on the basis of the results of an audit or audits 

conducted under section 452(a)(4)(C)(i) that the State 

data submitted pursuant to section 454(15)(B) is incomplete or unreliable; or 

(III) on the basis of the results of an audit or audits 

conducted under section 452(a)(4)(C) that a State 

failed to substantially comply with 1 or more of the requirements of part D (other than paragraph (24), or 

subparagraph (A) or (B)(i) of paragraph (27), of section 

454); and 

(ii) that, with respect to the succeeding fiscal year— 

(I) the State failed to take sufficient corrective 

action to achieve the appropriate performance levels or compliance as described in subparagraph 

(A)(i); or 


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(II) the data submitted by the State pursuant to 

section 454(15)(B) is incomplete or unreliable; 

the amounts otherwise payable to the State under this 

part for quarters following the end of such succeeding fiscal year, prior to quarters following the end of the first 

quarter throughout which the State program has achieved 

the paternity establishment percentages or other performance measures as described in subparagraph (A)(i)(I), or is 

in substantial compliance with 1 or more of the requirements of part D as described in subparagraph (A)(i)(III), as 

appropriate, shall be reduced by the percentage specified 

in subparagraph (B). 

(B) AMOUNT OF REDUCTIONS.—The reductions required 

under subparagraph (A) shall be— 

(i) not less than 1 nor more than 2 percent; 

(ii) not less than 2 nor more than 3 percent, if the 

finding is the 2nd consecutive finding made pursuant 

to subparagraph (A); or 

(iii) not less than 3 nor more than 5 percent, if the 

finding is the 3rd or a subsequent consecutive such 

finding. 

(C) DISREGARD OF NONCOMPLIANCE WHICH IS OF A TECH- NICAL NATURE.—For purposes of this section and section 

452(a)(4), a State determined as a result of an audit— 

(i) to have failed to have substantially complied with 

1 or more of the requirements of part D shall be determined to have achieved substantial compliance only if 

the Secretary determines that the extent of the noncompliance is of a technical nature which does not adversely affect the performance of the State’s program 

under part D; or 

(ii) to have submitted incomplete or unreliable data 

pursuant to section 454(15)(B) shall be determined to 

have submitted adequate data only if the Secretary 

determines that the extent of the incompleteness or 

unreliability of the data is of a technical nature which 

does not adversely affect the determination of the level 

of the State’s paternity establishment percentages (as 

defined under section 452(g)(2)) or other performance 

measures that may be established by the Secretary. 

(9) FAILURE TO COMPLY WITH 5-YEAR LIMIT ON ASSISTANCE.— 

If the Secretary determines that a State has not complied with 

section 408(a)(7) during a fiscal year, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for 

the immediately succeeding fiscal year by an amount equal to 

5 percent of the State family assistance grant. 

(10) FAILURE OF STATE RECEIVING AMOUNTS FROM CONTIN- GENCY FUND TO MAINTAIN 100 PERCENT OF HISTORIC EFFORT.— 

If, at the end of any fiscal year during which amounts from the 

Contingency Fund for State Welfare Programs have been paid 

to a State, the Secretary finds that the qualified State expenditures (as defined in paragraph (7)(B)(i) (other than the expenditures described in subclause (I)(bb) of that paragraph)) under 

the State program funded under this part for the fiscal year 

are less than 100 percent of historic State expenditures (as deVerDate Sep 11 2014 06:27 Jul 01, 2016 Jkt 059006 PO 00000 Frm 00025 Fmt 6659 Sfmt 6601 E:\HR\OC\HR644.XXX HR644

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fined in paragraph (7)(B)(iii) of this subsection), excluding any 

amount expended by the State for child care under subsection 

(g) or (i) of section 402 (as in effect during fiscal year 1994) for 

fiscal year 1994, the Secretary shall reduce the grant payable 

to the State under section 403(a)(1) for the immediately succeeding fiscal year by the total of the amounts so paid to the 

State that the State has not remitted under section 403(b)(6). 

(11) FAILURE TO MAINTAIN ASSISTANCE TO ADULT SINGLE CUS- TODIAL PARENT WHO CANNOT OBTAIN CHILD CARE FOR CHILD

UNDER AGE 6.— (A) IN GENERAL.—If the Secretary determines that a 

State to which a grant is made under section 403 for a fiscal year has violated section 407(e)(2) during the fiscal 

year, the Secretary shall reduce the grant payable to the 

State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not more than 

5 percent of the State family assistance grant. 

(B) PENALTY BASED ON SEVERITY OF FAILURE.—The Secretary shall impose reductions under subparagraph (A) 

with respect to a fiscal year based on the degree of noncompliance. 

(12) REQUIREMENT TO EXPEND ADDITIONAL STATE FUNDS TO

REPLACE GRANT REDUCTIONS; PENALTY FOR FAILURE TO DO SO.— If the grant payable to a State under section 403(a)(1) for a fiscal year is reduced by reason of this subsection, the State 

shall, during the immediately succeeding fiscal year, expend 

under the State program funded under this part an amount 

equal to the total amount of such reductions. If the State fails 

during such succeeding fiscal year to make the expenditure required by the preceding sentence from its own funds, the Secretary may reduce the grant payable to the State under section 

403(a)(1) for the fiscal year that follows such succeeding fiscal 

year by an amount equal to the sum of— 

(A) not more than 2 percent of the State family assistance grant; and 

(B) the amount of the expenditure required by the preceding sentence. 

(13) PENALTY FOR FAILURE OF STATE TO MAINTAIN HISTORIC

EFFORT DURING YEAR IN WHICH WELFARE-TO-WORK GRANT IS RE- CEIVED.—If a grant is made to a State under section 

403(a)(5)(A) for a fiscal year and paragraph (7) of this subsection requires the grant payable to the State under section 

403(a)(1) to be reduced for the immediately succeeding fiscal 

year, then the Secretary shall reduce the grant payable to the 

State under section 403(a)(1) for such succeeding fiscal year by 

the amount of the grant made to the State under section 

403(a)(5)(A) for the fiscal year. 

(14) PENALTY FOR FAILURE TO REDUCE ASSISTANCE FOR RECIPIENTS REFUSING WITHOUT GOOD CAUSE TO WORK.— (A) IN GENERAL.—If the Secretary determines that a 

State to which a grant is made under section 403 in a fiscal year has violated section 407(e) during the fiscal year, 

the Secretary shall reduce the grant payable to the State 

under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not less than 1 percent and 


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not more than 5 percent of the State family assistance 

grant. 

(B) PENALTY BASED ON SEVERITY OF FAILURE.—The Secretary shall impose reductions under subparagraph (A) 

with respect to a fiscal year based on the degree of noncompliance. 

(15) PENALTY FOR FAILURE TO ESTABLISH OR COMPLY WITH

WORK PARTICIPATION VERIFICATION PROCEDURES.— (A) IN GENERAL.—If the Secretary determines that a 

State to which a grant is made under section 403 in a fiscal year has violated section 407(i)(2) during the fiscal 

year, the Secretary shall reduce the grant payable to the 

State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not less than 1 

percent and not more than 5 percent of the State family 

assistance grant. 

(B) PENALTY BASED ON SEVERITY OF FAILURE.—The Secretary shall impose reductions under subparagraph (A) 

with respect to a fiscal year based on the degree of noncompliance. 

(16) PENALTY FOR FAILURE TO ENFORCE SPENDING POLI- CIES.— (A) IN GENERAL.—If, within 2 years after the date of the 

enactment of this paragraph, any State has not reported 

to the Secretary on such State’s implementation of the 

policies and practices required by section 408(a)(12), or the 

Secretary determines, based on the information provided 

in State reports, that any State has not implemented and 

maintained such policies and practices, the Secretary shall 

reduce, by an amount equal to 5 percent of the State family assistance grant, the grant payable to such State under 

section 403(a)(1) for— 

(i) the fiscal year immediately succeeding the year 

in which such 2-year period ends; and 

(ii) each succeeding fiscal year in which the State 

does not demonstrate that such State has implemented and maintained such policies and practices. 

(B) REDUCTION OF APPLICABLE PENALTY.—The Secretary 

may reduce the amount of the reduction required under 

subparagraph (A) based on the degree of noncompliance of 

the State. 

(C) STATE NOT RESPONSIBLE FOR INDIVIDUAL VIOLATIONS.—Fraudulent activity by any individual in an attempt to circumvent the policies and practices required by 

section 408(a)(12) shall not trigger a State penalty under 

subparagraph (A). 

(b) REASONABLE CAUSE EXCEPTION.— 

(1) IN GENERAL.—The Secretary may not impose a penalty on 

a State under subsection (a) with respect to a requirement if 

the Secretary determines that the State has reasonable cause 

for failing to comply with the requirement. 

(2) EXCEPTION.—Paragraph (1) of this subsection shall not 

apply to any penalty under paragraph (6), (7), (8), (10), (12), or 

(13) of subsection (a) and, with respect to the penalty under 

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tent the Secretary determines that the reasonable cause for 

failure to comply with a requirement of that paragraph is as 

a result of a one-time, unexpected event, such as a widespread 

data system failure or a natural or man-made disaster. 

(c) CORRECTIVE COMPLIANCE PLAN.— (1) IN GENERAL.— (A) NOTIFICATION OF VIOLATION.—Before imposing a penalty against a State under subsection (a) with respect to a 

violation of this part, the Secretary shall notify the State 

of the violation and allow the State the opportunity to 

enter into a corrective compliance plan in accordance with 

this subsection which outlines how the State will correct or 

discontinue, as appropriate, the violation and how the 

State will insure continuing compliance with this part. 

(B) 60-DAY PERIOD TO PROPOSE A CORRECTIVE COMPLIANCE PLAN.—During the 60-day period that begins on the 

date the State receives a notice provided under subparagraph (A) with respect to a violation, the State may submit 

to the Federal Government a corrective compliance plan to 

correct or discontinue, as appropriate, the violation. 

(C) CONSULTATION ABOUT MODIFICATIONS.—During the 

60-day period that begins with the date the Secretary receives a corrective compliance plan submitted by a State in 

accordance with subparagraph (B), the Secretary may consult with the State on modifications to the plan. 

(D) ACCEPTANCE OF PLAN.—A corrective compliance plan 

submitted by a State in accordance with subparagraph (B) 

is deemed to be accepted by the Secretary if the Secretary 

does not accept or reject the plan during 60-day period 

that begins on the date the plan is submitted. 

(2) EFFECT OF CORRECTING OR DISCONTINUING VIOLATION.— The Secretary may not impose any penalty under subsection 

(a) with respect to any violation covered by a State corrective 

compliance plan accepted by the Secretary if the State corrects 

or discontinues, as appropriate, the violation pursuant to the 

plan. 

(3) EFFECT OF FAILING TO CORRECT OR DISCONTINUE VIOLA- TION.—The Secretary shall assess some or all of a penalty imposed on a State under subsection (a) with respect to a violation if the State does not, in a timely manner, correct or discontinue, as appropriate, the violation pursuant to a State corrective compliance plan accepted by the Secretary. 

(4) INAPPLICABILITY TO CERTAIN PENALTIES.—This subsection 

shall not apply to the imposition of a penalty against a State 

under paragraph (2)(B), (6), (7), (8), (10), (12), (13), or (16) of 

subsection (a). 

(d) LIMITATION ON AMOUNT OF PENALTIES.— 

(1) IN GENERAL.—In imposing the penalties described in subsection (a), the Secretary shall not reduce any quarterly payment to a State by more than 25 percent. 

(2) CARRYFORWARD OF UNRECOVERED PENALTIES.—To the extent that paragraph (1) of this subsection prevents the Secretary from recovering during a fiscal year the full amount of 

penalties imposed on a State under subsection (a) of this section for a prior fiscal year, the Secretary shall apply any reVerDate Sep 11 2014 06:27 Jul 01, 2016 Jkt 059006 PO 00000 Frm 00028 Fmt 6659 Sfmt 6601 E:\HR\OC\HR644.XXX HR644

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maining amount of such penalties to the grant payable to the 

State under section 403(a)(1) for the immediately succeeding 

fiscal year. 

* * * * * * * 


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VIII. ADDITIONAL AND DISSENTING VIEWS 

ADDITIONAL VIEWS 

This legislation represents a missed opportunity to seriously address the ongoing challenge of poverty in America. 

Over the past 50 years, Congress has enacted laws that lifted 

tens of millions of Americans out of poverty, making our anti-poverty programs ten times more effective than they were when the 

War on Poverty began. 

But nearly 47 million Americans are still living in poverty, including one in five children. These families, and the millions of 

families at risk of falling into poverty, face impossible choices every 

day: transportation to work, child care, school supplies, food for 

dinner, and a place to live. They worry about what they will do if 

they or their children get sick and they have no paid leave at work, 

or how they will get to work if the car breaks down. And they have 

nothing left at the end of the month to save for college or retirement. 

A serious attempt to fight poverty would include action on the 

basic supports needed to support work and sustain employment— 

paid leave, access to quality child care, equal pay for women and 

a decent minimum wage, and an Earned Income Tax Credit that 

reaches all workers who need it. 

A serious attempt to fight poverty would include action on affordable housing, access to early childhood education, and an effort to 

make college more affordable to help struggling families raise their 

children and help them toward a better life. 

A serious attempt to fight poverty would build on successful programs like the Supplemental Nutrition Assistance Program 

(SNAP), which lifts nearly 10 million Americans out of poverty, and 

the Social Services Block Grant (SSBG), which provides critical 

help to nearly 30 million Americans. And it would build on the Affordable Health Care, which has given families long-awaited peace 

of mind about high medical bills. 

The millions of families that are struggling deserve more than 

this legislation. 

SANDER M. LEVIN, 

Ranking Member. 


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DISSENTING VIEWS 

What began as a legislative step forward has become a step backward. What did some modest good, now does harm. As introduced, 

the TANF Accountability and Integrity Improvement Act (H.R. 

2959) would have closed a loophole that a few states have created 

and exploited to avoid providing their state match for the federal 

TANF block grant. This loophole unfairly misapplies third-party 

spending as if it were state spending. 

The non-partisan General Accountability Office (GAO) has criticized this wrongful approach, which shortchanges poor children 

and their parents. I fully support the bill’s complete closure of this 

loophole that only a few states exploit to avoid providing their fair 

share of support for moving their impoverished residents from welfare to work. 

Unfortunately, only hours prior to the Committee markup, this 

bill was amended to do the opposite of what it originally would 

have accomplished. As amended, it legalizes this unfair loophole by 

grandfathering in current offenders. Now it does little more than 

prevent other states from following the leadership of a few pioneers 

in abuse. Why reward those states who balance their books on the 

backs of those least able to bear the burden? 

According to the GAO, Georgia is the chief offender, with nearly 

60 percent of its TANF contributions coming from private entities. 

Not only is it not making its proper match to access federal funds, 

but Georgia also consistently ignores the needs of its poorest citizens. For every TANF dollar, Georgia uses 80 cents for in ways 

that ignore the core purposes of TANF—work, direct assistance and 

child care. 

The Department of Health and Human Services (HHS) should 

have already initiated action to close this unjustified loophole. As 

amended, the bill would now prevent HHS from correcting this 

abuse. It should be rejected. 

LLOYD DOGGETT. JIM MCDERMOTT. 

Æ 


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