[Federal Register Volume 62, Number 224 (Thursday, November 20, 1997)]
[Proposed Rules]
[Pages 62124-62231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30195]



[[Page 62123]]

_______________________________________________________________________

Part II





Department of Health and Human Services





_______________________________________________________________________



Administration for Children and Families



_______________________________________________________________________



45 CFR Part 270, et al.



Temporary Assistance for Needy Families Program (TANF); Proposed Rule

Federal Register / Vol. 62, No. 224 / Thursday, November 20, 1997 / 
Proposed Rules

[[Page 62124]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 270, 271, 272, 273, 274, 275

RIN 0970-AB64, 0970-AB76, and 0970-AB77


Temporary Assistance for Needy Families Program (TANF)

AGENCY: Administration for Children and Families, HHS.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Administration for Children and Families (ACF) proposes to 
issue regulations governing key provisions of the new welfare block 
grant program enacted in 1996--the Temporary Assistance for Needy 
Families, or TANF, program. It replaces the national welfare program 
known as Aid to Families with Dependent Children (AFDC) and the related 
programs known as the Job Opportunities and Basic Skills Training 
Program (JOBS) and the Emergency Assistance (EA) program.
    The proposed rules reflect new Federal, State, and Tribal 
relationships in the administration of welfare programs; a new focus on 
moving recipients into work; and a new emphasis on program information, 
measurement, and performance. The proposed rules also reflect the 
Administration's commitment to regulatory reform.

DATES: You must submit comments by February 18, 1998.

ADDRESSES: You may mail or hand-deliver comments to the Administration 
for Children and Families, Office of Family Assistance, 5th Floor East, 
370 L'Enfant Promenade, SW, Washington, DC 20447. You may also transmit 
written comments electronically via the Internet. To transmit comments 
electronically, or download an electronic version of the proposed rule, 
you should access the ACF Welfare Reform Home Page at <a href="http://
www.acf.dhhs.gov/news/welfare/">http://
www.acf.dhhs.gov/news/welfare/</a> and follow any instructions provided.
    We will make all comments available for public inspection on the 
5th Floor East, 901 D Street, SW, Washington, DC 20447, from Monday 
through Friday between the hours of 9 a.m. and 4 p.m. For additional 
information, see Supplementary Information section of the preamble.

FOR FURTHER INFORMATION CONTACT: Mack Storrs, Director, Division of 
Self-Sufficiency Programs, Office of Family Assistance, ACF, at 202-
401-9289, or Robert Shelbourne, Chief, Program Development Branch, at 
202-401-5150.
    Deaf and hearing-impaired individuals may call the Federal Dual 
Party Relay Service at 1-800-877-8339 between 8 a.m. and 7 p.m. Eastern 
time.

SUPPLEMENTARY INFORMATION:

Comment Procedures

    We will not consider comments received beyond the 90-day comment 
period in developing the final rule. Because of the large number of 
comments we anticipate, we will only accept written comments. In 
addition, all your comments should:
    <bullet> Be specific;
    <bullet> Address only issues raised by the proposed rule, not the 
law itself;
    <bullet> Where appropriate, propose alternatives;
    <bullet> Explain reasons for any objections or recommended changes; 
and
    <bullet> Reference the specific section of the proposed rule that 
you are addressing.
    We will not acknowledge the comments we receive. However, we will 
review and consider all that are germane and received during the 
comment period.

Table of Contents

I. The Personal Responsibility and Work Opportunity Reconciliation 
Act
II. Regulatory Framework
    A. Consultations
    B. Related Regulations under Development
    C. Statutory Context
    D. Regulatory Reform
    E. Scope of This Rulemaking
    F. Applicability of the Rules
III. Principles Governing Regulatory Development
    A. Regulatory Restraint
    B. State Flexibility
    C. Accountability for Meeting Program Requirements and Goals
IV. Discussion of Individual Regulatory Provisions
    A. Part 270--General Temporary Assistance for Needy Families 
(TANF) Provisions
    B. Part 271--Ensuring that Recipients Work
    C. Part 272--Accountability Provisions--General
    D. Part 273--State TANF Expenditures
    E. Part 274--Other Accountability Provisions
    F. Part 275--Data Collection and Reporting Requirements
V. Regulatory Impact Analyses
    A. Executive Order 12866
    B. Regulatory Flexibility Analysis
    C. Paperwork Reduction Act
    D. Unfunded Mandates Reform Act of 1995

I. The Personal Responsibility and Work Opportunity Reconciliation 
Act

    On August 22, 1996, President Clinton signed ``The Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996''--or 
PRWORA--into law. The first title of this new law (Pub. L. 104-193) 
establishes a comprehensive welfare reform program designed to change 
the nation's welfare system dramatically. The new program is called 
Temporary Assistance for Needy Families, or TANF, in recognition of its 
focus on moving recipients into work and time-limiting assistance. 
Other key features of TANF include its provisions to reward States for 
high performance and to encourage continued State expenditures on 
assistance to needy families.
    PRWORA repeals the existing welfare program known as Aid to 
Families with Dependent Children (AFDC), which provided cash assistance 
to needy families on an entitlement basis. It also repeals the related 
programs known as the Job Opportunities and Basic Skills Training 
program (JOBS) and Emergency Assistance (EA).
    The new TANF program went into effect on July 1, 1997, except in 
States that elected to submit a complete plan and implement the program 
at an earlier date.
    The new law reflects widespread, bipartisan agreement on a number 
of key principles:
    <bullet> Welfare reform should help move people from welfare to 
work.
    <bullet> Welfare should be a short-term, transitional experience, 
not a way of life.
    <bullet> Parents should receive the child care and the health care 
they need to protect their children as they move from welfare to work.
    <bullet> Child support programs should become tougher and more 
effective in securing support from absent parents.
    <bullet> Because many factors contribute to poverty and dependency, 
solutions to these problems should not be ``one size fits all.'' The 
system should allow States, Indian tribes, and localities to develop 
diverse and creative responses to their own problems.
    <bullet> The Federal government should focus less attention on 
payment accuracy and program procedures and place more emphasis on 
program results.
    This landmark welfare reform legislation dramatically affects not 
only needy families, but also intergovernmental relationships. It 
challenges Federal, State, Tribal and local governments to foster 
positive changes in the culture of the welfare system and to take more 
responsibility for program results and outcomes. It transforms the way 
agencies do business, requiring that they engage in genuine 
partnerships with each other,

[[Page 62125]]

with businesses, community organizations and needy families.
    The new law provides an unparalleled opportunity to achieve true 
welfare reform. It also presents very significant challenges for 
families and State and Tribal entities in light of the changing program 
structure, loss of Federal entitlements, creation of time-limited 
assistance, and new penalty and bonus provisions.
    Most of the resources in the AFDC program went to support mothers 
raising their children alone. In the early years, the expectation was 
that these mothers would stay home and care for their children; in 
fact, in a number of ways, program rules discouraged work. Over time, 
as social and economic conditions changed, and more women entered the 
work force, the expectations changed. In 1988, Congress enacted the new 
JOBS program to provide education, training and employment that would 
help needy families avoid long-term welfare dependence. By 1994, 20 
percent of the non-exempt adult AFDC recipients nationwide were 
participating in the JOBS program.
    In spite of these changes, national sentiment supported more 
drastic change. Policy-makers, agency officials and the public 
expressed frustration about the slow progress being made in moving 
welfare recipients into work and the continuing decline in family 
stability. States were clamoring for more flexibility to reform their 
programs.
    While the Clinton Administration had supported individual reform 
efforts in almost every State, approving 80 waivers in its first five 
years, the waiver process was not an ideal way to achieve systemic 
change. It required separate Federal approval of each individual reform 
plan, limited the types of reforms that could be implemented, and 
enabled reforms to take place only one State at a time. Governors 
joined Congress and the President in declaring that the welfare system 
was ``broken.''
    After more than two years of discussion and negotiation, PRWORA 
emerged as a bipartisan vehicle for comprehensive welfare reform. On 
July 31, 1996, President Clinton issued a statement indicating that the 
pending bill had the potential ``to transform a broken system that 
traps too many people in a cycle of dependence to one that emphasizes 
work and independence, to give people on welfare a chance to draw a 
paycheck, not a welfare check. It gives us a better chance to give 
those on welfare what we want for all families in America, the 
opportunity to succeed at home and at work.''
    The law that was enacted three weeks later gives States, and 
federally recognized Indian tribes, the authority to use Federal 
welfare funds ``in any manner that is reasonably calculated to 
accomplish the purpose'' of the new program.
    It provides them broad flexibility to set eligibility rules and 
decide what benefits are most appropriate. It also enables States to 
implement their new programs without getting the ``approval'' of the 
Federal government. In short, it offers States and Tribes an 
opportunity to try new, far-reaching changes that can respond more 
effectively to the needs of families within their own unique 
environments.
    PRWORA redefines the Federal role in administration of the nation's 
welfare system. It limits Federal regulatory and approval authority, 
but gives the Federal government new responsibilities for tracking 
State performance. In a select number of areas, it calls for penalties 
when States fail to comply with program requirements, and it provides 
bonuses for States that perform well in meeting new program goals.
    Under the new statute, program funding and assistance for families 
both come with new expectations and responsibilities. Adults receiving 
assistance are expected to engage in work activities and develop the 
capability to support themselves before their time-limited assistance 
runs out. States and Tribes are expected to assist recipients making 
the transition to employment. They are also expected to meet work 
participation rates and other critical program requirements in order to 
maintain their Federal funding and avoid penalties.
    Some important indicators of the change in expectations are: time 
limits; higher participation rates; the elimination of numerous 
exemptions from participation requirements that existed under prior 
law; and the addition of a statutory option for States to require 
individual responsibility plans. Taken together, these provisions 
signal an expectation that we must broaden participation beyond the 
``job-ready.''
    In meeting these expectations, States need to examine their 
caseloads, identify the causes of long-term underemployment and 
dependency, and work with families, communities, businesses, and other 
social service agencies in resolving employment barriers. In some 
cases, States may need to provide intervention services for families in 
crisis or may need to adapt program models to accommodate individuals 
with disabilities or other special needs. TANF gives States the 
flexibility they need to respond to such individual family needs, but, 
in return, it expects States to move towards a strategy that provides 
appropriate services for all needy families.

II. Regulatory Framework

A. Consultations

    In the spirit of both regulatory reform and PRWORA, we implemented 
a broad and far-reaching consultation strategy prior to the drafting of 
this Notice of Proposed Rulemaking (NPRM). In Washington, we set up 
numerous meetings with outside parties to gain information on the major 
issues underlying the work, penalty, and data collection provisions of 
the new law. In our ten regional offices, we used a variety of 
mechanisms--including meetings, conference calls, and written 
solicitations--to garner views from ``beyond the Beltway.''
    The purpose of these discussions was to gain a variety of 
informational perspectives about the potential benefits and pitfalls of 
alternative regulatory approaches. We spoke with a number of different 
audiences, including: representatives of State, Tribal and local 
governments; nonprofit and community organizations; business and labor 
groups; and experts from the academic, foundation, and advocacy 
communities. We solicited both written and oral comments, and we worked 
to ensure that information and concerns raised during this process were 
shared with both the staff working on individual regulatory issues and 
key policy-makers.
    These consultations were very useful in helping us identify key 
issues and evaluate policy options. However, we would like to emphasize 
that we are publishing these regulations as a proposed rule. Thus, all 
interested parties have the opportunity to voice their concerns and 
react to specific policy proposals. We will review comments we receive 
during the comment period and take them into consideration before 
issuing a final rule.

B. Related Regulations Under Development

    This NPRM addresses the work, accountability, and data collection 
and reporting provisions of the new TANF program. Over the next several 
months, we expect to issue a number of other related proposed rules, 
covering: child poverty rates; high performance bonuses; illegitimacy 
reduction bonuses; and Tribal TANF and work programs.
    We will also be issuing a number of NPRMs on the child support

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enforcement provisions found in title III of PRWORA.
    This NPRM does not include the provisions for the new Welfare-to-
Work (WTW) provisions at section 403(a)(5) of the Act, as created by 
section 5001(a)(1) of Pub. L. 105-33. The Secretary of Labor is 
responsible for issuing regulations on these provisions and the 
provisions at section 5001(c), regarding WTW grants for Tribes. 
Information about this program is available on the Web at <a href="http://
wtw.doleta.gov">http://
wtw.doleta.gov</a>.
    This NPRM does include the conforming amendment to the definition 
of ``qualified State expenditures'' required by section 5001(a)(2) of 
Pub. L. 105-33, as well as the amendments to the TANF provisions at 
sections 5001(d), 5001(g)(1), and 5001(h). Section 5001(d) addresses 
treatment of assistance under WTW under the TANF time limits. Section 
5001(g)(1) provides a new penalty that takes away WTW funds when a 
State fails to meet the TANF MOE requirements. Section 5001(h) 
addresses the relationship between an individual penalty and work 
requirements.
    This NPRM does not include the provision at section 5001(g)(2), 
which requires repayment of WTW funds to the Secretary of Labor 
following a finding by the Secretary of Labor of misuse of funds. Since 
the Department of Labor is responsible for administering this penalty 
and receives any repaid funds, it would not be appropriate for us to 
issue rules on this provision.
    Under section 5001(e) of Pub. L. 105-33, we have responsibility for 
regulating the WTW data reporting requirements, under section 411(a) of 
the Act, as amended.
    We will issue a rulemaking that addresses these requirements at a 
later date, following consultation with the Department of Labor, State 
agencies, Private Industry Councils, and other affected parties.
    We encourage States and others who are interested in these areas to 
review and comment on these proposed rules when they are published in 
the Federal Register.
    You should be aware of the important relationships between this 
regulatory package and the other packages that will be following. In 
particular, we would like to point out that section 412 of the Social 
Security Act (as amended by PRWORA) provides that federally recognized 
Tribes may elect to operate their own TANF programs, and Tribes that 
operated their own JOBS programs may continue to receive those funds to 
operate Tribal work programs.
    The choice Tribes make on TANF will depend on a number of factors, 
including the nature of services and benefits available under the State 
program. Thus, Tribes have a direct interest in the regulations 
governing State programs.
    Tribes also have an interest in these regulations because some of 
the rules we develop for State programs could eventually apply to the 
Tribal programs. In particular, we urge Tribes to note the data 
collection and reporting requirements at part 275. While the statute 
allows Tribes to negotiate certain program requirements, it subjects 
Tribal programs to the same data collection and reporting requirements 
as States.
    We would also like to direct the Tribes to the maintenance-of-
effort (MOE) policies discussed at Sec. 273.1. In that section, we 
propose that State contributions to a Tribal program could count toward 
a State's MOE. Tribes should be aware that this proposal could have 
important implications for the funding of Tribal programs and State-
Tribal relations.
    In order for welfare reform to succeed in Indian country, it is 
important for State and Tribal governments to work together on a number 
of key issues, including data exchange and coordination of services. We 
remind States that Tribes have a right under law to operate their own 
programs. States should cooperate in providing the information 
necessary for Tribes to implement their own programs.
    Likewise, Tribes should cooperate with States in identifying Tribal 
members and tracking receipt of assistance.
    We are also issuing separate final rules to make conforming changes 
to our existing rules in chapter II of title 45.
    In the first, we will be repealing the obsolete regulations for the 
EA, JOBS, and the IV-A child care programs, and some rules covering 
administrative requirements of the AFDC programs. This rulemaking will 
be a final rule, effective upon publication. We expect to eliminate 
about 82 pages from the Code of Federal Regulations.
    Later on, we will be issuing a final rule that deletes or replaces 
obsolete AFDC and title IV-A references throughout chapter II. This 
second rulemaking will take additional time because the AFDC provisions 
are intertwined with provisions for other programs that are not 
repealed. Also, it is not clear that we should repeal all the AFDC 
provisions because Medicaid, foster care and other programs depend on 
the AFDC rules in effect under prior law. Because of these complexities 
and the non-urgent nature of the conforming changes, the second rule is 
on a slower schedule.
    PRWORA also makes changes to other major programs administered by 
ACF, the Department, and other Federal agencies that may significantly 
affect a State's success in implementing welfare reform. For example, 
title VI of PRWORA repeals the child care programs that were previously 
authorized under title IV-A of the Social Security Act (the Act). In 
their place, it provides two new sources of child care funding for the 
Lead Agency that administers the Child Care and Development Block Grant 
program. A major purpose of the increases in child care funding 
provided under PRWORA is to assist low-income families in their efforts 
to be self-sufficient. We issued proposed rules covering this new 
funding and amendments to the Child Care and Development Block Grant 
program on July 23, 1997. Comments were due within 60 days of that 
date.
    We encourage you to look in the Federal Register for rulemaking 
actions on related programs and to take the opportunity to comment.

C. Statutory Context

    These proposed rules reflect PRWORA, as enacted, and amended by 
Pub. L. 104-327 and Pub. L. 105-33.
    The changes made by Pub. L. 104-237 are fairly limited in scope; we 
discuss them in the preamble on contingency fund MOE requirements at 
Secs. 274.71, 274.72, and 274.77.
    Pub. L. 105-33 created the new Welfare-to-Work (WTW) program, made 
a few substantive changes to the TANF program, and made numerous 
technical corrections to the TANF statute. Throughout the preamble 
discussion and the appendices, you will note references to the 
amendments made by this legislation. However, as we previously 
mentioned, this NPRM includes only a limited number of changes related 
to the new WTW provisions. The Department of Labor has primary 
responsibility for administering the program and issuing the WTW 
regulations. We have responsibility for issuing rules on the WTW data 
collection requirements, but will be doing that at a subsequent date.

D. Regulatory Reform

    In its latest Document Drafting Handbook, the Office of the Federal 
Register supports the efforts of the National Performance Review and 
encourages Federal agencies to produce more reader-friendly 
regulations. In drafting this proposed rule, we have paid close 
attention to this guidance. Individuals who are familiar with our

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existing welfare regulations should notice that this package 
incorporates a more readable style. This rulemaking effort gave us a 
unique opportunity to change our approach because we were starting from 
scratch rather than amending an existing rule.
    In the spirit of facilitating understanding, we have included some 
preamble discussion and regulatory text to give you a broader context 
for other parts of the rulemaking document. Examples include the 
provisions in subparts A and G of part 271 (which address work 
provisions other than participation rates and penalties) and 
Sec. 270.20 (which includes the statutory goals of the program). These 
sections are primarily explanatory or restatements of the statutory 
requirements. The language used and the surrounding discussion should 
indicate the nature of the provision.
    In the same spirit, we have included draft data collection and 
reporting forms as appendices to the proposed rules even though we do 
not intend to publish the forms as part of the final rule. We thought 
that the inclusion of the draft forms would expand public access to 
this information and make it easier to comment on our data collection 
and reporting plans.

E. Scope of This Rulemaking

    Our initial regulatory plan for TANF included three separate TANF 
regulations--one each on work, penalties, and data collection and 
reporting. However, we decided it would be better to incorporate these 
into a single regulatory package. While this decision resulted in a 
much larger document, it should facilitate your understanding of the 
entire regulatory framework of the TANF program, as well as your review 
and comment.

F. Applicability of the Rules

    As we indicated in previous policy guidance to the States, a State 
may operate its program under a reasonable interpretation of the 
statute prior to our issuance of final rules. Thus, in determining 
whether a State is subject to a penalty, we will not apply regulatory 
interpretations retroactively. You can find a statement of this policy 
at Sec. 270.40(b) of the proposed rules.

III. Principles Governing Regulatory Development

A. Regulatory Restraint

    Under the new section 417 of the Act, the Federal government may 
not regulate State conduct or enforce any TANF provision except to the 
extent expressly provided by law. This limitation on Federal authority 
is consistent with the philosophy of State flexibility and the general 
State and Congressional interest in shifting more responsibility for 
program policy and procedures to the States.
    We are interpreting this provision to allow us to regulate in two 
different kinds of situations: (1) where Congress has explicitly 
directed the Secretary to regulate (for example, under the caseload 
reduction provisions, described below); and (2) where Congress has 
charged HHS with enforcing penalties, even if there is no explicit 
mention of regulation. In this latter case, we believe we have an 
obligation to States to set out, in regulations, the criteria we will 
use in carrying out our express authority to enforce certain TANF 
provisions by assessing penalties.
    Throughout the proposed rule, we have endeavored to regulate in a 
manner that does not impinge on a State's ability to design an 
effective and responsive program.
    You will also note that this rulemaking does not cover the non-
discrimination provisions at section 408(c). This subsection specifies 
that any program or activity receiving TANF funds is subject to the: 
(1) Age Discrimination Act of 1975; (2) section 504 of the 
Rehabilitation Act of 1973; (3) the Americans with Disabilities Act of 
1990; and (4) title VI of the Civil Rights Act of 1964. Since ACF is 
not responsible for administering these provisions of law, and they are 
not TANF provisions, this rulemaking does not include them.
    Individuals with questions about the requirements of the non-
discrimination laws, or concerns about compliance of individual TANF 
programs with them, should address their comments or concerns to the 
Director, Office of Civil Rights, Department of Health and Human 
Services, 200 Independence Ave, SW, Room 522A, Washington, DC 20201.

B. State Flexibility

    In the Conference Report to PRWORA, Congress stated that the best 
welfare solutions come from those closest to the problems, not from the 
Federal government. Thus, the legislation creates a broad block grant 
to each State to reform welfare in ways that work best. It gives States 
the flexibility to design their own programs, define who will be 
eligible, establish what benefits and services will be available, and 
develop their own strategies for achieving program goals, including how 
to help recipients move into the work force.
    Under the law and under these proposed rules, States may implement 
innovative and creative strategies for supporting the critical goals of 
work and responsibility. For example, they may choose to expend funds 
on earned income tax credits or transportation assistance that would 
help low-wage workers keep their jobs. They could also extend 
employment services to non-custodial parents, by including them within 
the definition of ``eligible families.''
    To ensure that our rules support the legislative goals of PRWORA, 
we are committed to gathering information on how States are responding 
to the new opportunities available to them. We reserve the right to 
revisit some issues, either through legislative or regulatory 
proposals, if we identify situations where State actions are not 
furthering the objectives of the Act.

C. Accountability for Meeting Program Requirements and Goals

    The new law gives States enormous flexibility to design their TANF 
programs in ways that strengthen families and promote work, 
responsibility, and self-sufficiency. At the same time, however, it 
reflects a bipartisan commitment to ensuring that State programs 
support the goals of welfare reform. To this end, the statutory 
provisions on data collection, bonuses, and penalties are crucial 
because they allow us to track what is happening to needy families and 
children under the new law, measure program outcomes, and promote key 
program objectives.
Work
    We believe the central goal of the new law is to move welfare 
recipients into work. The law reflects this important goal in a number 
of ways:
    <bullet> Work receives prominent mention in the statutory goals at 
section 401 and the plan provisions in section 402;
    <bullet> Section 407 establishes specific work participation rates 
each State must achieve;
    <bullet> Section 409 provides significant financial penalties 
against any State that fails to achieve the required participation 
rates;
    <bullet> Section 411 provides specific authority for the Secretary 
to establish data reporting requirements to capture necessary data on 
work participation rates; and
    <bullet> Section 413 calls for ranking of States based on the 
effectiveness of their work programs.
    These proposed rules reflect a similar, special focus on promoting 
the work objectives of the Act. We are proposing

[[Page 62128]]

specific rules under sections 407, 409, and 411 designed to ensure that 
States meet the statutory requirements. You should look at the proposed 
rules in part 271, and the related preamble discussion, for specific 
details.
    This Administration has already shown its commitment to promoting 
the work objectives of this new law in several ways. Before the 
legislation was passed, we worked very hard to ensure that Congress 
passed strong work provisions and provided adequate child care funding 
and other program supports.
    Since enactment, the President has announced a number of additional 
welfare-to-work initiatives designed to promote work. These include 
implementation of a new ``Work Opportunity Tax Credit'' that provides 
incentives for employers to hire welfare recipients and proposals to:
    <bullet> Extend and expand this credit;
    <bullet> Increase investments in distressed communities; and
    <bullet> Provide $3 billion in additional funding to help 
communities move hard-to-serve recipients into jobs.
    As part of budget reconciliation, Congress increased the Work 
Opportunity Tax Credit, available to employers who hire long-term 
welfare recipients, and funded a new Welfare-to-Work (WTW) program. 
States, localities, and Indian Tribes will receive the additional $3 
billion in WTW funds in FYs 1998 and 1999.
    The President has also challenged America's businesses, its large 
non-profit sector and the executive branch of the Federal government to 
make job opportunities available to welfare recipients. On March 8, 
1997, he directed all Federal agencies to submit plans describing the 
efforts they would make to respond to this challenge. In response to 
this directive, Federal agencies identified more than 10,000 jobs that 
would be available for welfare recipients over the next four years. 
(You can find additional information on this initiative on the Web at 
http://w2w.fed.gov.)
Meeting the Needs of Low-Income Families and Children
    In a number of different ways, the new law works to ensure that the 
needs of low-income children and families are met. First, it provides a 
guaranteed base level of Federal funding for the TANF programs. Then, 
in times of special financial need, it makes additional funding 
available through a $2 billion Contingency Fund and through a Federal 
loan fund. It also authorizes several studies to monitor changes in the 
situations of needy children and families that occur after enactment. 
For example, it requires us to report on how certain children are 
affected by the provisions of the new law, and to track State child 
poverty rates, and initiate corrective actions by States when such 
rates rise.
Domestic Violence
    We wish to bring one particular provision--known as the Family 
Violence Option (FVO)--to your attention. This provision, at section 
402(a)(7), gives States the option to waive certain program 
requirements for certain victims of domestic violence. It thus provides 
a valuable framework for identifying victims of domestic violence and 
developing appropriate service strategies for them.
    This Administration is strongly committed to reducing domestic 
violence, and we encourage all States to consider adopting the Family 
Violence Option. In working with domestic violence cases, we also 
encourage States to pay special attention to the need for maintaining 
the confidentiality of case-record information and the victims' own 
assessments of their safety needs and their abilities to meet program 
requirements.
    During our consultations, we heard numerous questions about the 
relationship between State policies on domestic violence and the 
determination of State work and time-limit penalties. Congress 
considered this issue in its budget resolution, but decided to study 
the issue further rather than to amend the statute during budget 
reconciliation. Our regulations seek to implement the statute in a way 
that is consistent with both the language of the statute and our 
national interest in fostering appropriate State responses to domestic 
violence.
    The FVO provides States with a specific vehicle for addressing 
domestic violence among recipients of TANF assistance. The provision 
envisions that States would screen and identify victims of violence, 
conduct individual assessments, and develop temporary safety and 
service plans that would protect victims from any immediate dangers, 
stabilize their living situations, and explore avenues for overcoming 
dependency.
    The family's individual circumstances or service plans may require 
that certain program requirements (e.g., regarding time limits and 
child support cooperation) be temporarily waived in cases where 
compliance with such requirements would make it difficult for 
individuals to escape domestic violence, unfairly penalize victims, or 
put individuals at further risk of domestic violence. In these cases, 
the FVO allows States to grant such waivers.
    Under TANF, States must meet numerical standards for work 
participation and the percentage of families that may receive 
federally-funded assistance for more than five years. The statutory 
language on calculating work participation rates makes no reference to 
domestic violence cases or to a State's good cause waivers of work 
requirements under the Family Violence Option. Thus, we think that the 
clearest reading of this statutory provision includes victims of 
domestic violence in the calculation of the work participation rates.
    The statutory language on time limits refers to victims of domestic 
violence, but not to the good cause waivers provided under the Family 
Violence Option. The statutory language suggests that victims of 
domestic violence would be included in the 20 percent limit on 
exceptions to the time limit.
    However, there is legitimate concern among States and others that 
election of the FVO might put States at special risk of incurring 
financial penalties. In granting good cause waivers of program 
requirements under the FVO, they may make it more difficult for 
themselves to meet the numerical requirements on time limits and the 
work participation rates.
    Our proposed rules attempt to remain true to the statutory 
provisions on work and time limits and to ensure that election of the 
FVO is an authentic choice for States. In deciding to address these 
waiver cases under ``reasonable cause'' rather than through direct 
changes in the penalty calculations, we are reflecting the statutory 
language and maintaining the focus on moving families to self-
sufficiency. At the same time, we are giving States some protection 
from penalties when their failures to meet the standard rates are 
attributable to the granting of good cause domestic violence waivers 
that are based on individual assessments, are temporary, and include 
individualized service and safety plans. We hope our proposal will 
alleviate concern among States that attention to the needs of victims 
of domestic violence might place them at special risk of a financial 
penalty.
    Our proposed rules recognize that, through the FVO, Congress gave 
unique status to victims of domestic violence under the TANF program. 
Likewise, under our proposed rules, this group of recipients receives 
special recognition under the ``reasonable cause'' provisions for the 
work and time-limit penalties.
    At Sec. 270.30, the proposed rules reflect our expectation that 
good cause waivers

[[Page 62129]]

will be bona fide waivers provided within the framework of the FVO. 
Under this framework: (1) State policies would provide for 
individualized responses and service strategies, consistent with the 
needs of individual victims; (2) waivers of program requirements would 
be temporary in nature (e.g., would not be granted for longer than six 
months); and (3) in lieu of program requirements, victims of domestic 
violence would be served in alternative ways, consistent with their 
individualized safety and service plans.
    In specifying that good cause waivers should not exceed six months 
in length, we have attempted to balance two distinct objectives: (1) 
giving States the flexibility they need to respond appropriately to the 
individual circumstances of domestic violence victims; and (2) assuring 
that the work objectives of the Act are not undermined.
    We do not intend that all good cause waivers should last six 
months. The length of the waiver should reflect the State's 
individualized determination of what length of time a client needs. We 
expect that the length of the waiver could be substantially shorter in 
some cases. Also, we expect that, in some cases, States might have to 
renew a waiver or issue a second waiver (i.e., because a victim of 
domestic violence suffered from continued abuse that required further 
protection and response).
    We welcome comments on whether our proposed approach and language 
achieve the balance we are seeking.
    We want to ensure that our rules work to foster, not undermine, the 
objectives of the Act. Our goal is to promote the provision of 
appropriate alternative services for victims of domestic violence that 
foster both safety and self-sufficiency.
    To ensure that these policies have the desired effect, we limit the 
availability of ``reasonable cause'' to States that have adopted the 
FVO. In addition, in the definitions section of the proposed rule (at 
Sec. 270.30), we specify criteria that will apply in deciding whether a 
good cause domestic violence waiver exists. Also, we reserve the right 
to audit States claiming ``reasonable cause'' to ensure that good cause 
domestic violence waivers that States include in their ``reasonable 
cause'' documentation meet the specified criteria.
    In addition, we intend to monitor the number of good cause waivers 
granted by States and their effect on work and time limits. We want to 
ensure that States identify victims of domestic violence so that they 
may be appropriately served, rather than exempted and denied services 
that lead to independence. We also want to ensure that the provision of 
good cause waivers does not affect a State's overall effort in moving 
families towards self-sufficiency. Thus, we will be looking at 
information on program expenditures and participation levels to see if 
States granting good cause domestic violence waivers are making 
commitments to assist all families in moving toward work.
    If we find that good cause waivers are not having the desired 
effects, we may propose regulatory or legislative remedies to address 
the problems we identify.
    For additional discussion of our proposals, see Secs. 270.30, 
271.52 and 274.3 of the preamble and proposed rule.
Use of Funds
    The new law imposes several restrictions on the use of both Federal 
and State funds to help ensure that program expenditures serve program 
goals. More specifically, the statute: (1) places a cap on the 
percentage of funds spent on administrative costs; (2) authorizes 
audits and penalties to protect against the misuse of funds; (3) 
establishes a number of limitations on the use of Federal funds; and 
(4) defines the conditions under which expenditures of State funds may 
count for MOE purposes. In general, States must expend both their 
Federal funds and their own State monies on activities that are 
consistent with the purposes of the TANF program. (For additional 
information on allowable uses of Federal TANF and State MOE funds, see 
ACF's guidance, TANF-ACF-PA-97-1, dated January 31, 1997, and the 
preamble discussion for part 273.)
Maintenance-of-Effort (MOE)
    One of the most important provisions in the new law designed to 
protect needy families and children is the TANF maintenance-of-effort 
(MOE) requirement. This provision requires States to maintain a certain 
level of spending on welfare, based on historic (i.e., fiscal year (FY) 
1994) expenditure levels. Because this provision is critical to the 
successful implementation of the law, Congress gave us the authority to 
enforce State compliance in meeting this requirement, and it receives 
significant attention in this proposed rule.
    Under the data collection, work, and penalty provisions of the 
proposed rule, at parts 271-275, we took care to propose rules that: 
(1) ensure that States continue to make the required investments in 
meeting the needs of low-income children and families; (2) prevent 
States from either supplanting State funds with Federal funds or using 
their MOE funds to meet extraneous program or fiscal needs; (3) give us 
adequate information to meet our statutory responsibility to determine 
what is happening in State programs; and (4) take a broad view of work 
effort, caseload reduction, and program performance.
    We recognize that States have more flexibility in spending State 
MOE funds than Federal funds, especially when they expend their MOE 
funds in separate State programs. However, the proposed rules also 
recognize and try to protect against actions that might undermine 
important goals of welfare reform. This is the same concern that we 
voiced in policy guidance we issued on MOE in January (TANF-ACF-PA-97-
1). In particular, we noted that States could design their programs so 
as to avoid the work requirements of the new law or to avoid returning 
a share of their child support collections to the Federal government.
    To mitigate these potential negative consequences, we indicated our 
intent to both take administrative actions and seek legislative 
remedies. As part of our commitment to taking administrative action, we 
are proposing to require States, under certain circumstances, to report 
information about the families served by States under separate State 
programs. Only through this additional reporting will we be able to 
determine the full nature and scope of State efforts to move needy 
families into work and the actual caseload reductions States are 
achieving. (See the preamble discussion and regulation under part 272, 
subpart D, and part 275.)
    In TANF-ACF-PA-97-1, we indicated that States not making a good-
faith effort on work in their separate State programs would not be 
eligible for a reasonable cause exception from the penalty for failing 
to achieve their work rate. The proposed rule incorporates and expands 
that proposal.
    More specifically, it indicates that States would not be eligible 
for a reasonable cause exception from the time-limit penalty or any of 
the three work-related penalties if we detect a significant pattern of 
diversion of families to separate State programs that has the effect of 
undermining the work participation requirements of the Act. In general, 
diverting States would not be eligible for reductions in the work 
penalty amounts. Finally, they would be ineligible for a penalty 
reduction under corrective compliance if they did not correct the 
diversion and meet the other

[[Page 62130]]

conditions for reduction specified in these proposed rules.
    In the January guidance we expressed similar concerns about the 
effect of separate State programs on the Federal share of child support 
collections. Therefore, our proposal in this area is similar to our 
proposal to prevent undermining of the work participation provisions. 
More specifically, we would deny States reasonable cause for the time-
limit, work participation, child support cooperation, and work sanction 
penalties if we detect a significant pattern of diversion of families 
into separate State programs that results in the diversion of the 
Federal share of child support collections to State coffers. States 
undertaking such diversions would also be ineligible for reductions in 
the amounts of any of these four penalties under corrective compliance 
unless they also corrected the diversion during the corrective 
compliance process.
    In making these proposals, we note that the Secretary has 
considerable discretion in determining whether to reduce penalties or 
grant a good cause exception.
    Getting recipients to work is the most critical component to 
achieving the purposes of TANF--making welfare a program of temporary 
assistance for families moving to self-sufficiency. The Secretary has 
determined that, to prevent circumvention of this purpose, it is 
appropriate to limit the availability of the reasonable cause exception 
and penalty reduction if a State attempts to avoid the work 
participation requirements. Congress has reinforced the importance of 
appropriate work for recipients in four of the established penalties in 
section 409 of the Act--work participation rates, continuing assistance 
when child care is not available, sanctioning families that fail to 
participate in work, and continuation of assistance beyond 60 months. 
To carry out the intent of Congress that work be a central part of the 
TANF program, if we detect that a State is avoiding the work 
requirements by diverting a significant number of families to separate 
State programs, we will not grant this State a reasonable cause 
exception from any of the four penalties most closely tied to the work 
requirements, either in the form of a reduction in its work penalty 
based on degree of non-compliance or as a reduction in any of the four 
penalties as the result of achieving substantial (but not full) 
compliance.
    The other key component to achieving self-sufficiency is 
implementation of the child support enforcement provisions. The Federal 
government has a major role to play in such enforcement (particularly 
with regard to the operation of the New Hire Directory and the Federal 
Parent Locator Service). It also has a continuing interest in the 
effectiveness of these programs and, under TANF, maintains its 
commitment to the funding of needy families whose children have been 
deprived of parental support and care.
    We are concerned that a State's diverting cases to separate State 
programs would not only have unintended, negative consequences for the 
Federal budget and the Federal government's ability to ensure an 
effective child support program; it would also diminish the State's 
accountability for ensuring that needy families take appropriate steps 
towards achieving self-sufficiency. The Secretary has determined that, 
in the interest of protecting the key goals of TANF, it is appropriate 
to exercise her discretion to set penalty amounts and forgive penalties 
in a manner that will ensure that States do not divert cases 
inappropriately. Thus, if we detect a significant pattern of diversion 
of families to separate State programs that has the effect of diverting 
the Federal share of child support collections, we will not grant a 
reasonable cause exception or reduced penalty through corrective 
compliance for the following four penalties: work participation, time 
limits, failure to cooperate with paternity establishment and child 
support enforcement requirements, or failure to impose work sanctions.
    We plan to monitor States' actions to determine if they constitute 
a significant pattern of diversion. For example, if, based on an 
examination of statistical or other evidence, we came to the conclusion 
that a State was assigning people to a separate State program in order 
to divert the Federal share of child support collections, or in order 
to evade the work requirements, we would conclude that this is a 
significant pattern of diversion and would deny the State certain types 
of penalty relief.
    A State would be permitted the opportunity to prove that this 
pattern was actually the result of State policies and objectives that 
were entirely unrelated to the goal of diversion, but we would make the 
final judgment as to what constitutes a significant pattern of 
diversion.
    For the specific regulatory changes associated with these policies, 
see Secs. 271.51, 272.5 (c) and (d), and 272.6(i)(2).
    We will also propose to require States seeking to receive high 
performance bonuses to report on families served by separate State 
programs. We will address this issue more fully in the coming NPRM on 
high performance bonuses.
    In the policy announcement, we advised States to think carefully 
about the risks to the long-term viability of their TANF programs if 
they rely too extensively on separate State MOE programs. In general, 
States cannot receive contingency funds unless their expenditures 
within the TANF program are at 100 percent of historic State 
expenditures. Thus, excessive State reliance on expenditures outside 
the TANF program to meet MOE requirements could make access to 
contingency funds difficult during economic downturns.
Child-Only Cases
    Since the January guidance came out, we have also become concerned 
that States might be able to avoid the work participation rates and 
time limits by excluding adults (particularly parents) from their 
eligible cases. Given the flexibility available to States under the 
statute and regulations, it appears possible that States could protect 
themselves from the requirement and the associated penalty risk by 
converting regular welfare cases into child-only cases. Such 
conversions would seriously undermine these critical provisions of 
welfare reform.
    To protect against these negative consequences, in the work and 
time-limit sections of this proposed rule, we would prohibit States 
from converting cases to child-only cases for the purpose of avoiding 
penalties and require annual reporting of any such exclusions (with 
explanations). We are also proposing to recalculate a State's work 
participation rates and time limit exemptions if we determine that a 
State has excluded cases from its calculations for the purpose of 
avoiding penalties in these areas. See Secs. 271.22, 271.24, and 274.1 
for the specific proposals.

IV. Discussion of Individual Regulatory Provisions

    Following is a discussion of all the regulatory provisions we have 
included in this package. The discussion follows the order of the 
regulatory text, addressing each part and section in turn.

A. Part 270--General Temporary Assistance for Needy Families (TANF) 
Provisions

    This part of the proposed rules helps set the framework for the 
rest of the proposed rule. For the convenience of the reader, it 
reiterates the goals stated in the new section 401. It also includes

[[Page 62131]]

a set of definitions that are common to the different parts of the 
proposed rule.
What does this part cover? (Sec. 270.10)
    This section of the proposed rules indicates that part 270 includes 
provisions that are applicable across all the TANF regulations in this 
rulemaking.
What is the purpose of the TANF program? (Sec. 270.20)
    This section of the proposed rules repeats the statutory goals of 
the TANF program. In brief, they include reducing dependency and out-
of-wedlock pregnancies; developing employment opportunities and more 
effective work programs; and promoting family stability.
    While we do not elaborate on the statutory language, we would like 
to point out that, in a number of ways, the new law speaks to the need 
to protect needy and vulnerable children. States should keep this 
implicit goal in mind as they implement their new programs.
What definitions apply under the TANF regulations? (Sec. 270.30)
    This section of the proposed rule includes definitions of the terms 
used in parts 270 through 275. It does not include definitions that 
pertain only to individual provisions. You should look to the 
appropriate individual parts of the proposed rules for definitions that 
are provision-specific.
    In drafting this section of the proposed rule, we defined only a 
limited number of terms used in the statute and regulations. We 
understood that excessive definition of terms could unduly and 
unintentionally limit State flexibility in designing programs that best 
serve their needs. For example, we did not define ``family'' or ``head-
of-household.'' States are thus free to define what types of families 
would be eligible for TANF assistance. (However, we suggest that you 
look at the sections of this rule covering work participation rates 
(Secs. 271.22 and 271.24), MOE requirements (subpart A of part 273), 
time limits (Sec. 274.1), and data collection definitions (Sec. 275.2); 
none of these sections creates a definition of family, but all address 
the definition of the term ``family'' in describing key requirements on 
States.)
    We also decided not to define the individual work activities that 
count for the purpose of calculating a State's participation rates. You 
should look to the preamble discussion for Sec. 273.13 and subpart C of 
part 271, respectively, for additional discussion of these decisions.
    You will note that we use the term ``we'' throughout the regulatory 
text and preamble. The term ``we'' means the Secretary of the 
Department of Health and Human Services or any of the following 
individuals or agencies acting on her behalf: the Assistant Secretary 
for Children and Families, the Regional Administrators for Children and 
Families, the Department of Health and Human Services, and the 
Administration for Children and Families.
    Likewise, you should note that we use the term ``Act'' to refer to 
the Social Security Act, as amended by the new welfare law. We use the 
term ``PRWORA'' when we refer to the new law itself. A section 
reference is a Social Security Act reference if we use neither term.
    Some of the definitions in this section incorporate the statutory 
definitions in PRWORA. We included these definitions largely for the 
reader's convenience. These statutory definitions include: ``adult,'' 
``minor child,'' ``eligible State,'' ``Indian, Indian Tribe and Tribal 
organization,'' ``State,'' and ``Territories.''
    We also propose some clarifying definitions. These include 
explanations of commonly used acronyms (such as ACF, AFDC, EA, IEVS, 
JOBS, MOE, PRWORA and TANF, as well as the new WTW) and commonly used 
terms and phrases (such as the Act and the Secretary). While the 
meaning of many of these is generally understood, we included them to 
ensure a common understanding.
    We are also proposing a number of definitions that have substantial 
policy significance, for clarification purposes. For example, the 
definitions distinguish among several types of expenditures. These 
distinctions are critical because the applicability of the TANF 
requirements vary depending on the source of funds for the 
expenditures. In particular, it is important to distinguish between 
expenditures from the Federal TANF grant and from the State funds 
expended to meet MOE requirements (either within the TANF program or in 
separate State programs).
    Federal expenditures. This is short-hand for the State expenditure 
of Federal TANF funds.
    Qualified State Expenditures. This term refers to expenditures that 
count for TANF MOE purposes (at section 409(a)(7)). By regulation, we 
are proposing that most of the requirements that apply for countable 
TANF MOE expenditures also apply for Contingency Fund MOE purposes.
    TANF MOE. This term refers to the expenditure of State funds that a 
State must make in order to meet the MOE requirement at section 
409(a)(7).
    Contingency Fund MOE. This term refers to expenditures of State 
funds that a State must make in order to meet the Contingency Fund MOE 
requirements under sections 403(b) and 409(a)(10). States must meet 
this MOE level in order to retain contingency funds made available to 
them for the fiscal year. Note that this term is more limited in scope 
than the term ``TANF MOE.'' See discussion at subpart B of part 274 for 
additional details.
    State MOE expenditures. This term refers to any expenditure of 
State funds that may count for TANF MOE or Contingency Fund purposes. 
It includes both State TANF expenditures and expenditures under 
separate State programs.
    State TANF expenditures. This term encompasses the expenditure of 
State funds within the State's TANF program. It identifies the only 
expenditures that can be counted toward the Contingency Fund MOE, 
except for expenditures made under the Child Care and Development Fund. 
It includes both commingled and segregated State TANF expenditures.
    Commingled State TANF expenditures. This term identifies the 
expenditure of State funds, within the TANF program, that are 
commingled with Federal funds. Such expenditures may count toward both 
the State's TANF MOE and Contingency Fund MOE. To the extent that 
expended State funds are commingled with Federal funds, they are 
subject to the Federal rules.
    Segregated State TANF expenditures. This term identifies State 
funds expended within the TANF program that are not commingled with 
Federal funds. Such expenditures count for both TANF MOE and 
Contingency Fund MOE purposes. They are not subject to many of the TANF 
requirements that apply only to Federal funds (including time limits).
    Separate State program. This term identifies programs operated 
outside of TANF in which the expenditure of State funds count toward 
TANF MOE, but generally does not count for Contingency Fund MOE. With 
one exception (for CCDF expenditures), expenditure of State funds must 
be made within the TANF program in order to count as MOE for 
Contingency Fund purposes.
    The definitions also distinguish among different categories and 
amounts of TANF grant funds. These distinctions are important because 
they affect the size of grant adjustments and total funding available 
to the State. In some

[[Page 62132]]

cases, different spending rules apply to different categories of funds.
    State Family Assistance Grant (or SFAG). This term refers to the 
annual allocation of Federal funds to a State under the formula at 
section 403(a)(1).
    Adjusted State Family Assistance Grant, or ``Adjusted SFAG.'' This 
term refers to the grant awarded to a State through the formula and 
annual allocation at section 403(a)(1), minus any reductions due to the 
implementation of a Tribal TANF program to serve Indians residing in 
the State. You should note the distinction between this term and the 
``SFAG,'' because of their significance in determining spending 
limitations and the amount of penalties that might be assessed against 
a State under parts 271-275.
    TANF funds. This term includes not just amounts made available to a 
State through the SFAG, but also other amounts available under section 
403, including bonuses, supplemental grants, and contingency funds.
    Federal funds. This has the same meaning as ``TANF funds.'' In 
expending Federal funds, States are subject to more restrictions than 
they are in expending State MOE as discussed in this NPRM under subpart 
B of part 273.
    You should also note the definition of ``assistance'' proposed in 
this section.
    Assistance. The terms ``assistance'' and ``families receiving 
assistance'' are used in the PRWORA in many critical places, including: 
(1) in most of the prohibitions and requirements at section 408, which 
limit the provision of assistance; (2) in the numerator and denominator 
of the work participation rates in section 407(b); and (3) the data 
collection requirements of section 411(a). Largely through reference, 
the term also affects the scope of the penalty provisions in section 
409. Thus, it is important that States have a definition of 
``assistance.'' At the same time, because TANF replaces AFDC, EA and 
JOBS, and provides much greater flexibility than these programs, what 
constitutes assistance is less clear than it was in the past.
    Because PRWORA is a block grant, and it incorporates three 
different programs, a State may provide some forms of support under 
TANF that would not commonly be considered public assistance. Some of 
this support might resemble the types of short-term, crisis-oriented 
support that was previously provided under the EA program. Other forms 
might be more directly related to the work objectives of the Act and 
not have a direct monetary value to the family. We are proposing to 
exclude some of these forms of support from the definition of 
assistance.
    The general legislative history for this title indicates that 
Congress meant that this term encompass more than cash assistance; 
beyond that, it is not very informative (H.R. Rep. No. 725, 104 Cong., 
2d Sess (1996)). Our consultations did not produce clear guidance in 
this area either. However, they did identify some areas where 
clarification would be helpful. Therefore, this proposed rule contains 
essentially the same definition as we suggested in our January policy 
announcement (TANF-ACF-PA-97-1), with some additional clarifications.
    In our January proposal, we took the view that the definition of 
assistance should encompass most forms of support. However, we 
recognized two basic forms of support that would not be considered 
welfare and proposed to exclude them from the definition. In brief, the 
two exclusions were: (1) services that had no direct monetary value and 
did not involve direct or indirect income support; and (2) one-time, 
short-term assistance.
    In the proposed rule, we are clarifying that child care, work 
subsidies, and allowances that cover living expenses for individuals in 
education or training are included within the definition of assistance. 
For this purpose, child care includes payments or vouchers for direct 
child care services, as well as the value of direct child care services 
provided under contract or a similar arrangement. It does not include 
child care services such as information and referral or counseling, or 
child care provided on a short-term, ad hoc basis. Work subsidies 
includes payments to employers to help cover the costs of employment or 
on-the-job training.
    We are also proposing to define one-time, short-term assistance as 
assistance that is paid no more than once in any twelve-month period, 
is paid within a 30-day period, and covers needs that do not extend 
beyond a 90-day period. In response to the policy announcement, we 
received a number of questions about what the term ``one-time, short-
term'' meant. Based on our experience with the EA program, we realized 
that a wide range of interpretations was possible, and we were 
concerned that States might try to define as ``short-term'' or ``one-
time'' many situations where assistance was of a significant and 
ongoing nature. We hope our proposal will give States the flexibility 
to meet short-term and emergency needs (such as an automobile repair), 
without invoking too many administrative requirements and undermining 
the objectives of the Act. We welcome comments on whether the proposed 
policy achieves this end.
    Under the policy announcement and proposed rule, we define the 
minimum types of services and benefits that must be included. Based on 
comments we received, we considered allowing States to include 
additional kinds of benefits and services, at their option. However, we 
were concerned that varying State definitions would create additional 
comparability problems with respect to data collection and penalty 
determinations. Also, we were concerned that an expanded definition 
might have undesirable program effects. For example, it could extend 
child support assignment to cases where it would not be appropriate.
    If States expanded their definitions of assistance, they would have 
to apply that same definition under all provisions of the regulations. 
Thus, if something fell within the definition of assistance, the family 
receiving that type of benefit would be subject to data collection and 
reporting, child support assignment and cooperation requirements, work 
requirements, and Federal time limits. In response to the policy 
announcement, we have also received a number of questions about the 
treatment of TANF assistance under the child support enforcement 
program. The Office of Child Support Enforcement will be issuing 
guidance on the distribution of child collections under PRWORA; this 
guidance will explain the treatment of TANF assistance under the new 
distribution rules.
    For those concerned about the inclusion of child care in the 
definition of assistance, we would point out the child care 
expenditures made under the CCDBG program are not subject to TANF 
requirements, and States have the authority to transfer up to 30 
percent of their TANF grant to the CCDBG program.
    We are proposing to collect data on how much of the program 
expenditures are being spent on different kinds of ``assistance'' and 
``non-assistance.'' See the discussion of the TANF Financial Report at 
part 275 for additional details.
    If the data show that large portions of the program resources are 
being spent on ``non-assistance,'' we would have concerns that the 
flexibility in our definition of ``assistance'' is undermining the 
goals of the legislation. We would then look more closely at the ``non-
assistance'' being provided and try to assess whether work 
requirements, time limits, case-record data and child support 
assignment would be appropriate for those cases. If necessary, we would 
consider a change to the

[[Page 62133]]

definition of ``assistance'' or other remedies.
    You should also note the definitions of ``waiver'' and 
``inconsistency'' in this part.
    Waiver and Inconsistency. Under the new section 415, States that 
received approval for welfare reform waivers under section 1115 before 
July 1, 1997, have the option to operate their cash assistance programs 
under some or all of these waivers. For States electing this option, 
provisions of the new law that are inconsistent with the waivers do not 
take effect until the expiration of the applicable waivers. States have 
raised numerous questions about how we will interpret this provision, 
particularly with regard to what is a waiver and an inconsistency.
    Since a waiver extension might affect the application of certain of 
the penalty provisions within a State, we are defining both terms. Part 
of our responsibility in administering the penalty provisions is to 
provide notice concerning the rules we will utilize in applying the 
penalties.
    The issue in defining waiver concerns the scope of the provision, 
specifically how much of the current or underlying law (i.e., the 
provisions of title IV-A as in effect on August 21, 1996) are properly 
considered to be part of the waiver. Three possible interpretations 
were suggested. The first is a very limited definition in which a 
waiver is only the specific change to the AFDC statute as articulated 
in the waiver list that was included in the terms and conditions for 
each demonstration project. The second possible interpretation is that 
a waiver includes all the underlying law; that, in effect, the AFDC 
statute, as modified by the waiver terms and conditions, would continue 
to apply in a State continuing a demonstration project. The third 
interpretation is that the waiver includes only some parts of the 
unwaived underlying law.
    We believe the third option is the best. It seems most consistent 
with the Congressional intent to allow States to finish testing the 
welfare reform policies they had initiated through waivers by allowing 
sufficient flexibility to continue relevant aspects of those policies. 
It recognizes that, although some requirements may not have 
specifically been part of the waiver (as there was no need for a waiver 
under AFDC), the requirements are an integral part of the demonstration 
embodied in the waiver.
    The first interpretation option is too narrow to allow continuation 
of many demonstration objectives; thus, it seems inconsistent with the 
Congressional intent. Similarly, to allow a State to continue the AFDC 
program in its entirety, even when a particular AFDC provision was not 
necessary to the demonstration, would seem to frustrate the intent of 
Congress in enacting TANF. Rather, we believe section 415 was intended 
to allow States to continue their reform policies, but not the AFDC 
program in its entirety.
    The definition of ``waiver'' we are proposing allows a State the 
flexibility to include applicable provisions of prior law, but only if 
their inclusion were necessary to achieve the objective of the approved 
waiver.
    At Sec. 271.60, we provide an example of the application of the 
definitions of waiver and inconsistent to the work requirements and 
explain their implications. We also discuss the application of the 
definitions to control and experimental groups.
    After extensive deliberations, we have also defined what makes the 
new law ``inconsistent'' with a waiver. We propose that a provision of 
TANF is inconsistent with a waiver only if the State must change its 
waiver policy in order to comply with the TANF requirement. A TANF 
provision is not inconsistent if it is possible for the TANF 
requirement and the waiver policy to operate concurrently.
    For example, if the State has a time limit that runs for two years 
and then has extensions if the recipient is ``playing by the rules,'' 
that time limit can run in tandem with the Federal time limit until the 
five-year limit on Federal assistance is reached. At that point, the 
TANF restriction would be inconsistent with providing further 
assistance under the demonstration's extension. However, since there is 
an inconsistency at that point, section 415 would allow a State to 
continue such assistance until the demonstration ended.
    We considered two alternative definitions of inconsistency. The 
first was that just having a waiver that differs in any respect from 
the TANF requirement creates an immediate inconsistency. For example, 
under this definition, the State time limit and the Federal time limit 
would run sequentially. However, this definition seems to create an 
artificial inconsistency where one does not exist in fact; thus, it 
seems contrary to the statute.
    The second alternative was to find that a waiver was not 
inconsistent with the TANF provisions of the law if TANF restrictions 
related only to the expenditure of Federal funds and did not prohibit 
States from continuing their waiver policies with their own funds. 
However, application of this theory could lead to a finding of no 
inconsistency for all waiver provisions, including those in the major 
areas of work and time limits. It would thus render section 415 
meaningless.
    At Sec. 274.1, we provide additional discussion regarding the 
implications of our definition of inconsistency.
    You should also note the definitions of ``Family Violence Option,'' 
``good cause domestic violence waiver,'' and ``victim of domestic 
violence.''
    Family Violence Option, Good Cause Domestic Violence Waivers, and 
Victims of Domestic Violence. These definitions are relevant to State 
claims of ``reasonable cause'' for failing to meet the work 
participation rate and time-limit requirements of the Act. Under parts 
271 and 274, a State's decision to implement the Family Violence Option 
and its provision of good cause waivers to victims of domestic violence 
under that provision create a special-case situation that may affect a 
State's eligibility for a reasonable cause exception from these two 
penalties.
    Finally, we would like you to note that Sec. 273.0(b) contains a 
definition of ``administrative costs.'' This definition is important 
because States are subject to 15 percent caps on the amount of Federal 
TANF and State MOE funds they may spend on administrative activities.
When are these provisions in effect? (Sec. 270.40)
    This section of the proposed rules provides only the general time 
frames for the effective dates of the TANF provisions. Many of the 
penalty and funding provisions have delayed effective dates. For 
example, most penalties would not be assessed against States in the 
first year of the program, and reductions in grants due to penalties 
would not occur before FY 1998 because reductions take place in the 
year following the failure. You should look to the discussion on the 
individual regulatory sections for specific information on effective 
dates.
    This section also makes the important point that we will not 
retroactively apply rules against States. With respect to any actions 
or behavior that occurs before we issue final rules, we will judge 
State actions and behavior only against a reasonable interpretation of 
the statute.

B. Part 271--Ensuring That Recipients Work

What does this part cover? (Sec. 271.1)
    This section identifies the scope of part 271: the mandatory work 
requirements of TANF.

[[Page 62134]]

What definitions apply to this part? (Sec. 271.2)
    This section cross-references the general definitions for the TANF 
regulations established under part 270.
Supart A--Individual Responsibility
    During our extensive consultations, a number of groups and 
individuals asked how the requirements on individuals relate to the 
State participation requirements and penalties. To help clarify what 
the law expects of individuals as opposed to the requirements it places 
on States, we have decided to outline a recipient's statutory 
responsibilities as part of the proposed rules. In so doing, we only 
paraphrase the statute, without interpreting these provisions. 
Inclusion of these provisions in the regulation does not indicate our 
intent to enforce these statutory provisions, but our expectation is 
that States will meet these requirements. We have included the 
requirements in the regulation for informational and contextual 
reasons.
What work requirements must an individual meet? (Sec. 271.10)
    PRWORA promotes self-sufficiency and independence by expanding work 
opportunities for welfare recipients while holding individuals to a 
higher standard of personal responsibility for the support of their 
children. The legislation expands the concept of mutual responsibility, 
introduced under the Family Support Act of 1988. It espouses the view 
that income assistance to families with able-bodied adults should be 
transitional and conditioned upon their efforts to become self-
sufficient. As States and communities assume new responsibilities for 
helping adults get work and earn paychecks quickly, parents face new, 
tougher work requirements.
    Readers should understand that the law imposes a requirement on 
each parent or caretaker to work (see section 402(a)(1)(A)(ii)). That 
requirement applies when the State determines the individual is ready 
to work, or after (s)he has received assistance for 24 months, 
whichever happens first. For this requirement, the State defines what 
work activities meet the requirement.
    In addition, there is a requirement that each parent or caretaker 
participate in community service employment if s(he) has received 
assistance for two months and is not either engaged in work in 
accordance with section 407(c) or exempt from work requirements. The 
State must establish minimum hours of work and the tasks involved. A 
State may opt out of this provision if it chooses. A State may impose 
other work requirements on individuals, but there is no further Federal 
requirement to work.
    These individual requirements are different from the work 
requirements described at section 407. Section 407 applies a 
requirement on each State to engage a certain percentage of its total 
caseload and a certain percentage of its two-parent caseload in 
specified work activities. For the State requirement, the law lists 
what activities meet the requirement. A State could chose to use this 
statutory list for the first requirement on individuals, but is not 
required to do so. Subpart B below explains more fully what the 
required work participation rates are for States and how they are 
calculated. Subpart C explains the work activities and when an 
individual is considered ``engaged in work'' for those rates.
Which recipients must have an assessment under TANF? (Sec. 271.11)
    Each State must make an initial assessment of the skills, prior 
work experience and employability of each recipient who is at least 18 
years old, or has not completed high school (or equivalent) and is not 
attending secondary school.
    With respect to the timing of assessments, within 90 days of the 
effective date of the State's TANF program (or up to 180 days, at State 
option), the State may assess an individual who is already receiving 
benefits as of that date. For any other recipient, the State may make 
the assessment within 30 days of the date on which the individual is 
determined to be eligible for assistance, but may increase this period 
to as much as 90 days. For example, if a State begins operating its 
TANF program on July 1, 1997, it may assess all individuals in its 
existing caseload by September 30, 1997 (or, at State option, December 
31, 1997). For any individual applying after July 1, 1997, the State 
may do an assessment within 30 days (or 90 days, at State option).
What is an individual responsibility plan? (Sec. 271.12)
    A State may require individuals to adhere to the requirements of an 
individual responsibility plan. Developed in consultation with the 
individual on the basis of the initial assessment described above, the 
plan should set forth the obligations of both the individual and the 
State. It should include an employment goal for the individual and a 
plan to move him/her into private-sector employment as quickly as 
possible. The proposed regulation includes more detailed suggestions 
for the content of an individual responsibility plan.
May an individual be penalized for not following an individual 
responsibility plan? (Sec. 271.13)
    If the individual does not have good cause, (s)he may be penalized 
for not following the individual responsibility plan that (s)he signed. 
The State has the flexibility to establish good cause criteria, as well 
as to determine what is an appropriate penalty to impose on the family. 
This penalty is in addition to any other penalties the individual may 
have incurred.
What is the penalty if an individual refuses to engage in work? 
(Sec. 271.14)
    If an individual refuses to engage in work in accordance with 
section 407, the State must reduce the amount of assistance otherwise 
payable to the family pro rata (or more, at State option) for the 
period during the month in which the individual refused, subject to 
good cause and other exceptions determined by the State. The State also 
has the option to terminate the case.
    Each State may establish its own criteria for determining when not 
to impose a penalty on an individual. States may also establish other 
rules governing penalties as needed.
    Under the Family Violence Option, a State may waive work 
requirements in cases where compliance would make it difficult for an 
individual to escape domestic violence or would unfairly penalize 
individuals who are or have been victimized by such violence or 
individuals who are at risk of further domestic violence. The State 
must determine that the individual receiving the program waiver has 
good cause for failing to comply with the standard work requirements.
Can a family be penalized if a parent refuses to work because (s)he 
cannot find child care? (Sec. 271.15)
    A State may not reduce or terminate assistance to a single 
custodial parent caring for a child under age six for refusing to 
engage in required work, if the parent demonstrates an inability (as 
determined by the State) to obtain needed child care. This exception 
applies to penalties the State imposes for refusal to engage in work in 
accordance with either section 407 or section 402(a)(1)(A)(ii) of the 
Act. The parent's demonstrated inability must be for one of the 
following reasons:
    <bullet> Appropriate child care within a reasonable distance from 
the

[[Page 62135]]

individual's home or work site is unavailable;
    <bullet> Informal child care by a relative or under other 
arrangements is unavailable or unsuitable; or
    <bullet> Appropriate and affordable formal child care arrangements 
are unavailable.
    This penalty exception underscores the pivotal role of child care 
in supporting work and also recognizes that the lack of appropriate, 
affordable child care can create unacceptable hardships on children and 
families. To keep families moving toward self-sufficiency, and to 
assess the State's compliance with this penalty exception, we have 
described in the preamble to Sec. 274.20 our expectation that States 
will have a process or procedure that: (1) Enables a family to 
demonstrate its inability to obtain needed child care; (2) informs 
parents that the family's benefits cannot be reduced or terminated when 
they demonstrate that they are unable to work due to the lack of child 
care for a child under the age of six; and (3) advises parents that the 
time during which they are excepted from the penalty will still count 
toward the time limit on benefits at section 408(a)(7).
    Because the State has the authority to determine whether the 
individual has demonstrated adequately an inability to obtain needed 
child care, as the regulations indicate, we expect the State to define 
the terms ``appropriate child care,'' ``reasonable distance,'' 
``unsuitability of informal care,'' and ``affordable child care 
arrangements.'' The State should also provide families with the 
criteria, including the definitions, that it will use to implement the 
exception and the means by which a parent can demonstrate an inability 
to obtain needed child care.
    The proposed regulations for the Child Care and Development Fund 
(CCDF) reinforce the importance of providing this vital information to 
parents by requiring the child care Lead Agency, as part of its 
consumer education efforts, to inform parents about: (1) The penalty 
exception to the TANF work requirement; (2) the State's process or 
procedure for determining a family's inability to obtain needed child 
care; and (3) the fact that the exception does not extend the time 
limit for receiving assistance. The information must also include the 
definitions or criteria that the State employs to implement the State's 
determination process.
    Under the proposed CCDF rule, we would require the Lead Agency for 
child care to coordinate with the TANF agency in order to understand 
how the TANF agency defines and applies the terms of the statute 
regarding the penalty exception and to include the definitions (listed 
above) and criteria in the CCDF plan.
    Thus, the proposed CCDF rule requires that the Lead Agency would 
submit the definitions and criteria used by the State in determining 
whether child care is available. We took this child care proposal into 
consideration in drafting our proposed rule. Under Sec. 271.15, we 
would require that the definitions and criteria be submitted, but would 
not require that the TANF agency submit them directly. Our goal is to 
ensure that these items are made available for audit and penalty 
purposes and that they be part of the public record.
    If, based on the child care final rule, we would not expect to 
receive the criteria and definitions from the Lead Agency, we would add 
a data element to one of the proposed TANF reporting forms (such as the 
annual addendum) to incorporate them.
Does the imposition of a penalty affect an individual's work 
requirement? (Sec. 271.16)
    Section 408(c) of the Act, as amended by section 5001(h) of Pub. L. 
105-33, clarifies that sanctions against recipients under TANF ``shall 
not be construed to be a reduction in any wage paid to the 
individual.'' This means that imposition of such penalties would not 
result in a reduction in the number of hours of work required.
Subpart B--State Accountability
How will we hold a State accountable for achieving the work objectives 
of TANF? (Sec. 271.20)
    Work is the cornerstone of welfare reform. Research has 
demonstrated that early connection to the labor force helps welfare 
recipients make important steps toward self-sufficiency. The rigorous 
work participation requirements embodied in the legislation provide 
strong incentives to States to concentrate their resources in this 
crucial area. This summary section makes the legislation's focus on 
work and the requirements for work clear, while other sections address 
each of these areas in more detail.
    This section of the proposed regulations describes what a State 
must do to meet the overall and two-parent work participation rates. It 
explains that a State must submit data to allow us to measure each 
State's success with the work participation rates. It notes that a 
State meeting the minimum rates will have a reduced MOE requirement but 
that a State failing to meet them risks a financial penalty.
What overall work rate must a State meet? (Sec. 271.21)
    Section 407(a) establishes two minimum participation rates that a 
State must meet for FYs 1997 through 2002 and thereafter. The first, 
the overall work rate, is the percentage of all families receiving 
assistance who must participate in work activities by fiscal year. This 
section lists the statutory overall participation rate by fiscal year. 
The second is the work rate for two-parent families, addressed below at 
Secs. 271.23 and 271.24.
How will we determine a State's overall work rate? (Sec. 271.22)
    This section of the proposed regulation restates in clear terms the 
participation rate calculation specified in the statute. In particular, 
without changing its meaning, we have phrased the denominator in a way 
that we think is easier to understand than the statutory language.
    We received many requests for guidance concerning how, for purposes 
of the participation rates, a State should treat a family that it 
exempts from work requirements. A State has the flexibility to 
establish any exemptions it chooses; however, with two exceptions 
(discussed below), the legislation offers no room to remove categories 
of recipients from the denominator. PRWORA embodies the views that: (1) 
Work is the best way to achieve independence; and (2) each individual 
should participate to his or her greatest ability. As waiver projects 
have demonstrated, innovative State programs can often find meaningful 
ways for nearly every recipient to participate in work-related 
activities. Therefore, the statute and the proposed regulation require 
nearly all families to be included in the calculation of the 
participation rates.
    The proposed regulation makes clear that a State may count as a 
month of participation any partial months of assistance, if an adult in 
the family is engaged in work for the minimum average number of hours 
in each full week that the family receives assistance in that month. 
These families are already included in the denominator since they are 
recipients of assistance in that month.
    This provision ensures that a State receives credit for its efforts 
in the first and last months that a family receives assistance. Without 
it, a State would have an inadvertent incentive to start and end 
assistance as close as possible to the beginning of the month, rather 
than as families need it. We think that measuring work in full weeks of

[[Page 62136]]

assistance during a partial month is consistent with the spirit of 
PRWORA. We have proposed the same policy for partial months of 
assistance under the two-parent rate at Sec. 271.24.
    During the development of the proposed regulation and in 
consultation with stakeholders, one important topic of discussion was 
how to treat victims of domestic violence whom the State is helping 
under the Family Violence Option (FVO), under section 402(a)(7). We 
recognize that there are circumstances in which a State should and will 
temporarily waive work requirements for some domestic violence victims. 
One question we considered was how such waivers would affect the 
calculation of the participation rates.
    Many commenters urged us to remove all victims of domestic violence 
from the denominator of a State's participation rate so that the State 
would not be penalized for choosing to develop appropriate responses to 
their problems. Instead of changing the basic calculation of the work 
participation rates, we chose to address this situation under the 
definition of ``reasonable cause'' for States failing to meet their 
rates. Our approach is targeted, so as not to provide blanket 
exemptions for those who have ever suffered domestic violence, but 
instead to provide appropriate protections and supports for TANF 
recipients who need them.
    We believe that keeping recipients who are being assisted under the 
FVO in the calculation is the better reading of the statute. In the 
calculation of work participation rates, the statute provides only two 
exemptions from the denominator: one for a single custodial parent of a 
child under 12 months old; the other for a recipient who is being 
sanctioned but has not been so for more than three of the last 12 
months. The law is very specific concerning these exemptions and does 
not provide for others.
    We believe victims of domestic violence and the objectives of the 
Act will be best served if we maintain the integrity of the work 
requirements and promote appropriate services to the victims of 
domestic violence. Service providers who work closely with victims of 
domestic violence attest that work is often a key part of the solution 
to domestic violence problems; it may provide both emotional support 
and a path to financial independence. Thus, we do not want to create an 
incentive for States to waive work requirements routinely for a 
recipient who does not need such a waiver.
    However, we also hear that, in some cases, going to work may 
aggravate tensions with a batterer and place the victim at risk of 
further danger. Under our proposed rules, States should feel free to 
provide temporary waivers of work requirements in such cases.
    Given the pressure States are under to meet the work participation 
rates, and the individualized circumstances that domestic violence 
victims face, we have concerns that automatically removing victims of 
domestic violence from the calculations could result in inappropriate 
exemptions or deferrals of work requirements for victims of domestic 
violence. We also have concerns that it could result in diversion of 
resources away from these families to other categories of recipients. 
We believe our ``reasonable cause'' proposal and our strategy for 
monitoring the effect of these provisions will protect against these 
possible negative effects.
    You will also note that this section of the regulation addresses 
our concern that States could use the flexibility inherent in the 
statute and these regulations to avoid the work participation rates for 
certain families in the TANF program. Because the participation rates 
include only those families receiving assistance that include an adult, 
the possibility exists that States could try to keep cases out of the 
calculation by converting them to child-only cases. Under our proposal, 
States would continue to have discretion in defining ``families 
receiving assistance'' and deciding the circumstances under which 
adults and children receive assistance in the State. However, we would 
reserve the right to add cases back into the calculation if we 
determine that a State was defining families solely for the purpose of 
avoiding a work penalty. Also, we are proposing to require that States 
submit annual reports to us specifying how many families were excluded 
from the overall work participation rate, together with the basis for 
any exclusions.
    Please see Sec. 271.52 of the proposed regulations for further 
discussion of the reasonable cause criteria.
What two-parent work rate must a State meet? (Sec. 271.23)
    As with Sec. 271.21, this section restates the minimum work 
participation rates for two-parent families established in the statute.
    States should note the sharp increases in the two-parent 
participation rate. Congress has high expectations that States will 
help the vast majority of adults in two-parent families find jobs or 
participate in other work activities. We note that most States had 
difficulty meeting the less ambitious JOBS participation rates for 
unemployed parent families (UPs), the primary two-parent cases under 
AFDC. For several reasons, the new rates under TANF are much more 
demanding than they were under JOBS. First, the TANF rate is a ``two-
parent'' rate, not a rate just for UPs. Secondly, the denominator 
includes much more of the caseload; it recognizes many fewer 
exemptions. Finally, PRWORA lifted the restrictions on providing 
assistance to two-parent families. Thus, in some States, many more two-
parent families could be eligible for assistance and subject to the 
work requirements than under prior law.
    We strongly encourage each State to consider carefully what it must 
do to get two-parent families working. In some cases, States may need 
to make substantial changes to their program designs over time. In the 
first few years of operating TANF, the participation rates are at their 
lowest and pro rata reductions may significantly reduce the minimum 
required rates. We think it is important for States to capitalize on 
this initial period to invest in program designs that will allow them 
to achieve the higher participation rates in effect in later years. We 
intend to assist States in this endeavor through technical assistance 
and by sharing promising models as they emerge.
    Finally, we would like to make it clear that providing a non-
custodial parent with TANF services need not cause a State to consider 
the family a two-parent family for the purposes of the participation 
rate. States could define two-parent families as those with two parents 
living in the same household.
How will we determine a State's two-parent work rate? (Sec. 271.24)
    The proposed regulations express the two-parent work participation 
rate in terms very similar to those we used for the overall rate. 
States should note that any family that includes a disabled parent is 
not considered a two-parent family for purposes of the participation 
rate and, thus, is not included in the numerator or denominator of the 
two-parent rate. They should also note the prohibition against defining 
families receiving assistance for the purpose of excluding cases from 
two-parent participation rate. (See Sec. 271.22 for additional 
discussion.)
    It is important to note that, in accordance with the statute, we 
calculate both participation rates in terms of families, not 
individuals. Whether we include the family in the numerator depends on 
the actions of individuals, but an entire family either

[[Page 62137]]

counts toward the rate or does not. In the case of a two-parent family, 
whether a family counts may depend on the actions of both parents.
    Section 408(a)(7) limits the receipt of Federal TANF assistance to 
60 months for any family, unless the family qualifies for a hardship 
exception or disregard of a month of assistance. (In our discussion of 
Sec. 274.1, we explain that months of receipt are disregarded when the 
assistance was received either: (1) by a minor child who was not the 
head of a household or married to the head of a household; or (2) while 
an adult lived in Indian country or in an Alaska Native Village with 50 
percent or greater unemployment.) We have received inquiries concerning 
the effect of a time-limit exception or disregard on the participation 
rates. In fact, the time limit does not have a bearing on the 
calculation of the participation rate. All families must be included in 
the participation rate, unless they have been removed from the rate for 
one of the two work-related exemptions (i.e., the family is subject to 
a penalty but has not been sanctioned for more than three of the last 
12 months, or the parent is a single custodial parent of a child under 
one year of age and the State has opted to remove the family from the 
rate).
Does a State include Tribal families in calculating these rates? 
(Sec. 271.25)
    States have the option of including in the participation rates 
families in the State that are receiving assistance under an approved 
Tribal family assistance plan or under a tribal work program. If the 
State opts to include such families, they must be included in the 
denominator, as well as the numerator where appropriate. We are 
particularly interested in receiving comments relating to the 
implementation of this option, such as Tribal reporting of 
participation information to the State.
Subpart C--Work Activities and How To Count Them
What are ``work activities?'' (Sec. 271.30)
    Section 407(d) specifies the twelve work, training, and education 
activities in which individuals may participate in order to be 
``engaged in work'' for the purpose of counting toward the work 
participation rate requirements. Congress did not define these 
activities further. Some have commonly understood meanings from their 
use over time or from operational definitions adopted by prior 
employment and training programs. But several of the permissible 
activities, such as ``vocational educational training'' and ``job 
readiness assistance,'' do not have commonly understood meanings and 
are subject to interpretation. Because these terms lack a common 
definition or understanding, we began receiving questions soon after 
the enactment of PRWORA about whether we would define them in the 
rules.
    To address this problem, we first examined legislative intent. In 
enacting TANF, Congress wanted to give States significant flexibility 
in administering TANF and limit Federal authority to regulate. At the 
same time, Congress wanted to create a work-focused program of time-
limited assistance. In addition, it established significant data 
reporting requirements for States, including information about the 
activities in which individuals participate. As discussed below, these 
three purposes do not clearly point in the direction of more or less 
definition. Thus, the statute itself did not clearly resolve the 
matter.
    Secondly, we engaged in wide and extensive consultation with a 
variety of groups to determine what others thought about the definition 
issue. Most groups, particularly States and their organizational 
representatives, overwhelmingly urged us not to define the work 
activities further and recommended that definitions be left to States. 
They suggested that we could use this preamble to underscore the 
flexibility and latitude intended by the statute, especially in 
vocational education. A few individuals asked whether a State would be 
subject to a penalty if it did not define activities in a way we 
thought appropriate. They suggested providing illustrative examples or 
including guidance in the preamble on activities that could not count 
as work. Several participants thought that we should offer general 
guidance on the definition of activities to ensure uniform data 
reporting across States.
    Representatives of the education community and some from the labor 
community expressed concerns about how work-focused activities will 
affect programs that have been operating under the Job Opportunities 
and Basic Skills Training (JOBS) program. They emphasized the positive 
correlation between educational attainment and job acquisition and 
advancement, as well as the importance of parental education levels and 
involvement in the education of their children. They also expressed 
concern that, without additional education and training, many families 
will find it difficult to hold meaningful employment, much less to 
advance. They wanted us to take this opportunity to define work 
activities in ways that fostered education while promoting work.
    In this regulation, we are proposing not to define the individual 
work activities. In making our decision, we considered the following.
    Congress did not define the terms and clearly gave States overall 
flexibility to design their programs. Certainly, one element of that 
flexibility could be to allow each State to define the work activities 
in order to address its unique needs and circumstances.
    We recognize that definitions of terms could help clarify the 
parameters of a work-focused program design. For example, without 
Federal definitions, States could conceivably include a range of 
activities that may not enhance work skills or might not be considered 
``work experience'' by potential employers. However, in light of the 
five-year time limit, we expect that States will be very careful to 
establish programs that do not work to prolong a family's use of 
assistance.
    After considering the extensive input we received, we think that 
the goals and objectives of the legislation will be better served by 
having each State define the work activities. We believe States will 
use the flexibility of the statute to formulate a variety of reasonable 
interpretations leading to greater innovation, experimentation, and 
success in helping families become self-sufficient quickly.
    Because the flexibility could also be used in ways that do not 
further Congressional intent, we are requiring each State to provide us 
with its definitions of work activities for both TANF and separate 
State programs under the data collection requirements at Secs. 275.9 
and 273.7. We are concerned that different TANF definitions could 
affect the vulnerability of States to penalties for failure to meet the 
participation rate. This data collection will help us determine whether 
this is in fact a serious problem; to the extent possible, we want to 
ensure an equitable and level playing field for the States. Over the 
next several years, we will carefully assess the types of programs and 
activities States develop and will actively publicize and share the 
results of our findings. If necessary at some time in the future, we 
will initiate further regulatory action.
    Before leaving the subject of work activities and program design, 
we would like to remind States about some key research findings from 
prior welfare-to-work programs. According to the Manpower Demonstration 
Research Corporation's publication, Work First:

    The most successful work first programs have shared some 
characteristics: a mixed

[[Page 62138]]

strategy including job search, education and training, and other 
activities and services; an emphasis on employment in all 
activities; a strong, consistent message; a commitment of adequate 
resources to serve the full mandatory population; enforcement of 
participation requirements; and a cost-conscious management style.

    While the most successful programs consistently and strongly 
emphasize work, the actual program designs recognize and address the 
critical role education plays in preparing adults for work. As more and 
more recipients engage in work, State caseloads may reflect higher 
proportions of the educationally disadvantaged. In combination with 
other work activities, education may become more important in improving 
basic communication, analytical and work-readiness skills of 
recipients. Thus, States may need to integrate adult basic skills, 
secondary education, and language training within high-quality 
vocational education programs. Such program designs encourage 
recipients to continue acquiring necessary educational skills and 
foster programs that prepare recipients for higher-skill, higher-wage 
jobs.
    In his most recent ``State of the Union'' address, President 
Clinton identified education as his number one priority. He Issued a 
call to action for American education based on principles necessary to 
prepare people for the 21st century. One principle was to make sure 
that learning is available for a lifetime.
    We encourage States to adopt program designs that take advantage of 
existing educational opportunities. States may use the statutory 
flexibility to design programs that promote educational principles by:
    <bullet> Actively encouraging adults and children to finish high 
school or its equivalent;
    <bullet> Expecting family members to attain basic levels of 
literacy and to supplement their education in order to enhance 
employment opportunities;
    <bullet> Encouraging family literacy; and
    <bullet> Promoting community-based work-related vocational 
education classes, created in collaboration with employers.
    States could also make it easier for individuals to combine school 
and work. For example, they could develop on-campus community work 
experience program positions, where child care is also available. They 
could also encourage schools to use work-study funds for students on 
welfare and then count the hours worked in those programs toward work 
requirements.
    While we have not regulated the definition of work activities, we 
want to ensure that recipients and children both experience positive 
outcomes. This is a particularly significant issue when child care is 
the work activity. For this to happen, child care arrangements should 
be well developed, implemented and supported.
    Research has found that quality child care is critical to the 
healthy development of children and that providers who choose to care 
for children create more nurturing environments than those who feel 
they have no choice and are providing care only out of necessity. Thus, 
States should assess whether recipients have an interest in providing 
child care before assigning them to this activity.
    In addition, States should provide training, supervision and other 
supports to enhance caregiving skills if they wish recipients to attain 
self-sufficiency. Such supports would assist the development of both 
the caregivers and the children in care.
    A State that assesses the individual's commitment to child care and 
provides opportunities for training in health and safety (e.g., first 
aid and CPR), nutrition, and child development, should see successful 
outcomes for both the adults and children in care.
    Finally, the stability of child care arrangements affects outcomes 
for both parents and the children in care. When parents feel 
comfortable with their child care arrangements, their own participation 
in the work force becomes more stable. Stability fosters emotional 
security for children. Thus, stability should be one of the factors 
States take into account when assigning participants to child care as a 
work activity.
How many hours must an individual participate to count in the numerator 
of the overall rate? (Sec. 271.31)
    Section 407(c) specifies the minimum hours an individual must 
participate to count in the State's participation rate calculation. 
There are two related requirements. First, there is a minimum average 
number of hours per week for which a recipient must be engaged in work 
activities. The average weekly hours are reflected in the following 
table:

------------------------------------------------------------------------
                                                      All families      
                                               -------------------------
                                                                and the 
            If the fiscal year is:                 Then the     average 
                                                participation    weekly 
                                                   rate is:     hours of
                                                  (percent)    work are:
------------------------------------------------------------------------
1997..........................................           25           20
1998..........................................           30           20
1999..........................................           35           25
2000..........................................           40           30
2001..........................................           45           30
2002..........................................           50           30
------------------------------------------------------------------------

    Second, the law requires that at least an average of 20 hours per 
week of the minimum average must be attributable to certain specific 
activities. These activities are:
    <bullet> Unsubsidized employment;
    <bullet> Subsidized private sector employment;
    <bullet> Subsidized public sector employment;
    <bullet> Work experience;
    <bullet> On-the-job training;
    <bullet> Job search and job readiness assistance for no more than 
four consecutive weeks and up to six weeks total in a year;
    <bullet> Community service programs;
    <bullet> Vocational educational training not to exceed 12 months;
    <bullet> Provision of child care services to an individual who is 
participating in a community service program.

    Note: The limitation that at least 20 hours come from certain 
activities does not apply to teen heads of households; however, 
there are other limitations related to teen heads of households. 
Please refer to Sec. 271.33 below.

    After an individual meets the basic level of participation, the 
following activities may count toward the total work requirement hours 
of work:
    <bullet> Job skills training directly related to employment;
    <bullet> Education directly related to employment for those without 
a high school diploma or equivalent;
    <bullet> Satisfactory attendance at a secondary school or GED 
course for those without a high school diploma or equivalent.
    In our consultations, several people asked whether a State may 
average the hours of participation of different recipients to reach the 
minimum average hours required by the work participation rate, as they 
could in the JOBS program. PRWORA does not permit combining and 
averaging the hours of work of different individuals. However, we have 
clarified in the rules that a State may average an individual's weekly 
work hours over the month to reach the minimum average number of hours 
per week that the individual must engage in work.
    Our consultations uniformly suggested that we did not need to 
provide any further regulatory guidance or clarification in this area. 
Thus, in the

[[Page 62139]]

regulatory text, we have paraphrased the statute in simple, 
understandable terms.
How many hours must an individual participate to count in the numerator 
of the two-parent rate? (Sec. 271.32)
    For two-parent families, section 407(c) specifies that the parents 
must be participating in work activities for a total of at least 35 
hours per week and that a specified number of hours be attributable to 
specific work activities. A State may have one parent participate for 
all 35 hours, or both parents may share in the work activities. If the 
family receives federally-funded child care assistance and an adult in 
the family is not disabled or caring for a severely disabled child, 
then the parents must be participating for a total of at least 55 hours 
per week. As before, a specified number of hours must be attributable 
to certain activities (listed below). We summarize the requirements for 
two-parent families in the table below:

------------------------------------------------------------------------
                                                  Two-parent families   
                                             ---------------------------
                                                               and the  
                                                                weekly  
                                                               hours of 
           If the fiscal year is:                then the        work   
                                              participation   (without/ 
                                                 rate is:        with   
                                                (percent)      federal  
                                                             child care)
                                                                 are:   
------------------------------------------------------------------------
1997........................................            75         35/55
1998........................................            75         35/55
1999........................................            90         35/55
2000........................................            90         35/55
2001........................................            90         35/55
2002........................................            90         35/55
------------------------------------------------------------------------

    In the first situation (where the weekly total must be at least 35 
hours), at least 30 hours must be attributable to the same specific 
activities as in the overall rate. In the second situation (where the 
weekly total must be at least 55 hours), 50 hours must be attributable 
to these activities. Again, these are:
    <bullet> Unsubsidized employment;
    <bullet> Subsidized private sector employment;
    <bullet> Subsidized public sector employment;
    <bullet> Work experience;
    <bullet> On-the-job training;
    <bullet> Job search and job readiness assistance for no more than 
four consecutive weeks and up to six weeks total in a year;
    <bullet> Community service programs;
    <bullet> Vocational educational training (for not more than 12 
months);
    <bullet> The provision of child care services to an individual who 
is participating in a community service program.
    Therefore, no more than five of the appropriate minimum hours may 
be attributable to education related to employment, high school (or 
equivalent), or job skills training activities.
    During our consultations, many thought it was unclear whether the 
35-hour requirement is a minimum for each week or whether it is a 
minimum weekly average, as is the case in the overall rate. For 
example, if a parent participated 40 hours one week and 30 hours the 
next, the question arises whether (s)he would meet the minimum 
requirement for both weeks. To provide maximum flexibility for States 
to meet the program goals, we have clarified in the proposed rule that, 
as long as the parents' average total hours equal at least 35 hours per 
week, the individual meets the participation requirement.
    Other than this clarification, we have mirrored the statute in 
simple, understandable terms.
What are the special requirements concerning educational activities in 
determining monthly participation rates? (Sec. 271.33)
    Section 407(c)(2)(C) provides that a teen who is married or the 
single head-of-household is deemed to be engaged in work for a month if 
(s)he maintains satisfactory attendance at a secondary school or the 
equivalent or participates in education directly related to employment 
for an average of at least 20 hours per week. Since we have heard few 
comments about this provision, our proposed rule paraphrases the 
statutory language.
    To reinforce the emphasis on work, section 407 limits educational 
activities in two ways:
    (1) An individual's participation in vocational educational 
training may count for participation rate purposes for a maximum of 12 
months; and
    (2) For each participation rate, not more than 30 percent of 
individuals determined to be engaged in work for a month may count by 
reason of participation in vocational educational training or, for 
teens who are married or single heads of households, either by reason 
of maintaining satisfactory attendance at secondary school (or the 
equivalent) or participating in education directly related to 
employment. Teen parents are only included in the 30 percent limitation 
in fiscal year 2000 and thereafter.
    When PRWORA was enacted, there was substantial controversy about 
precisely how the second limitation would apply. However, Pub. L. 105-
33 modified this provision, making the limitation much clearer. The 
description above and the regulation at Sec. 271.33 reflect the new 
provision, as amended by Pub. L. 105-33.
Are there any limitations in counting job search and job readiness 
assistance toward the participation rates? (Sec. 271.34)
    Section 407(c)(2)(A)(i) limits job search and job readiness 
assistance in several ways.
    First, an individual generally may not be counted as engaged in 
work by virtue of participation in job search and job readiness 
assistance for more than six weeks. No more than four of these weeks 
may be consecutive. During our consultations, we were asked whether 
these limitations apply for the lifetime of the individual, per spell 
of assistance, or per fiscal year.
    Many people recommended treating it as a fiscal-year limit for two 
policy reasons. First, since the participation rate itself is tied to 
the fiscal year, it makes sense to have the limitation apply to the 
same time frame. Second, a different policy could force States to place 
individuals in other, less appropriate activities just to meet the 
participation rate. Moreover, research indicates that job search 
activities are an instrumental component in effective work program 
designs.
    The statutory language supports the fiscal-year interpretation. The 
job search language at 407(c)(2)(A)(i) limiting the weeks of 
participation states that the limit is ``notwithstanding paragraph 
(1).'' Paragraph (1) refers to the determination of whether a recipient 
is engaged in work for a month ``in a fiscal year.'' Thus the reference 
to paragraph (1) puts the job search limitation in the context of a 
calculating whether an individual is engaged in work in the fiscal 
year. Based on these considerations, we have clarified in the proposed 
rules that the six-week limitation applies to each fiscal year.
    The legislation and our proposed rules allow the six-week limit on 
job search and job readiness assistance to extend to 12 weeks if the 
unemployment rate of a State exceeds the national unemployment rate by 
at least 50 percent, or if the State could qualify as a needy State for 
the Contingency Fund.
    Finally, our rules paraphrase the statute (at section 
407(c)(2)(A)(ii)) in allowing a State to count three or four days of 
job search and job readiness assistance during a week as a full week of 
participation on one occasion for the individual.
Are there any special work provisions for single custodial parents? 
(Sec. 271.35)
    Section 407(c)(2)(B) provides a special participation rule for 
single parents or caretakers with young children. A single

[[Page 62140]]

parent or caretaker with a child under the age of six will be deemed to 
be engaged in work for a month if s(he) participates in work activities 
for an average of at least 20 hours per week.
    This provision has little relevance in FYs 1997 and 1998, when, for 
the overall rate, the required number of hours for all individuals is 
20 hours per week. But, when the required number of hours rises to 25 
hours per week in FY 1999 and to 30 hours per week thereafter, this 
provision allows single parents or caretakers to spend time with 
younger children. It also may enable those with young children to 
fulfill their work obligations while their children are in preschool 
activities.
    Because our consultations yielded few comments regarding this 
provision, the proposed regulations paraphrase the statute.
Do welfare reform waivers affect what activities count as engaged in 
work? (Sec. 271.36)
    This section is simply a cross-reference to Sec. 271.60, which 
addresses welfare reform demonstration waivers. We thought it would be 
helpful to include it so that readers would know to refer to this 
important exception to the work activities and hours specified in 
subpart C.
Subpart D--Caseload Reduction Factor for Minimum Participation Rates
Is there a way for a State to reduce the work participation rates? 
(Sec. 271.40)
    Section 407(b)(3) requires us to issue regulations to reduce a 
State's minimum participation rate based on reductions in its welfare 
caseload. Under this provision, a State's participation rate for any 
fiscal year will be reduced by the same number of percentage points as 
the reduction in the State's average monthly caseload since 1995. The 
reduction reflects the difference between the State's caseload under 
the IV-A State plan in effect in FY 1995 and the average number of 
cases receiving assistance, including assistance under a separate State 
program, in the prior year.
    The statute specifies that the reduction must not reflect any 
caseload changes that resulted from either Federal requirements or 
State changes in eligibility between the previous and current IV-A 
programs.
    States have an inherent interest in achieving caseload reductions; 
this provision increases that interest. If a State were to reduce its 
caseload, under the caseload reduction provision it could qualify for 
lower participation rate requirements, reduce the risk of a penalty for 
failing to meet the work participation rates, and increase its chance 
of qualifying for a lower TANF MOE requirement. It could also free up 
resources to serve recipients in alternative ways.
How will we determine the caseload reduction factor? (Sec. 271.41)
    We found it difficult to develop an appropriate methodology that 
could quantify different types of caseload reductions. In our extensive 
consultations, we found no straightforward methodology for estimating 
the reduction factor.
    We considered and rejected two alternative approaches for 
calculating the caseload reduction factor.
    The first alternative was to use Medicaid records to estimate the 
effect of eligibility changes. Initially, we thought this might be a 
viable solution because, under section 114 of PRWORA, States continue 
to determine Medicaid eligibility on the basis of the AFDC eligibility 
rules in effect as of July, 1996. Thus, in theory, this provision might 
give us a count of how many individuals would have been eligible for 
benefits in the absence of Title IV-A eligibility changes. However, 
this option proved not to be feasible because Medicaid data are not 
collected in a manner that is useful for this purpose. In addition, the 
statute allows States to modify AFDC rules for Medicaid eligibility 
purposes; adjusting for such changes would greatly complicate any 
estimations.
    Our second alternative was to estimate the caseload reduction 
factor for each State based on a computer model. The hope was that we 
might estimate the caseload effects of State and Federal policy changes 
using State-reported information on policy changes and Current 
Population Survey household data. However, this option also was not 
feasible due to the difficulty of developing computer models that could 
accurately estimate the effects on State caseloads. In particular, 
using Census data would make it difficult to estimate the effects of 
certain policy changes in small States. Finally, we were concerned that 
this approach would run counter to our intention of creating a simple, 
understandable methodology.
    Because of the difficulty we had in establishing a uniform 
methodology, we are proposing to determine the appropriate caseload 
reductions that apply to each State based on information and estimates 
reported to us by the State. The statute specifies that the 
responsibility for establishing the caseload reduction factors lies 
with us. We will analyze the information and estimates provided, 
determine whether we think they are reasonable (based in part on State-
by-State comparisons), and conduct periodic, on-site reviews to 
validate the accuracy of the information. This approach involves States 
in the process of assessing the causes of caseload changes. It also 
tries to ensure program accountability and preserve the focus on work.
    As the first step in the process, we will be using the caseload 
data reported to us by the State. To establish the caseload base for 
fiscal year 1995, we will use the number of AFDC cases reported on ACF-
3697, Statistical Report on Recipients Under Public Assistance. For 
fiscal years 1996-1998, we will be using data from this same report, 
supplemented by caseload information from the TANF Data Report and the 
TANF MOE Data Report, beginning with the fourth quarter of fiscal year 
1997, where appropriate. For fiscal years 1999 and beyond, we will only 
be using caseload information from the TANF Data Report and the TANF 
MOE Data Report to compare against the fiscal year 1995 base year 
information. Therefore, in order to qualify for a caseload reduction, a 
State must have reported information on monthly caseloads for the 
previous year (including cases in separate State programs), based on 
the definition of a case receiving assistance, as defined at 
Sec. 271.43.
    Next, to receive a reduction in the participation rates, a State 
must provide us with sufficient data and information to calculate the 
reduction. To facilitate such reporting, a State must submit the 
Caseload Reduction Report to us containing the following information:
    (1) A complete listing of and implementation dates for all 
eligibility changes, including those mandated by Federal law, made by 
the State since the beginning of FY 1995, and a listing of the reasons 
(such as found employment) for case closures;
    (2) A numerical estimate of the impact on the caseload of each 
eligibility change or case closure reason;
    (3) Descriptions of its estimating methodologies, with supporting 
documentation; and
    (4) A certification from the Governor that it has taken into 
account all reductions resulting from changes in Federal and State 
eligibility.
    States should note that the information required here to make a 
determination about the reduction factors is distinct from the case-
record information proposed as an optional reporting requirement at 
Sec. 275.3(d).

[[Page 62141]]

    We will determine whether the methodology and resulting estimates 
are reasonable. We will compare each State's methodology, estimates and 
impact against that of other States. We will also review the quality 
and completeness of data and the adequacy of the documentation. We may 
discuss the estimates and methodologies with State staff and may 
request additional information or documentation to make adjustments in 
the estimates. We will also conduct periodic, on-site visits and 
examine case-record information in order to validate the information, 
data and estimates provided.
    The proposed regulation requires States to provide us with any 
additional information within two weeks of our requesting it. We 
realize that this is a short time period, but we have proposed this 
deadline because a State's MOE requirement for the fiscal year may 
hinge upon the caseload reduction calculations. A State that achieves 
the participation rates must only reach 75 percent of its historic 
expenditures for the MOE requirement, rather than 80 percent. The 
reduction factor may play a significant part in whether States meet the 
participation rates. We have given ourselves a limited timeframe of 90 
days in which to evaluate, make any necessary modifications, and 
establish caseload reduction factors. We must acquire and evaluate any 
additional information we need within that period. In light of these 
constraints, we think that the two-week timeframe is reasonable.
    Many of the eligibility changes States have made have a 
differential effect on two-parent cases (compared to the impact on 
cases overall). We did a State-by-State comparison of the overall 
caseload reductions and the two-parent caseload reduction between 
fiscal years 1995 and 1996 and noted dramatic differences for almost 
all States. Therefore, we are requiring States to calculate two 
separate sets of caseload reduction estimates, one for the overall 
caseload and another for two-parent cases. States must base their 
overall caseload reduction estimates on decreases in cases receiving 
assistance in the prior year compared to the AFDC caseload in FY 1995. 
States must base their caseload reduction estimates for two-parent 
families on decreases in their two-parent caseload compared to the AFDC 
Unemployed Parent caseload in FY 1995.
Which reductions count in determining the caseload reduction factor? 
(Sec. 271.42)
    In drafting this provision, Congress recognized that some, but not 
all, caseload reductions in a State should be allowed to reduce work 
participation rates. Allowing States too much credit could mean that 
they could avoid accountability for meeting the law's tough new work 
requirements; they could simply deny families assistance and face much 
lower requirements. Allowing States too little credit would mean that 
the States that are most successful in moving families into employment 
and off their caseloads would not get the intended reward for their 
efforts.
    In implementing this provision, therefore, our primary goals were 
to: (1) reinforce strongly the work participation requirements of the 
Act; (2) give States full credit for caseload reductions that result 
from moving people into work; and (3) avoid categorizations of 
eligibility changes that would create inadvertent incentives for 
changes in State policy that were unrelated to work and harmful to 
vulnerable families. Thus, we propose to give States credit for 
caseload reductions except when those caseload reductions arise from 
changes in eligibility rules that directly affect a family's 
eligibility for benefits (e.g., more stringent income and resource 
limitations, time limits, grant reductions, changes in requirements 
based on residency, age or other demographic or categorical factors). A 
State need not factor out calculable effects of enforcement mechanisms 
or procedural requirements that are used to enforce existing 
eligibility criteria (such as fingerprinting or other verification 
techniques) to the extent that such mechanisms or requirements identify 
or deter families ineligible under existing rules.
    In short, we are seeking to achieve the balance identified by 
Congress: that a State should receive credit for moving families off 
welfare, but should not be able to avoid its accountability for work as 
a result of any changes that restrict program eligibility.
    Likewise, a State can argue that some or all of the families in 
separate State programs should not be included in this calculation, 
based on the type of family served or the nature of benefits provided, 
but it must substantiate such a claim with specific data on the family. 
Case-record information on the characteristics of families served in 
separate State programs and data on the services provided in those 
programs will contribute to this discussion. Under part 275 and 
Sec. 271.41(e), we propose that States wishing to claim a caseload 
reduction factor must report these data.
What is the definition of a ``case receiving assistance'' in 
calculating the caseload reduction factor? (Sec. 271.43)
    To determine the caseload reduction factor, we will look at 
caseloads in both TANF and separate State programs. Using the 
definition of assistance proposed under part 270, we propose to base 
the calculation on all cases in the State receiving IV-A assistance, 
except those receiving one-time, short-term assistance or services with 
no monetary value.
When must a State report the required data on the caseload reduction 
factor? (Sec. 271.44)
    The caseload reduction factors reflect the caseloads in the 
previous year compared to FY 1995. For each fiscal year, a State must 
report its data by November 15th. We will approve or reject a State's 
proposed reduction within 90 days of that date, or by February 15th.
Subpart E--State Work Penalties
    While PRWORA embodies State flexibility in program design and 
decision-making, it also embodies the principle of accountability. 
Where a State does not live up to the minimum standards of performance, 
it faces serious financial penalties. One of the principal areas of 
accountability is in the State's provision of work and work-related 
activities that recipients need to leave the system and become self-
sufficient. The work participation rates are demanding, but designed to 
ensure that recipients move as quickly as possible into work and 
towards independence. This is especially important given the time-
limited nature of Federal TANF benefits.
    Almost all of the groups with which we consulted were interested in 
the penalty related to the work participation rates. Most had strong 
views about what should be a reasonable cause exception to the penalty. 
They stressed that the criteria should be flexible, leaving room to 
respond to circumstances in different States. They also urged us to 
examine a State's good-faith efforts in determining the severity of a 
penalty.
    In structuring this part of the proposed regulations, we have 
attempted to balance the imperative of State accountability in the work 
participation rates with the knowledge that each State enters TANF from 
a different standpoint and with different plans for helping its 
recipients.
What happens if a State fails to meet the participation rates? 
(Sec. 271.50)
    In accordance with section 409(a)(3), as amended by Pub. L. 105-33, 
if we

[[Page 62142]]

determine that a State has not achieved either or both of the minimum 
participation rates in a fiscal year, we must reduce the SFAG payable 
for the following fiscal year. The initial penalty is five percent of 
the adjusted SFAG and increases by two percentage points for each 
successive year that the State does not achieve the participation 
rates. We may reduce the penalty amount based on the degree of 
noncompliance, as discussed at Sec. 271.51. The total work 
participation penalty can never exceed 21 percent of the adjusted SFAG. 
(Please refer to Sec. 272.1(d) for a discussion of the total penalty 
limit under TANF.)
    If a State fails to provide complete and accurate data on work 
participation, as required under section 411(a) of the Act and part 275 
of the proposed rules, we will determine that a State has not achieved 
its participation rates, and the State will be subject to a penalty 
under this part. We have the authority to penalize a State that does 
not report its work participation data for failure to report (under 
section 409(a)(2)). However, in this case, we thought it would be more 
appropriate to penalize the State for failure to meet its work rate. 
First, this policy is consistent with the approach we are taking when 
States fail to report information related to other penalty 
determinations. Also, we did not want to create a situation where non-
reporting States would face lesser penalties than reporting States, and 
we did not believe duplicate penalties were warranted.
Under what circumstances will we reduce the amount of the penalty below 
the maximum? (Sec. 271.51)
    The statute requires us to reduce the amount of the penalty based 
on the degree to which the State is not in compliance with the required 
participation rate. However, it specifies neither the measures of 
noncompliance nor the extent of reduction. The proposed rule uses three 
criteria to measure the degree of noncompliance. The statute also gives 
us the discretion to reduce the penalty if the State's noncompliance 
resulted from certain specific causes; we address this latter issue 
separately, in the section entitled ``Discretionary Reductions.''
    We are proposing that, a State will not receive a penalty reduction 
based on the severity of the failure or our discretionary authority, if 
a State has diverted cases to a separate State program for the purpose 
of avoiding the work participation rates. We want to ensure that each 
State makes a serious effort to provide work and work-related 
activities in any State-only funded programs. As we indicated in 
program announcement TANF-ACF-PA-97-1, we do not believe Congress 
intended a State to use separate State welfare programs to avoid TANF's 
focus on work.
Required Reduction
    In part, we will measure noncompliance on the basis of whether the 
State failed one or both rates for the fiscal year and which 
participation rate it failed, if only one. First, we believe that a 
State that fails the two-parent rate should be subject to a smaller 
penalty than a State that fails the overall rate or both. Second, we 
believe it is appropriate to consider the size of the two-parent 
caseload in deciding how much weight to give a failure of the two-
parent rate only.
    In looking at the data for FY 1996, we noted that the two-parent 
participation rate on average affects a very small percentage of a 
State's entire caseload; the mean State percentage was about 6.6 
percent, but the median was only about 2.4 percent.
    Under our proposal, the maximum penalty a State would face for 
failure to meet the two-parent rate would depend directly on how much 
of the total caseload in the State was comprised of two-parent 
families.
    The State would not get a similar reduction if it failed the 
overall rate because all cases, including two-parent cases, are 
reflected in the overall rate.
    We believe a State that failed with respect to only a small 
percentage of its cases should not face a huge penalty. At the same 
time, we want to ensure that States make adequate commitments to 
achieving the two-parent participation rates and that our policies 
support State efforts to extend benefits to two-parent families. We 
would like comments as to whether our proposal properly balances these 
objectives.
    Finally, we will measure noncompliance on the basis of the severity 
of a State's failure to achieve the required rate. We are proposing to 
reduce the penalty in direct proportion to the State's level of 
achievement above a threshold of 90 percent. We would compute a ratio 
whose numerator is the difference between the participation rate a 
State actually achieved and the applicable threshold rate and whose 
denominator is the difference between the applicable required 
participation rate and the applicable threshold rate.
    For example, assume a State achieved 95 percent of the required 
rate, or 5 percentage points above the threshold. These 5 percentage 
points represent 50 percent of the difference between the required rate 
and the threshold. Therefore, we would reduce by 50 percent that 
portion of the penalty (either 90 percent or 10 percent) allocated to 
the rate the State failed.
    In drafting the regulation, we wanted to strike the right balance 
between the importance of work and the requirement to reduce the 
penalty based on the degree of noncompliance. Although our first 
inclination was to make reductions in proportion to the State's 
achievement toward the required rate, our experience in the JOBS 
program led us to consider creating a threshold below which we would 
grant no reduced penalty. We were concerned that, as in the JOBS 
Unemployed Parent participation rates, there would be States whose 
level of achievement was negligible, particularly with the two-parent 
caseload, and thus did not merit a reduced penalty. Given that 
experience, we thought it was essential to have a threshold.
    We considered basing the threshold on the past performance of the 
States, for example at the 50th or 75th percentile of participation the 
previous year. However, the data we had from the JOBS program did not 
prove sufficient to determine where we should set such a State 
performance threshold. Instead, we chose to establish a threshold as a 
percentage of the required participation rate. We set the participation 
threshold at 90 percent because of the emphasis in the statute on 
making the work penalty meaningful. In particular, Pub. L. 105-33 
amended the work penalty provision so that the amount was fixed, 
removing the discretion we had under PRWORA to set a lesser penalty 
amount. We think this shows Congressional intent that the work penalty 
should be meaningful. To avoid undercutting this intent, we believe 
that a State should make substantial progress in meeting the target 
rates before we should consider a reduction.
    Moreover, the threshold works in conjunction with the penalty 
allocation we are proposing for failing to meet just one rate. Given 
their combined effects, we think it is appropriate to set the threshold 
at 90 percent.
    We are particularly interested in any comments readers have 
concerning the measures of noncompliance we have proposed.
Discretionary Reductions
    The proposed regulation also reflects the discretion that we have 
to reduce the amount of the penalty if the State could qualify as a 
needy State for the Contingency Fund. The definition of ``needy State'' 
is based on especially high unemployment or large numbers of Food Stamp 
recipients in the State. Please see Sec. 270.2 for more discussion of

[[Page 62143]]

how a State qualifies for the Contingency Fund.
    Pub. L. 105-33 gave us the added discretion to reduce the penalty 
if the State failed to meet the participation rate due to extraordinary 
circumstances such as a natural disaster or regional recession. To 
ensure that we take any such circumstances into consideration, States 
should submit information describing the circumstances and their 
effects on the ability of the State to meet the participation rates. We 
must provide a written report to Congress to justify any penalty 
reductions we provide States on this basis.
    Readers will note the similarity between this criterion for 
reducing the amount of the penalty and the criterion at 
Sec. 272.5(a)(1) for granting a reasonable cause exception to a penalty 
due to a natural disaster. We will evaluate any information a State 
submits concerning the effects of a natural disaster on its ability to 
achieve the participation rates. If the material does not support 
granting a reasonable cause exception, we will consider whether it is 
appropriate to reduce the penalty. For example, if the disaster caused 
a failure in only one area of the State, we might reduce the penalty in 
proportion to the TANF caseload in that area. We intend to use a 
similar approach to evaluating the effects of a regional recession.
    Finally, this section of the proposed regulation indicates that 
States may dispute our findings that they are subject to a penalty.
Is there a way to waive the State's penalty for failing to achieve 
either of the participation rates? (Sec. 271.52)
    Section 409(b) creates a reasonable cause exception to the 
requirement for certain penalties, including failure to meet the 
minimum participation rates. If we determine that a State has 
reasonable cause for failing to meet one of the rates, we cannot impose 
a penalty.
    We have included general reasonable cause criteria at Sec. 272.5, 
which may apply to any of the penalties for which there are reasonable 
cause exceptions. The preamble to Sec. 272.5 discusses how we arrived 
at these criteria as well as our general thinking about the reasonable 
cause exception. For the work participation rate penalty, two 
additional, specific reasonable cause exceptions apply. Under the 
proposed rule at Sec. 271.52, a State may demonstrate that its failure 
can be attributed to its granting of good cause domestic violence 
waivers under the Family Violence Option. In this case, the State must 
show that it would have achieved the required work rates if cases with 
good cause waivers were removed from both parts of the calculation 
(i.e., from the numerators described in Secs. 271.22(b)(1) and 
271.24(b)(1) and the denominators described in Secs. 271.22(b)(2) and 
271.24(b)(2)). A State must grant the good cause domestic violence 
waivers in accordance with criteria in the regulation to be eligible to 
receive a reasonable cause exemption on these grounds.
    The regulation also provides that a State may receive a good cause 
exemption if it demonstrates that its failure to achieve the work 
participation rates can be attributed to the provision of assistance to 
refugees in federally-approved alternative project.
    In either of these two situations, as well as in the general 
reasonable cause criteria, a State must demonstrate that it did not 
divert cases to a separate State program for the purpose of avoiding 
the work participation rates before we will grant a reasonable cause 
exemption.
Can a State correct the problem before incurring a penalty? 
(Sec. 271.53)
    The process for developing a corrective compliance plan does not 
differ from one penalty to the next, although the content of the plan 
naturally would. Thus, the proposed regulation refers to Sec. 272.6, 
the general section on submittal of a corrective compliance plan for 
any penalty.
    However, in this section, we establish a specific threshold that 
States must achieve in order to be considered for a reduced work 
penalty under Sec. 272.6(i)(1). More specifically, we indicate that the 
State must increase its participation rate during the compliance period 
enough to reduce the difference between the participation rate it 
achieved in the year for which it is subject to a penalty and the 
minimum participation rate it must achieve in the year of the 
corrective compliance plan by 50 percent. (In other words, if you 
divided the difference between the rate achieved during the compliance 
period and the rate achieved during the penalty year by the difference 
between the target rate during the compliance period and the rate 
achieved during the penalty year, the result must be 0.50 or greater.)
    We believe that showing more progress than not indicates 
significant compliance. Thus, if the State achieves this amount of 
progress towards coming into compliance, we may reduce its work penalty 
under the corrective compliance provision.
    This proposal is similar in approach to the approach taken in 
Sec. 271.51, with respect to potential reductions in work penalties 
based on degree of noncompliance. In both cases, we are expecting a 
State to come into significant compliance in order to get a reduced 
penalty.
Is a State subject to any other penalty relating to its work program? 
(Sec. 271.54)
    In accordance with section 409(a)(14), as amended by Pub. L. 105-
33, if we determine that a State has violated 407(e) of the Act in a 
fiscal year, which relates to when a State must impose penalties on 
individuals who refuse to engage in required work, we must reduce the 
SFAG payable for the following fiscal year by between one and five 
percent of the adjusted SFAG.
    We propose to require each State to provide us with a description 
of how it will carry out a pro reduction for individuals under both 
TANF and separate State programs. This requirement appears in the data 
collection requirements at Sec. 275.9. This data collection will help 
us determine whether this is in fact a serious problem; to the extent 
possible, we want to ensure an equitable and level playing field for 
the States.
Under what circumstances will we reduce the amount of the penalty for 
not properly imposing penalties on individuals? (Sec. 271.55)
    The statute requires us to reduce the amount of the penalty based 
on the degree to which the State is not in compliance with the section 
407(e) of the Act.
    In determining the size of any reduction, we propose to consider 
two factors. First, we will examine whether the State has established a 
control mechanism to ensure that the grants of individuals are reduced 
for refusing to engage in required work. Second, we will consider the 
percentage of grants that the State has failed to reduce in accordance 
with the statute. We are particularly interested in any comments 
readers have concerning what criteria to use in this area. We would 
like readers' views on the proposal to link the penalty amount to the 
percentage of cases for which grants have not been appropriately 
reduced.
Subpart F--Waivers
How do existing welfare waivers affect the participation rate? 
(Sec. 271.60)
    Section 415 permits a State to continue operating any welfare 
reform demonstration waiver (i.e., section 1115 waiver) affecting work 
activities granted prior to the date of enactment of PRWORA, to the 
extent that PRWORA is inconsistent with the waiver.
    In considering how this provision affects the work rules applicable 
in a State, we wanted to draft a regulation

[[Page 62144]]

that would balance the legislative emphasis on helping recipients find 
work quickly with the intent to allow States to continue reform 
activities they had already undertaken. Under prior law, this 
Administration encouraged States to use the waiver mechanism to its 
fullest capacity and to act as the ``laboratories of change'' for the 
nation. Our intent is to help States capitalize on the promising 
initiatives they began under those waivers, but in a way that is 
consistent with the overall purpose of PRWORA. We are also cognizant of 
the importance Congress placed on ensuring that States are accountable 
for promoting work.
    The proposed regulation requires a waiver to meet the definition 
included in Sec. 270.30. This definition allows a State the flexibility 
to include applicable provisions of prior law, but only if their 
inclusion were necessary to achieve the objective of the approved 
waiver. For example, a State might have had a waiver requiring single 
parents with children under one year of age and pregnant recipients to 
participate in JOBS, while maintaining the JOBS exemptions for the 
disabled and the elderly. In this example, the objective of the waiver, 
as reflected in the application and terms and conditions, was to expand 
the group of recipients who were required to participate in work 
activities. Maintaining the other statutory exemptions would not be 
necessary to achieve this objective and, in fact, would be inconsistent 
with the fundamental purpose of the waiver. Therefore, the prior law 
exemptions would not be included as part of the waiver; the waiver 
would include only the expanded participation requirements for single 
parents of young children and pregnant recipients. Moreover, because 
those two groups can also be required to participate under TANF, there 
is no inconsistency. Thus, in this example, the prior law exemptions 
would not be included in the waiver, and the waiver itself would not be 
inconsistent with TANF.
    The proposed definition recognizes two kinds of waiver 
inconsistencies with respect to the work requirements. The first is in 
the area of what activities a State may count toward the participation 
rate. As part of the waiver demonstrations, a number of States expanded 
the JOBS work activities. Those States believed that a broader range of 
activities would be most effective in helping the recipients in their 
States find and retain work and achieve self-sufficiency. In creating 
this package of activities, States generally kept some of the prior law 
activities, changed others, and added new ones. While only the changed 
and new activities required waivers, we would include the prior law 
activities under the waiver because they are necessary for the State to 
carry out the objectives of the approved waiver. Some of these 
activities are inconsistent with the definition of work activities in 
section 407(d), so States could use the activities defined under the 
waivers instead of the TANF list of work activities. Thus, States could 
count participation in a broader range of activities as participation 
in work.
    The other area in which the proposed definition recognizes waiver 
inconsistencies relates to hours of participation. In approving waivers 
of required hours of participation, we allowed States to implement two 
kinds of policies.
    First, States expanded the number of required hours of 
participation for a class or classes of recipients. Because those 
classes of recipients are already required to participate for a greater 
number of hours under TANF than under prior law, there is no 
inconsistency. Those waivers would not continue under this proposed 
regulation.
    Second, we approved waivers that allowed a State to set the number 
of hours an individual must participate in accordance with an 
individualized plan for achieving self-sufficiency. This gave States 
additional freedom to tailor work requirements to the circumstances of 
the individual. For example, some States removed the JOBS exemption for 
the disabled. The intent of such a waiver was to find an appropriate 
level of participation based on the particular circumstances and 
abilities of the individual. Because continuing these policies could be 
inconsistent with TANF, due to requiring a lesser number of hours of 
participation than TANF, we will recognize such waivers as allowable 
inconsistencies.
    The definition does not recognize prior law exemptions from the 
denominators of the participation rates as part of the waiver, except 
for research group cases. We believe this is appropriate for two 
reasons. First, although we have allowed new or modified activities to 
count for participation, we have never granted a waiver of a 
participation rate itself. Second, we have never granted a waiver that 
added new exemptions from the work requirements, which would have 
reduced the number of recipients counted in the denominator. We think 
that States need to try to provide work-related services for the entire 
caseload, because almost all families will be facing the time limit on 
benefits. By not adjusting the number of families who would otherwise 
be counted in the denominators, States have a greater incentive to 
provide work-related services for everyone.
    Finally, we would like to explain the policy in the proposed 
regulations with respect to control and experimental treatment groups. 
As part of the demonstrations, States divided the AFDC population in 
the demonstration into three groups. The first, the control group, 
received benefits under the regular, statutory AFDC program. The 
second, the experimental treatment group, received benefits under AFDC 
with the demonstration changes and is used to evaluate the impacts of 
the new program. The third, the non-experimental treatment group, also 
received benefits under AFDC with the demonstration changes, but is not 
used to evaluate the impacts of the new program. The control and 
experimental treatment groups together comprise the research group and 
contain a fairly small number of the AFDC recipients. Except in States 
with small caseloads, the research group represents a very small 
proportion of the welfare caseload. The non-experimental treatment 
group includes the vast majority of the welfare population.
    Information on the research group is the sole basis for impact and 
cost-benefit analyses of the effects of the demonstration provisions 
and is essential to all the major components of the evaluation. Because 
evaluation is one of the goals of the demonstration, and the 
maintenance of different requirements for the three groups of 
recipients is necessary to avoid compromising the evaluation, we 
believe all of the underlying law for the research group continues to 
apply in those States continuing demonstration evaluations and is 
uniquely necessary to achieve that evaluation goal. Thus, the research 
group--both the control and experimental treatment groups--should not 
be included in either the numerator or the denominator of the 
participation rates.
Subpart G--Non-displacement
What safeguards are there to ensure that participants in work 
activities do not displace other workers? (Sec. 271.70)
    The proposed regulations incorporate the statutory prohibition 
against allowing an individual participating in TANF work activities 
from displacing another employee. A participant in a work activity may 
not fill a vacancy that exists because another individual is on layoff 
from the same or equivalent job. Also, a participant may not fill a

[[Page 62145]]

vacancy created by an involuntary reduction in work force or by the 
termination of another employee for the purpose of filling a vacancy 
with a participant.
    We encourage States to take aggressive steps to ensure that the 
current work force is not harmed or their employment jeopardized in any 
way by a State's efforts to place welfare recipients in employment or 
work-related positions. Our ultimate goal, and that of States, is to 
increase the ranks of the employed, not to substitute one group of job-
seekers for another. Displacing current workers is counter-productive 
and damages the overall stability of the labor force. We are confident 
that States will develop procedures for working with employers to 
protect against displacing other employees.

C. Part 272--Accountability Provisions--General

    It is clear that, in enacting the penalties at section 409(a), 
Congress intended for State flexibility to be balanced with State 
accountability. To assure that States fulfilled their new 
responsibilities under the TANF program, Congress established a number 
of penalties and requirements under section 409(a). The penalty areas 
indicate the areas of State performance that Congress found most 
significant and for which it gave us clear enforcement authority.
What definitions apply to this part? (Sec. 272.0)
    This section cross-references the general TANF regulatory 
definitions established under part 270.
What penalties will apply to States? (Sec. 272.1)
    Section 409 includes 15 penalties that may be imposed on States. 
This proposed rule covers 14 of the 15. We have not included the 
specific penalty dealing with substantial noncompliance with 
requirements under title IV-D (section 409(a)(8)) in this proposed 
rule. Our Office of Child Support Enforcement will address this penalty 
in a separate proposed rule to be published at a future time.
    The penalties for which we are proposing regulations are:
    (1) a penalty for using the grant in violation of title IV-A of the 
Act, as determined by findings from a single State audit and equal to 
the amount of the misused funds;
    (2) a penalty of five percent of the adjusted SFAG, based on audit 
findings that show that a State intentionally violated a provision of 
the Act;
    (3) a penalty of four percent of the adjusted SFAG for the failure 
to submit an accurate, complete and timely required report;
    (4) a penalty of up to 21 percent of the adjusted SFAG for the 
failure to satisfy the minimum participation rates;
    (5) a penalty of no more than two percent of the adjusted SFAG for 
the failure to participate in the Income and Eligibility Verification 
System (IEVS);
    (6) a penalty of no more than five percent of the adjusted SFAG for 
the failure to enforce penalties on recipients who are not cooperating 
with the State Child Support Enforcement Agency;
    (7) a penalty equal to the outstanding loan amount plus interest 
for the failure to repay a Federal loan provided for under section 406;
    (8) a penalty equal to the amount by which qualified State 
expenditures fail to meet the appropriate level of historic effort in 
the operation of the TANF program;
    (9) a penalty of five percent of the adjusted SFAG for the failure 
to comply with the five-year limit on Federal funding of assistance;
    (10) a penalty equal to the amount of contingency funds unremitted 
by a State for a fiscal year;
    (11) a penalty of no more than five percent of the adjusted SFAG 
for the failure to maintain assistance to an adult single custodial 
parent who cannot obtain child care for a child under age six;
    (12) a penalty of no more than two percent of the adjusted SFAG 
plus the amount a State has failed to expend of its own funds to 
replace the reduction to its SFAG due to the assessment of penalties in 
Sec. 272.1 in the year of the reduction;
    (13) a penalty equal to the amount of the State's Welfare-to-Work 
formula grant for failure to maintain the historic effort during a year 
in which this formula grant is received; and
    (14) a penalty of not less than one percent and not more than five 
percent of the adjusted SFAG for failure to reduce assistance for 
recipients refusing without good cause to work.
    In calculating the amount of the penalty, we will take into 
consideration the extent to which a State's SFAG has been reduced to 
fund Tribal TANF grants. This is particularly applicable for penalties 
based on percentage reductions. These regulations use the term 
``adjusted SFAG'' to refer to States whose SFAG allocations are reduced 
for this purpose. For States without Tribal grantees, ``adjusted SFAG'' 
will be the same as SFAG.
    Except for the penalty at Sec. 272.1(a)(12), all penalties are 
either a percentage of the adjusted SFAG or a fixed amount. In 
calculating the amount of these penalties, we will add all applicable 
penalty percentages together, and we will apply the total percentage 
reduction to the amount of the adjusted SFAG that would have been 
payable if no penalties were assessed against the State. As a final 
step, we will subtract other (fixed) penalty amounts.
    The penalty at Sec. 272.1(a)(12) requires that we reduce a State's 
adjusted SFAG if, after one of the penalties under this section has 
been taken, a State does not expend its own funds on the State's TANF 
program in the amount of the penalty, i.e., the amount by which the 
adjusted SFAG is reduced. Unlike the other penalties, this penalty 
represents a percentage of the adjusted SFAG (up to two percent) and a 
fixed amount, i.e., the amount of the reduction a State has failed to 
expend under the TANF program with its own funds. We believe it is 
appropriate to calculate the amount of this penalty by including the 
amount of the penalty based on a percentage with other applicable 
penalty percentages. The fixed amount of this penalty will be 
subtracted with other fixed-amount penalties. Then we will add the 
amount based on the percentage for this penalty and the fixed amount 
for this penalty to determine the cumulative amount of this penalty.
    The total reduction in a State's grant must not exceed 25 percent. 
If the 25 percent limit prevents the recovery of the full penalty 
imposed on a State during a fiscal year, we will apply the remaining 
amount of the penalty to the SFAG payable for the immediately 
succeeding fiscal year. If it is not possible to take the full penalty 
in the next succeeding year, we will defer taking the penalty to 
subsequent years until it is finally taken in full.
When do the TANF penalty provisions apply? (Sec. 272.2)
    States may implement the TANF program at different times, but no 
later than July 1, 1997. The Territories, i.e., Guam, the Virgin 
Islands, Puerto Rico, and American Samoa, may not implement until July 
1, 1997.
    Congress recognized that, in certain circumstances, States should 
face the consequences for failing to meet the requirements of the 
penalty provisions from the first day the State operates the TANF 
program. It also recognized, however, that States needed some lead time 
in implementing other TANF requirements.
    Section 116(a)(2) of PRWORA delays the effective date of some of 
the penalty provisions in title IV-A. For those provisions where the 
effective date is

[[Page 62146]]

not delayed, we believe that Congress intended that a State would be 
subject to these penalties from the first day it began to operate TANF.
    Before we issue final rules, States must implement the TANF 
provisions in accordance with their own reasonable interpretation of 
the statute. If we find that a State's actions are inconsistent with 
the final regulations, but consistent with a reasonable interpretation 
of the statute, we will not impose a penalty. However, if we find that 
a State has operated its TANF program in a manner that is not based on 
a reasonable interpretation of the statute, we may penalize the State.
How will we determine if a State is subject to a penalty? (Sec. 272.3)
    We have concluded that no one method can be used for monitoring 
State performance. The following discussion explains the different 
methods we will use to determine State compliance with the requirements 
with which noncompliance may lead to penalties.
Using the Single Audit to Determine Misuse of Funds and the 
Applicability of Certain Other Penalties
    We will determine whether a State has used funds under section 403 
in violation of title IV-A through an audit conducted under the Single 
Audit Act. (See Sec. 273.10 on Misuse of Funds.) This is the only 
penalty for which Congress identified a method for determining a 
penalty.
    Under the requirements of the Single Audit Act, States operating 
Federal grant programs meeting a monetary threshold (currently 
$100,000, but soon to be $300,000) must conduct an audit under the Act. 
Most States must audit annually; a few may audit biennially. Because of 
the substantial funding under TANF, all TANF States meet the audit 
threshold.
    The single audit is an organization-wide audit that reviews State 
performance in many program areas. We will implement the Single Audit 
Act through use of Office of Management and Budget (OMB) Circular A-
133, ``Audits of States, Local Governments, and Non-Profit 
Organizations.'' OMB recently revised the Circular, merging former 
Circulars A-128 and A-133, because of amendments to the Act in 1996. 
The new Circular was published in the Federal Register on June 30, 
1997, at 62 FR 35277.
    In conducting their audits, auditors use a variety of tools, 
including the statute and regulations for each program and a compliance 
supplement issued by OMB that focuses on certain areas of primary 
concern to that program. Upon issuance of final regulations, we will 
prepare a TANF program compliance supplement, for OMB to issue, which 
will focus on those penalties for which the single audit will be our 
primary compliance instrument.
    The Single Audit Act does not preclude us or other Federal offices 
or agencies, such as the Office of the Inspector General (OIG), from 
conducting additional audits or reviews. In fact, there is specific 
authority to conduct such additional audits or reviews. In particular, 
31 U.S.C. 7503(b) states:

    (b) Notwithstanding subsection (a), a Federal agency may 
conduct, or arrange for additional audits that are necessary to 
carry out its responsibilities under Federal law or regulation. The 
provisions of this chapter do not authorize any non-Federal entity 
(or sub-recipient thereof) to constrain, in any manner, such agency 
from carrying out or arranging for such additional audits, except 
that the Federal agency shall plan such audits to not be duplicative 
of audits of Federal awards.

    States should note, therefore, that the State-conducted single 
audit will be our primary means for determining if a State has misused 
funds. We may, however, through our own audits and reviews, or through 
OIG and its contractors, conduct audits or reviews of the TANF program 
that will not be duplicative of single organization-wide audit 
activities. We may identify a need to conduct such audits as the result 
of complaints from individuals and organizations, requests by the 
Congress to review particular areas of interest, or other indications 
of problems in State compliance with TANF program requirements.
    We are proposing that the single audit be the primary means for 
determining certain other penalties as well.
    Where we determine that a State is subject to a penalty for the 
misuse of funds, we may apply a second penalty if we determine that the 
State intentionally misused Federal TANF funds. The criteria for 
determining ``intentional misuse'' are found at Sec. 273.12. The single 
audit will be the primary vehicle for this penalty because of its link 
to the determination of misuse of funds.
    The single audit will also be the primary means that we use to 
determine State compliance with the following three penalties: (1) 
failure to participate in the Income and Eligibility Verification 
System (see Sec. 274.11); (2) failure to comply with paternity 
establishment and child support enforcement requirements under title 
IV-D of the Act (see Sec. 274.31); and (3) failure to maintain 
assistance to an adult single custodial parent who cannot obtain child 
care for a child under age six (see Sec. 274.20). For these process-
focused penalties, we determined that we could make appropriate use of 
the single audit to monitor State compliance.
    The audit compliance supplement will include guidance to auditors 
on how to monitor these areas. As in the case of the misuse-of-funds 
penalty, we may conduct other reviews and audits, if necessary. For 
example, the penalty for a State's failure to maintain assistance to an 
adult single custodial parent who cannot obtain child care is an area 
where we anticipate that we could receive complaints from individuals 
and organizations. A number of substantiated complaints may indicate 
that an additional review may be warranted.
Use of Data Collection and Reporting for Determining Applicability of 
Certain Penalties
    We will monitor State compliance with the penalties for failure to 
satisfy minimum participation rates (see Sec. 271.21) and failure to 
comply with the five-year limit on Federal assistance primarily through 
the information required to be reported by section 411(a) (i.e., State 
reporting of disaggregate case record information). (See part 275 of 
the proposed rule for the proposed data collection and reporting 
requirements.)
    We believe that Congress intended that the data elements in section 
411(a) be used to gather information for these two penalty areas. Thus, 
we concluded that the section 411(a) data collection tools would be our 
primary means for determining these penalties. We may also need to 
conduct reviews in the future to verify the data submitted by States, 
particularly in these two areas where a fiscal penalty is applicable. 
States should maintain records to adequately support any report in 
accordance with 45 CFR 92.42. States may not revise the sampling frames 
or program designations for cases in the quarterly TANF and TANF MOE 
Data Reports retroactively (i.e., after submission).
    Accurate data are essential if we are to apply penalties fairly. If 
the State submits insufficient data to verify its compliance with the 
requirements, or if we determine that a State can not adequately 
document data it has submitted showing that it has met its 
participation rates or the five-year time limit, we will enforce the 
participation rate penalty or five-year time limit penalty.
    In our consultations, some participants recommended that the

[[Page 62147]]

single audit be the means for determining all the penalties. However, 
since States must otherwise report the data that directly speak to 
their compliance in these two areas, and timely determination of State 
compliance is necessary, we did not accept that recommendation and have 
proposed to rely on the quarterly reports required under part 275 of 
the proposed rule.
TANF MOE and Contingency Fund MOE Penalties, and Failure to Replace 
Grant Reductions Penalty
    All States are subject to the TANF MOE penalty for failure to 
maintain a certain level (i.e., 75 or 80 percent) of historic effort. 
Those States that choose to receive contingency funds under section 
403(b) are subject to a separate maintenance-of-effort penalty for 
failure to maintain 100 percent of historic effort.
    We have developed a proposed TANF Financial Report (see Appendix D 
of part 275). We designed this report to gather information required 
under sections 403(b)(4), 405(c)(1), 409(a)(1), 409(a)(7), 411(a)(2), 
411(a)(3), 411(a)(5), including data on administrative costs, types of 
State expenditures, and transitional services for families no longer 
receiving assistance. It will also gather financial information to 
enable us to award grant funds, close out accounts, and manage other 
financial aspects of the TANF program. In addition, we will be using 
this report to monitor State compliance with the TANF and Contingency 
Fund MOE requirements and to aid us in determining if Federal TANF 
funds have been used properly.
    Consistent with section 5506(a) of Pub. L. 105-33, the TANF 
Financial Report is due 45 days after the end of each quarter. Upon 
receipt of the report for the fourth quarter, i.e., by November 14, we 
will have State-reported information indicating whether or not the 
State met its MOE requirements.
    On the TANF Financial Report, States will inform us of the amount 
of expenditures they have made for TANF and Contingency Fund MOE 
purposes. For the TANF MOE, States must inform us of the amount of 
expenditures made in the State TANF program and in separate State 
programs. (See part 274, subpart B, for more information on the 
Contingency Fund MOE requirement.)
    For the TANF MOE, we are proposing to require a supplemental report 
that must accompany the fourth quarter TANF Financial Report. The 
supplemental report (or addendum) will include a description of the 
TANF MOE expenditures that States have made under separate programs, 
i.e., not as part of their State TANF programs. (See Secs. 273.7 and 
275.9(a) for more information on the contents of this supplemental 
report.)
    If we reduce a State's SFAG as the result of a penalty, the State 
is required to expend an equal amount of its own funds for the fiscal 
year in which the reduction is made. If the State fails to replace the 
funds through these State-only expenditures, as required, the State is 
subject to the penalty at Sec. 272.(1)(a)(12), i.e., an amount of up to 
two percent of the adjusted SFAG and the amount not expended to replace 
the reduction to the SFAG due to the penalty.
    We will use the TANF Financial Report (or Territorial Financial 
Report) to determine if a State has complied with these provisions. 
Instructions to the TANF Financial Report in Appendix D require States 
to include amounts that they are required to contribute as a result of 
a penalties taken against the State. (A similar requirement will be 
included in the Territorial Financial Report.)
    As in the case of the penalties for failure to meet the 
participation rates or comply with the five-year limit on assistance, 
our program management responsibilities may require us to verify the 
data submitted by States on the TANF Financial Report, particularly 
data on MOE expenditures and ``replacement funds.'' States should 
maintain records in accordance with 45 CFR 92.42. As we have stated, 
accurate data are essential if we are to determine State compliance. If 
the State submits insufficient MOE data to verify its compliance or if 
we determine that the State can not adequately document data it has 
submitted showing that it has met its MOE requirements, we will apply 
the penalties for failure to meet the TANF and Contingency Fund MOE 
requirements. For the TANF MOE, we may have to estimate the actual 
level of qualifying MOE expenditures. We would then base the amount of 
the penalty on the degree to which we believe the data are inaccurate.
Federal Loan Repayment
    We will penalize States for failing to repay a loan provided under 
section 406 (see Sec. 274.40). A specific vehicle for determining a 
State's compliance with this requirements is unnecessary. In our loan 
agreements with States, we will specify due dates for the repayment of 
the loans and will know if payments are not made.
Penalty for Reporting Late
    We will penalize States for failing to submit a report required 
under section 411(a) by the established due dates (see Secs. 275.4 and 
275.7). As noted before, we are requiring that the reports must not 
only be timely, but they must also be complete and accurate. Thus, we 
may take actions to review the accuracy of data reporting if 
appropriate. If we determine that the data required under section 
411(a) are incomplete or inaccurate, we may apply the penalty for 
failing to submit a report. As discussed above, if the data that are 
inaccurate or incomplete pertain to other penalties (i.e., the 
participation rate, the five-year time limit on assistance, or the TANF 
MOE and Contingency Fund MOE requirements), we will apply the penalties 
associated with these requirements.
Additional Single Audit Discussion
    Although we are proposing that the single audit be the primary 
means to determine certain specific penalties, if a single audit 
detects the lack of State compliance in other penalty areas, e.g., the 
five-year limit on Federal assistance, we cannot ignore those findings. 
Therefore, we will also impose a penalty based on the single audit 
findings in such other penalty areas.
    For most programs, other than TANF, the Single Audit Act procedures 
provide for disallowance in cases of substantiated monetary findings. 
However, in accordance with section 409(a), we will be taking 
penalties, rather than disallowances, under TANF. When the single audit 
determines a specific penalty, the penalty amount that we will apply is 
the penalty amount associated with the specific penalty provision or 
provisions, for example, misuse of funds and failure to end federal 
assistance after 60 months of receipt. Likewise, where we, or OIG, 
conduct an audit or review, the penalty amount that will apply is the 
penalty amount associated with the specific penalty or penalties under 
section 409.
    Regardless of how we determine that a State is subject to a 
penalty, the determination of whether a State may invoke the reasonable 
cause exception or enter into a corrective compliance plan depends on 
the specific penalty provision. States cannot avoid all penalties 
through the reasonable cause exception or a corrective compliance plan 
(see Sec. 272.4).

[[Page 62148]]

What happens if we determine that a State is subject to a penalty? 
(Sec. 272.4)
Notification to the State
    If we determine that a State is subject to a penalty, we will send 
the State a notice that it has failed to meet a requirement under 
section 409(a). This notice will: (1) specify the penalty provision at 
issue, including the applicable penalty amount; (2) specify the source 
and reasons for our decision; (3) explain how and when the State may 
submit a reasonable cause justification under 409(b) and/or corrective 
compliance plan under 409(c); and (4) invite the State to present its 
arguments if it believes that the data or method we used were in error 
or were insufficient, or that its actions, in the absence of Federal 
regulations, were based on a reasonable interpretation of the statute.
Process When Both Reasonable Cause and Corrective Compliance Plan 
Provisions Apply
    For penalties where the reasonable cause and the corrective 
compliance plan provisions both apply, we are proposing that a State 
submit to us both its justification for reasonable cause and corrective 
compliance plan within 60 days of receipt of our notice of failure to 
comply with a requirement. The objective of this proposal is to 
expedite the resolution of State failure to meet a requirement.
    A State may choose to submit a reasonable cause justification 
without a corrective compliance plan. In this case, we will notify the 
State if we do not accept the State's justification of reasonable 
cause. Our notification will also inform the State that it has an 
opportunity to submit a corrective compliance plan. The State will then 
have 60 days from the date it receives the notification to submit a 
corrective compliance plan. (Under this scenario, we will send the 
State two notices--the first will inform the State that it may be 
subject to a penalty, and the second will inform the State that we 
determined that it did not have reasonable cause.)
    A State may also choose to submit only a corrective compliance plan 
if it believes that the reasonable cause factors do not apply in a 
particular case.
Process When the Reasonable Cause and/or Corrective Compliance Plan 
Provisions Do Not Apply
    The reasonable cause and corrective compliance plan provisions in 
the statute do not apply to five penalties:
    (1) failure to repay a Federal loan on a timely basis; (2) failure 
to maintain the applicable percentage of historic State expenditures 
for the TANF MOE requirement; (3) failure to maintain 100 percent of 
historic State expenditures for States receiving Contingency Funds; (4) 
failure to expend additional state funds to replace grant reductions 
due to the imposition of one or more penalties listed in Sec. 272.1; 
and (5) failure to maintain 80, or 75 percent, as appropriate, of 
historic State expenditures during a year in which a Welfare-to-Work 
grant is received.
Due Dates
    States must postmark their responses to our notification within 60 
days of their receipt of our notification.
    If, upon review of the State's submittal(s), we find that we need 
additional information, the State must provide the information within 
two weeks of the date of our request. This is to make sure we are able 
to respond timely.
Under what general circumstances will we determine that a State has 
reasonable cause? (Sec. 272.5)
    Two provisions in section 409, the reasonable cause and corrective 
compliance provisions, could result in our decision to excuse or reduce 
a penalty. After reviewing these provisions, we decided that we should 
not consider the reasonable cause exception in isolation. Rather, we 
view it in conjunction with the provision for developing corrective 
compliance plans. In drafting this proposed regulation, we have 
acknowledged the new Federal and State roles under TANF and worked to 
minimize adversarial Federal-State issues. Our primary task is to help 
each State operate the most effective program it can to meet the needs 
of its caseload and the goals of the law. Through these rules, we hope 
to focus States on positive steps that they should take to correct 
situations that resulted in a determination that they are subject to a 
penalty rather than let them simply avoid the penalty. As such, we 
consider it more appropriate to emphasize the use of the corrective 
compliance plan process over the reasonable cause exception. 
Consequently, we have drafted a more limited list of reasonable cause 
criteria than some suggested during our consultations.
    PRWORA did not specify any definition of reasonable cause or 
indicate what factors we should use in deciding whether to grant a 
reasonable cause exception for a penalty. During our deliberations on 
reasonable cause factors, we considered the diverse opinions expressed 
during our consultation process, as well as the need to support the 
commitment of Congress, the Administration, and States to the work and 
other objectives of the TANF program. In keeping with these objectives, 
we are proposing a limited number of reasonable cause factors for 
circumstances that are beyond a State's control, and placing a greater 
emphasis on corrective solutions for those circumstances a State can 
control. We strongly believe that States must correct problems that 
detract from moving families from welfare to self-sufficiency.
    In the discussion that follows, we will describe: (1) the factors 
that we will consider in deciding whether or not to excuse a penalty 
based on a State's claim of reasonable cause; (2) the contents of an 
acceptable corrective compliance plan; and (3) the process for applying 
these provisions. Our proposal attempts to treat these two provisions 
as part of an integrated process.
    We are proposing factors that would be applicable to all penalties 
for which the reasonable cause provision applies. We generally limit 
reasonable cause to the following: (1) natural disasters and other 
calamities (e.g., hurricanes, tornadoes, earthquakes, fires, floods, 
etc.) whose disruptive impact was so significant as to cause the 
State's failure to meet a requirement; (2) formally issued Federal 
guidance that provided incorrect information resulting in the State's 
failure; and (3) isolated, non-recurring problems of minimal impact 
that are not indicative of a systemic problem (e.g., although a State's 
policies and procedures, including a computerized kick-out system, 
require that Federal TANF assistance be time-limited to five years, ten 
families somehow slip through and receive assistance for longer than 
five years).
    We are also proposing a separate factor that would apply in cases 
when the State fails to satisfy the minimum participation rates, and 
another specific factor that would apply to cases when the State fails 
to meet the five-year limit. We discuss specific factors in our 
preamble discussion of Secs. 271.52 and 274.3.
    We will not grant a State reasonable cause to avoid the time-limit 
penalty or any of the three penalties related to work if we detect a 
significant pattern of diversion of families to separate State programs 
that achieves the effect of avoiding the work participation rates. As 
we indicated in program announcement TANF-ACF-PA-97-1, we do not 
believe Congress intended a State to use separate State welfare 
programs to avoid TANF's focus on work.
    Likewise, as discussed previously, we will not grant a State 
reasonable cause to avoid the penalty on work participation, failure to 
enforce child

[[Page 62149]]

support cooperation, time limits or failure to impose work sanctions if 
we detect a significant pattern of diversion of families to separate 
State programs that has the effect of diverting the Federal share of 
child support collections.
    In determining reasonable cause, we will consider the efforts the 
State made to meet the requirement. We will also take into 
consideration the duration and severity of the circumstances that led 
to the State's failure to achieve the requirement.
    The burden of proof rests with the State to explain fully what 
circumstances, events, or other occurrences constitute reasonable cause 
with reference to its failure to meet a particular requirement. The 
State must provide us with sufficient relevant information and 
documentation to substantiate its claim of reasonable cause. If we find 
that the State has reasonable cause, we will not impose the penalty.
What if a State does not demonstrate reasonable cause? (Sec. 272.6)
    As noted, section 409(c), as amended by section 5506 of Pub. L. 
105-33, provides that, prior to imposing a penalty against a State, we 
will notify the State of the violation and allow the State the 
opportunity to enter into a corrective compliance plan. The State will 
have 60 days from the date it receives our notice of a violation to 
submit a corrective compliance plan if it does not claim reasonable 
cause or if it claims reasonable cause simultaneously with its 
corrective compliance plan. If, in response to our notice of a 
violation, the State initially submits only a claim of reasonable 
cause, and if we deny this claim, the State has 60 days from the date 
it receives our (second) notice denying the claim to submit a 
corrective compliance plan. If an acceptable corrective compliance plan 
is not submitted on time, we will assess the penalty immediately. 
Outside of the notice(s) we will not remind the State that the 
corrective compliance plan is due.
    The corrective compliance plan must identify the milestones, 
including interim process and outcome goals, the State will achieve to 
assure that it will fully correct or discontinue the violation within 
the time period specified in the plan. In order to highlight the 
importance of the plan, it must also include a certification by the 
Governor that the State is committed to correcting or discontinuing the 
violation in accordance with the plan.
    We recognize that each plan will be specific to the violation (or 
penalty) and that each State operates its TANF program in a unique 
manner. Thus, we will review each plan on a case-by-case basis. Our 
determination to accept a plan will be guided by the extent to which 
the State's plan indicates that it will completely correct or 
discontinue, as appropriate, the situation leading to the penalty.
    The steps a State takes to correct or discontinue a violation may 
vary. For example, where a State is penalized for misusing Federal TANF 
funds, we will expect it to remove this expenditure from its TANF 
accounting records (charging it to State funds, as allowable) and 
provide steps to assure that such a problem does not recur. Where a 
State has reduced or denied assistance improperly to a single custodial 
parent who could not find child care for a child under six, correcting 
the violation may require that the State reimburse a parent 
retroactively for the assistance that was improperly denied. The 
State's corrective compliance plan would also have to describe the 
steps to be taken to prevent such problems in the future.
    Section 409(c)(3) requires that a violation be corrected or 
discontinued, as appropriate, ``in a timely manner.'' A State's timely 
correction of the problem or discontinuance of an improper action is 
critical to assure that the State is not subject to a subsequent 
penalty. At the same time, we recognize that the causes of violations 
will vary and we cannot expect all violations to be rectified in the 
same time frame. Thus, we do not want to unduly restrict the duration 
of corrective compliance plans. At the same time, we do not want to 
allow States to prolong the corrective compliance process indefinitely 
and leave problems unresolved into another fiscal year. Therefore, we 
are proposing that the period covered by a corrective compliance plan 
end no later than six months after the date we accept a State's 
corrective compliance plan.
    We believe that, for most violations, States will have some prior 
indication that a problem exists and will be able to begin addressing 
its problems during the period before the deadline for submitting its 
corrective compliance plan. Therefore, we think it fair that the 
corrective compliance plan period extend no more than six months from 
the date when we accept the State's plan; this period should provide 
the State sufficient time in which to correct or discontinue 
violations.
    We would like to hear comments from States and other interested 
parties on this proposal to restrict the time period for a corrective 
compliance plan. We will consider all comments and suggestions we 
receive on this matter.
Corrective Compliance Plan Review
    We propose to consult with States on any modifications to the 
corrective compliance plan and seek mutual agreement on a final plan. 
Such consultation will occur only during the 60-day period specified in 
the law. Any modifications to the State's corrective compliance plan 
resulting from such consultation will constitute the State's final 
corrective compliance plan and will obligate the State to take such 
corrective actions as specified in the plan.
    We may either accept or reject the State's corrective compliance 
plan within the 60-day period that begins on the date that we receive 
the plan. If a State does not agree to modify its plan as we recommend, 
we may reject the plan. If we reject the plan, we will immediately 
notify the State that the penalty is imposed. The State may appeal our 
decision to impose the penalty in accordance with the provisions of 
section 410 of the Act and the proposed regulations at Sec. 272.7. If 
we have not taken an action to reject a plan by the end of the 60-day 
period, the plan is accepted, as required by section 409(c)(1)(D).
    If a State corrects or discontinues, as appropriate, the violations 
in accordance with its corrective compliance plan, we will not impose 
the penalty. The statute permits us to collect some or all of the 
penalty if the State has failed to correct or discontinue the 
violation. Therefore, under limited circumstances, we may reduce the 
amount of the penalty if the violation has not been fully rectified, 
based on one or more of the following situations: (1) the State made 
substantial progress in correcting or discontinuing the violation; or 
(2) a natural disaster or regional recession prevented the State from 
coming into full compliance.
    As discussed previously, we are proposing that, for certain 
penalties, we would not grant a State a reduced penalty through 
corrective compliance if we detect a significant pattern of diversion 
of cases to separate State programs that result in avoidance of the 
work requirements or diversion of the Federal share of child support 
collections unless the State discontinues the diversion during the 
corrective compliance period. A State wishing to receive one of these 
reductions should address its plans to discontinue the diversion during 
the corrective compliance period and provide evidence of the 
discontinuation.

[[Page 62150]]

How can a State appeal our decision to take a penalty? (Sec. 272.7)
    Once we make a final decision to impose a full or partial penalty, 
we will notify the State that we will reduce the State's SFAG payable 
for the quarter or the fiscal year and inform the State of its right to 
appeal to the Departmental Appeals Board (the Board).
    Section 410 provides that the Secretary will notify the chief 
executive officer of the State of the adverse action within five days. 
This provision covers any adverse actions with respect to the State 
TANF plan or the imposition of a penalty under section 409.
    Within 60 days after the date a State receives this notice, the 
State may file an appeal of the action, in whole or in part, to the 
Board. As Congress only allowed 60 days for the Board to reach a 
decision following the appeal, it is evident they intended a very 
streamlined procedure. Therefore, the State's appeal must include all 
briefs and supporting documentation for its case when it files its 
appeal. A copy of the appeal should be sent to the Office of the 
General Counsel, Children, Families and Aging Division, Room 411-D, 200 
Independence Avenue, S.W., Washington, D.C. 20201. ACF must file its 
reply brief and supporting documentation within 30 days after a State 
files its appeal. Further briefing and argument will be at the 
discretion of the Board. A State's appeal to the Board will also be 
subject to the following regulations at part 16 of title 45: 
Secs. 16.2, 16.9, 16.10, and 16.13-16.22.
    Section 410(b)(2) provides that the Board will consider an appeal 
on the basis of documentation the State submits, along with any 
additional information required by the Board to support a final 
decision. In deciding whether to uphold an adverse action or any 
portion of such action, the Board will conduct a thorough review of the 
issues and make a final determination within 60 days after the appeal 
is filed. The filing date will be the date that materials are received 
by the Board in a form acceptable to it. The 60 days may be tolled by 
the Board, for a reasonable period, if it determines it needs 
additional documentation to reach a decision.
    Finally, a State may obtain judicial review of a final decision by 
the Board by filing an action within 90 days after the date of the 
final decision. States may file either with the district court of the 
United States in the judicial district where the State Agency is 
located or in the United States District Court for the District of 
Columbia. The district courts will review the final decision of the 
Board on the record established in the administrative proceeding, to 
determine if it is arbitrary, capricious, an abuse of discretion or 
otherwise not in accordance with law, or unsupported by substantial 
evidence. The court's review will be on the basis of the documents and 
supporting data submitted to the Board.
What is the relationship of continuing waivers on the penalty process 
for work participation and time limits? (Sec. 272.8)
    States that, in accordance with section 415 of the Act, continue 
waivers may operate under a different set of requirements in 
determining the calculation of work participation rates and/or 
applicability of time limits. Providing this flexibility is an 
important aspect of encouraging States who have been innovative in 
implementing welfare reform to continue those endeavors and test their 
results. However, this flexibility must also be balanced with 
accountability to the purposes of TANF, particularly those of 
encouraging work and focusing TANF on the provision of temporary 
support to families as they move to self-sufficiency. To address this 
balance, we will: (1) require Governors to certify waiver 
inconsistencies a State believes apply; (2) treat a State's failure to 
meet work participation rates or time limit requirements in a modified 
manner for States continuing waivers that are inconsistent with TANF; 
and (3) publish information related to a State's success in meeting 
work participation rates and time-limit restrictions, as measured 
against both TANF and waiver requirements. Further, if this information 
indicates that States continuing waivers inconsistent with TANF perform 
significantly below States operating fully under TANF we will consider 
seeking legislative changes regarding State authority to continue 
waivers policies inconsistent with TANF.
Governor's Certification
    Because the inconsistent waiver will constitute an alternative 
requirement, it is important to establish the specific extent of 
applicability of waiver inconsistencies and their related purpose. 
Consequently, Sec. 272.8 requires Governors to certify to the 
Secretary, up-front and in writing, the specific inconsistencies that 
the State chooses to continue and the reasons for continuing the 
alternative waiver requirements, including how their continuation is 
consistent with the purposes of the waiver. As indicated in our 
definitions of waiver and inconsistency at Sec. 270.30, we will not 
recognize inconsistencies related to continuation of alternative waiver 
requirements for the explicit purpose of avoiding penalties for failing 
to meet the work participation rate or implement the time limit as 
these were not part of the original purpose of the waiver. The 
Governor's certification of waiver inconsistencies must, consistent 
with the approved waivers, describe the standards the State will use 
in: (1) assigning individuals to alternative waiver work activities or 
to an alternative number of hours of work; and (2) determining 
exemptions from or extensions to the time limit.
    For additional discussion of what are waiver inconsistencies in 
work participation and time limits, see Secs. 270.30, 271.60 and 
274.1(e).
Penalty Process for States Continuing Waivers
    States operating under alternative waiver requirements are at an 
advantage compared to other States in being able to meet participation 
rates and comply with time limit requirements. For example, a State 
with a waiver allowing unlimited job search has more options in how it 
can assign work and training activities to meet work participation 
requirements. Similarly, a State continuing waiver policies that exempt 
a portion of its cases which include an adult recipient from the time 
limit will have a lower percentage of families reaching the 60-month 
time limit and therefore less difficult decisions in granting 
applicable hardship extensions.
    We have taken this advantage into consideration and determined that 
States continuing waivers in either of these areas will not be eligible 
for a reasonable cause exception from a related work participation or 
time-limit penalty. Nor will they be eligible for a work participation 
rate penalty reduction based on severity of the failure or under our 
discretionary authority, as otherwise allowed in accordance with 
Sec. 271.51(b)(3) or (c). Given the State's advantage compared to 
States operating fully under TANF rules, neither a reasonable cause 
exception nor a reduction in the penalty is warranted.
    Further, in developing a corrective compliance plan to address 
failure to meet work participation requirements or adhere to the 
restriction on the percentage of families receiving TANF benefits in 
excess of 60 months, we will require that States consider modification 
of its alternative waiver requirements as part of the plan. In making 
this consideration, we will expect States to assess whether continuing 
any of their waiver policies

[[Page 62151]]

hinders their ability to achieve compliance. If the State continues 
waivers related to the failure to achieve compliance with the work 
requirements described in subparts B and C of part 271 or the time 
limits described in Secs. 274.1 and 274.2 and still fails to correct 
the violation, it will not be eligible for a reduced penalty for such 
related noncompliance regardless of whether the State made substantial 
progress towards achieving compliance or if the State's failure to 
comply was attributable to natural disaster or regional recession.
Calculating/Publishing Results
    In publishing information concerning State performance related to 
work participation rates, it is necessary to measure compliance based 
on waiver rules. Similarly, reports on the percentage of cases with an 
adult recipient receiving Federal TANF benefits in excess of 60 months 
should reflect the percentage of cases receiving benefits in excess of 
60 months under alternative waiver rules, an amount which may exceed 
the TANF 20 percent limit. However, these differential rules do not 
provide a comparable basis for reporting on State performance related 
to work, nor an accurate picture of the extent to which Federal TANF 
benefits are provided for more than 60 months. Therefore, we will 
publish reports which provide information, where applicable, concerning 
the percentage of cases meeting work participation requirements under 
both TANF and waiver rules. Similarly, we will provide information 
indicating the percentages of cases with an adult recipient that 
receive more than 60 months of Federal TANF benefits in accordance with 
TANF hardship exemptions and in accordance with alternative rules under 
waivers. The requirements specified under the TANF data collection 
regulations will facilitate reporting results under both sets of rules.

D. Part 273--State TANF Expenditures

Subpart A--What Rules Apply to a State's Maintenance of Effort?
What definitions apply to this part? (Sec. 273.0)
    This section cross-references the general TANF regulatory 
definitions established under part 270. It also adds a definition of 
``administrative costs'' that is applicable in determining whether 
States have exceeded the caps on ``administrative costs'' that apply 
separately to their Federal TANF funds and State MOE funds.
    We consulted with State and local representatives and other parties 
and organizations on whether and how we should define the types of 
costs that should be considered administrative costs.
    We considered not proposing a Federal definition (but requiring 
States to develop their own definitions and provide them to us as part 
of the annual addendum). That option had appeal because: (1) it is 
consistent with the philosophy of a block grant; (2) we took a similar 
approach in some other areas (i.e., in not defining individual work 
activities); (3) we support the idea that we should focus on outcomes, 
rather than process; and (4) the same definition might not work for 
each State. Also, we were concerned we could exacerbate consistency 
problems if we created a Federal definition. Because of the wide 
variety of definitions in other related Federal programs, adoption of a 
single national definition could create new inconsistencies in 
operational procedures within State agencies and add to the 
complexities administrators would face in operating these programs.
    At the same time, we were hesitant to defer totally to State 
definitions. The philosophy underlying this provision is very 
important; in the interest of protecting needy families and children, 
it is critical that the substantial majority of Federal TANF funds and 
State MOE funds go towards helping needy families. If we did not 
provide some definition, it would be impossible to assure that the cap 
had meaning. Also, we felt that it would be better to give general 
guidance to States than to get into disputes with individual States 
about whether their definitions represented a ``reasonable 
interpretation of the statute.''
    We thought that it was very important that any definition be 
flexible enough not to unnecessarily constrain State choices on how 
they deliver services. As numerous commenters have pointed out, a 
traditional definition of administrative costs would be inappropriate 
because the TANF program is unique, and we expect TANF to evolve into 
something significantly different from its predecessors and from other 
welfare-related programs. Specifically, we expect TANF to be a more 
service-oriented program, with substantially more resources devoted to 
case management and fewer distinctions between administrative 
activities and services provided to recipients.
    You will note that the definition we have proposed does not 
directly address case management or eligibility determination. We 
understand that, in many instances, the same individuals may be 
performing both activities. In such cases, to the extent that a 
worker's activities are essentially administrative in nature (e.g., 
traditional eligibility determinations or verifications), the portion 
of the worker's time spent on such activities will be treated as 
administrative costs, along with any associated indirect (or overhead) 
costs. However, to the extent that a worker's time is essentially spent 
on case-management functions or delivering services to clients, that 
portion of the worker's time can be charged as program costs, along 
with associated indirect (or overhead) costs.
    We believe that the definition we have proposed will not create a 
significant new administrative burden on States. We hope that it is 
flexible enough to facilitate effective case management, accommodate 
evolving TANF program designs, and support innovation and diversity 
among State TANF programs. It also has the significant advantage of 
being closely related to the definition in effect under the Job 
Training Partnership Act (JTPA). Thus, it should facilitate the 
coordination of Welfare-to-Work and TANF activities and support the 
transition of hard-to-employ TANF recipients into the work force.
    We have not included specific language in the proposed rule about 
treatment of costs incurred by subgrantees, contractors, community 
service providers, and other third parties. Neither the statute nor the 
proposed regulations make any provision for special treatment of such 
costs. Thus, the expectation is that administrative costs incurred by 
these entities would be part of the total administrative cost cap. In 
other words, it is irrelevant whether costs are incurred by the TANF 
agency directly or by other parties.
    We realize this policy may create additional administrative burdens 
for the TANF agency and do not want to unnecessarily divert resources 
to administrative activities. At the same time, we do not want to 
distort agency incentives to contract for administrative or program 
services. In seeking possible solutions for this problem, we looked at 
the JTPA approach (which allows expenditures on services that are 
available ``off-the-shelf'' to be treated entirely as program costs), 
but did not think that it provided an adequate solution. We thought 
that too few of the service contracts under TANF would qualify for 
simplified treatment on that basis.
    We welcome comments on how to deal with this latter dilemma, as 
well as comments on our overall approach to the definition of 
administrative costs. We discussed this issue thoroughly

[[Page 62152]]

during our consultations, but this is a policy area where no single, 
clear solution emerged.
How much State money must a State expend annually to meet the TANF MOE 
requirement? (Sec. 273.1)
    To ensure that States would continue to contribute their own money 
towards meeting the needs of low-income families, the new section 
409(a)(7) requires States to maintain a certain level of spending on 
programs on behalf of eligible families. If a State does not meet the 
``TANF MOE'' requirements in any fiscal year, then it faces a penalty 
for a following fiscal year. The penalty consists of a dollar-for-
dollar reduction in a State's adjusted SFAG.
    In order for States to know their specific TANF MOE requirements, 
they must understand the terms used in amended section 409(a)(7). 
Therefore, we address each of these terms in this proposed rule.
Historic State Expenditures
    Each State's TANF MOE requirement reflects its historic spending on 
welfare programs. Section 409(a)(7)(B)(iii) provides two ways to 
calculate a State's FY 1994 expenditures. It then establishes that the 
lesser amount be used for determining a State's MOE requirement.
    The first calculation, at section 409(a)(7)(B)(iii)(I), defines 
historic State expenditures as the State's FY 1994 share of 
expenditures for the AFDC, EA, AFDC-related child care, transitional 
child care, at-risk child care and JOBS programs (including 
expenditures for administration and systems operations). An alternative 
calculation appears in section 409(a)(7)(B)(iii)(II).
    After examining the formula for the alternative method, we 
determined that the amounts resulting from this calculation would 
always equal or exceed the amount calculated under the first, simpler 
method. Therefore, we calculated the historic State expenditures based 
on the first method.
Adjusting A State's TANF MOE Level
    The statute authorizes an adjustment to a State's TANF MOE level. 
If a Tribe or a consortium of Tribes residing in the State submits a 
plan to operate its own TANF program, and we approve this plan, then 
that State's MOE requirement will be reduced beginning with the 
effective date of the approved Tribal plan. Section 409(a)(7)(B)(iii) 
excludes from the TANF MOE calculation any IV-A expenditures made by 
the State for FY 1994 on behalf of individuals covered by an approved 
Tribal TANF plan. Because TANF funding for Tribes may also reflect a 
State's IV-F (JOBS) expenditures, we believe that it is appropriate 
that State TANF MOE levels be reduced for IV-A and IV-F expenditures.
    Under our proposed rules, we will determine the percentage 
reduction in the SFAG due to Tribal programs and apply the same 
percentage reduction to the State's TANF MOE requirement. The State's 
revised TANF MOE level applies for each fiscal year covered by the 
approved Tribal TANF plan(s).
    For example, if the amount of the Tribal Family Assistance Grant 
represents ten percent of the State's SFAG, then the State's MOE 
requirement will be reduced by ten percent. This approach provides a 
consistent method for determining both the reduction in the State's 
SFAG and required MOE level.
Applicable Percentage
    The TANF MOE rules do not require that a State spend the same 
annual amount as it did in FY 1994. (States must spend 100 percent of 
the amount spent in FY 1994 to access the Contingency Fund under 
section 403(b). See part 274, subpart B, for a discussion of the 
Contingency Fund requirements.) Rather, States must maintain the 
``applicable percentage'' of their FY 1994 expenditures.
    Under section 409(a)(7)(B)(ii), if any State fails to meet the 
minimum work program participation rate requirements in the fiscal 
year, then it must spend at least 80 percent of its FY 1994 spending 
level. If a State meets the minimum work participation rate 
requirements, then the ``applicable percentage'' is 75 percent of its 
FY 1994 spending level for the year. The dollar amount representing 75 
and 80 percent of the FY 1994 State expenditures is known as the TANF 
MOE level.
    States must know the amount of their FY 1994 total expenditures and 
calculate the figures that represent 75 and 80 percent of those 
expenditures.
Data
    Section 5506(f) of Pub. L. 105-33 clarifies the source and date of 
data to use to calculate FY 1994 State expenditures. We used the same 
data sources. We calculated each State's total FY 1994 expenditures and 
TANF MOE levels by using data on the State share of expenditures for 
AFDC benefits and administration, EA, FAMIS, AFDC/JOBS Child Care, and 
Transitional and At-Risk Child Care programs reported by States on form 
ACF-231 as of April 28, 1995, as well as the State share of JOBS 
expenditures reported by each State on form ACF-331 as of April 28, 
1995. These are the same State expenditure data sources that we used to 
calculate the SFAGs under TANF.
    We transmitted tables showing FY 1994 spending amounts and MOE 
levels to the States via Program Instruction Number TANF-ACF-PI-96-2, 
dated December 6, 1996. This Program Instruction, as well as a separate 
MOE table listing FY 1994 State expenditures and MOE levels for each of 
the 50 States and the District of Columbia, are available on the world 
wide web at http://www.acf.dhhs.gov/.
    We also determined FY 1994 spending and MOE levels for each of the 
Territories. We transmitted this information to the Territories via our 
Regional Administrators in San Francisco and New York.
    For IV-A expenditures for Puerto Rico, we used the Financial Report 
Form ACF-231 as of April 28, 995. However, for Guam and the Virgin 
Islands, we did not use the Territories' share of expenditures as 
submitted on the ACF-231 because their share of expenditures exceeded 
the amounts for which Federal reimbursement was available (due to the 
statutory ceiling on funding for each, under section 1108). If we used 
the expenditures reported on form ACF-231, then the MOE levels for both 
Guam and the Virgin Islands would be inordinately high. We believe that 
Congress' intent in establishing the historic spending level was to 
assure that States and Territories contribute to the specified programs 
at least 80 percent (or 75 percent) of the amounts they were required 
to expend to match Federal funds in FY 1994. Thus, for Guam and the 
Virgin Islands, we used the share of expenditures that corresponded to 
the amount on the Federal grant awards for FY 1994, i.e., the 
Territories' share of AFDC benefit payments (25 percent), EA (50 
percent), administration (50 percent), and Child Care (25 percent).
    The Territories' funds for the JOBS program were not subject to the 
ceiling amounts given in section 1108. They are subject to an 
appropriation limit, but the Territorial expenditures did not exceed 
this amount. Therefore, for JOBS, the Territories' MOE levels reflect 
expenditures reported on the ACF-331 as of April 28, 1995.
    In addition, for both IV-A (AFDC, EA, and child care) and JOBS, 
Guam and the Virgin Islands (but not Puerto Rico) benefit from Pub. L. 
96-205, as amended (48 U.S.C. 1469a). This law permits waiver of the 
first $200,000 of the Territories' share of expenditures. Therefore, 
for Guam and the Virgin Islands, we reduced the share they were

[[Page 62153]]

required to contribute, and thus their MOE amount, by $200,000.
FY 1997 MOE Level
    Finally, we considered whether to require all States to meet the 
full MOE level in FY 1997, the first year for the requirement. Because 
States have until July 1, 1997, to implement the TANF program, many 
States are not operating a TANF program for all of FY 1997.
    We examined two alternative adjustments to FY 1997 TANF 
requirements. First, we could require that all States meet 80 percent 
(or 75 percent) of their full FY 1994 spending level, but count the 
State portion of expenditures from AFDC, EA, and JOBS made in FY 1997 
toward the State's MOE expenditures. Alternatively, we could prorate a 
State's FY 1997 MOE level based on the date of TANF implementation. 
Under this latter option, none of the expenditures from AFDC, EA, and 
JOBS made in FY 1997 prior to implementation of the State's TANF 
program count toward meeting the State's prorated MOE level. We 
determined that the former option is less acceptable because it fails 
to recognize the distinction between TANF and the AFDC and JOBS 
programs. Therefore, we decided that proration of the FY 1997 MOE level 
presented the most consistent and equitable approach.
    Under the proposed rules, the State may prorate its TANF MOE level 
for FY 1997 by taking the total FY 1994 State expenditures provided to 
the State in Program Instruction Number TANF-ACF-PI-96-2, multiplying 
that number by the number of days during FY 1997 that the State 
operated a TANF program and dividing by 365. The State's TANF 
implementation date is the date given in the Department's completion 
letter to the State. The State must meet 80 percent (or 75 percent) of 
the resulting amount.
What kinds of State expenditures count toward meeting a State's annual 
MOE expenditure requirement? (Sec. 273.2)
Qualified State Expenditures
    Section 409(a)(7)(B)(i) establishes the criteria for the 
expenditure of State funds to count toward a State's TANF MOE level. 
This critical provision has already engendered a number of inquiries as 
States and organizations strive to meet the challenge of welfare 
reform. While we are unable to discuss every potential use of State 
funds, we do discuss the specific requirements that must be met and 
address some of the examples that have come to our attention.
    Congress wanted States to be active partners in the welfare reform 
process. Thus, States must spend a substantial amount of their own 
money on aid to needy families. While Congress gave States significant 
flexibility in this area, it did establish a number of important 
statutory restrictions on which State expenditures qualify as MOE.
    Section 409(a)(7)(B)(i) defines ``qualified State expenditures'' to 
include certain expenditures by the State under all State programs. We 
interpret ``all State programs'' to mean the State's family assistance 
(TANF) program plus any other separate State program that assists 
``eligible families'' and provides appropriate services or benefits.
    Thus, States could structure the use of State expenditures for MOE 
purposes in three ways. The first would be a TANF program funded by 
expenditures of commingled State funds and Federal grant funds. The 
second would be a TANF program in which a State segregates its Federal 
grant from its State funds.
    A State might choose to operate a ``segregated'' TANF program 
because certain limitations apply to the program funded with Federal 
funds that would not apply to a TANF program funded wholly with State 
funds, e.g., time limitations and certain alien restrictions.
    Third, States could use State funds in a State program, separate 
from TANF, but for the types of activities listed in the statute, e.g., 
cash assistance, child care assistance and education activities.
    In order for the expenditure of State funds under State programs to 
count toward meeting the State's TANF MOE, the expenditures must: (1) 
be made to or on behalf of an eligible family; (2) provide assistance 
to eligible families in one or more of the forms listed in the statute 
under section 409(a)(7)(B)(i)(I); and (3) comply with all other 
requirements and limitations set forth in this part of the proposed 
regulations, including those set forth in Secs. 273.5 and 273.6.
Eligible Families
    Section 409(a)(7)(B)(i)(I) provides that State funds under all 
State programs must be spent on behalf of eligible families to count 
toward the State's MOE. Section 409(a)(7)(B)(i)(IV) further clarifies 
that an eligible family means a family eligible for assistance ``under 
the State program funded under this part.'' We have interpreted ``under 
the State program funded under this part'' to mean the State's TANF 
program.
    Thus, we propose that, in order to be considered an ``eligible 
family'' for MOE purposes, a family must have a child living with a 
custodial parent or other adult caretaker relative (or consist of a 
pregnant individual) and be financially needy under the TANF income and 
resource standards established by the State under its TANF plan. This 
definition would include all families funded under TANF, including 
certain alien families or time-limited families who cannot be served 
with Federal funds, but who are being served in a segregated State TANF 
program. (We discuss this alien limitation in detail further on in this 
section.)
    If a family meets these criteria, then the family may be considered 
an ``eligible family'' for purpose of counting State-funded assistance 
for any of the forms listed in section 409(a)(7)(B)(i)(I) as MOE. The 
family does not have to be receiving TANF, but instead could be 
receiving assistance from a non-TANF State program. The expenditures to 
provide these services under all State programs may count toward the 
MOE requirement, provided the expenditures also meet all other 
requirements and limitations set forth in part 273.
    A State is free to define who is a member of the family for TANF 
purposes and may use this same definition for MOE purposes. For 
example, it could choose to assist other family members, such as non-
custodial parents, who might significantly enhance the family's ability 
to achieve economic self-support and self-sufficiency. By including 
such individuals within its definitions of ``eligible family,'' a State 
could provide them with services through TANF or a separate State 
program. Non-custodial parents could then engage in activities such as 
work or educational activities, counseling, or parenting and money 
management classes.
    We expect States to define ``child'' consistent either with the 
``minor child'' definition given in section 419 or some other 
definition applicable under State law.
    The definition of ``eligible family'' expressly includes 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 U.S. 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.''
    Under section 408(a)(7), States may not use Federal funds to 
provide TANF assistance to a family that includes an adult who has 
received federally-funded assistance for a total of 60 months. 
Therefore, if a family becomes ineligible for Federal assistance under 
the TANF program due to this time limit, but still

[[Page 62154]]

meets the definition of eligible family, then this family may be 
considered an eligible family for MOE purposes.
    Title IV of PRWORA prohibits certain aliens from receiving certain 
Federal assistance. Section 401 of PRWORA prohibits all aliens who are 
not qualified aliens from receiving Federal public benefits, with 
exceptions. The definition of ``qualified aliens,'' at Sec. 270.30, 
refers to section 431 of PRWORA, as amended by the Illegal Immigration 
Reform and Immigrant Responsibility Act of 1996 (Pub. L. 104-208). It 
includes, among other alien categories, permanent residents, refugees 
and asylees. Section 403 of PRWORA prohibits qualified aliens (with 
exceptions) who arrive on or after August 22, 1996, i.e., ``newly-
arrived aliens,'' from receiving, for five years after entry, Federal 
means-tested public benefits, which would include the federally-funded 
TANF program benefits, during their first five years in the country. 
Section 402(b) of PRWORA allows States to determine whether to provide 
TANF assistance at all to certain qualified aliens, while other 
categories of qualified aliens cannot be denied benefits on the basis 
of their immigration status. Given these limitations, a State could 
choose to provide Federal TANF assistance to qualified aliens who enter 
before August 22, 1996, and, for those who enter on or after enactment, 
after the expiration of the five-year time-bar. The State, however, 
would still be precluded from providing Federal TANF assistance to non-
qualified aliens and to newly-arrived qualified aliens who have been in 
the country less than five years, except for those who are exempted 
from the limitations.
    Under certain circumstances, however, State expenditures for aliens 
who are precluded from receiving Federal TANF assistance may count 
towards the State's TANF MOE. The family must have a child living with 
a parent or other adult relative (or must be a pregnant individual), 
and the family must be financially needy under the State's TANF income 
and resource standards. The expenditures must be made on one of the 
statutorily permitted activities enumerated in section 
409(a)(7)(B)(i)(I) and meet all other requirements and limitations set 
forth in subpart A of this part.
    Section 5506(d) of Pub. L. 105-33 clarifies that an eligible 
family, for TANF MOE purposes, includes legal aliens who are no longer 
eligible for Federal assistance due to title IV of PRWORA. The alien 
restrictions that apply to State-funded programs are found at title IV, 
section 411 of PRWORA.
    Section 411(d) addresses the treatment of illegal aliens. It 
permits a State to provide State or local benefits to illegal aliens if 
the State enacted a law after August 22, 1996, which affirmatively 
provides for such eligibility. Thus, we conclude that if a State 
decides to provide assistance to illegal aliens ``in a State program 
funded under this Part,'' per title IV, section 411(d), such assistance 
may count toward the State's TANF MOE.
    There is another complication in this policy area. Section 411(a) 
of PRWORA prohibits States from providing State or local public 
benefits, with exceptions, to aliens who are not qualified aliens, non-
immigrants, or aliens who are paroled into the U.S. for less than one 
year. There are a handful of categories of legal aliens, e.g., 
temporary residents under the Immigration Reform and Control Act 
(IRCA), aliens with temporary protected status, and aliens in deferred 
action status, who are prohibited from receiving State or local public 
benefits under this provision. Thus, expenditures on assistance for 
legal aliens who are not qualified aliens, non-immigrants, or aliens 
paroled in for less than one year may not count towards a State's TANF 
MOE.
    In addition, States may transfer funds to Tribal grantees to assist 
families eligible under an approved Tribal TANF plan. However, if the 
eligibility criteria under the Tribal TANF program are broader than 
under the State's TANF plan, then all expenditures of State funds 
within the Tribal TANF program might not be countable as MOE. Only 
expenditures used to assist an ``eligible family'' under the State 
program count. States must ensure that State funds are expended on 
behalf of families eligible under the State's income and resource 
standards.
Types of Activities
    Section 409(a)(7)(B)(i)(I)(aa)-(ee) specifies that State 
expenditures on eligible families for the following types of assistance 
are ``qualified expenditures'' for MOE purposes:
    <bullet> Cash assistance (see subsequent discussion on this);
    <bullet> Child care assistance (see the discussion at Sec. 273.3);
    <bullet> Education activities designed to increase self-
sufficiency, job training, and work (note the specific exception at 
Sec. 273.4);
    <bullet> Any other use of funds allowable under section 404(a)(1) 
(see subsequent discussion on this); and
    <bullet> Associated administrative costs (subject to a 15 percent 
cap, as discussed subsequently).
    For MOE purposes, ``assistance'' may take the form of cash, 
certificates, vouchers or other forms of disbursement, as determined by 
the State. Assistance may also be ongoing, short-term, or one-time 
only. The definition of assistance at Sec. 270.30 does not limit the 
nature of State-funded aid provided to eligible families under TANF or 
separate State programs. We proposed that definition of ``assistance'' 
for the sole purpose of establishing when critical provisions in the 
statute using this term apply to States providing support to families 
under TANF.
    Thus, State expenditures for activities such as pre-pregnancy 
family planning services, teen parenting programs, youth and family 
counseling or support services, job training or employment services, or 
forms of crisis assistance that meet the purposes of the program may 
also count toward meeting a State's MOE requirement. However, we remind 
States that such expenditures are subject to other limitations and 
restrictions under Secs. 273.5 and 273.6.
    We address the additional limitations and restrictions in the 
discussion that follows. We also discuss some specific case situations 
that have come to our attention. We invite comment on these and other 
examples of aid for eligible families that States believe could 
qualify.
Cash Assistance
    This category includes cash payments, including electronic benefit 
transfers, to meet basic needs; assistance with work-related 
transportation costs; clothing allowances; and any child support 
collected on behalf of an eligible child that the State passes through 
to the eligible family. Section 5506(b) of Pub. L. 105-33 amended 
section 409(a)(7)(B)(i)(I)(aa) to expressly allow assigned child 
support collected by the State and distributed to the family to count 
toward a State's TANF MOE so long as the amount sent to the family is 
disregarded in determining the family's eligibility and amount of 
assistance.
    Cash assistance also includes State expenditures on behalf of 
eligible families as part of a State's Earned Income Tax Credit (EITC) 
program. Under a State EITC program, we have determined that only the 
EITC cash payments actually sent to eligible families are countable as 
MOE. Also, in a fiscal year, States that had EITC programs in FY 1995 
may count total cash payments sent to eligible families

[[Page 62155]]

only to the extent that these payments exceed the cash payments sent in 
FY 1995 (see Sec. 273.5).
Any Other Use Of Funds Allowable Under Section 404(a)(1)
    Section 404(a)(1) provides that TANF funds may be used ``in any 
manner that is reasonably calculated to accomplish the purpose of the 
TANF program, including to provide low income households with 
assistance in meeting home heating and cooling costs.'' Section 270.20 
of these proposed rules lists the purposes of the TANF program.
Medical and Substance Abuse Services
    The statute does not prohibit the expenditure of State MOE funds on 
medical expenditures. Therefore, States may use their own funds to 
provide treatment services to individuals seeking to overcome drug and/
or alcohol abuse when these services assist in accomplishing the 
purposes of the program. This policy would also comport with both the 
Administration's support for drug rehabilitation services and the 
Congressional call for State flexibility in the operation of welfare 
programs.
    We remind States that such expenditures must be consistent with the 
purposes of the program and made to or on behalf of eligible families. 
We also remind States that section 408(a)(6) bars the use of Federal 
TANF funds for medical services. Therefore, States using MOE funds to 
provide medical treatment services may not commingle State and Federal 
funds. In addition, any State expenditures on medical services that are 
used to obtain Federal matching funds under the Medicaid program would 
not count as MOE. (Refer to the discussion under Sec. 273.6.) Finally, 
State expenditures on medical and substance abuse services may only 
count as MOE subject to the limitations set forth in Sec. 273.5.
Juvenile Justice
    State funds used to pay the costs of benefits or services provided 
to children in the juvenile justice system and previously matched under 
the EA program do not count toward MOE. More specifically, as juvenile 
justice services do not meet any of the purposes of the TANF program, 
they are not an allowable use of funds under section 404(a)(1).
    While some States may expend their Federal TANF funds for this 
purpose, under section 404(a)(2), the definition of ``qualified State 
expenditures,'' for MOE purposes, does not include the reference to 
section 404(a)(2). Therefore, we conclude that Congress did not intend 
to automatically qualify all previously authorized IV-A expenditures to 
count as MOE. States that expend Federal funds for this purpose, under 
section 404(a)(2), must not commingle State funds with Federal funds if 
they wish the State funds to count as MOE.
State ``Rainy Day'' Funds
    Finally, some States have inquired whether State funds allocated or 
set aside during a fiscal year as a ``rainy day'' fund, to act as a 
hedge against any economic downturn, could count as MOE. While we 
understand State intent, these allocations or set-asides do not qualify 
as expenditures. States must actually expend funds on behalf of 
eligible families during the fiscal year for expenditures to count 
toward the State's MOE for that fiscal year. (However, under section 
404(e), States may reserve Federal TANF funds from any fiscal year for 
use in any other fiscal year.)
Administrative Costs
    Administrative expenditures may count toward a State's MOE, but 
only to the extent that they do not exceed 15 percent of the total 
amount of qualified State expenditures for the fiscal year. This 
limitation is the same as the limit for TANF administrative 
expenditures. Therefore, we propose that the State apply the same 
definition of administrative costs for MOE purposes as for TANF. 
Section 404(b)(2) states that expenditures of Federal funds with 
respect to information technology and computerization needed for 
tracking or monitoring activities are not subject to the 15 percent 
TANF limit. We are providing the same flexibility with respect to the 
administrative cost cap on MOE expenditures. Thus, the proposed rules 
do not count information technology and computerization expenditures 
under the administrative cost cap and allows such expenditures to count 
toward meeting a State's MOE requirement without being limited by the 
15 percent cap on administrative expenditures.
When do child care expenditures count? (Sec. 273.3)
    There are certain restrictions on the child care expenditures that 
may count for TANF MOE purposes. First, only child care expenditures 
used to assist eligible families under the State's TANF criteria count 
toward the State's TANF MOE. As explained earlier, eligible families 
means families that have a child living with a parent or other adult 
caretaker relative (or consisting of a pregnant woman) and that are 
financially needy per the TANF income and resource standards 
established by the state under its TANF plan. Thus, not all State 
expenditures to provide child care services would necessarily qualify 
for TANF MOE purposes, particularly if the eligibility criteria for the 
child care services are broader than the State's TANF criteria, e.g., 
under the Child Care Development Fund (CCDF).
    Second, section 409(a)(7)(B)(iv) establishes four general 
restrictions on State expenditures. (These restrictions are listed in 
Sec. 273.6.) Two of the restrictions apply to child care expenditures: 
subsections 409(a)(7)(B)(iv)(IV) and 409(a)(7)(B)(iv)(I).
    Subsection 409(a)(7)(B)(iv)(IV) excludes any State funds expended 
as a condition of receiving Federal funds under other Federal programs 
from counting toward a State's TANF MOE. However, this subsection also 
provides an exception to this restriction. The exception applies to the 
CCDF Matching Fund (i.e., the State's CCDF MOE and the State's share of 
matching funds). State child care expenditures used to meet the child 
care MOE requirement or to receive Federal matching funds may also 
count toward meeting the State's TANF MOE requirement if the 
expenditures were made on behalf of members of an eligible family.
    But, subsection IV limits the amount of the above-mentioned State 
child care expenditures that may count for TANF MOE purposes to the 
State's share of expenditures in FY 1994 or FY 1995, whichever is 
greater, for the programs described in section 418(a)(1)(A). These are 
the former title IV-A child care programs, i.e., the AFDC/JOBS child 
care, transitional child care, and at-risk child care programs. A 
State's child care MOE amount (for purposes of qualifying for child 
care matching funds) is also based on its expenditures for title IV-A 
child care in FY 1994 or FY 1995, whichever is greater. Hence, the 
amount of State child care expenditures used to meet the child care MOE 
requirement and to receive Federal Matching Funds that may count for 
TANF MOE purposes is limited to the amount of the child care MOE 
requirement for the State under section 418(a)(2)(C).
    If a State has additional State child care expenditures, i.e., 
expenditures which have not been used toward meeting the child care MOE 
requirement or to receive Federal matching funds, these expenditures 
may count toward the State's TANF MOE provided the expenditures meet 
all other requirements and limitations set forth in subpart A of this 
part. We concluded that subsection IV does not limit the amount of such 
additional

[[Page 62156]]

child care expenditures which may count for TANF MOE purposes.
    Subsection 409(a)(7)(B)(iv)(I) excludes any expenditures that come 
from amounts made available by the Federal government. Therefore, 
Federal funds transferred from the TANF program to the Child Care and 
Development Block Grant (also known as the Discretionary Fund) would 
not count toward MOE, nor would Federal funds received under CCDF.
When do educational expenditures count? (Sec. 273.4)
    Only expenditures on educational services or activities that are 
targeted to eligible families to increase self-sufficiency, job 
training, and work may count toward a State's MOE. The statute excludes 
educational services or activities that are generally available, 
including through the public education system. The conference report 
confirms this exclusion. In H. Rept. 104-725, page 277, the conferees 
agreed to exclude ``any expenditure for public education in the State 
other than expenditures for services or assistance to a member of an 
eligible family that is not generally available to other persons.''
    Expenditures on special services that are targeted to an ``eligible 
family'' and are not generally available to other residents of the 
State may count. These could include contracted educational services or 
activities, such as special classes for teen parents in high schools or 
other settings; special classes in English as a second language for 
legal immigrants; special classes in remedial education to achieve 
basic literacy; special classes that lead to a certificate of high 
school equivalency (GED); or pre-employment or job-readiness 
activities.
    We also note that expenditures on supportive services, such as 
transportation, to assist a member of an eligible family in accessing 
educational activities may also count toward a State's MOE, either as 
cash assistance or another type of aid consistent with the purposes of 
the Act. (See Secs. 273.5 and 273.6 for other general restrictions on 
these expenditures.)
When do expenditures in separate State programs count? (Sec. 273.5)
    Section 409(a)(7)(B)(i)(II) establishes limits on the amount of 
expenditures that may count when the MOE expenditures are for 
activities under separate State or local programs. The heading for the 
provisions under this section indicates that ``transfers from other 
State and local programs'' must be excluded from consideration toward a 
State's MOE. We received numerous questions about this language. We do 
not believe that the language intended to convey merely a literal or 
physical transfer of funds. Instead, we believe that Congress wanted to 
prevent States from substituting existing expenditures in these outside 
programs for cash welfare and related assistance to needy families and 
claiming them as expenditures for MOE purposes. Therefore, section 
409(a)(7)(B)(i)(II)(aa) provides that the money spent under State or 
local programs may count as MOE only to the extent that the 
expenditures exceed the amount expended under such programs in the 
fiscal year most recently ending before the date of enactment (August 
22, 1996). Thus, States may count only additional or new expenditures, 
i.e., expenditures above FY 1995 levels.
    Section 409(a)(7)(B)(i)(II)(bb) provides what may appear to be an 
alternative limitation. We believe that this provision was intended as 
an exception to the limitation under (aa). Under provision (bb), State 
expenditures under any State or local program during a fiscal year may 
count toward a State's MOE to the extent that the State is entitled to 
a payment under former section 403 as in effect before the date of 
enactment with respect to the expenditures. We interpret this to mean 
that State funds expended under separate State/local programs that had 
been previously authorized and allowable under the former AFDC/EA/JOBS 
programs in effect as of August 21, 1996, may have all such 
expenditures count toward the State's MOE. In other words, the limit 
under (aa) does not apply; there is no requirement that these 
expenditures be additional or new expenditures, above FY 1995 levels.
What kinds of expenditures do not count? (Sec. 273.6)
    As previously discussed, expenditures under State programs (TANF 
and separate State programs) do not count if they are not made on 
behalf of eligible families.
    There are also specific statutory requirements that affect the use 
of State funds under a State's TANF program. The specific requirements 
that apply depend on whether the expenditures meet the definition of 
assistance under Sec. 270.30; the language used in each TANF provision 
or in a related provision elsewhere in the statute; and the manner in 
which a State structures its TANF program and accounts. (None of the 
TANF program requirements directly apply to eligible families served in 
separate State programs.)
    Provisions in the statute that use the terms ``under the program,'' 
``under the program funded under this part,'' and ``under the State 
program funded under this part'' apply to the State's TANF program, 
regardless of the funding source. That is, they apply to segregated 
Federal programs, commingled State/Federal programs, and segregated 
State programs. Thus, all families receiving TANF assistance (whether 
funded with State or Federal funds) must meet work participation and 
child support requirements.
    Provisions pertaining solely to the use of Federal funds would not 
apply to families assisted under TANF with State-only funds. 
Consequently, if State funds are segregated from Federal funds, State 
expenditures on ``assistance'' must comply with all the rules 
pertaining generally to the State's TANF program, e.g., work and child 
support requirements. However, they are not subject to requirements 
that pertain only to the use of Federal funds.
    These requirements are found in the provisions in the statute using 
the term ``grant,'' or ``amounts attributable to funds provided by the 
Federal government.'' This language refers to the Federal funds 
provided to the State under section 403. Therefore, those provisions 
affect only the use of Federal TANF funds, unless the State commingles 
its money with Federal TANF funds. If commingled, Federal and State 
funds become subject to the same rules. Thus, commingling of State and 
Federal funds can reduce the total amount of flexibility available to 
the State in its use of both Federal and State funds.
    The provisions governing the use of Federal TANF funds are 
generally found in sections 404 and 408 of the Act and section 115 of 
PRWORA. The proposed regulations at Sec. 273.11 provide additional 
requirements regarding allowable uses of Federal TANF funds.
    The statute also provides several general restrictions on MOE 
expenditures. Pursuant to section 409(a)(7)(B)(iv), the following types 
of expenditures do not count: (1) expenditures of funds that originated 
with the Federal government; (2) State funds expended for the Medicaid 
program under title XIX of the Act; (3) any State funds used to match 
Federal Welfare-to-Work funds provided under section 403(a)(5) of the 
Act, as amended by sections 5001(a) (1) and (2) of Pub. L. 105-33; or 
(4) expenditures that States make as a condition of receiving Federal 
funds under other programs. See discussion of Sec. 273.3 for additional 
information.

[[Page 62157]]

    Section 5506(c) of Pub. L. 105-33 amends section 409(a)(7)(B)(i) by 
adding another restriction under section 409(a)(7)(B)(i)(III). Pursuant 
to section 409(a)(12), States must expend State funds equal to the 
total reduction in the State's SFAG due to any penalties incurred. 
Section 409(a)(7)(B)(i)(III) provides that such expenditures may not 
count toward a State's TANF MOE. (See Sec. 274.50.)
    TANF funds transferred to the Social Service Block Grant Program 
under title XX of the Act or transferred to the Child Care and 
Development Block Grant program (also known as the Discretionary Fund 
within the Child Care and Development Fund) do not count toward meeting 
a State's MOE requirement because of the first restriction under 
409(a)(7)(b)(iv) that prohibits funds that originated from the Federal 
government from being used for MOE purposes.
    Finally, it is important to note that only State expenditures made 
in the fiscal year for which TANF funds are awarded count toward 
meeting the MOE requirement for that year. Therefore, expenditures made 
in prior fiscal years or, in the case of FY 1997, expenditures made 
prior to the date the State starts its TANF program do not count as 
TANF MOE.
How will we determine the level of State expenditures? (Sec. 273.7)
    Congress recognized that State contributions would play an 
important role in making welfare reform a success. We are interested in 
learning about the ways in which States help families move toward 
economic self-support and self-sufficiency. We are particularly 
interested in the types of services eligible families are receiving 
through separate State programs or activities. We propose to use the 
administrative avenues available to us to learn about expenditures 
under separate State programs.
    To help determine if States are meeting MOE requirements, we have 
created a TANF Financial Report. The report will require the State to 
specify expenditures under its TANF program and other separate State 
programs that serve eligible families. Please refer to the description 
of the TANF Financial Report under part 275 for additional information.
    We are also proposing an annual addendum to the report for the 
fourth quarter. The addendum will supplement information on separate 
State programs that is captured only in a general fashion in the 
quarterly report.
    Thus, we propose that the annual addendum contain: (1) a 
description of the specific State-funded program activities provided to 
eligible families; (2) the program's statement of purpose (how the 
program serves eligible families); (3) the definitions of each work 
activity in which families in the program are participating; (4) a 
statement whether the program/activity had been previously authorized 
and allowable as of August 21, 1996 under former section 403; (5) the 
FY 1995 State expenditures for each program/activity not so authorized; 
(6) the total number of eligible families served by each program/
activity as of the end of the fiscal year; (7) the eligibility criteria 
for families served under each program or activity; and (8) a 
certification that each of the families served met the State's criteria 
for ``eligible family.'' This information will enable us to understand 
how separate State programs are serving needy families outside of the 
TANF program and to report on those services to Congress.
What happens if a State fails to meet the TANF MOE requirement? 
(Sec. 273.8)
    Under section 409(a)(7)(A), if a State does not meet the TANF MOE 
requirement, we will reduce the amount of the SFAG payable for the 
following fiscal year on a dollar-for-dollar basis.
    Section 5001(g) of Pub. L. 105-33 adds another penalty to section 
409(a) for a State that receives a Welfare-to-Work formula grant 
pursuant to section 403(a)(5)(A), as amended by section 5001(a)(1), but 
fails to meet the TANF MOE requirement for the fiscal year. Under 
section 409(a)(13), the amount of the State's SFAG will be reduced for 
the following fiscal year by the amount of the Welfare-to-Work formula 
grant paid to the State.
May a State avoid a TANF MOE penalty because of reasonable cause or 
through corrective compliance? (Sec. 273.9)
    Under section 409(b)(2), a State may not avoid a penalty for 
failure to meet its TANF MOE requirement based on reasonable cause. In 
addition, section 5506(m) of Pub. L. 105-33 amended section 409(c)(4) 
to provide that a State may not avoid the penalty through a corrective 
compliance plan.
    Congress' decision not to provide for a reasonable cause exception 
or corrective compliance in TANF MOE penalty cases indicates that 
Congress viewed this requirement as critical. In short, the MOE 
requirement is crucial to meeting the work and other objectives of the 
Act.
Subpart B--What rules apply to the use of Federal funds?
What actions are to be taken against a State if it uses Federal TANF 
funds in violation of the Act? (Sec. 273.10)
    Section 409(a)(1) contains two penalties related to use of Federal 
TANF funds (i.e., all Federal funds under section 403) in violation of 
TANF program requirements. The first is a penalty in the amount of 
funds that are used improperly, as found under the Single Audit Act. We 
would reduce the SFAG payable to the State for the immediately 
succeeding fiscal year quarter by the amount misused.
    In addition, we would take a second penalty, equal to five percent 
of the adjusted SFAG, if we find that a State has intentionally misused 
funds. The criteria for ``intentional misuse'' is found at Sec. 273.12.
    For both of these penalties, States may request that we consider 
reasonable causes for not taking the penalty and may submit a 
corrective compliance plan for correcting the violation.
What uses of Federal TANF funds are improper? (Sec. 273.11)
    The statute contains many prohibitions and restrictions on the use 
of Federal TANF funds. In determining if funds have been used ``in 
violation of this part,'' States should particularly note the 
prohibitions in section 408 of the Act and section 115 of PRWORA. These 
sections provide that States must not use Federal TANF funds to provide 
assistance to:
    <bullet> A family with an adult who has received assistance funded 
with Federal TANF funds for 60 months (except for a family included in 
the 20 percent hardship exemption);
    <bullet> A family without a minor child (or pregnant individual);
    <bullet> A family not assigning support rights;
    <bullet> An unmarried parent under 18, without a high school 
diploma, who does not attend high school or equivalent training;
    <bullet> An unmarried parent under 18 not living in an adult-
supervised setting;
    <bullet> A fugitive felon and probation and parole violator;
    <bullet> A minor child absent from the home 45 days (or at State 
option, 30-180 days);
    <bullet> For ten years, a person found to have fraudulently 
misrepresented residence to obtain assistance; and
    <bullet> An individual convicted of certain drug-related offenses 
unless the State has enacted a law to exempt such individuals from the 
prohibition (refer to section 115 of PRWORA).

[[Page 62158]]

    Also, States must not use Federal TANF funds for medical services, 
except for pre-pregnancy family planning services. This prohibition 
raised a number of concerns among States and advocates that are 
discussed below as one of the clarifications on the use of Federal TANF 
funds.
    Section 404 also limits the use of Federal TANF funds. More 
specifically, section 404(a)(1) provides that TANF funds may be used 
``. . . in any manner that is reasonably calculated to accomplish the 
purpose of this part, including to provide low income households with 
assistance in meeting home heating and cooling costs. . . .'' 
Conversely, TANF funds cannot be used in a manner not reasonably 
calculated to serve the purposes of the program.
    In determining if an activity may be funded with TANF funds under 
this provision, you should refer to the purposes described in section 
401 and reiterated at Sec. 270.20. Also, you should be aware that the 
specific prohibitions or restrictions in the statute (e.g., the 
prohibitions in section 408) apply even if an activity seems otherwise 
consistent with the purposes in section 404(a)(1).
    In addition, section 404(a)(2), as amended by section 5503 of Pub. 
L. 105-33, permits Federal TANF funds to be used ``in any manner that 
the State was authorized to use amounts received under part A or F, as 
such parts were in effect on September 30, 1995 or (at the option of 
the State) August 21, 1996.'' We interpret this provision to cover 
activities that are not permissible under section 404(a)(1), but were 
included in a State's approved State AFDC plan, JOBS plan, or 
Supportive Services Plan as of September 30, 1995, or, at State option, 
August 21, 1996. An example of such an activity is Emergency Assistance 
juvenile justice activities that were included in many State plans. 
Under this provision, only those States whose approved AFDC State plans 
included juvenile justice activities as of September 30, 1995, or, at 
State option, August 21, 1996, may use Federal TANF funds for those 
activities. Further, as with section 404(a)(1), this provision does not 
permit Federal TANF funds to be used for any activity that is otherwise 
prohibited or restricted under the statute.
    States should also note that if they exceed the 15 percent limit on 
administrative costs under section 404(b), we will consider any amount 
of funds exceeding the limit to be misused funds. Likewise, we would 
consider unauthorized or inappropriate transfers of TANF funds to be a 
misuse of funds. We would consider any of the following transfers to be 
inappropriate or unauthorized: transfers to any program except the 
Child Care and Development Block Grant (also known as the Discretionary 
Fund within the Child Care and Development Fund) or the Social Services 
and Block Grant Program under title XX of the Social Security Act; 
transfers to those two programs in excess of the 30 percent cap; and 
transfers to SSBG in excess of the 10 percent cap.
    OMB Circulars A-102 and A-87 also include restrictions and 
prohibitions that limit the use of Federal TANF funds. The Department 
previously promulgated A-102 (the common rule) in its regulations at 
part 92 of title 45, ``Uniform Administrative Requirements for Grants 
and Cooperative Agreements to State and Local Governments.''
    All provisions in part 92 are applicable to the TANF program. TANF 
is not one of the Block Grant programs exempt from the requirements of 
part 92, as OMB has not taken action to exempt it. Rather, OMB has 
determined that TANF should be subject to part 92. Section 417 does not 
prevent us from applying the part 92 regulations to TANF because the 
referenced requirements are not developed to enforce substantive 
provisions under this part. We believe that Congress understood that 
TANF, like other Federal grant programs, was subject to existing 
appropriations, statutory and regulatory requirements regarding the 
general administration of grants, notwithstanding section 417. Section 
417 was not meant to invalidate other requirements that Congress and 
Federal agencies, primarily OMB, have put in place to assure that 
Federal grant funds are properly administered or to inhibit Federal 
agencies from fulfilling their financial management responsibilities in 
managing their programs.
    By reference, part 92 also includes A-87, the ``Cost Principles for 
State, Local and Indian Tribal Governments,'' the basic guidelines for 
Federal awards. These guidelines provide, in part, that an allowable 
cost must be necessary and reasonable for the proper and efficient 
administration of a Federal grant program, and authorized or not 
prohibited under State or local laws or regulations.
    A-87 also includes some specific prohibitions on the use of Federal 
funds generally that apply to Federal TANF funds. For example, A-87 
prohibits the use of Federal funds for alcoholic beverages, bad debts, 
and the salaries and expenses of the Office of the Governor.
Clarifications of Use of Federal TANF Funds--Substance Abuse Services
    In our consultations, we received several inquiries regarding the 
use of Federal TANF funds for substance abuse treatment, i.e., 
treatment for alcohol and drug abuse. In light of the prohibition on 
the use of Federal TANF funds for ``medical services, except for pre-
pregnancy family planning activities,'' we held discussions with other 
Federal agencies and learned that in many, but not all instances, the 
treatment of alcohol and drug abuse involves not just ``medical 
services,'' but other kinds of social and support services as well.
    Allowing States to use Federal TANF funds for substance abuse 
treatment is programmatically sound since it may help clients make 
successful transitions to work and provide for a stable home 
environment for TANF children. Accordingly, we are proposing a policy 
that permits States to use Federal TANF funds for drug and alcohol 
abuse treatment services to the extent that such services are not 
medical. States will have to look at the range of services offered and 
differentiate between those that are medical and those that are not. In 
short, States cannot use Federal TANF funds for services that the State 
identifies as medical; they may only use Federal funds used for 
services that are non-medical.
Clarification of the Use of Federal TANF Funds for Construction and 
Purchase of Facilities
    The Comptroller General of the United States has prohibited the use 
of Federal funds for the construction or purchase of facilities or 
buildings unless there is explicit statutory authority permitting 
Federal grant funds to be used for this purpose. Since the statute is 
silent on this, States must not use Federal TANF funds for construction 
or the purchase of facilities or buildings.
Clarification of the Use of Federal TANF Funds as State Match for Other 
Federal Grant Programs
    Federal TANF funds under section 403(a) may be used to match other 
Federal grant programs if authorized under the statute of the grant 
program. However, these funds are still subject to the TANF program 
requirements and must be used in accordance with the purposes of the 
TANF program and with these proposed regulations.
Clarification of the Use of Federal TANF Funds to Add to Program Income
    We have received a number of inquiries about whether or not TANF 
funds may be used to generate program income. An example of program 
income

[[Page 62159]]

is the income a State earns if it sells another State a training 
curricula that it has developed, in whole or mostly, with Federal TANF 
funds.
    States may generate program income to defray costs of the program. 
Under 45 CFR 92.25, there are several options for how this program 
income may be treated. For the TANF program, in order to give States 
flexibility in their use of TANF funds, we are proposing to permit 
States to add to their TANF grant program income that has been earned 
by the State. States must use such program income for the purposes of 
the TANF program and for allowable TANF activities. We will not require 
States to report on the amount of program income earned, but they must 
keep on file financial records on program income earned and the 
purposes for which it is used in the event of an audit or review.
How will we determine if a State intentionally misused Federal TANF 
funds? (Sec. 273.12)
    To determine if funds have been intentionally misused, we will 
require the State to demonstrate to our satisfaction that TANF funds 
were spent for purposes that a reasonable person would consider to be 
within the purposes of the TANF program. Funds will also be considered 
intentionally misused if there is documentation, such as Federal 
guidance or policy instructions, that provides that funds must not be 
used for such purposes, or if the State misuses the funds after 
receiving notification from us that such use is not allowable.
What types of activities are subject to the administrative cost limit 
on Federal TANF grants? (Sec. 273.13)
    Section 404 of the Act sets forth the various ways in which a State 
may expend its Federal TANF grant under section 403. As a general rule, 
under section 404(b)(1), only 15 percent of a State's Federal fiscal 
year grant may consist of administrative expenditures. This limit is 
reached in the quarter in which a State's administrative expenditures, 
which may be made over one or more fiscal years for each fiscal year 
grant, equal 15 percent of the fiscal year grant.
    For the purpose of the 15 percent limit, State expenditures on 
information technology and computerization necessary for tracking or 
monitoring cases covered by the TANF program do not count. But 
remaining of particular interest to our State partners and other 
interested parties is the definition of the costs that are included as 
administrative costs. This information is critical to State planning 
for welfare reform.
    In this proposed rule, the term ``administrative costs'' will 
include only those expenditures that are subject to the 15 percent 
limit in section 404(b). Expenditures for information technology and 
computerization necessary for tracking and monitoring and other 
expenditures, that have traditionally been considered ``administrative 
costs'' but that are outside of the 15 percent limit, are referred to 
as ``administrative costs outside of the 15 percent limit.''
    We include our proposed definition of ``administrative costs'' at 
Sec. 273.0(b). In the preamble for Sec. 273.0, we include a detailed 
explanation of the proposal.
    Pursuant to section 404(d), States may transfer up to 30 percent of 
each fiscal year's SFAG to the Child Care and Development Block Grant 
Program (also known as the Discretionary Fund of the Child Care and 
Development Fund) and the Social Services Block Grant Program under 
title XX of the Act. All 30 percent may be transferred to CCDBG, but no 
more than ten percent can be transferred to SSBG. As transferred funds 
must then be treated as if they were funds appropriated to CCDBG and 
title XX, and not as TANF funds, we will reduce the total amount of 
TANF funds available for administrative costs by the total amount of 
any such transfers. The 15 percent ceiling applies to each fiscal 
year's adjusted SFAG.
    If a State's administrative costs exceed the 15 percent limit, the 
penalty for misuse of funds will apply. The penalty will be in the 
amount spent on administrative costs in excess of 15 percent. We will 
take an additional penalty in the amount of five percent of the 
adjusted SFAG if we find that a State has intentionally exceeded the 15 
percent limit.
    States must allocate costs to proper programs. Under the Federal 
Appropriations Law, grantees must use funds in accordance with the 
purpose for which they were appropriated. In addition, as stated 
previously, the grants administration regulations at part 92, and OMB 
Circular A-87, ``Cost Principles for State, Local, and Indian Tribal 
Governments'' apply to the TANF program. A-87, in particular, 
establishes the procedures and rules applicable to the allocation of 
costs among programs and the allowability of costs under Federal grant 
programs such as TANF.
Subpart C--What Rules Apply to Individual Development Accounts?
What definitions apply to Individual Development Accounts (IDAs)? 
(Sec. 273.20)
    An IDA is defined as an account established by or for an individual 
who is eligible for TANF assistance to allow the individual to 
accumulate funds for specific purposes. A number of other terms used in 
discussing IDAs are also defined.
May a State use the TANF grant to fund IDAs? (Sec. 273.21)
    Section 404(h) of PRWORA gives States the option to fund IDAs with 
TANF funds for individuals who are eligible for TANF assistance.
Are there any restrictions on IDA funds? (Sec. 273.22)
    IDAs are similar to savings accounts and enable recipients to save 
earned income for certain, specified, significant items. Individuals 
may spend IDA funds only to purchase a home, pay for a college 
education, or start a business.
How does a State prevent a recipient from using the IDA account for 
unqualified purposes? (Sec. 273.23)
    Money in an IDA account will not affect a recipient's eligibility 
for assistance. Withdrawals from the IDA should be paid directly to a 
college or university, to a bank, savings and loan institution, or to 
an individual selling a home or to a special account if the recipient 
is starting a business. Thus, IDAs may provide an incentive for 
recipients to find jobs and use their earned income to save for the 
future.
    Section 404(h) authorizes the Secretary to establish regulations to 
ensure that individuals do not withdraw funds held in an IDA except for 
one or more of the above qualified purposes.
    In our research, we found several States had established Individual 
Development Accounts under their Welfare Reform Demonstration Projects 
and subsequently transferred those provisions to their TANF programs. 
Each State had designed its own procedures for preventing withdrawals 
or penalizing recipients who withdrew funds from their IDAs for 
unauthorized purposes. For example, several States count a withdrawal 
for a non-qualified purpose as earned income in the month of withdrawal 
unless the funds were already counted as earned income. Other States 
treat such withdrawals against a family's resource limit. Still another 
State calculates a period of ineligibility using a complex formula.

[[Page 62160]]

    With this in mind, we did not feel that it was necessary to be 
overly prescriptive in mandating how States ensure that individuals do 
not make unauthorized withdrawals from IDA accounts. In keeping with 
the intent of PRWORA, we have tried to give States maximum flexibility 
to establish procedures that ensure that only qualified withdrawals are 
made.
    In addition, section 404(h)(5)(D) gives the Secretary the authority 
to determine whether or not a business contravenes law or public 
policy. We have decided that we should base our determination on the 
business's compliance with State law or policies. Our proposal will 
allow States maximum flexibility in setting up these programs, while 
assuring that a business established by a needy family meets State 
requirements.
    We have incorporated statutory provisions in the regulations for 
the reader's convenience.

E. Part 274--Other Accountability Provisions

Subpart A--What Specific Rules Apply for Other Program Penalties?
What definitions apply to this part? (Sec. 274.0)
    This section cross-references the general TANF regulatory 
definitions established under part 270.
What restrictions apply to the length of time Federal TANF assistance 
may be provided? (Sec. 274.1)
    Under the former AFDC program, families could receive assistance as 
long as necessary, if they continued to meet program eligibility rules. 
Under the TANF program, Congress established a maximum length of time 
in which a family may receive assistance funded by Federal funds.
    Sections 408(a)(1)(B) and 408(a)(7) stipulate that States may not 
use Federal funds to provide assistance to a family that includes an 
adult who has received assistance for more than five years. Therefore, 
when a parent or other adult caretaker relative of a minor child 
applies for and receives federally-funded assistance under the State's 
TANF program on behalf of him/herself and his/her family, Federal 
funding of that assistance may not last longer than five years. 
(Certain exceptions are covered later in the discussion of this 
section.)
    As discussed earlier in this preamble (e.g., at Sec. 271.22), we 
are concerned that States might define eligibility in such a way as to 
avoid the time limits (i.e., by converting cases to be child-only 
cases). Thus, under this section, we would prohibit States from 
excluding adults from their definition of families for the purpose of 
avoiding this penalty, and we would require annual reporting of the 
number of such families excluded (along with the basis for excluding 
them). Further, if we determine that States were defining ``families 
that include an adult'' so as to avoid a time-limit penalty, we would 
add the child-only cases back and recalculate the number of cases over 
the limit. We would determine whether a State was subject to a penalty 
based on this recalculation.
    The five-year limit on Federal funding is calculated as a 
cumulative total of 60 months. Section 408(a)(7)(B) clarifies that the 
State must disregard any month for which assistance has been provided 
to an individual who is a minor child who is not the head of a 
household or married to the head of a household. However, any month 
when a pregnant minor or minor parent is the head-of-household or 
married to the head-of-household does count toward the five-year limit. 
The five-year limitation on Federal funding also disregards any months 
that an adult received assistance while living in Indian country (as 
defined by section 1151 of title 18, United States Code) or in an 
Alaska Native Village where at least 50 percent of the adults are not 
employed (see Sec. 274.1(b)(2)).
    Section 5001(d) of Pub. L. 105-33 added subsection (G) to section 
408(a)(7). This subsection provides for special treatment of assistance 
provided to a family with Welfare-to-Work grant funds (formula or 
competitive) under the time-limit provision. First, months in which a 
family receives cash assistance funded with Welfare-to-Work grant funds 
(under section 403(a)(5) of the Act) do count towards the five-year 
limit; however, months in which a family receives only non-cash 
assistance under WTW do not count towards the five-year limit. 
Secondly, families may receive assistance funded with Welfare-to-Work 
grant funds even though they are precluded from receiving other TANF 
assistance because of the five-year limit.
    Some families may receive assistance from Federal funds for more 
than five years based on hardship or if the family includes an 
individual who has been battered or subjected to extreme cruelty as 
defined in section 408(a)(7)(C)(iii). Under section 408(a)(7)(C), the 
average monthly number of such families may not exceed 20 percent of 
the State's average monthly caseload during either the fiscal year or 
the immediately preceding fiscal year, whichever the State elects.
    The Act does not specifically prescribe whether a family can be 
excepted from the time limit before they have received 60 cumulative 
months of Federal assistance or whether it can only be applied after 
the limit is reached. As the purpose of the provision is to provide an 
extension to the 60-month limit, we propose that it would only apply 
after that limit is reached. No determination of whether a State has 
exceeded the cap will be made until some families in the TANF program 
have received at least 60 cumulative months of federally-funded 
assistance. We believe that this approach is the most straightforward 
and comports with Congressional intent that TANF assistance be provided 
on a temporary basis while a family becomes self-sufficient. Thus, 
unless the minor child or Native American statutory disregard applies, 
Federal support would cease once any adult in the family has been 
assisted for 60 total months with Federal funds unless the State 
chooses at that time to include the family in its 20 percent exception. 
However, the State may elect to use State funds to continue to pay 
eligible families.
    The provision is a time limit on Federal funding, and does not set 
an upper or lower bound on the amount of time a State could provide 
assistance to an individual family with State funds. States are free to 
impose shorter time limits on the receipt of assistance under their 
programs. They are also free to allow receipt for longer periods if the 
assistance is paid from State funds or if the family meets the criteria 
the State has chosen for extension and fits with the 20 percent limit.
    We are very interested in comments on our approach to clarifying 
the time limit on assistance. We will also be paying close attention to 
learn what is happening to families as they begin to reach time limits 
under waiver and TANF rules. In this regard, tracking the number of 
months that each family has received TANF assistance is very important, 
both to the State and to the family. We urge States to regularly 
provide families with information on how close they are to reaching the 
time limit. This information should help strengthen the family's focus 
on achieving self-sufficiency.
    We have received numerous inquiries regarding the relationship 
between good cause waivers of the time limit permitted under the Family 
Violence Option at section 402(a)(7) and the limit on the exceptions to 
the Federal time limit at section 408(a)(7)(C)(ii). The key issue is 
whether the 20 percent limit on hardship exceptions includes families 
of domestic violence victims.

[[Page 62161]]

    Section 402(a)(7)(B) expressly refers to section 408(a)(7)(C)(iii) 
in applying the meaning of the term ``domestic violence'' to the Family 
Violence Option at section 402(a)(7)(A). Section 408(a)(7)(C)(iii) 
defines ``battered'' or ``subjected to extreme cruelty'' for purposes 
of describing families who may qualify for a hardship exemption at 
section 408(a)(7)(C)(i), and section 408(a)(7)(C)(ii) specifies a 20 
percent limit on the exceptions to the time limit due to hardship. 
Consequently, we conclude that the statutory language includes the 
number of families waived from the five-year time limit per section 
402(a)(7) within the 20 percent ceiling established under section 
408(a)(7)(C)(ii).
    We further note that Congress chose not to amend the statute as 
part of budget reconciliation. Thus, our proposed policy includes these 
cases within the 20 percent limitation. However, our policy would 
enable a State to claim ``reasonable cause'' when its failure to meet 
the five-year limit could be attributed to its provision of bona fide 
good cause domestic violence waivers. See Sec. 274.3 for additional 
information.
    As previously discussed, section 408(a)(7)(D) provides an exemption 
to the time limit on receipt of federally-funded TANF assistance for 
families living in Indian country or in an Alaskan Native village. The 
months a family, that includes an adult, lives in Indian country or in 
an Alaskan Native village, where at least 50 percent of the adults are 
not employed, do not count when determining whether the adult has 
received federally-funded assistance for 60 cumulative months. In 
accordance with section 408(a)(7)(D), as amended by section 5505(d)(2) 
of Pub. L. 105-33, the percentage of adults who are not employed in a 
month will be determined by the State using the most reliable data 
available for the month, or for a period including the month.
    This exception does not include families receiving assistance under 
an approved Tribal family assistance plan because these families are 
covered by the requirements at section 412.
    In our consultations on the regulations, questions were raised 
about the relationship of section 415, the application of waivers 
inconsistent with PRWORA, and the time limit on Federal assistance. 
Some waivers include provisions for time limiting assistance.
    As discussed in the preamble to Sec. 270.30, we define what it 
means for a provision of the Act to be inconsistent with provision(s) 
in a waiver. We believe it is crucial to define what ``inconsistent'' 
means because: (1) the Act does not define it; (2) States need to know 
whether any time-limit policies in their waivers are inconsistent with 
the provisions in sections 408(a)(1)(B) and 408(a)(7); and (3) if there 
is an inconsistency, States need to know how the time-limit 
restrictions under 408(a)(1)(B) and 408(a)(7) apply in relation to the 
State's policy. We must define the term to implement the time limit 
penalty provision at section 409(a)(9), and States must understand what 
it means when it is applied to the five-year limit, in order to avoid 
that penalty.
    Under our proposed definition of inconsistency, the five-year limit 
on Federal assistance is inconsistent with a State's waiver only: (1) 
if the State has an approved waiver (a) that provides for terminating 
cash assistance to individuals or families because of the receipt of 
assistance for a period of time specified by the approved waiver(s), 
and (b) under which the State would have to change its waiver policies 
(including policies regarding exemptions and extensions) in order to 
comply with the five-year limit on Federal assistance; or (2) for a 
control or experimental treatment group where a State chooses to 
maintain prior law policies applicable to research group cases for the 
purpose of completing an impact evaluation using an experimental 
design.
    We believe that this proposed regulation is consistent with the 
language in the conference report, H. Rept. 104-725 at 311, indicating 
agreement by the conferees that:

    * * * such waivers may only apply * * * to the specific program 
features for which the waiver was granted. All * * * program 
features of the State program not specifically covered by the waiver 
must conform to this part (i.e., to TANF).

    Except for control and experimental treatment group cases 
maintained for the purpose of completing an impact evaluation of the 
waiver policies, a State that does not have an approved time-limit 
provision in its waiver that meets the above criteria must adhere to 
the provisions set forth in sections 408(a)(1)(B) and 408(a)(7). A 
State that does have an approved time-limit provision in its waiver 
that meets the above criteria does not have to follow the provisions of 
the five-year limit, to the extent they are inconsistent, until the 
waiver expires. Several examples of the application of the proposed 
policy follow.
    A State has an approved seven-year waiver that terminates a 
family's cash benefits after 18 months of benefits if the adult fails 
to participate in a work program. Assistance does not end because of 
the passage of time, but because of the adult's failure to participate 
in a required work activity. The waiver policy does not meet the first 
prong of the test for time limit inconsistency, as it is a work policy. 
Therefore, it is not inconsistent with the Federal time-limit 
provision. The State will have to adhere to the five-year limit under 
sections 408(a)(1)(B) and 408(a)(7).
    Even if a State has an approved time-limit waiver policy, we 
believe that the waiver policy and the Federal five-year limit can 
operate concurrently. In most cases, the State would not have to change 
waiver policy because of the Federal limit, and, thus, there would not 
be an inconsistency. As a general rule, individuals subject to a State 
time limit under an approved waiver will concurrently be subject to the 
Federal time limit.
    For example, a State has been granted an eleven-year waiver to 
operate a demonstration that limits the receipt of assistance by a 
family to two years (with extensions under certain circumstances). 
Because the Federal time limit can run concurrently, a family receiving 
assistance for two years under the State's time limit is also receiving 
two years of assistance under the Federal five-year limit. Once the 
demonstration ends, if the family has received just two years of TANF 
assistance, then the family can receive three more years of federally-
funded assistance under the five-year limit (assuming all other 
eligibility criteria are met per the State's TANF plan). Alternatively, 
should the family move to another State, that State can provide three 
more years of federally-funded assistance (assuming the State provides 
five years of TANF assistance).
    Under this policy, there will be circumstances under which the 
State may use Federal funds for longer than five years to provide 
assistance to a family that includes an adult. For example, under the 
terms of the waiver, assistance is extended so long as the eligible 
adult in the family complies with his/her personal responsibility plan. 
In such situations, we propose that a State may apply extensions of its 
time limit in accordance with the terms of the approved waiver in lieu 
of the provision under section 408(a)(7)(C)(ii).
    We believe that this approach comports with the intent of section 
415. Section 408(a)(7)(C) permits Federal funds to be used to continue 
to assist families beyond the five-year limit based on hardship. Under 
section 408(a)(7)(C)(ii), a State may apply this extension for up to 
only 20 percent of

[[Page 62162]]

its average monthly caseload during the fiscal year or the immediately 
preceding fiscal year, whichever the State elects. A State's approved 
waiver may very well include a provision for extending assistance as 
needed to cases meeting the waiver requirements, without limit. Under 
the above proposal, a State may apply extensions of its time limit, 
without caseload limits, in accordance with the terms of its approved 
waiver.
    Another State might have waivers approved for a nine-year period 
that apply a three-year time limit on receipt of assistance to adults 
in the family (with extensions under certain circumstances). The 
children in the family continue to receive assistance even after 
assistance ends for the adults. If the adults receive no extension, 
there is no inconsistency and the children may continue to receive 
benefits. If the adults receive extensions under the demonstration, and 
thus more than five years of assistance, there would be an 
inconsistency because the State would need to change its waiver policy 
and terminate assistance. Therefore, the family can continue to receive 
assistance as long as the adults have an extension and the children can 
receive assistance even if the adult is terminated. (Note that once the 
adults are removed from the State-defined family, the Federal time 
limit clock does not advance.) When the waiver authority ends, the 
State will need to determine if the adults in demonstration families 
received five years of federally-funded TANF assistance. If not, the 
families will be eligible to receive assistance with Federal TANF funds 
for up to a total of 60 cumulative months (assuming all other 
eligibility criteria are met per the State's TANF plan).
    We recognize that there will be situations, although limited, in 
which, as a result of a waiver policy, a family will not accrue months 
towards the Federal time limit even though it receives assistance with 
Federal (or commingled) funds. For months when a family is exempt from 
the State time limit (e.g., when the adult in the family is aged or 
disabled), the family is also exempt from the Federal time limit during 
the duration of the waiver authority. To subject such families to a 
time limit would be inconsistent with the State's approved waiver 
policy. Therefore, for the period of the waiver authority, the number 
of months the family receives assistance do not accrue against the 
Federal five-year time limit as long as the family remains exempt under 
the State time limit. These exemptions cease once the waiver authority 
ends or if the family moves to another State.
    A family that is in the control or experimental treatment group 
maintained for the purpose of completing an impact evaluation of a 
waiver demonstration program would not be subject to a time limit. 
Therefore, it would not begin to accrue months towards the Federal time 
limit until the end of the waiver demonstration (or sooner if the 
evaluation is discontinued) and would not count towards the 20 percent 
limit on extensions.
What happens if a State does not comply with the five-year limit? 
(Sec. 274.2)
    Congress created a penalty under section 409(a)(9) to ensure that 
States comply with the five-year restriction on the receipt of 
federally-funded TANF assistance. If we determine that a State has not 
complied with the five-year time limit during a fiscal year, then we 
will reduce the SFAG payable for the immediately succeeding fiscal year 
by five percent of the adjusted SFAG.
    Five years is the maximum period of time permitted under the 
statute for families to receive federally-funded TANF assistance. 
Therefore, the penalty under this section does not apply if the State 
exceeds any shorter time limits on the receipt of federally-funded 
assistance that it may choose to impose. It also does not apply to any 
time limits on receipt of State-funded assistance or the receipt of 
non-cash assistance through participation in an allowable activity 
financed through Federal Welfare-to-Work grant funds.
    In defining the requirement, section 409(a)(9) refers to section 
408(a)(7). This section provides the circumstances under which 
assistance may be extended. It provides exceptions to the time limit 
requirement for minors, hardship, or families living in Indian country 
or in an Alaskan Native village. Therefore, we will take into account 
the exceptions described under paragraphs (B), (C), or (D) of section 
408(a)(7) when deciding whether the State complied with the five-year 
time limitation.
    We do not intend to hold States immediately accountable for knowing 
about and verifying all months of assistance received in other States, 
since we are aware that, in general, States' data processing systems 
generally are not currently capable of accomplishing interstate 
tracking of the number of months an individual has received TANF 
assistance. We will use the information required to be reported by the 
proposed rules in part 275 to learn whether a State is complying with 
the five-year time restriction on the receipt of federally-funded 
assistance.
How can a State avoid a penalty for failure to comply with the five-
year limit? (Sec. 274.3)
    In Sec. 272.5, we have proposed general circumstances under which 
we would find reasonable cause to waive potential penalties. We also 
propose to consider an additional factor in determining whether there 
is reasonable cause for failure to meet the five-year limit. The 
additional factor relates to a State's implementation of the Family 
Violence Option (FVO) and its provision of temporary waivers of time 
limits, when necessary, for victims of domestic violence.
    We want to encourage States to adopt this amendment and to provide 
appropriate assistance that reflects the safety and employment-related 
needs of these families. In adding this reasonable cause factor, we 
recognize that some of these individuals may need special assistance, 
at least over the short term. However, we also want to ensure that 
States make timely, good-faith efforts to help victims of domestic 
violence become independent. To ensure that States make such efforts, 
we would limit this reasonable cause provision to States that have 
implemented the FVO; we reference the criteria we included at 
Sec. 270.30 to define what qualifies as a good cause domestic violence 
waiver; and we have set forth a strategy for monitoring the 
implementation of these provisions.
    Under our proposal, as under the work participation penalty, States 
would have to grant good cause domestic violence waivers appropriately. 
In the case of time limits, we would only allow States to exclude from 
their calculations families that had good cause domestic violence 
waivers and service plans in effect at the time of, or after, the 
family had reached the 60-month limit on federally-funded assistance. 
We would not stop the Federal clock for families that receive good 
cause domestic violence waivers during the five-year period, and we 
would only recognize waivers that reflected a State assessment that the 
individual's or family's situation was temporarily preventing them from 
work.
    There are several reasons why we have taken a restrictive approach 
on this reasonable cause provision.
    The most important is that the 20 percent hardship exemption 
already provides considerable flexibility for States--for example, it 
only applies to federally-funded assistance, and it excludes certain 
types of families.
    A related reason is that we think the time-limit provision gives 
States added incentive to work vigorously with

[[Page 62163]]

families in making the transition from welfare to work. We want States 
to have similar motivation to assist victims of domestic violence in 
becoming independent. If we are too generous in granting reasonable 
cause for domestic violence cases, we believe there will be a risk that 
States will divert resources and attention from these cases and 
unnecessarily prolong their dependence.
    We tie the availability of reasonable cause to the family's ability 
to work because that factor is the most critical in determining whether 
a family could support itself or would continue to need assistance. 
Families facing the most serious domestic violence situations are 
likely to have waivers of work requirements because their lives will be 
too unstable to expect ongoing work. These same families will be the 
ones whose situations may take more time to resolve and will have the 
most trouble becoming self-sufficient within the time limits. Thus, it 
makes sense to address these cases through reasonable cause. Other 
cases can be served under the 20 percent hardship exemption or a State-
funded program, if they fail to become self-sufficient within five 
years.
    We do not expect that victims of domestic violence will routinely 
need more than five years of assistance before becoming self-
sufficient. However, our proposal recognizes that there may be special 
circumstances when that is not possible. For example, a woman could 
suffer recurrent episodes of domestic violence, including one at the 
end of the five-year period, that prevent her from securing or 
maintaining a stable work situation. The reasonable cause provision in 
this section of the proposed rule would give special consideration to 
States if such situations arose.
    Under our proposed rules, a State must substantiate its case for 
all claims of reasonable cause. We will examine each situation on its 
own merits and determine whether to assess a penalty on a case-by-case 
basis.
Must States do computer matching of data records under IEVS to verify 
recipient information? (Sec. 274.10)
    The Income and Eligibility Verification System (IEVS) was 
originally established on July 18, 1984 under section 1137. PRWORA 
created a penalty at section 409(a)(4) requiring the reduction of a 
State's SFAG for the immediately succeeding fiscal year by up to two 
percent if the State is not participating in IEVS.
    This IEVS provision was intended to improve the accuracy of 
eligibility determinations and grant computations for the public 
assistance (AFDC, Medicaid, Food Stamp and SSI) programs. It achieves 
this goal by expanding access to, and exchanges of, available computer 
files to verify client-reported earned and unearned income. 
Specifically, it makes the following files available to the State 
public assistance agencies: (1) IRS unearned income; (2) State Wage 
Information Collection Agencies (SWICA) employer quarterly reports of 
income and unemployment insurance benefit payments; (3) IRS earned 
income maintained by the Social Security Administration (SSA); and (4) 
with the passage of the Immigration Control and Reform Act of 1986, 
immigration status information maintained by the Immigration and 
Naturalization Service (INS).
    Currently, regulations at Secs. 205.51 through 205.62 and section 
1137(d) describe what is meant by ``participating * * * in the income 
and eligibility verification system required by section 1137.'' The 
regulation at Sec. 205.60(a) requires each State to maintain statistics 
on its use of IEVS. In general, ``participation'' means that a State 
agency submits electronic requests to IRS, SWICA, SSA and INS for 
information listed in the preceding paragraph, for all TANF applicants 
and recipients. IRS, SWICA, SSA and INS provide the State agencies with 
an electronic response regarding the information requested. The 
frequency of the request and the timeliness of the response is a 
function of the agency (IRS, SWICA, SSA and INS) data processing 
systems design. The State agency worker compares the information 
provided by IRS, SWICA, SSA and INS to determine the accuracy of client 
reporting of case circumstances.
How much is the penalty for not participating in IEVS? (Sec. 274.11)
    We are proposing to use an audit pursuant to the Single Audit Act 
as the primary means of monitoring a State's IEVS participation. 
Statistics maintained by the State, as required by Sec. 205.60(a), will 
be one of the sources of information that will be reviewed during the 
audit. However, we may conduct additional Federal reviews or audits as 
needed.
    Since IEVS has been in existence for more than 12 years, we believe 
that States have had significant time to become full participants in 
IEVS. Therefore, we believe it is appropriate to impose the maximum 
two-percent penalty upon all findings that a State is not participating 
in IEVS.
What happens if a State sanctions a single parent of a child under six 
who cannot get needed child care? (Sec. 274.20)
    To support the intent of the statute to move people to work, 
section 407(e) requires that States reduce or terminate assistance to 
individuals who refuse to engage in work as required by section 
402(a)(1)(A)(ii), as amended by section 5501(b) of Pub. L. 105-33, and 
section 407. However, section 407(e)(2) gives an exception for single 
custodial parents with a child under six if the State determines they 
have a demonstrated inability to obtain needed child care. Parents 
refusing to participate in work must demonstrate that they could not 
obtain child care for one or more of the following three reasons: (1) 
appropriate child care was not available within a reasonable distance 
from the parent's home or work site; (2) informal child care, by a 
relative or under other arrangements, was unavailable or unsuitable; 
and (3) appropriate and affordable formal child care arrangements were 
unavailable.
    Section 409(a)(11)(A) directs the Secretary to reduce by no more 
than five percent of the adjusted SFAG, the SFAG payable to the State 
that reduces or terminates assistance to parents who refuse to work 
because they cannot obtain needed child care for a child under six 
years of age. The determination that a State is liable for a penalty 
would be dependent on a finding that the State reduced or terminated 
assistance to a parent who qualified for an exception under the 
definitions or criteria that the State developed regarding a parent's 
``demonstrated inability'' to obtain needed child care.
    We expect that, because of the interrelationship between TANF and 
CCDF, the TANF staff would work in close coordination with the Lead 
Agency for child care. Our expectation is that the TANF staff will 
provide families information about the penalty exception. Under the 
CCDF proposed rule, ACF would also require that the Lead Agency for the 
CCDF program inform parents in the CCDF system about the penalty 
exception to the TANF work requirement and the process or procedures 
developed by the State by which they can demonstrate their inability to 
obtain needed child care. ACF would also require the Lead Agency for 
child care to include the TANF agency's definitions in the CCDF plan 
for ``appropriate child care,'' ``reasonable distance,'' 
``unsuitability of informal care,'' ``affordable,'' and ``child care 
arrangements.'' Thus, we would expect the TANF agency to share its

[[Page 62164]]

definitions of these items with the child care agency. Both agencies 
would then be able to share them with families whom they may be 
assisting with child care arrangements.
    Following are the factors that ACF would consider in determining if 
a State violated the exception to the penalty provided at section 
407(e)(2):
    <bullet> Whether the State informs families about the exception to 
the penalty for refusing to work, including the fact that the exception 
does not extend the time limit on benefits;
    <bullet> Whether the State informs families about the process or 
procedures by which they can demonstrate an inability to obtain needed 
child care;
    <bullet> Whether the State has defined and informed parents of its 
definitions of ``appropriate child care,'' ``reasonable distance,'' 
``unsuitability of informal care,'' and ``affordable child care 
arrangements'';
    <bullet> Whether the State notifies the parent of its decision to 
accept or reject the parent's demonstration in a timely manner;
    <bullet> Whether the State has developed alternative strategies to 
minimize the amount of time parents are excepted from work requirements 
due to their inability to obtain needed child care.
    For example, a State that uses the services of a child care 
resource and referral (CCR&R) office might accept a statement from that 
office noting the unavailability of appropriate or affordable child 
care. Or, if the refusal to work is due to difficulty in arranging 
transportation, the State could refer to bus and rail rates and 
schedules to determine if the appropriateness and/or reasonable 
distance criteria had been met.
    We are not specifying the process or procedures that States should 
develop, or the documents, if any, States should require. However, we 
suggest that if States plan to require documents, they select ones that 
are readily available to families. We recommend that the process or 
procedures be simple and straight forward. In addition, we recommend 
frequent contact with parents since the penalty exception does not stay 
the time limits and there may be fluctuations in the availability of 
child care services.
    We propose to impose the maximum penalty if States do not have a 
process or procedure in place that enables families, who refuse to work 
because they are unable to find needed child care, to demonstrate that 
they have met the guidelines provided by the State. Additionally, we 
will impose the maximum penalty if there is a pattern of substantiated 
complaints from parents or organizations verifying that a State has 
reduced or terminated assistance in violation of the requirement at 
section 409(a)(11). We will impose a reduced penalty if the State 
demonstrates that the incidents were isolated or that a minimal number 
of families were affected. States faced with a penalty under this 
requirement can claim reasonable cause and/or submit a corrective 
compliance plan as described in part 272.
What procedures exist to ensure cooperation with child support 
enforcement requirements? (Sec. 274.30)
    One of TANF's purposes is to provide assistance to needy families 
so that children may be cared for in their own homes or the homes of 
relatives. Another is to end the dependence of needy parents on 
government benefits by promoting job preparation, work, marriage, and 
parental responsibility. A third is to prevent and reduce the incidence 
of out-of-wedlock pregnancies and to encourage the formation and 
maintenance of two-parent families. Child support enforcement provides 
an important means of achieving all of these goals.
    The law has long recognized that paternity establishment is an 
important first step toward self-sufficiency in cases where a child is 
born out of wedlock. The earlier paternity is established, the sooner 
the child may have a relationship with the father and access to child 
support, the father's medical benefits, information on his medical 
history, and other benefits resulting from paternity establishment.
    Establishment of paternity may also help establish entitlement to 
other financial benefits, including Social Security benefits, pension 
benefits, veterans' benefits, and rights of inheritance. Accordingly, 
establishing paternity and obtaining child support from the non-
custodial parent are critical components of achieving independence.
    To ensure that a legal relationship protecting the interests of the 
children is established quickly and in accordance with State law, the 
State agency (the IV-A agency) must refer all appropriate individuals 
in the family of a child, for whom paternity has not been established 
or for whom a child support order needs to be established, modified or 
enforced, to the Child Support Enforcement Agency (the IV-D agency). 
Those individuals must cooperate in establishing paternity and in 
establishing, modifying or enforcing a support order with respect to 
the child.
    The IV-D agency will determine whether the individual is 
cooperating with the State as required. If the IV-D agency determines 
that an individual has not cooperated, and the individual does not 
qualify for any good cause or other exception established by the State, 
the IV-D agency will notify the IV-A agency promptly. The IV-A agency 
must then take appropriate action. The IV-A agency may either reduce 
the family's assistance by an amount equal to not less than 25 percent 
of the amount that the family would otherwise receive or deny the 
family assistance under TANF.
What happens if a State does not comply with the IV-D sanction 
requirement? (Sec. 274.31)
    As stated in section 409(a)(5) of the Act and Sec. 272.1 of these 
proposed rules, we will impose a penalty of up to five percent of the 
adjusted SFAG if the IV-A agency fails to enforce penalties requested 
by the IV-D agency against individuals who fail to cooperate without 
good cause. We propose to monitor State adherence to this requirement 
primarily through the single audit process. We further propose that the 
amount of the penalty will be equal to one percent of the adjusted SFAG 
for the first year there is such a finding. For the second year, the 
amount of the penalty will equal two percent of the adjusted SFAG. We 
will apply the maximum penalty of five percent only if there is such a 
finding in a third, or subsequent year.
    In determining the appropriate penalty for this provision, we took 
into account the comments made during our consultations with States and 
other organizations. Although States have been required to establish 
paternity and enforce other child support provisions for several years, 
and States already have systems and procedures in place for dealing 
with these requirements, the division of responsibility between the IV-
A and IV-D agencies is now slightly different. Accordingly, the 
proposal that we gradually increase the amount of the penalty was made 
to give States the opportunity to make procedural adjustments before 
they are subject to the full impact of the penalty. We believe that the 
suggestion has merit and, therefore, are proposing an incremental 
approach, with reduced penalties for the first two violations, i.e., 
one percent for the first and two percent for the second. However, 
since this is not an entirely new requirement, we are proposing to 
apply the full five percent penalty beginning with the third violation 
of the provision.

[[Page 62165]]

What happens if a State does not repay a Federal loan? (Sec. 274.40)
    Section 406 permits States to borrow funds to operate their TANF 
programs. States must use these loan funds for the same purposes as 
apply to other Federal TANF funds. In addition, the statute also 
specifically provides that States may use such loans for welfare anti-
fraud activities and for the provision of assistance to Indian families 
that have moved from the service area of an Indian Tribe operating a 
Tribal TANF program. States have three years to repay loans and must 
pay interest on any loans received. We will be issuing a program 
instruction notifying States of the application process and the 
information needed for the application.
    Section 409(a)(6) establishes a penalty for States that do not 
repay loans provided under section 406. If the State fails to repay its 
loan in accordance with its agreement with ACF, we will reduce the 
adjusted SFAG for the immediately succeeding fiscal year by the 
outstanding loan amount, plus any interest owed.
    Sections 409(b)(2) and 409(c)(3) provide that States cannot avoid 
this penalty either through reasonable cause or corrective compliance.
What happens if, in a fiscal year, a State does not expend, with its 
own funds, an amount equal to the reduction to the adjusted SFAG 
resulting from a penalty? (Sec. 274.50)
    Section 409(a)(12), as amended by PRWORA, requires States to expend 
under the TANF program an amount equal to the reduction made to its 
adjusted SFAG as a result of one or more of the TANF penalties. States 
are thus required to maintain a level of TANF spending that is 
equivalent to the funding provided through the SFAG even though Federal 
funding was reduced as a result of penalties. However, PRWORA did not 
establish a penalty for a State's failure to meet this requirement. 
Section 5506(j) of Pub. L. 105-33 further amended section 409(a)(12) to 
create such a penalty. If a State fails to expend its own funds to pay 
for State TANF expenditures in an amount equal to the reduction made to 
its adjusted SFAG for a penalty under Sec. 272.1, the State's SFAG for 
the next fiscal year will be reduced by an amount equal to not more 
than two percent of its adjusted SFAG plus the amount that should have 
been expended (reduced for any portion of the required amount actually 
expended by the State in the fiscal year).
    As discussed in Sec. 272.3, we will monitor closely a State's 
efforts to replace the reduced SFAG with its own expenditures. A 
State's investment in its TANF program must not be diminished as a 
result of actions violative of the TANF requirements. Therefore, if a 
State fails to make any expenditures in the TANF program to compensate 
for penalty reductions, we will penalize the State in the maximum 
amount, i.e., two percent of the adjusted SFAG plus the amount it was 
required to expend. The penalty will be reduced based on the percentage 
of any expenditures that are made by the State. For example, if a State 
were required to replace an SFAG reduction by $1,000,000, but its 
increase in expenditures equalled only $500,000, its penalty would be 
equal to two percent of the adjusted SFAG times 50 percent (because 
$500,000 is 50 percent of $1,000,000), plus the $500,000 it failed to 
expend as required.
    States should note that if they do not expend State-only funds as 
required, the effect will be that the amounts to be deducted from the 
SFAG will compound yearly, as the penalty for failure to replace SFAG 
funds with State expenditures also applies to the penalty at 
Sec. 272.1(a)(12). We believe that this is appropriate because full 
resources must be available to ensure that the goals of the TANF 
program are met.
    State expenditures that are used to replace reductions to the SFAG 
as the result of TANF penalties must be expenditures made under the 
State TANF program, not under ``separate State programs.'' This 
requirement is stated in section 409(a)(12). However, as noted in 
Sec. 273.6, regarding the limits on MOE expenditures, State 
expenditures made to replace reductions to the SFAG as a result of 
penalties cannot be counted as TANF MOE expenditures.
    In addition, sections 5508(k) and (m) of Pub. L. 105-33 provide 
that the reasonable cause and corrective compliance plan provisions at 
Secs. 272.4, 272.5, and 272.6 do not apply to the penalty for failure 
to replace SFAG reductions due to penalties with State expenditures.
Subpart B--What are the Funding Requirements for the Contingency Fund?
Optional Use of the Contingency Fund
    In addition to the funding they receive under section 403(a), 
States may receive funding from the Contingency Fund under section 
403(b). The purpose of the Fund is to make additional funds available 
to States, at their request, for periods when unfavorable economic 
conditions threaten their ability to operate their TANF programs. For 
each month of the fiscal year that they meet the eligibility criteria, 
States may receive up to 1/12th of 20 percent of their SFAG annual 
allocation. The actual amount of funds a State may realize from the 
Contingency Fund will vary depending on the level of State expenditures 
and the number of months that a State is eligible. States eligible in 
one month may automatically receive a payment for the following month. 
We have issued a program instruction to States on the Contingency Fund, 
which provides guidance on the requirements of the Fund as well as the 
associated MOE requirement.
    As noted in the definitions at Sec. 270.30, the term ``Contingency 
Funds,'' when used in these proposed rules, refers to the Federal funds 
a State may receive under section 403(b). It does not refer to any 
required State expenditures.
    Unless otherwise indicated, the terms ``MOE requirement'' and ``MOE 
level,'' when used in this Subpart, refer to the Contingency Fund MOE 
requirement.
    For funding from the Contingency Fund, a State must: (1) be a 
``needy State,'' i.e., meet one of two eligibility triggers--
unemployment or Food Stamp caseload; (2) submit a request for these 
funds; (3) meet a maintenance-of-effort level based on 100 percent of 
historic State expenditures for FY 1994; (4) complete an annual 
reconciliation after the end of the fiscal year to ensure that 
contingency funds are matched by the expenditure of State funds above a 
certain level; and (5) provide State matching funds.
    To be eligible for contingency funds under the unemployment 
trigger, the State's unemployment rate for the most recent three-month 
period must be at least 6.5 percent and at least equal to 110 percent 
of the State's rate for the corresponding three-month period in either 
of the two preceding calendar years. To be eligible for contingency 
funds under the Food Stamp trigger, a State's monthly average of 
individuals (as of the last day of each month) participating in the 
Food Stamp program for the most recent three-month period must exceed 
by at least ten percent its monthly average of individuals in the 
corresponding three-month period in the Food Stamp caseload for FY 1994 
or FY 1995 had the immigrant provisions under title IV and the Food 
Stamp provisions under title VIII of PRWORA been in effect in those 
years.
    In general, contingency funds may be used for the same purposes as 
other Federal TANF funds. However, the Contingency Fund provisions 
contain several unique requirements that are discussed below.

[[Page 62166]]

    Unlike the TANF funds provided under section 403(a), contingency 
funds (provided under section 403(b)) cannot be transferred to the 
Child Care and Development Block Grant Program (also known as the 
Discretionary Fund of the Child Care and Development Fund) and/or the 
Social Services Block Grant Program under title XX of the Act. Section 
404(d) permits the transfer of funds received pursuant to section 
403(a) only.
    Territories and Tribal TANF grantees are not eligible to 
participate in the Contingency Fund. Section 403(a)(7) provides that 
only the 50 States and the District of Columbia are eligible.
    The TANF MOE requirement is 80 percent (or 75 percent if a State 
meets its participation rate) of historic State expenditures. The 
Contingency Fund MOE requirement is 100 percent of historic State 
expenditures. However, meeting the Contingency Fund MOE requirement is 
not accomplished by increasing State expenditures by 20 (or 25) 
percent. The calculation is more complicated because the MOE is 
calculated differently for purposes of determining compliance with the 
TANF MOE requirements and determining eligibility for the Contingency 
Fund. For example, Contingency Fund MOE expenditures must be the 
expenditure of State funds within TANF and not expenditures made under 
``separate State programs.'' Therefore, TANF MOE ``separate program'' 
expenditures under separate State programs cannot count toward the 
Contingency Fund MOE requirement. However, TANF MOE expenditures may 
also count as Contingency Fund MOE expenditures.
    Contingency funds are available only for expenditures made in the 
fiscal year for which the funds were received. Unlike TANF funds under 
section 403(a), contingency funds are not available until expended.
    Section 403(b)(4) provides that the funds are to be used to match 
State funds for expenditures above a specified MOE level and requires 
an annual reconciliation to determine if the State is entitled to the 
amount of funds it has received for the fiscal year. We will use the 
term ``matching expenditures'' to mean State and Contingency Fund 
expenditures that exceed the MOE level specified in this section.
    ``Qualifying State expenditures'' refers to matching expenditures, 
excluding Contingency Fund expenditures, and the expenditure of State 
funds made to meet the Contingency Fund MOE requirement.
    In this part of the proposed rule, we explain the reconciliation 
and MOE requirements and the actions that we will take if the State 
does not remit its contingency funds under the annual reconciliation 
requirement.
What funding restrictions apply to the use of contingency funds? 
(Sec. 274.70)
Annual Reconciliation
    Annual reconciliation involves first computing the amount, if any, 
by which countable State expenditures, in a fiscal year, exceed the 
State's section 403(b)(6) MOE requirement. If the countable 
expenditures exceed 100 percent of that level, then the State is 
entitled to all or a portion of the contingency funds paid to it.
    If the State has met its requirement, the amount of contingency 
funds it may retain is the lesser of two amounts. The first amount is 
the amount of contingency funds paid to it for the fiscal year. The 
second amount is its expenditures above its MOE level, multiplied by 
(1) the State's Federal Medical Assistance Percentage (FMAP) applicable 
for the fiscal year for which funds were awarded and (2) \1/12\ times 
the number of months during the fiscal year that the State received 
contingency funds. (Note that if the State was eligible for, and 
received contingency funds for fewer than 12 months during the fiscal 
year, the effective rate for contingency funds will be less than its FY 
FMAP.)
    The annual reconciliation provision of section 403(b)(6) is clear 
that contingency funds are available only to match expenditures that 
exceed a State's MOE level.
How will we determine 100 percent of historic State expenditures, the 
MOE level, for the annual reconciliation? (Sec. 274.71)
    Pub. L. 105-33 amended section 403(b), by deleting an alternative 
MOE requirement.
    For the Contingency Fund, historic State expenditures, or MOE 
level, (i.e., expenditures for FY 1994) include the State share of AFDC 
benefit payments, administration, FAMIS, EA, and JOBS expenditures. 
They do not include the State share of AFDC/JOBS, Transitional and At-
Risk child care expenditures.
    We will use the same data sources and date, i.e., pril 28, 1995, to 
determine each State's historic State expenditures as we used to 
determine the TANF MOE requirement. However, we will exclude the State 
share of child care expenditures for FY 1994. States must meet 100 
percent of this MOE level.
Reduction to MOE Level
    States should note that we will reduce the MOE level for the 
Contingency Fund if a Tribe within the State receives a Tribal Family 
Assistance Grant under section 412. This reduction is provided for in 
the last paragraph of section 409(a)(7)(B)(iii). For the TANF MOE 
requirement, we have provided that we will reduce the State's TANF MOE 
level by the same percentage as a State's SFAG annual allocation is 
reduced for Tribal Family Assistance Grants in the State for a fiscal 
year. For example, if a State's SFAG amount is $1,000 and Tribes 
receive $100 of that amount, the State's TANF MOE requirement is 
reduced by ten percent. If the same State also receives contingency 
funds in the same fiscal year, the Contingency Fund MOE level will also 
be reduced by ten percent.
For the annual reconciliation requirement, what restrictions apply in 
determining qualifying State expenditures? (Sec. 274.72)
    Section 403(b)(6)(B)(ii)(I) provides that the expenditure of State 
funds counted toward the Contingency Fund MOE must only be expenditures 
made under the State program funded under this part. Thus, the State 
expenditures that the State makes to meet this Contingency Fund MOE 
level and its ``matching expenditures'' include the expenditure of 
State funds within TANF only; they do not include expenditures made 
under ``separate State programs.'' In addition, the provision specifies 
that the State's expenditures for child care cannot be used to meet the 
requirement.
What other requirements apply to qualifying State expenditures? 
(Sec. 274.73)
    Section 403(b)(6)(B)(ii) defines the amounts required to meet the 
MOE level and ``matching expenditures'' as ``countable'' expenditures 
under the TANF program. Since these expenditures are covered under 
title IV-A and are supplemental to the TANF MOE, we believe the same 
requirements that apply to the TANF MOE should also apply to these 
expenditures. Therefore, except where they conflict with section 
403(b)(6)(B)(ii), we propose that the TANF MOE provisions at section 
409(a)(4)(7)(B) apply to State expenditures under the Contingency Fund 
provision. Thus, to be qualifying State expenditures for Contingency 
Fund purposes, expenditures would be subject to the following proposed 
regulations: (1) Sec. 273.2, which discusses types of expenditures 
(except for paragraph 273.2(a)(2), which pertains to child care); (2) 
Sec. 273.4, which discusses educational expenditures; and (3) 
Sec. 273.6, which describes the kinds of expenditures that cannot count 
as MOE.

[[Page 62167]]

When must a State remit contingency funds under the annual 
reconciliation? (Sec. 274.74)
    After reconciliation, if a State fails to meet the section 
403(a)(6) MOE level, it must remit all the contingency funds we paid to 
it for the fiscal year. If the State does not have sufficient matching 
expenditures above its MOE level to retain all the funds paid to it, 
then it must remit a portion of the funds paid to it. The amount the 
State must remit in this instance is the difference between the amount 
it received and the amount determined by multiplying: (1) the matching 
expenditures it made above the MOE level; by (2) the State's FMAP rate 
for the fiscal year; and (3) 1/12 times the number of months during the 
fiscal year that the State received contingency funds.
    Below we provide an example requiring the remittance of funds.
    Assume State expenditures are $103 million (which includes $2.5 
million in contingency funds for the six months that the State met the 
Unemployment or Food Stamp trigger and excludes $2 million in child 
care expenditures). The required expenditure of State funds to meet the 
100 percent MOE level would be $95 million, i.e., $100 million minus $5 
million for child care expenditures. Assume the State's FMAP is 50 
percent.
    In determining if any funds must be remitted, we must subtract from 
the expenditures made by the State, the MOE level, i.e., $103 million 
minus $95 million. This difference of $8 million must then be 
multiplied by the State's FMAP rate for FY 1997. In this example, the 
FMAP is 50 percent. Thus, $8 million multiplied by 50 percent is $4 
million. Next, we must multiply the $4 million by 1/12 times the number 
of months the State received funding for the Contingency Fund, in this 
case, six months. The result is $2 million, i.e., the amount of 
contingency funds the State is entitled to for the fiscal year. 
However, if a State has received $2.5 million, then it must remit 
$500,000. A simplified formula is presented below:
$103M-95M = $8M
$8M x 50% = $4M
$4M x 1/12 x 6 mos. = $2M

$2.5M (Received)--$2M = $500,000 (Amount that must be remitted.)

    Under section 5502(e) of Pub. L. 105-33, a State is not required to 
remit contingency funds until one year after it has failed to meet 
either the Food Stamp trigger or the unemployment trigger for three 
consecutive months. Thus, States may retain these funds for at least 14 
months after the fiscal year has ended.
    For example, FY 1997 ends September 30, 1997. The State fails to 
meet either trigger for the months of October, November, and December, 
1997. The State has until December 31, 1998, to remit the funds.
    It is possible that a State will have used the contingency funds it 
received for expenditures meeting the requirements included in this 
proposed rule, but still have to return a part of the funds used to 
make these expenditures because of the formula that determines how much 
a State may retain. This is evident in the example above where the 
State had to remit $500,000 of the $2.5 million received even though it 
had made expenditures above the MOE level. We will not consider use of 
funds which later must be returned under the reconciliation formula as 
an improper use of contingency funds since the statute specifies a 
separate consequence in this situation.
    Contingency funds are for use in the fiscal year only; States may 
not use funds for a fiscal year for expenditures made in either the 
subsequent fiscal year or a prior fiscal year.
What action will we take if a State fails to remit funds as required? 
(Sec. 274.75)
    PRWORA established a penalty at section 409(a)(10) for this 
failure. As amended by Pub. L. 105-33, section 409(a)(10) provides that 
if a State does not remit funds as required, then the State's SFAG 
payable for the next fiscal year will be reduced by the amount of funds 
not remitted. Other amendments in Pub. L. 105-33 eliminated the 
Secretary's ability to waive this penalty for reasonable cause or 
corrective compliance. However, the State may appeal our decision to 
reduce the State's SFAG pursuant to the proposed regulations at 
Sec. 272.7.
How will we determine if a State has met its Contingency Fund 
reconciliation MOE level requirement and made expenditures that exceed 
its MOE requirement? (Sec. 274.76)
    ACF has created a TANF Financial Report, the ACF-196. States will 
use the ACF-196 to report on their use of Federal TANF funds, including 
the contingency funds. For the Contingency Fund, States will report 
``matching expenditures'' and expenditures also required to meet their 
MOE level. We will use this report to complete the annual 
reconciliation after the end of the fiscal year. We will review it to 
ensure that expenditures reported are consistent with the statute and 
these proposed rules. Please see the discussion of part 275 for 
additional information.
Are contingency funds subject to the same restrictions that apply to 
other Federal TANF Funds? (Sec. 274.77)
    In general, as Federal TANF funds, the same requirements that apply 
to other Federal TANF funds apply to the Contingency Fund. For example, 
Federal assistance cannot be paid to a family with contingency funds if 
the family has already received Federal assistance for 60 months. (See 
the discussion in Sec. 273.21 on ``Misuse of Federal TANF Funds'' for 
additional information.) However, contingency funds may not be 
transferred to the Social Services Block Grant or the Discretionary 
Fund of the Child Care Development Fund, as section 404(d) authorizes 
these transfers only for those Federal funds provided under section 
403(a).
Meeting FY 1997 MOE Requirements
    Unlike the TANF MOE level, the Contingency Fund MOE level for FY 
1997 will not be prorated based on the fraction of the year the State 
was under TANF. Pub. L. 104-327 amended section 
116(b)(1)(B)(ii)(II)(aa) and (b) of PRWORA to provide that we will 
increase the SFAG of any State for FY 1997 in an amount ``that the 
State would have been eligible to be paid under the Contingency Fund . 
. . during the period beginning October 1, 1996, and ending on the date 
the Secretary of Health and Human Services'' deems that the State plan 
is complete, if the State otherwise would have been eligible for 
contingency funds but for the fact that it was not under TANF. That is, 
for all States regardless of the TANF implementation date, the SFAG for 
FY 1997 may be increased in any month by the amount of contingency 
funds for which a State would qualify had it been under TANF 
requirements. The Program Instruction mentioned previously provides 
additional guidance to States on how their SFAG amounts can be 
increased for FY 1997. As the increase to the FY 1997 SFAG is a one-
time occurrence, we are not regulating on this matter.
    In order to compute the amount of this increase for a State meeting 
this criteria, and to ensure equity among all States, regardless of the 
dates they elected to come under TANF, we must use the MOE level for 
all of FY 1997. (For this limited purpose, amounts expended by a State 
in FY 1997 prior to the date the State came under TANF, i.e., to 
fulfill a State's matching requirement for AFDC, EA and JOBS, will 
count toward meeting the State's FY 1997 Contingency Fund MOE 
requirement.)

[[Page 62168]]

Subpart C--What Rules Pertain Specifically to the Spending Levels of 
the Territories?
    Section 103(b) of PRWORA amended section 1108. Section 1108 
establishes a funding ceiling for Guam, the Virgin Islands, American 
Samoa and Puerto Rico. Prior to PRWORA, the following programs 
authorized in the Act were subject to this ceiling: AFDC and EA under 
title IV-A; Transitional and At-Risk Child Care programs under title 
IV-A; the adult assistance programs under titles I, X, XIV, and XVI; 
and the Foster Care, Adoption Assistance, and Independent Living 
programs under title IV-E. Funding for the JOBS program, which covered 
AFDC/JOBS child care, was excluded from the ceiling.
    Under the amendments in PRWORA, the funding ceiling at section 1108 
applies to the TANF program under title IV-A, the adult programs, and 
title IV-E programs. Section 1108(b) provides a separate appropriation 
for a Matching Grant, which is also subject to a ceiling. The Matching 
Grant is not a new program; rather it is a funding mechanism that 
Territories can use to fund expenditures under the TANF and title IV-E 
programs.
    We had not previously regulated the provisions of section 1108. 
However, in light of this new MOE requirement within section 1108, as 
discussed later, we believe that we need to regulate to clarify the 
requirements and the consequences if a Territory fails to meet the new 
section 1108 requirements. We have authority to issue rules on this 
provision under section 1102, which permits us to regulate where 
necessary for the proper and efficient administration of the program, 
but not inconsistent with the Act. (The limit at section 417 does not 
apply.) In addition, we have prepared a program instruction for the 
Territories to provide additional guidance on receiving funds under 
section 1108.
    In February 1997, we provided to the Territories: (1) their FAG 
annual allocations; (2) their TANF MOE levels under section 409(a)(7); 
(3) their Matching Grant MOE levels; (4) their section 1108(e) MOE 
levels (which were created by PRWORA, and were subsequently eliminated 
by Pub. L. 105-33); and (5) a detailed explanation of the methodology 
and expenditures we used to determine each of these amounts.
If a Territory receives a Matching Grant, what funds must it expend? 
(Sec. 274.80)
    Section 1108(b) provides that Matching Grant funds are available: 
(1) to cover 75 percent of expenditures for the TANF program and the 
Foster Care, Adoption Assistance and Independent Living programs under 
title IV-E of the Act; and (2) for transfer to the Social Services 
block Grant program under title XX of the Act or the Child Care and 
Development Grant (CCDBG) program (also known as the Discretionary 
Fund) pursuant to section 404(d), as amended by PRWORA and Pub. L. 105-
33. However, Matching Grant funds used for these purposes must exceed 
the sum of: (a) the amount of the FAG without regard to the penalties 
at section 409; and (b) the total amount expended by the Territories 
during FY 1995 pursuant to parts A and F of title IV (as so in effect), 
other than for child care.
    Under the first requirement, the Territory must spend an amount up 
to its Family Assistance Grant annual allocation using Federal TANF or 
Federal title IV-E funds or funds of its own for TANF or title IV-E 
programs.
    The second requirement establishes an MOE requirement at 100 
percent of historic expenditures, based on FY 1995, separate from the 
TANF MOE requirement, and applicable only if a Territory requests and 
receives a Matching Grant. Historic expenditures include 100 percent of 
State expenditures made for the AFDC program (including administrative 
costs and FAMIS), EA, and the JOBS program. Territorial expenditures 
made to meet this requirement include Territorial, not Federal, 
expenditures made under the TANF program or title IV-E programs.
    Territorial expenditures used to meet the FAG amount requirement, 
the MOE requirement and the matching requirement, can only be used for 
one of these purposes. We believe this is appropriate because our 
interpretation of the statute is that Congress intended that the 
provisions on spending up to the FAG amount, meeting the MOE 
requirement, and meeting the matching requirement be separate 
requirements.
What expenditures qualify for Territories to meet the Matching Grant 
MOE requirement? (Sec. 274.81)
    For the TANF MOE, section 409(a)(7) includes specific provisions on 
what States and Territories may count as ``qualifying State 
expenditures'' (i.e., expenditures that may count towards the TANF MOE 
requirement).
    However, the statute provides little guidance on what expenditures 
a Territory may count toward the Matching Grant MOE for IV-A 
expenditures. Because the Matching Grant is intended to be used for the 
TANF program, we will apply many of the TANF MOE requirements in part 
273, subpart A, to the Matching Grant MOE. These sections are: 273.2 
(What kinds of State expenditures count toward meeting a State's annual 
spending requirement?); 273.3 (When do child care expenditures count?); 
273.4 (When do educational expenditures count?); and, 273.6 (What kinds 
of expenditures do not count?). Section 273.5 (When do expenditures in 
separate State programs count?) does not apply because section 
1108(b)(1)(B)(ii) requires that these MOE expenditures must be 
expenditures made under the TANF program. Thus, TANF expenditures that 
are made to meet the Matching Grant MOE requirement must be 
expenditures made under TANF, not expenditures made under separate 
State programs. (Because Territories do not receive Matching Child Care 
funds, the limit on child care expenditures in Sec. 273.3 does not 
apply.)
    Also, Territorial expenditures made in accordance with Federal IV-E 
program requirements may count toward this MOE requirement. These 
include the State share of IV-E expenditures and expenditures funded 
with the State's own funds that meet Federal title IV-E program 
requirements.
    Territories may also count toward their Matching Grant MOE 
requirement expenditures made under the TANF program that meet the TANF 
MOE requirement.
What expenditures qualify for meeting the Matching Grant FAG amount 
requirement? (Sec. 274.82)
    The statute intends that expenditures made to meet this requirement 
must be TANF or title IV-E expenditures. For TANF expenditures, 
allowable expenditures made with Federal TANF funds may be used to meet 
this requirement. These include amounts that have been transferred from 
TANF to title XX and the Discretionary Fund in accordance with section 
404(d). (See Sec. 273.11, which describes the proper uses of Federal 
TANF funds.) Also, the Territory's own funds, when used for the TANF 
program, may be used for this purpose. Because IV-A expenditures made 
with the Territories' own funds must be for the TANF program, it is 
reasonable that we apply to these TANF expenditures the MOE 
requirements applicable for the Matching Grant to this FAG amount 
requirement.
    For IV-E expenditures, as with the Matching Grant MOE, expenditures 
made in accordance with Federal IV-E program requirements may count 
toward this MOE requirement. These include the Federal share and the 
Territories' share of IV-E expenditures and expenditures funded with 
the

[[Page 62169]]

Territories' own funds that meet Federal IV-E program requirements.
How will we know if a Territory failed to meet the Matching Grant 
funding requirements at Sec. 274.80? (Sec. 274.83)
    We are currently developing a separate Territorial Financial Report 
for the Territories. We will require this report to be filed quarterly; 
it will apply to all programs subject to section 1108. This report will 
cover TANF MOE and Matching Grant MOE requirements. For the Matching 
Grant, Territories will report expenditures claimed under title IV-E 
and IV-A and the total expenditures (including Federal) made to meet 
the requirement that they spend up to their Family Assistance Grant 
annual allocations.
    We would not require Territories to file the TANF Financial Report; 
however, they must report comparable information on the Territorial 
Financial Report. Furthermore, if one of the Territories fails to file 
the Territorial Financial Report or to include certain information in 
that report, it would be treated like a State that fails to file its 
TANF Financial Report and subject to the penalty for failure to report 
at Sec. 272.1(a)(3).
What will we do if a Territory fails to meet the Matching Grant funding 
requirements at Sec. 274.80? (Sec. 274.84)
    The statute does not address the consequences for a Territory if it 
fails to meet the Matching Grant MOE and the FAG amount requirements. 
The proposed rule provides that we disallow the entire amount of a 
fiscal year's Matching Grant if the Territory fails to meet either 
requirement. This is because the statute provides that the Matching 
Grant funds are only allowable if both requirements are met. Thus, if 
the Territory does not meet either one or both of the requirements, it 
must return the funds to us. We will get the funds back by taking a 
disallowance action.
    A disallowance represents a debt to the Federal government. 
Therefore, we will apply our existing regulations at 45 CFR part 30. 
Once we issue a disallowance notice, we can require a Territory to pay 
interest on the unpaid amount.
What rights of appeal are available to the Territories? (Sec. 274.85)
    The Territory may appeal a disallowance decision in accordance with 
45 CFR part 16. As these are not penalties, the reasonable cause and 
corrective compliance provisions of section 409 do not apply. Section 
410, covering the appeals process in TANF, also does not apply.

F. Part 275--Data Collection and Reporting Requirements

General Approach
    There are a substantial number of specific data reporting 
requirements on States under the TANF program. Some of these reporting 
requirements are explicit, primarily in section 411(a); others are 
implicit, e.g., States represent the source of information for reports 
that the Secretary must submit to Congress and for the determination of 
penalties.
    These data requirements support two complementary purposes: (1) 
they enable determinations about the success of TANF programs in 
meeting the purposes described in section 401; and (2) they assure 
State accountability for key programmatic requirements. In particular, 
they ensure accurate measurement of State performance in achieving the 
work participation rates in section 407 and other objectives of the 
Act.
    These purposes can only be achieved if data are comparable across 
States and over time. At section 411(a)(6), the TANF statute provides 
that, to the extent necessary, the Secretary shall provide definitions 
of the data elements required in the reports mandated by section 
411(a). That this is one of the few places in which the law authorizes 
regulation by the Secretary reflects the importance of collecting 
comparable data.
    With respect to the first purpose, measuring the success of TANF 
programs, the data requirements of section 411(a) reflect particular 
features of the TANF program. States have collected and reported 
similar data on the characteristics, financial circumstances, and 
assistance received by families served by the AFDC and JOBS programs 
for many years. By requiring the collection of similar data under TANF, 
the statute enables the Congress, the public, and States to observe how 
welfare reform changes the demographic characteristics and the 
financial circumstances of, and the self-sufficiency services received 
by, needy families. In so doing, it facilitates comparisons across 
States and over time and promotes better understanding of what is 
happening nationwide--how States are assisting needy families; how they 
are promoting job preparation, work, and marriage; what is happening to 
the number of out-of-wedlock births among assisted families; and what 
kinds of support two-parent families are receiving.
    With respect to ensuring accurate measurement of work 
participation, section 411(a)(1)(A)(xii) specifically requires States 
to report on the ``information necessary to calculate participation 
rates under section 407.'' Given the significance of the work rates for 
achieving the objectives of TANF and for determining whether States 
face penalties, this is an area where accurate and timely measurement 
is particularly important.
    Our goal in implementing the data collection and reporting 
requirements of the Act is to collect the data required and necessary 
to monitor program performance. A secondary goal is to give States 
clear guidance about what these requirements entail and the 
consequences of failing to meet the requirements.
    At the same time, however, we are sensitive to the issue of 
paperwork burden and committed to minimizing the reporting burden on 
States, consistent with the TANF statutory framework. In this context, 
where applicable, we have considered the comments we received when we 
proposed the draft Emergency TANF Data Report. (OMB subsequently 
approved this reporting form, and we issued it on September 30 as TANF-
ACF-PI-97-6, Form ACF-198.) However, we welcome additional comments on 
whether these proposed rules, and appendices, are consistent with our 
interest in both minimizing reporting burdens and meeting TANF 
requirements.
External Consultation
    Data collection and reporting issues were a critical part of the 
agenda for the external consultations ACF held during the past fall and 
winter. We also engaged in consultations when we issued a draft 
Emergency TANF Data Report for public comment this past summer.
    In general, States expressed the view that the statutory provisions 
on data collection are too onerous. They recommended that ACF limit the 
burden on States and issue minimum regulatory requirements. However, 
some State officials acknowledged that they were currently collecting 
and reporting most of the case-specific data required by the Act as a 
part of the previous AFDC/JOBS program and the Quality Control 
reporting system.
    Advocates and researchers generally recommended more data 
collection in order to track program effects on employment and child 
and family well-being.
    Other Federal agencies (e.g., Census Bureau, Bureau of Economic 
Analysis of the Department of Commerce, Congressional Research Service) 
have been major users of our past program

[[Page 62170]]

data and strongly recommended the continuation of a number of current 
data elements or collection instruments, e.g., the monthly Caseload 
Data (or FLASH) Report.
Overview of Part 275
    Under this NPRM, States must submit two quarterly reports (the TANF 
Data Report and the TANF Financial Report) and two annual reports (a 
program and performance report for the annual report to Congress and, 
as an addendum to the fourth quarter Financial Report, State 
definitions and other information).
    Most of the information we propose to collect is required by 
section 411(a). We do not have the authority to permit States to report 
only some of the data required in section 411(a), and our authority to 
require expanded data reporting is limited. We are, however, proposing 
to require some additional data elements necessary to: ensure 
accountability under section 409(a) (penalties); meet other statutory 
requirements, e.g., under section 403 (grants to States) and section 
405 (administrative provisions); and assess State achievement of 
program goals, e.g., rankings of State programs under section 413(e).
    Before we discuss each of the quarterly and annual reports in 
detail, we present an overview of the major provisions of this part.
    1. We are proposing that each State, in the TANF Data Report--
    <bullet> Collect and report the case record information on 
individuals and families and other data, as required in section 411(a).
    <bullet> Collect and report information to monitor State compliance 
with the work requirements in section 407, as authorized by section 
411(a)(1)(A)(xii).
    <bullet> Collect and report information to implement the penalty 
provisions in section 409(a)(9). This penalty applies to time limits on 
receipt of assistance.
    <bullet> Collect and report a minimum number of items as break-outs 
of the data elements specified in section 411(a), such as citizenship 
status, educational level, and earned and unearned income; and a few 
additional items necessary to the operation of a data collection 
system, including Social Security Numbers.
    <bullet> Collect and report a minimum number of data elements 
related to child care.
    2. We are proposing that each State, in the TANF Financial Report 
(or, as applicable, the Territorial Financial Report)--
    <bullet> Collect and report information necessary to estimate the 
amounts to be paid to a State each quarter pursuant to section 
405(c)(1).
    <bullet> Collect and report information on Federal, State, and MOE 
expenditures under sections 411 (a)(2), (a)(3), and (a)(5); information 
for the purpose of implementing section 409(a)(1) (penalty for misuse 
of funds), section 409(a)(7) (maintenance of effort), section 
409(a)(10) (Contingency Fund MOE requirements), section 409(a)(12) 
(replacement of funds requirement), section 403(b)(4) (Contingency Fund 
reconciliation); and data to carry out our financial management 
responsibilities for Federal grant programs under 45 CFR part 92.
    3. We are proposing that each State--
    <bullet> At State option, collect and report data on individuals 
and families served by separate State MOE programs if a State wishes to 
receive a high performance bonus, qualify for work participation 
caseload reduction credit, or be considered for a reduction in the 
amount of the penalty for failing to meet the work participation 
requirements.
    4. We also propose to--
    <bullet> Define ``TANF family'' for data collection and reporting 
purposes only.
    <bullet> Define ``a complete and accurate report.'' This definition 
will serve as a compliance standard for implementing the penalty in 
section 409(a)(2) for failure to submit quarterly reports required 
under section 411(a).
    <bullet> Define ``scientifically acceptable sampling method'' as a 
basis for State sampling systems and reporting disaggregated data in 
the TANF Data Report.
    <bullet> Require States to file quarterly reports electronically.
    5. We propose to minimize reporting burden by--
    <bullet> Limiting required reports to a quarterly TANF Data Report, 
a quarterly TANF Financial Report (or Territorial Financial Report), an 
annual program and performance report, and an annual addendum to the 
fourth quarter Financial Report.
    <bullet> Requiring States to report information only on the 
demographic and financial characteristics of families applying for 
assistance whose applications are approved. We will conduct special 
studies to obtain information on families who apply but are not 
approved, e.g., families denied, diverted, or otherwise referred. These 
data are required for purposes of section 411(b).
    <bullet> Consolidating all aggregate financial and expenditure data 
into a single financial report. States had to submit three separate 
financial reports for the prior programs.
    <bullet> Using the data collected under section 411(a) to conduct 
annual reviews and rankings of successful State work programs under 
section 413(d) and adding two data elements in order to conduct 
rankings of State efforts to reduce out-of-wedlock births, as required 
under section 413(e).
    <bullet> Clarifying how States may use sampling to collect and 
report data as specified in section 411(a)(1)(B).
    As an additional aid to States, we will develop a pc-based software 
package. This package will facilitate data entry and create 
transmission files for each report. We also plan to provide some edits 
in the system to ensure data consistency, and we invite States to 
comment on what sort of edit capability they would like to see in the 
system. The transmission files created by the system will use a 
standard file format for electronic submission to ACF.
    Finally, in order to provide an opportunity for maximum review and 
public comment on the reporting requirements, we have attached the 
proposed quarterly reports (including the specific data elements and 
instructions) as Appendices A through G to part 275. We will revise 
these instruments following the comment period on the NPRM and will 
issue them to States through the ACF policy issuance system. We will 
not re-publish these appendices as a part of the final rule. However, 
we will make appropriate changes in the data collection instruments in 
the Appendices as a result of comments received.
    We have submitted copies of this proposed rule and the proposed 
data reporting requirements to OMB for its review of the information 
collection requirements. We encourage States, organizations, 
individuals, and others to submit comments regarding the information 
collection requirements to ACF (at the address above) and to the Office 
of Information and Regulatory Affairs, OMB, Room 3208, New Executive 
Office Building, Washington, DC 20503, ATTN: Desk Officer for ACF.
Section-by-Section Discussion of this Part
    The following discussion provides additional background information 
on, and a discussion of, each section in part 275. We discuss the 
specific data elements we are proposing, the statutory authority and 
other bases for their inclusion, the issues and options considered in 
developing the proposals in this part, and our rationale for taking a 
particular approach.

[[Page 62171]]

What does this part cover? (Sec. 275.1)
    This section provides an overview of the scope and content of part 
275. Paragraph (a) specifies the statutory provisions on which our data 
collection proposals are based. We will reference these statutory 
citations throughout our discussion of the specific reports, data 
collection instruments, and data elements in subsequent sections of 
this preamble.
    Paragraph (b) describes the two quarterly reports and the two 
annual reports we propose to require. We discuss each of these reports 
and the specific data elements in the reports more fully in Sec. 275.3 
and Sec. 275.9 below.
    Paragraph (c) describes the optional reporting of case-record data 
for separate State MOE programs. We discuss our rationale for this 
proposal more fully in the discussion on Sec. 275.3(d) below so that 
States may understand how we will evaluate certain benefits and options 
in deciding whether to report MOE case-record data.
    Paragraph (d) describes the other provisions we propose to cover in 
part 275. These are the use of sampling to meet the data collection and 
reporting requirements, electronic submission of reports, due dates, 
and our plan to implement the penalty for failure to submit a timely 
report, as required by section 409(a)(2). You can find a more complete 
discussion of these matters in Secs. 275.4-10.
    Paragraph (e) calls attention to the eleven Appendices at the end 
of part 275. These Appendices contain the proposed data collection 
instruments and instructions for all of the quarterly reports. The 
Appendices also contain a summary of sampling specifications and three 
reference charts that link each data element in the three sections of 
the TANF Data Report to its specific statutory authority and our 
rationale for collecting these data. We have included these materials 
in order to obtain more informed comment on the proposed reporting 
requirements.
    Although the Act requires that the reporting requirements for 
States under section 411 also apply to Indian tribal grantees, we will 
address data collection and reporting by Tribes in a separate NPRM that 
will deal with the full range of Tribal issues.
    We will also address additional data collection requirements, if 
any, to implement the high performance bonus in a separate NPRM 
scheduled to be published later this year.
What definitions apply to this part? (Sec. 275.2)
    The data collection and reporting regulations rely on the general 
TANF definitions at part 270.
    In this part, we are proposing one additional definition--for data 
collection and reporting purposes only--a definition of ``TANF 
family.'' This definition will apply to data collection for both the 
TANF program and any separate State programs.
    The law uses various terms to describe persons being served under 
the TANF program, e.g., eligible families, families receiving 
assistance, and recipients. Unlike the AFDC program, there are no 
persons who must be served under the TANF program. Therefore, each 
State will develop its own definition of ``eligible family,'' to meet 
its unique program design and circumstances; similarly, each State will 
have its own definition of ``eligible family'' for State MOE programs.
    We do not expect coverage and family eligibility definitions to be 
comparable across States. Therefore, we have proposed a definition that 
will enable us to better understand the different State programs and 
their effects. We are proposing that the definition of ``TANF family'' 
start with the persons in the family who are actually receiving 
assistance under the State program. (Any non-custodial parents 
participating in work activities will be included as a person receiving 
assistance in an ``eligible family'' since States may only serve non-
custodial parents on that basis.) We, then, would include three 
additional categories of persons living in the household, if they are 
not already receiving assistance. These three additional categories 
are:
    (1) Parent(s) or caretaker relative(s) of any minor child receiving 
assistance;
    (2) Minor siblings of any child receiving assistance; and
    (3) Any person whose income and resources would be counted in 
determining the family's eligibility for or amount of assistance.
    We believe information on these additional individuals is critical 
to understanding the effects of TANF on families and the variability 
among State caseloads, e.g., to what extent are differences due to, or 
artifacts of, State eligibility rules.
    <bullet> We need information on the parent(s) or caretaker 
relative(s) (i.e., an adult relative, living in the household but not 
receiving assistance, and caring for a minor child) to understand the 
circumstances that exist in no-parent (e.g., child-only) cases not 
covered by key program requirements, such as time limits and work 
requirements.
    <bullet> We need information on minor siblings in order to 
understand the impact of ``family cap'' provisions.
    <bullet> We also need information on other persons whose income or 
resources are considered in order to understand the paths by which 
families avoid dependence.
    We considered alternative terms on which to base TANF data 
collection such as the ``TANF assistance unit'' or ``TANF reporting 
unit.'' However, as participants in the external consultation process 
pointed out, these terms no longer have a commonly understood meaning, 
particularly as States re-design their assistance and service programs.
    For research and other purposes, there was interest in collecting 
data on a broader range of persons in the household, e.g., any other 
person living in the household such a grandmother or a non-marital 
partner of the mother.
    We determined that we should limit reporting to those categories of 
persons on whom the States will gather data for their own purposes and 
for which information will be directly relevant to administration of 
the TANF program.
    In the interest of greater comparability of data, we also 
considered defining terms such as ``parent,'' ``caretaker relative,'' 
and ``sibling.'' We chose not to define these terms because we were 
concerned that our data collection policies could inadvertently 
constrain State flexibility in designing their programs. We believe 
that variation among State definitions in these areas will not be 
significant and will not decrease the usefulness of the data.
    We believe this definition of family will not create an undue 
burden on States since these additional persons are either all 
individuals who are a part of an aided child's immediate family or 
whose income or resources the State already considers in determining 
eligibility.
    We offer one clarifying note regarding data collection in relation 
to non-custodial parents. As we indicated in the discussion of part 
271, the provision of work activities to a non-custodial parent need 
not cause a State to consider the family a two-parent family for the 
purposes of the work participation rate. States could define two-parent 
families as those with two parents living in the same household.
    Finally, we want to emphasize that we have proposed this definition 
of ``TANF family'' for reporting purposes only. Our aim is to obtain 
data that will be as comparable as possible under the statute, and, to 
the extent possible, over time. Some comparability in data collection 
is necessary for assessing program performance; understanding

[[Page 62172]]

the impact of program changes on families and children; and informing 
the States, the Congress, and the public of the progress of welfare 
reform.
What reports must the State file on a quarterly basis? (Sec. 275.3)
    We are proposing in paragraph (a) to require that each State must 
file two reports on a quarterly basis--the TANF Data Report and the 
TANF Financial Report (or, as applicable, the Territorial Financial 
Report). We are also establishing the circumstances under which a State 
may opt to submit a quarterly TANF-MOE Data Report.
    The TANF Data Report consists of three sections whose contents are 
discussed below. You will find these proposed sections in their 
entirety in Appendices A-C to this part. You will find the proposed 
TANF Financial Report in Appendix D and the three sections of the 
proposed TANF-MOE Report in Appendices E-G. (The Territorial Financial 
Report is under development.)
    By publishing these data collection instruments in the NPRM, we are 
providing the public with an opportunity for a thorough review of the 
specific data elements proposed to be collected. We anticipate that 
this opportunity for an in-depth public review of these instruments 
will result in more useful and informed suggestions and 
recommendations.
    Section 411(a)(1)(A)(i)-(xvii) authorizes monthly collection and 
quarterly reporting of a specified list of more than 30 data elements. 
Sections 411(a)(2)-(5) also authorize quarterly reports on 
administrative costs, program expenditures for needy families, non-
custodial parents' participation in work activities, and transitional 
services to families who no longer receive assistance due to 
employment.
    The data elements specified in section 411(a) represent the 
overwhelming majority of the data elements we are proposing to collect 
in the TANF Data Report and the TANF-MOE Report. Some section 411(a) 
data elements are also included in the TANF Financial Report in 
addition to information required by section 403(b)(4) (Contingency Fund 
reconciliation requirements), section 405(c)(1) (computation of 
payments to States), section 409(a)(10) (Contingency Fund MOE 
requirements), section 409(a)(12) (failure to expend additional State 
funds to replace grant reductions), and information to carry out our 
financial management and oversight responsibilities.
    Where we have added data elements beyond those explicitly stated in 
section 411(a), we explain our rationale for their inclusion.
    As a further aid to public analysis and comment, we have attached 
three statutory reference tables that correspond to the three sections 
in the TANF Data Report. These tables list each data element we are 
proposing to collect and the applicable statutory citation or other 
rationale for its collection. See Appendices I-K.
TANF Data Report: Disaggregated Data--Sections One and Two 
(Sec. 275.3(b)(1))
    Paragraph (b)(1) of this section proposes to require that each 
State must file the disaggregated case record information, as specified 
in section 411(a), on: (1) families receiving TANF assistance (Section 
One); and (2) families no longer receiving TANF assistance (Section 
Two). (See Appendices A and B respectively for the specific data 
elements.)
    The information we propose to be collected includes identifying and 
demographic information; data on the types and amount of assistance 
received under the TANF program; the reasons for and amount of any 
reductions in assistance; data on adults, including the Social Security 
Number, educational level, citizenship status, work participation 
activities, employment status, and earned and unearned income; and data 
on children, including the Social Security Number, educational level, 
and child care information.
    The statute requires that, in her Annual Report to Congress, the 
Secretary must report on the financial and demographic characteristics 
of families leaving assistance. However, it does not directly specify 
the data elements that States must submit. In specifying the data 
elements in Section Two of the TANF Data Report (for families no longer 
eligible), we borrowed heavily from the data elements specified for 
families receiving TANF assistance. We have assumed that States will 
not have a great deal of difficulty collecting these data because: (1) 
they are reporting similar data for TANF cases; (2) we only expect 
States to collect these data at the time the families are leaving the 
rolls; and (3) we substantially reduced the total number of elements 
States must report. However, we invite comments on whether the value of 
the data required in this section (e.g., in terms of preparing the 
Annual Report, conducting research, and tracking the impacts of State 
policies) justifies the burden on States. We encourage commenters to be 
specific about the value and burden of individual data elements.
    Appendix A contains 99 data elements, most of which are required to 
be reported by section 411(a)(1)(A). As indicated above, we have 
prepared, at Appendix I, a list of each data element in section one of 
the TANF Data Report (Appendix A) and its statutory basis or other 
rationale for its inclusion. The data elements not specified in section 
411(a) are discussed more fully below.
    a. Administration of a data collection system. The following items 
are not required by statute, but they are necessary to, and implicit 
in, the administration of a data collection system:

1. State FIPS Code
2. Reporting Month
3. Sampling Stratum
4. Family Case Number
5. Sample Case Disposition

    Other proposed data elements necessary for the administration of 
the data collection system and our rationale for their inclusion are as 
follows:
    6. ZIP Code--This information is readily available and is needed 
for geographic coding and rural/urban analyses.
    7. Family Affiliation--We need this information to identify which 
persons in the family are receiving assistance in order to monitor work 
participation, receipt of assistance, and time limits. We also need 
this information to understand the relationship between the members of 
the household.
    8. Social Security Number--This information is also readily 
available. States use Social Security Numbers to carry out the 
requirements of IEVS. (See sections 409(a)(4) and 1137.) This element 
will enable us to track recipients who move or become part of a 
different family. We also need this information for research on the 
circumstances of children and families as required in section 413(g).
    9. Gender--This is a standard demographic data element. The 
information could be collected under a relationship element (e.g., 
father, mother, brother). However, by using this single element, the 
coding is simpler; it is easier to report; and, thus, is less 
burdensome.
    b. Break-outs. We are proposing to collect additional information 
as break-outs of certain single data elements in section 411(a). Some 
break-outs are required by section 411(a). See ``Amount and Type of 
Assistance'' (10 items), ``Reason for and Amount of Reduction in 
Assistance'' (11 items), ``Adult Work Participation Activities'' (14 
items), and ``Educational Level'' (two items).

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    Other specific break-outs not specified in section 411(a) but that 
we believe States have available and that are necessary for 
comparability of data are:
    1. Earned income. Two break-outs ask for the dollar amount of 
wages, salaries and other earnings and the amount of EITC.
    2. Unearned income. Five break-outs ask for the amount of Social 
Security benefits, SSI benefits, Worker's Compensation benefits, child 
support, and other.
    3. Subsidized housing. Data element #13 asks for an indication of 
the source of the subsidy, e.g., public housing, HUD rent subsidy, or 
other.
    4. Food Stamps. Data element #15 asks for the type of Food Stamps 
assistance, i.e., allotment, cash, or subsidy.
    On these last two items, in particular, we are interested in 
receiving comments on whether the value of the break-out information 
(e.g., in terms of enabling comparisons with historical information, 
conducting research, and assessing dependency) justifies the additional 
reporting burden on States.
    One final break-out area is Citizenship. We propose to require nine 
break-outs of the data element ``citizenship'' in section 
411(a)(1)(A)(xv). We believe it is necessary to track the proper use of 
TANF funds in terms of the types of aliens served to ensure that TANF 
benefits are going to eligible aliens. Section 409(a)(1) provides for a 
penalty if funds are used in violation of the requirements of the law. 
PRWORA created complex and potentially confusing eligibility criteria 
for different types of qualified aliens; the requirements are made even 
more confusing by the imposition of certain time limits in terms of 
United States residency for certain groups of qualified aliens, such as 
refugees, and by the time limit on receipt of TANF assistance for 
everyone. We also believe States will need the information in the 
break-outs to carry out their eligibility determinations.
    c. Data elements necessary to implement other sections of the Act. 
The following items are not required by section 411(a) but are 
necessary to implement other statutory requirements:
    1. Cooperation with child support--Section 409(a)(5). (Data element 
#94)
    2. Time limits for receipt of assistance--Section 409(a)(9). (Data 
elements #44 and #62-65)
    3. New Applicants--Section 411(b). (Data element #10)
    4. Amount of the family's cash resources--Section 411(b). (Data 
element #21)
    d. Child Care. Five data elements are identical to the child care 
information required to be reported on families served by the Child 
Care Development Fund (CCDF). The purpose of this collection of 
information is to track child care provided under TANF in relation to a 
State's provision of CCDF child care. (Child care provided under CCDBG 
with funds transferred from TANF is captured through the CCDF program, 
not TANF data collection.) It is also necessary for assessing program 
performance and the total financial commitment a State is making to 
achieve the work objectives of the Act.
    The second section of the TANF Data Report, Appendix B, contains 46 
elements applicable to families no longer receiving assistance. The 
data elements in Appendix B are identical to those in Appendix A except 
that some elements are omitted as not applicable and others consist of 
a single data element with no break-outs. See Appendix J for the 
statutory reference table applicable to Appendix B.
TANF Data Report: Aggregated Data--Section Three (Sec. 275.3(b)(2))
    Paragraph (b)(2) of this section proposes that each State must file 
quarterly aggregated information. (See Appendix C for the list of data 
elements.)
    The data elements in this section of the TANF Data Report cover 
families receiving, applying for, and no longer receiving TANF 
assistance. They include total figures on the number of approved and 
denied applications; the number of no-parent (e.g., child-only), one-
parent, and two-parent families; the number of child and adult 
recipients; the number of minor child heads-of-households; the number 
of out-of-wedlock births; the number of births; the number of non-
custodial parents participating in work activities; the number of 
closed cases; and the total amount of TANF assistance provided.
    This third section of the TANF Data Report contains 19 data 
elements. Ten of the 19 are specified in, or are break-outs of data 
elements in, section 411(a).
    Technical amendments to PRWORA under section 5507 of Pub. L. 105-33 
added a new section 411(a)(6) to the TANF data collection and reporting 
requirements. This new paragraph (6) requires reports on ``the number 
of families and individuals receiving assistance . . . (including the 
number of 2-parent and 1-parent families).'' It also asks for the total 
dollar value of such assistance received by all families.
    We propose two break-outs for these new data elements in section 
411(a)(6). As a break-out under the ``number of families,'' we are 
proposing to collect data on the number of no-parent families and the 
number of minor-child heads-of-household. As a break-out under ``number 
of individuals,'' we are proposing to require data on the number of 
adult recipients and the number of child recipients.
    In addition to the statutorily-based data elements, we have added 
nine data elements. We are proposing to require three data elements 
(#1-3) as necessary to administer a data collection system and two data 
elements (#5 and #19) as necessary to verify and validate the quality 
and consistency of the disaggregated data. Because we allow States to 
report disaggregated data on a sample basis, we need certain aggregated 
data to test the reliability of estimates and the representativeness of 
the disaggregated sample data.
    Finally, two data elements (#4 and #6) are required by section 
411(b) for the report to Congress, and two elements (#17-18) are 
required by section 413(e) for the annual rankings of States related to 
their efforts to prevent out-of-wedlock births. See Appendix K for the 
Statutory Reference Table for Appendix C.
    This section of the TANF Data Report is made up of aggregate data 
almost all of which was previously reported under the AFDC and JOBS 
programs. We have: consolidated the data elements in the previously 
required monthly FLASH Report and two quarterly aggregated data 
reports--the 3637 Report and the 3800 Report--into a single quarterly 
report; eliminated the monthly report; and greatly reduced the number 
of data elements. We believe the States will welcome the reduced burden 
in this area.
    In addition, we have further minimized the reporting burden on 
States by how we propose to collect ``demographic and financial 
characteristics of families applying for assistance.'' In interpreting 
this requirement in section 411(b), we propose to collect information, 
not on all families who apply, but only on those whose applications are 
newly approved. We propose to collect any additional information that 
is needed on applicants who are not approved through a special study or 
studies.
    We adopted this approach because the question of ``what is an 
application'' and ``what is a denied application'' (as opposed to a 
referral or a diverted family, for example) is often very difficult to 
determine. If we were to require data on all applications, we believe 
that considerable portions of the

[[Page 62174]]

demographic and financial data would be incomplete or entirely missing. 
We also believe that there would be extraordinary variability in the 
information provided across States. This variability would have an 
adverse impact on the quality of any estimates based on these data and 
on our ability to interpret the data.
    Also, data collection on all applicants could be very burdensome on 
States as they would need to create an additional sample frame to 
select samples for all applications and to collect data on families who 
are not receiving assistance. These families may be difficult to locate 
and unwilling to cooperate.
    As noted earlier, in our external consultation, users of these data 
expressed strong support for continued collection of this information.
    We received recommendations that additional data elements should be 
added. In many instances, we agreed with the importance of the data, 
but we could not justify its necessity for the administration of the 
program, given our limited regulatory authority.
    We also considered various options in how to design a data 
collection system to minimize the burden on States. The statutory 
requirements include monthly collection, quarterly reports, annual 
reports, and other periodic activities (e.g., annual rankings of 
States, application of penalties). We have tried to simplify these 
requirements in our proposal to include all data collection in the 
quarterly TANF Data Report and the TANF Financial Report (or, as 
applicable, the Territorial Financial Report), including a fourth 
quarter addendum, and one annual program and performance report. Since 
the data being collected apply to individuals and families, it is 
easier for a State to modify its current data collection system than to 
set up new systems with different periodicities. We believe that: (1) 
States will be able to accommodate to this proposed system of quarterly 
reports, one annual addendum to the quarterly reports, and one annual 
report; and (2) by this simplification of data collection and 
reporting, we will have come a long way to increasing the completeness 
and accuracy of the data.
TANF Financial Report (Sec. 275.3(c))
    We propose in paragraph (c) to require each State to file a TANF 
Financial Report quarterly. See Appendix D for the content of the TANF 
Financial Report and the content of the addendum that must be filed 
with the fourth quarter TANF Financial Report as described in 
Sec. 275.9.
    We will be issuing a separate Territorial Financial Report for the 
Territories because they have different funding sources and different 
MOE requirements. The Territorial Financial Report will incorporate the 
requirements of the TANF Financial Report--including the data elements, 
fourth quarter addendum, and filing deadlines. Also, if one of the 
Territories fails to file the Territorial Financial Report or to 
include certain information in that report, it would be treated like a 
State that fails to file its TANF Financial Report and subject to the 
penalty for failure to report at Sec. 272.1(a)(3).
    We propose that States report information in two broad categories--
``Expenditures on Assistance'' and ``Expenditures on Non-Assistance''--
because we need to track the reasonableness of the definition of 
assistance for Federal funding and State MOE purposes. These data will 
assist us in understanding the extent to which recipients of benefits 
and services are covered by program requirements. As we indicated in 
the discussion of the definition of ``assistance'' in Sec. 270.30, we 
want to make sure that our definition does not have the effect of 
undermining the objectives of the Act. The data will also be important 
in helping us validate the data received on disaggregated cases.
    The TANF Financial Report is designed to serve multiple purposes:
    (1) To gather data required under section 411 (a)(2), (a)(3), and 
(a)(4), i.e., data on administrative costs, State expenditures on 
programs for needy families, and transitional services for families no 
longer receiving assistance due to employment;
    (2) To gather quarterly estimates for Federal TANF grants as 
authorized by section 405(c)(1);
    (3) To monitor expenditures and closeout TANF grants for a fiscal 
year, in accordance with standard financial reporting requirements for 
federal grant programs;
    (4) To determine if a State has met its TANF MOE requirement under 
section 409(a)(7);
    (5) To determine compliance with the limitations on administrative 
costs as specified in section 409(a)(7)(B)(i)(I)(dd);
    (6) To accomplish the annual reconciliation for the Contingency 
Fund under section 403(b);
    (7) To assure compliance with section 409(a)(1) (misuse of funds), 
section 409(a)(10) (Contingency Fund MOE requirements), and section 
409(a)(14) (State reduction of assistance for recipients refusing 
without good cause to work; and
    (8) To monitor the expenditure of additional State funds to replace 
grant reductions.
    With respect to MOE and Contingency funds, TANF MOE and Contingency 
Fund reporting for a fiscal year culminate with the submission of the 
fourth quarter financial report for the fiscal year. However, because 
Federal TANF funds granted for a fiscal year are available until 
expended, States must continue reporting on State expenditures of 
Federal funds each quarter until they have expended all their funds.
    Paragraph (c)(4) proposes to require that if a State is expending 
funds received in a prior fiscal year, it must file a separate 
quarterly TANF Financial Report (or, as applicable, Territorial 
Financial Report) for each fiscal year that provides information on how 
that fiscal year's funds were expended.
    For example, if a State reserves FY 1997 funds through the second 
quarter of FY 1999, the State must submit quarterly reports on FY 1997 
funds with the final report covering the second quarter of FY 1999. 
During this same period, a State must submit its reports for FYs 1998 
and 1999.
    The MOE expenditure information in the TANF Financial Report is not 
an optional reporting requirement, as is the information on families 
served by separate State programs in the TANF Data Report. States must 
report such expenditure data as a part of the evidence required to 
assure that State MOE expenditures are ``qualified.''
    OMB has approved the use of an interim financial reporting form 
(#0970-0165) on an emergency basis until it approves the TANF Financial 
Report.
    We have not attached a statutory reference chart for Appendix D. 
With a few exceptions, the data elements in the TANF Financial Report 
are required by section 411, are needed to determine if a State has met 
the TANF MOE requirements under section 409(a)(7), and are necessary to 
carry out our financial management responsibilities under 45 CFR part 
92.
    The exceptions and our rationale for their inclusion are as 
follows:
    1. Expenditure data on cash assistance, work subsidies and 
activities, and child care. These expenditure categories provide 
information to assess a State's use of funds (see penalty sections 
409(a)(1) and 409(a)(7)) and are a basis for determining a State's 
total commitment to work (see sections 409(a)(3) and 409(a)(9)).

[[Page 62175]]

    2. Expenditures on systems. For Federal TANF funds, the statute 
excludes systems costs from the 15 percent limit on administrative 
costs. The statute is silent as to whether such costs are within the 15 
percent limit on administrative costs for State MOE expenditures. We 
are proposing that systems costs may also be excluded from the State 
calculation. Attaching information on State systems expenditures will 
enable us to judge the implications of our proposal to exclude such 
costs from the administrative cost cap applicable to State funding.
    3. Fourth Quarter Addendum.
    <bullet> State reporting of families excluded from work rates and 
time-limit calculations under the State definition of families 
receiving assistance.
    States must annually report the number of families excluded from 
the overall work participation rate (at Sec. 271.22), the two-parent 
rate (at Sec. 271.24), and the time-limit calculations (at Sec. 274.1), 
together with a description of the family circumstances that explains 
why they were excluded. The purpose of this information is to provide a 
national perspective as to whether States are avoiding critical 
provisions of the law by creating child-only cases.
    <bullet> State definition of work activities.
    This State definition must also be reported annually. We need this 
information to monitor the work participation requirements in section 
407. See also our preamble discussion in Sec. 271.30, ``What are work 
activities?''
    <bullet> Description of transitional services.
    This description of transitional services provided to families that 
are not receiving TANF assistance because of employment implements 
section 411(a)(5).
    <bullet> Description of how a State will reduce the amount of 
assistance payable to a family when the individual refuses to engage in 
work.
    This description of how a State carries out pro rata (or more) 
reductions provides information that is necessary to implement section 
409(a)(14). See also Sec. 271.54 and 55.
    <bullet> Descriptive and expenditure-related information on the 
State's separate MOE program.
    This information is necessary to carry out requirements of section 
409(a)(7). See the discussion of Sec. 273.7 for additional details.
TANF-MOE Data Report (Sec. 275.3(d))
    Paragraph (d) proposes to require that a State must report case 
record data on separate MOE programs if it wishes to be considered for 
certain benefits and options under the Act.
    The data elements we are proposing to collect on separate State 
programs are identical in content to but fewer in number than the 
demographic and work activity data we have proposed in paragraphs (b) 
and (c) of this section. (See Appendices E, F, and G.)
    We are proposing to collect information on separate State programs 
in order to help ensure that State decisions to establish such programs 
do not undermine the work provisions of the new law, undercut 
Congressional intent to share child support collections between the 
Federal and State governments, or have other negative consequences.
    We believe that it is not possible to judge the impacts and 
accomplishments of the State's TANF program by looking only at how a 
part of the State's program is operating. We need information on the 
separate State programs so that we can better identify which States are 
truly successful in serving needy families, promoting work, and meeting 
other legislative goals.
    For example, a State could score well on a measure of its TANF 
performance by relegating the most-difficult-to-serve families to a 
separate State program in which they received no self-sufficiency 
services. In reality, this State would be performing more poorly than a 
State that achieved the same level of success with its TANF population, 
but served all families through its TANF program. Similarly, a State 
that ``reduced'' its TANF caseload by simply splitting its program into 
a TANF program and a separate State program should not get credit for 
caseload reduction in determining its work participation rate.
    Thus, collection of data on separate State programs would give us 
the capacity to look broadly at issues of work effort, caseload 
reductions, family structure, and other measures of performance.
    We plan to look at overall participation levels, including 
participation by families receiving assistance under separate State 
programs, to assess how well States are meeting their responsibilities 
to help families toward self-sufficiency. These overall participation 
levels could affect the size of a State's penalty if it does not meet 
the rates at section 407. However, we base our initial determination 
that a State is subject to a penalty under section 407 on the work 
participation rates of families receiving TANF assistance, not these 
overall participation levels.
    The differences between the TANF Data Report and the TANF-MOE Data 
Report are minor. Appendix A contains six data elements not included in 
Appendix E. They are: Tribal Code, Amount of Monthly Child Care Co-
Payment, Is the TANF Family Exempt from the Federal Time Limit 
Provision, Type of Child Care, Total Monthly Cost of Child Care, and 
Total Monthly Hours of Child Care Provided During the Reporting Month.
    Appendix B contains one data element not in Appendix F--Tribal Code 
Number. Appendix C contains four data elements that do not appear in 
Appendix G. They are: Tribal Code, Total Number of Applications, Total 
Number of Approved Applications, and Total Number of Denied 
Applications.
    The statutory authority and rationale for these data elements are 
found in Appendices I-K.
When are quarterly reports due? (Sec. 275.4)
    Paragraph (a) of this section implements section 409(a)(2), as 
amended by Pub. L. 105-33, which requires that States file quarterly 
reports within 45 days following the end of the fiscal quarter or be 
subject to a penalty.
    Paragraph (c) implements section 116 of PRWORA in defining the 
effective date of the reporting requirements for individual States, 
depending on the date they began implementation of the TANF program. 
Section 116 states that the reporting requirements shall take effect on 
the later of July 1, 1997, or six months after the Secretary receives a 
TANF Plan from the State. For operational purposes, we interpret this 
to mean that the reporting period begins six months after the State 
implements the program.
    For example--

------------------------------------------------------------------------
    If a State implements TANF         Reporting period      Reports due
------------------------------------------------------------------------
March 1, 1997....................  September 1, 1997-           11/14/97
                                    September 30, 1997.                 
April 10, 1997...................  October 10, 1997-            02/14/98
                                    December 31, 1997.                  
July 1, 1997.....................  January l, 1998-March        05/15/98
                                    31, 1998.                           
------------------------------------------------------------------------


[[Page 62176]]

    These effective dates apply to the TANF Data Report and the TANF 
Financial Report, including the annual addendum to the fourth quarter 
TANF Financial Report.
    Paragraph (b) proposes that a State may collect and submit its 
quarterly TANF-MOE Data Reports at the same time as it submits TANF 
Data Reports, or it may submit them at the time it seeks to be 
considered for a high performance bonus, a caseload reduction credit, 
or a reduction in the penalty for failing to meet work participation 
requirements, as long as the data submitted are for the full period on 
which these decisions will be based.
    Although we believe that it will be easier for States (and State 
data collection systems) to file all data reports at the same time, 
this additional flexibility may be useful for some States.
May States use sampling? (Sec. 275.5)
    This section implements section 411(a)(1)(B) in permitting the 
States to meet the disaggregated data collection and reporting 
requirements by submitting data based on the use of a scientifically 
acceptable sampling method approved by us. States may not submit 
aggregated data based on a sample, e.g., the TANF Financial Report.
    We have proposed a definition of ``scientifically acceptable 
sampling method'' in paragraph (b) of this section. This definition 
reflects generally acceptable statistical standards for selecting 
samples and is consistent with existing AFDC/JOBS statistical policy. 
(See Appendix H for a summary of the sampling specifications.)
    At a later date we will issue the TANF Sampling and Statistical 
Manual that will contain instructions on the approved procedures and 
more detailed specifications for sampling methods.
Must States file reports electronically? (Sec. 275.6)
    We are proposing to require that States must submit all quarterly 
reports--the TANF Data Report, the TANF Financial Report (or, as 
applicable, the Territorial Financial Report), and the TANF-MOE Data 
Report--electronically.
    We are proposing electronic submission for several reasons. For 
each collection of information, OMB regulations at 5 CFR 1320.8 require 
Federal agencies to evaluate whether the burden on respondents can be 
reduced by use of automatic, electronic, mechanical, or other 
technological collection techniques. This Department has for many years 
encouraged programs and grantees to use such non-paperwork approaches 
to meet data collection requirements.
    All States submitted data reports electronically under the prior 
AFDC, JOBS, and the Quality Control data reporting systems. In external 
consultation meetings, State representatives supported electronic 
submission of both data and financial reports. Therefore, we conclude 
that continuing electronic submission of data reports will not be a 
burden on States and that requiring electronic submission of all data 
and financial reports will reduce paperwork and administrative costs, 
be less expensive and time-consuming, and be more efficient for both 
States and the Federal government.
    As noted earlier, we will develop and provide for State use a pc-
based software package to facilitate data entry and create transmission 
files for each quarterly report.
    We are considering developing, when feasible, an electronic 
reporting format for the annual addendum to the TANF Financial Report 
and the annual program and performance report as required in 
Sec. 275.9. We would appreciate comments and suggestions on the 
desirability and usefulness of this approach.
How will we determine if the State is meeting the quarterly reporting 
requirements? (Sec. 275.7)
    In order to set a standard of compliance for monitoring and penalty 
purposes, we have proposed definitions of what will constitute ``a 
complete and accurate report'' for disaggregated data reports, for 
aggregated data reports, and for the TANF Financial Report (and, as 
applicable, the Territorial Financial Report). We will use these 
definitions in determining if the State is subject to any of the 
penalties for which we are collecting data. (See Sec. 275.8 of this 
part for the specific circumstances under which we will impose the 
penalty for failure to report complete, accurate, and timely data under 
section 409(a)(2).)
    We will also use these definitions for monitoring the completeness 
and accuracy of the data and financial reports under our authority in 
section 411(a)(1)(B) to verify the quality of data submitted.
    We believe these definitions are necessary to ensure that we 
receive data reports that are in good order. We considered not 
providing a definition or a standard of compliance, but rejected that 
option because the data reports are so critical to our ability to 
provide information to Congress, States, and the public on how welfare 
reform is proceeding as well as to assess and hold States accountable 
for program performance.
    In the past, we have had problems obtaining complete and accurate 
data. Errors have been common, thus creating substantial burdens for 
ACF (in conducting edit checks) and for States (in revising and 
correcting their reports). Because of errors and omissions, we have 
also experienced significant delays in reporting national program data 
to States, Congress, and the public. We welcome suggestions and 
recommendations on ways to help assure more accurate data reporting 
without creating undue burden on States.
    We are concerned about complete, accurate, and timely data for 
another reason. We are considering posting information from the 
quarterly TANF Data Reports on the Internet for access by other Federal 
agencies, legislators, researchers, the public, and others for a 
variety of analytic and evaluation purposes. Posted data would allow 
States and others to make comparisons among State programs, 
accomplishments, outcomes, and levels of performance. If we put these 
data in the public domain, the need for completeness and accuracy is 
much greater because the likelihood increases that the numbers would be 
used or published without appropriate caveats or consideration of their 
limitations. In addition, posting data that could not be relied upon 
defeats the purpose of making the data more accessible.
    The standards for ``completeness and accuracy'' that we are 
proposing for the TANF Financial Report (and Territorial Financial 
Report) in paragraph (d) apply to all expenditures reported; i.e., 
Federal TANF, State TANF, Contingency Fund, and State MOE expenditures. 
We propose that these expenditures be made in accordance with the 
requirements at 45 CFR 92.20(a). Under this provision, all expenditures 
must be traceable, so that we can determine if funds have been used 
properly, and made in accordance with Federal and State laws and 
procedures. For the ``completeness'' standard, we expect that States 
will report expenditures for all data elements for which expenditures 
are made in the quarter.
    Also in paragraph (b), the proposed definition of ``a complete and 
accurate report'' includes the statement that ``where estimates are 
necessary, the State uses reasonable methods to develop these 
estimates.'' We plan to review each State's methods and procedures for 
developing these estimates through on-site verifications or technical 
assistance visits.

[[Page 62177]]

    Finally, regarding verification of data, the Secretary has the 
authority under section 411(a)(1)(B) to verify the quality of the data 
submitted by States. We will be exploring several approaches to 
verification of data, including audits and reviews. We also remind 
States, in paragraph (f), that backup documents need to be retained to 
support the information in any report and for verification purposes.
Under what circumstances will a State be subject to a reporting penalty 
for failure to submit quarterly reports? (Sec. 275.8)
    In order to ensure that States file required reports, section 
409(a)(2)(A) requires us to impose a penalty on a State if the State 
has not filed the required report within 45 days following the last 
month of a fiscal quarter. However, section 409(a)(2)(B) allows us to 
rescind the penalty if the State files the report before the end of the 
quarter immediately following the quarter for which the report was 
required. These provisions are reflected in paragraphs (c) and (d) of 
this section.
    In paragraph (a), we propose to impose the penalty only with 
respect to the two quarterly reports--the TANF Data Report and the TANF 
Financial Report (or Territorial Financial Report), including the 
fourth quarter annual addendum--and only under one or more of the 
following five circumstances:
    <bullet> The State fails to file the TANF Data Report or the TANF 
Financial Report (or Territorial Financial Report) on a timely basis.
    <bullet> The disaggregated data in the TANF Data Report is not 
accurate or does not include all of the data elements required by 
section 411(a) (other than section 411(a)(1)(A)(xii) regarding work 
participation requirements) or the nine additional data elements 
necessary to carry out the data collection system requirements.
    <bullet> The aggregated data in the TANF Data Report does not 
include complete and accurate information on the ten data elements 
required by section 411(a) and the five data elements necessary to 
carry out the data collection system requirements and verify and 
validate disaggregated data.
    <bullet> The TANF Financial Report (or Territorial Financial 
Report) does not contain complete and accurate information on total 
expenditures and expenditures on administrative costs and transitional 
services, as required by section 411(a).
    <bullet> The annual addendum to the fourth quarter TANF Financial 
Report (or Territorial Financial Report) does not contain the required 
information on families excluded from the work participation and time-
limit calculations, the State's definition of work activities, and the 
descriptive information on transitional services in the TANF program as 
required by section 411(a).
    This means that:
    (1) For the disaggregated data in section one of the TANF Data 
Report (Appendix A), we will impose a penalty if the section 411(a)-
based data elements are not complete and accurate and if the items 
identified as necessary to carry out the data collection system 
requirements are also not complete and accurate;
    (2) For the disaggregated information in section two of the TANF 
Data Report (Appendix B), the information required by section 411(a) 
must be complete and accurate;
    (3) For the aggregated data in section three of the TANF Data 
Report (Appendix C), the section 411(a)-based data elements, and the 
data elements necessary to meet the data collection systems 
requirements and verify and validate the disaggregated data, must be 
complete and accurate; and
    (4) For the TANF Financial Report (or Territorial Financial 
Report), a State must file complete and accurate information on its 
definition of work activities, any families excluded from the work 
participation or time-limit calculations because of the State's 
definition of families receiving assistance, total program expenditures 
and expenditures on administrative costs and transitional services as 
specified in section 411(a).
    The Statutory Reference Tables at Appendices I-K identify the 
specific statutory bases for the data elements and those that are 
necessary to carry out the data collection system requirements.
    Paragraph (b) specifies that we will not apply the penalty to the 
TANF-MOE Data Report, the annual program and performance report 
proposed in Sec. 275.9, or the other information on individuals and 
families required based on section 411(b).
    We took this approach because the penalty for failure to submit a 
timely report at section 409(a)(2) applies to the data collection 
requirements in section 411(a). We considered applying the penalty to 
all of the data elements in the disaggregated sections of the TANF Data 
Report (Appendices A and B) as the overwhelming majority of the data 
elements in these two instruments are specified in section 411(a). In 
addition to the importance of the information, we thought that this 
approach would be simpler and easier to administer.
    We concluded, however, that we do not have the authority to impose 
a penalty for failure to report on additional elements (other than 
those relating to section 411(a)) in the TANF Data Report or the TANF 
Financial Report. Nor do we have authority to impose a penalty for 
failure to file the TANF-MOE Data Report or the annual report on 
program and performance.
    This means we will not impose a penalty under this part for failure 
to file data elements necessary to carry out other statutory 
provisions. However, the failure to file data elements based on other 
statutory provisions will subject the State to any penalty relating to 
those provisions. For example, the TANF Data Report includes five 
elements based on section 409(a)(9) (time limits on receipt of 
assistance). The penalty for failure to file the section 409(a)(9) data 
elements is tied to the penalty provisions in section 409. If a State 
does not file the complete and accurate information necessary to 
administer section 409(a)(9) in the TANF Data Report, we will determine 
that the State has not met this requirement, and we will impose the 
penalty specified under section 409(a)(9).
    We cannot over-emphasize how seriously we look upon the matter of 
complete, accurate, and timely reporting. As noted earlier, the data 
collected will serve many functions--for States, the Congress, the 
public, and for us. Adequate data will be critical to many policy and 
administrative implementation activities.
    For example, a State's failure to file complete, accurate, and 
timely TANF Financial Reports may jeopardize the timely payment of TANF 
grants to the State and will raise questions as to whether a State is 
subject to a penalty for misuse of funds, intentional misuse of funds, 
or failure to make sufficient ``qualified State expenditures'' for TANF 
MOE or Contingency Fund MOE purposes.
    We propose in paragraph (c) that, when a State meets one or more of 
the conditions set forth in paragraph (a), we will notify the State 
that we intend to impose a penalty and reduce the SFAG for the 
immediately succeeding fiscal year by four percent.
    However, paragraph (d) specifies that, if the State meets the 
requirements by the end of the next fiscal quarter that immediately 
follows the quarter for which the report was due, we will not impose 
the penalty. For example, if a State fails to file a complete and 
accurate report for the first quarter of the fiscal year by February 
14, but does file the report by March 31, we will not penalize the 
State.

[[Page 62178]]

    If a State does not meet the reporting requirements, we intend to 
impose the penalty. Before we do so, paragraph (e) provides that States 
will have an opportunity to submit ``reasonable cause'' justifications 
and/or corrective compliance plans in accordance with Secs.  272.4-
272.6.
    If we find that a penalty is appropriate, we propose, in paragraph 
(f), that we will reduce, by four percent, the State's family 
assistance grant for the next fiscal year as specified in section 
409(a)(2) unless we determine that a reduction is not appropriate 
pursuant to sections 409(c) (2) and (3).
What information must the State file annually? (Sec. 275.9)
    We propose in this section that States must submit two reports 
annually. Paragraphs (a) and (b) refer to the State's definitions and 
other information that must be submitted as an addendum to the fourth 
quarter TANF Financial Report (or Territorial Financial Report). See 
Section 3 of Appendix D for details. Paragraph (c) proposes that an 
annual program and performance report must be submitted to meet the 
requirements of section 411(b), the report to Congress.
    In paragraph (a), we propose to require four items of information 
on the State's TANF program: the number of families excluded from the 
two work participation rates and time-limit calculations under the 
State's definition of families receiving assistance (with the basis for 
the exclusions); the State's definition of each work activity; a 
description of the transitional services provided to families no longer 
receiving assistance due to employment, as specified in sections 
411(a)(1)(A)(xi), (a)(2) and (a)(5); and a description of how the State 
carries out pro rata (or more) reductions in assistance for recipients 
refusing without good cause to work. This last item would provide 
information necessary to implement section 409(a)(14).
    In paragraph (b), we propose to require the eight items of 
descriptive and expenditure-related information on the State's separate 
MOE program, as specified in Sec. 273.7.
    States must submit the information in both paragraphs (a) and (b) 
at the same time as the fourth quarter TANF Financial Report.
    We believe the information in paragraphs (a) and (b) is readily 
available, will be easy to report annually, and will not be burdensome 
for States. The information related to the State's separate MOE program 
is important to our ability to track and monitor the MOE expenditures 
and program effects. (See also our discussion of the importance of MOE 
program information in Sec. 273.7.)
    In order to reflect the most current and accurate information about 
State TANF programs in the Secretary's annual report to Congress, we 
propose in paragraph (c) that each State must file an annual program 
and performance report. The content of this report, as described in 
paragraph (c), will address the provisions of section 411(b) and the 
concerns of Congress and others about the implementation of the TANF 
program.
    At a later date, following public comment on this NPRM, we will 
develop and obtain further public comment on, and OMB approval for, a 
reporting form that includes both the specific content of the report 
and instructions for filing.
    In order to minimize the reporting burden on States, we will 
collect some information for our report to Congress from the quarterly 
Data and Financial Reports, State Plans, annual rankings and reviews, 
and/or other special studies. We also plan to take advantage of, and 
work in conjunction with other efforts to acquire information on the 
TANF program, including research agencies and organizations currently 
gathering information on program design and implementation.
    To the extent that we may be able to build on existing 
collaborations, we can avoid duplication of effort and produce a 
better, more complete national picture of the TANF program.
When are annual reports due? (Sec. 275.10)
    Paragraph (a) proposes that the information in the addendum to the 
fourth quarter TANF Financial Report, specified in Sec. 275.9 (a) and 
(b), must be filed at the same time as the fourth quarter TANF 
Financial Report. This means that this information is due one month 
following the end of the fourth quarter.
    Paragraph (b) proposes that States must file the annual program and 
performance report to meet the provisions of section 411(b) within 90 
days after the close of the fiscal year. This means that the annual 
report describing State activities carried out in FY 1997 will be due 
December 30, 1997.
    This annual report requirement in section 411(b) is not covered by 
the statutory effective date for reporting in section 116 of PRWORA. 
The proposed deadline is consistent, however, with the deadline for 
most annual reports under DHHS grant programs as specified in 45 CFR 
92.40(b)(1).

V. Regulatory Impact Analyses

A. Executive Order 12866

    Executive Order 12866 requires that regulations be drafted to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that this 
proposed rule is consistent with these priorities and principles. This 
proposed rulemaking implements statutory authority based on broad 
consultation and coordination.
    The Executive Order encourages agencies, as appropriate, to provide 
the public with meaningful participation in the regulatory process. As 
described elsewhere in the preamble, ACF consulted with State and local 
officials and their representative organizations as well as a broad 
range of advocacy groups, researchers and others to obtain their views.
    We discuss the input received during the consultation process in 
the ``supplementary information'' section of the preamble and in 
discussions of individual regulatory provisions. To a considerable 
degree, these proposed rules reflect the discussion and concerns of the 
groups with whom we consulted.
    These proposed rules reflect the intent of PRWORA to achieve a 
balance between granting States the flexibility they need to develop 
and operate effective and responsive programs and ensuring that the 
objectives of the program are met. Under the new law, State flexibility 
is achieved by converting the welfare program into a block grant and 
limiting Federal rules; ensuring that program goals are accomplished is 
achieved through a number of penalty and bonus provisions and extensive 
data collection.
    We support State flexibility in numerous ways--such as by 
exercising regulatory restraint; giving States the ability to define 
key program terms; and clarifying that States have the ability to 
continue their welfare reform demonstrations and serve victims of 
domestic violence, non-custodial parents, and immigrants (with State 
funds).
    We support the achievement of program goals by ensuring that we 
capture key information on what is happening under the State TANF 
programs and maintaining the integrity of the work and other penalty 
provisions. We take care, in provisions such as the proposed MOE data 
collection and caseload reduction factor approval process, to protect 
against negative impacts on needy families. (Subsequent rules on the 
high performance bonus, illegitimacy bonus,

[[Page 62179]]

child poverty rates and Tribal TANF programs will reinforce these 
objectives.)
    One of our key goals in drafting the penalty rules was to ensure 
State performance in all key areas provided under statute--including 
work participation, time limits, State maintenance-of-effort, proper 
use of Federal funds and data reporting. The law specified that we 
should enforce State actions in these areas and specified the penalty 
for each failure. Through the ``reasonable cause'' and ``corrective 
compliance'' provisions in the proposed rules we give some 
consideration to special circumstances within a State to help ensure 
that neither the State nor needy families within the State will be 
unfairly penalized for circumstances beyond their control.
    In the work and penalty areas, this rulemaking provides information 
to the States that will help them understand our specific expectations 
and take the steps necessary to avoid penalties. These rules may 
ultimately affect the number and size of penalties that are imposed on 
States, but the basic expectations on States are statutory, and the 
effect of these rules is non-material.
    The financial impacts of these proposed rules should be minimal 
because of the fixed level of funding provided through the block grant. 
(We expect Federal outlays for State Family Assistance Grants, 
exclusive of any bonuses, to amount to nearly $15.6 billion in FY 
1998.) A State's Federal grant could be affected by the penalty 
decisions made under the law and these rules, and State expenditures on 
needy families could be affected by the proposed rules on the caseload 
reduction. Otherwise, we do not believe that the rulemaking will affect 
the overall level of funding or expenditures. However, it could have 
minor impacts on the nature and distribution of such expenditures.
    In the area of data collection, the statutory requirements are very 
specific and extensive--especially with respect to case-record or 
disaggregated data. These proposed rules include additional data 
reporting with respect to program expenditures and MOE cases. They 
expand upon the expenditure data explicitly mentioned by the statute in 
order to ensure that: needy families continue to receive assistance and 
services; monies go for the intended purposes; and the financial 
integrity of the program is maintained. They also include additional, 
optional data collection for MOE cases. We included this additional MOE 
data collection in order to assess the overall impact of the program 
and ensure that the creation of separate State programs does not 
undermine the objectives of the Act.
    The impacts of these rules on needy individuals and families will 
depend on the choices the State makes in implementing the new law. We 
expect our proposed data collection to enable tracking of these effects 
over time and across States. Overall, our assessment of these proposed 
rules indicates that they represent the least burdensome approach and 
that the impacts and consequences are non-material for individuals, 
States, and other entities.

B. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. Ch. 6) requires the 
Federal government to anticipate and reduce the impact of rules and 
paperwork requirements on small businesses and other small entities. 
Small entities are defined in the Act to include small businesses, 
small non-profit organizations, and small governmental entities. This 
rule will affect only the 50 States, the District of Columbia, and 
certain territories. Therefore, the Secretary certifies that this rule 
will not have a significant impact on small entities.

C. Paperwork Reduction Act

    This proposed rule contains information collection activities that 
are subject to review and approval by the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act of 1995. Under this Act, 
no persons are required to respond to a collection of information 
unless it displays a valid OMB control number. As required by the 
Paperwork Reduction Act, we have submitted the proposed data collection 
requirements to OMB for review and approval. We are concurrently using 
this NPRM as a vehicle for seeking comment from the public on these 
information collection activities.
    The proposed rules contain provisions covering three quarterly 
reports and one annual report. In addition, we are proposing that 
States provide documentation for caseload reduction credit and the 
reasonable cause/corrective action process and that they file certain 
program definitions and descriptions annually. In order to provide an 
opportunity for maximum review and public comment on the reporting 
requirements, we have attached the proposed quarterly reports 
(including the specific data elements) and the annual addendum as 
Appendices to part 275. We will revise these instruments following the 
comment period on the NPRM and will issue them to States through the 
ACF policy issuance system. We will not re-publish these appendices as 
a part of the final rule.
    The three quarterly reports are the TANF Data Report (Appendices A 
through C), the TANF MOE Data Report (Appendices E through G), and the 
TANF Financial Report (Appendix D) (or, as applicable, the Territorial 
Financial Report). The TANF Data Report and the TANF MOE Data Report 
consist of three sections each. Two of these three sections consist of 
disaggregated case-record data elements, and one consists of aggregated 
data elements.
    We need this proposed information collection to meet the 
requirements of section 411(a) and to implement other sections, 
including sections 407 (work participation requirements), 409 
(penalties), 413 (annual rankings), and 411(b) (Annual report to 
Congress).
    Reporting on the separate State MOE program(s) is optional. 
However, if a State claims MOE expenditures under a separate State 
program and wishes to receive a high performance bonus, qualify for 
work participation caseload reduction credit, or be considered for a 
reduction in the penalty for failing to meet the work participation 
requirements, it must file disaggregated and aggregated information on 
the separate State program(s) that is similar to that reported for the 
TANF program. (See Appendices E, F, and G for the proposed data 
elements.)
    The TANF Financial Report consists of one form with an annual 
addendum to be submitted at the same time as the TANF Financial Report 
for the fourth quarter. (See Appendix D.)
    We need this report to meet the requirements of sections 405(c)(2), 
411(a)(2), 411(a)(3), and 411(a)(5), and to carry out our other 
financial management and oversight responsibilities. These include 
providing information that could be used in determining whether States 
are subject to penalties under section 409(a)(1), 409(a)(3), 409(a)(7), 
409(a)(9), or 409(a)(14), tracking the reasonableness of our definition 
of ``assistance,'' learning the extent to which recipients of benefits 
and services are covered by program requirements, and helping to 
validate the disaggregated data we receive on TANF and MOE cases.
    We are also proposing an annual report in order to collect the data 
required by section 411(b). This report requires the submission of 
information about the characteristics of each State program; the design 
and operation of the program; the services, benefits, and assistance 
provided; the State's

[[Page 62180]]

eligibility criteria; and the State's definition of work activities. At 
its option, each State may also include a description of any unique 
features, accomplishments, innovations, or additional information 
appropriate for inclusion in the Department's annual report to the 
Congress.
    We will work with representatives of States and others to identify 
the specific form that will be used for this report, building on the 
information currently being collected on the TANF program by research 
organizations and others. Before we issue a reporting form to gather 
this information and instructions for filing the report, we will give 
the public another opportunity to comment on its content and the burden 
imposed.
    Besides the data collection instruments discussed above, there are 
two other circumstances in the proposed rules that will create a 
reporting burden. The first circumstance would be in cases where a 
State wants to qualify for caseload reduction credit. The second would 
be in cases where a State is subject to a penalty under section 409 and 
wishes to avoid the penalty or receive a reduced penalty.
    If a State elects to request a decrease in its participation rates 
based on caseload reduction, we are proposing in Sec. 271.41 that it 
must file certain data. In addition, if a State wishes to dispute a 
penalty determination or wants to be considered for a waiver of a 
penalty based on ``reasonable cause'' or corrective compliance, we are 
proposing in Sec. 272.4 that the State would provide us with 
information. We are proposing that a State would use a similar process 
if it is seeking a reduced penalty for failure to meet the work 
participation rates, as discussed at Sec. 271.51. Therefore, we also 
address the burden issues related to these processes below.
    The respondents for the TANF Financial Report are the 50 States of 
the United States and the District of Columbia. The respondents for the 
TANF Data Report, the TANF MOE Data Report, the TANF Annual Report, the 
Caseload Reduction Credit documentation process, and the Reasonable 
Cause/Corrective Action documentation process are the 50 States of the 
United States, the District of Columbia, Guam, Puerto Rico, and the 
United States Virgin Islands. American Samoa is eligible for the TANF 
program and could use funds that it receives under section 1108 to 
operate the TANF program. However, it did not elect to operate an AFDC 
program, and we assumed that it would elect not to operate a TANF 
program.
    While the statute requires Tribal organizations with TANF programs 
to submit some of the same data as States, we have not calculated the 
burden for the Tribal organizations in this NPRM because a separate 
NPRM will address Tribal TANF programs.
    Tribal TANF programs will not be required to submit all of the data 
required for State TANF programs because some provisions for which data 
are being collected apply only to States. In addition, because Tribal 
organizations have not previously operated AFDC programs, the burden 
imposed on them by reporting will be substantially different than it is 
for the States. In light of these special considerations, we considered 
it more appropriate to address the burden on Tribes in that separate 
NPRM.
    In providing these estimates of reporting burden, we would like to 
point out that some of the reporting burden that used to exist in the 
AFDC program has disappeared, including the ``FLASH Report'' and 
several other reports. Nevertheless, most of the data elements required 
under the TANF Data Report are similar to previous data elements 
required in the AFDC or JOBS program. Therefore, the existence of these 
data elements should reduce the systems development and modification 
that the States will undertake. In calculating the estimates of the 
reporting burden, we assumed that all States would collect the data by 
means of a review sample. We believe that a number of States will 
eventually choose to undertake the one-time burden and cost of 
developing or modifying their systems to provide the required data 
directly from their automated systems, thus substantially reducing or 
eliminating the ongoing annual burden and cost reflected in these 
estimates.
    In a very limited number of cases, we have proposed collecting 
information quarterly where the statute only requires annual reporting, 
or we have added elements not directly specified in the statute. We did 
this because one of our goals was to limit the number of reporting 
forms and systems modifications that States would be required to make.
    Specifically, we believe that adding a data element like gender, 
that had been developed for other purposes such as Quality Control, 
would be useful to understanding the impact of the program and would 
not impose an additional burden. Similarly, while the reporting of the 
demographic and financial characteristics of families that become 
ineligible to receive assistance is only required annually, these data 
can be collected and reported more efficiently and without creating 
another form by inclusion in the quarterly TANF Data Report.
    Overall, the proposed reporting burden represents a substantial 
decrease from the burden imposed by the reporting requirements of the 
prior programs that TANF has replaced. Nevertheless, we encourage 
States and members of the public to comment and provide suggestions on 
how the burden can be further reduced and whether we have taken the 
right course regarding frequency of reporting. The annual burden 
estimates include any time involved pulling records from files, 
abstracting information, returning records to files, assembling any 
other material necessary to provide the requested information, and 
transmitting the information.
    Because of the constraints of the Administrative Procedure Act 
(APA), we were unable to consult with the States directly on the 
development of the specific data collection instruments. However, prior 
to the development of the data collection instruments, we conducted 
extensive consultations on general data collection issues with 
representative groups such as the American Public Welfare Association 
(APWA), the National Governors' Association (NGA), and the National 
Conference of State Legislatures (NCSL). We also researched the burden 
estimates for similar OMB-approved data collections in our inventory 
and consulted with knowledgeable Federal officials.
    The annual burden estimates for these data collections are:

----------------------------------------------------------------------------------------------------------------
                                                                    Number of     Average burden                
           Instrument or requirement                Number of     responses per     hours per      Total burden 
                                                   respondents     respondent        response          hours    
----------------------------------------------------------------------------------------------------------------
TANF Data Report-Sec.  275.3(b)................          \1\ 54               4            526.5         113,724
TANF MOE Data Report-Sec.  275.3(d)............          \2\ 54               4            523.5         113,076
TANF Financial Report-Sec.  275.3(c) & Sec.                                                                     
 275.9(a)-(b)..................................          \3\ 51               4             12             2,448
TANF Annual Report-Sec.  275.9(c)..............          \1\ 54               1             20             1,080
Caseload Reduction Documentation Process-Sec.                                                                   
 271.41 & Sec.  271.44.........................          \4\ 54               1             40             2,160

[[Page 62181]]

                                                                                                                
Reasonable Cause/Corrective Action                                                                              
 Documentation Process-Secs.  272.4, 272.6, &                                                                   
 272.7; Sec.  271.51...........................          \4\ 54               1            160             8,640
----------------------------------------------------------------------------------------------------------------
\1\ We estimate that the 50 States, the District of Columbia, Guam, Puerto Rico, and the United States Virgin   
  Islands will be respondents.                                                                                  
\2\ We estimate that the 50 States, the District of Columbia, Guam, Puerto Rico, and the United States Virgin   
  Islands will be respondents, though not necessarily all 54 of these States and Territories will elect to have 
  MOE programs and respond the first year.                                                                      
\3\ We estimate that the 50 States and the District of Columbia will be respondents.                            
\4\ We estimate that the 50 States, the District of Columbia, Guam, Puerto Rico, and the United States Virgin   
  Islands will be respondents, though not necessarily all 54 States and Territories will elect to respond the   
  first year.                                                                                                   

    Estimated Total Annual Burden Hours: 241,128.
    We encourage States, organizations, individuals, and other parties 
to submit comments regarding the information collection requirements to 
ACF (at the address above) and to the Office of Information and 
Regulatory Affairs, OMB, Room 3208, New Executive Office Building, 725 
17th Street, Washington, DC 20503, ATTN: Desk Officer for ACF.
    To ensure that public comments have maximum effect in developing 
the final regulations and the data collection forms, we urge that each 
comment clearly identify the specific section or sections of the 
proposed rule or data collection form that the comment addresses and 
follow the same order as the regulations and forms.
    We will consider comments by the public on these proposed 
collections of information in:
    <bullet> Evaluating whether the proposed collections are necessary 
for the proper performance of our functions, including whether the 
information will have practical utility;
    <bullet> Evaluating the accuracy of our estimate of the burden of 
the proposed collections of information, including the validity of the 
methodology and assumptions used, and the frequency of collection;
    <bullet> Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
    <bullet> Minimizing the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technology, e.g., the 
electronic submission of responses.
    OMB is required to make a decision concerning the collections of 
information contained in these proposed rules between 30 and 60 days 
after publication of this document in the Federal Register. Therefore, 
a comment is assured of having its full effect if OMB receives it 
within 30 days of publication. This OMB review schedule does not affect 
the deadline for the public to comment to ACF on the proposed rules. 
Written comments to OMB for the proposed information collection should 
be sent directly to the following: Office of Management and Budget, 
Paperwork Reduction Project, 725 17th Street, N.W., Washington, D.C. 
20502, Attn: Ms. Laura Oliven.

D. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded 
Mandates Act) requires that a covered agency prepare a budgetary impact 
statement before promulgating a rule that includes any Federal mandate 
that may result in the expenditure by State, local, and Tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year.
    If a covered agency must prepare a budgetary impact statement, 
section 205 further requires that it select the most cost-effective and 
least burdensome alternative that achieves the objectives of the rule 
and is consistent with the statutory requirements. In addition, section 
203 requires a plan for informing and advising any small government 
that may be significantly or uniquely impacted by the proposed rule.
    We have determined that the proposed rules will not result in the 
expenditure by State, local, and Tribal governments, in the aggregate, 
or by the private sector, of more than $100 million in any one year. 
Accordingly, we have not prepared a budgetary impact statement, 
specifically addressed the regulatory alternatives considered, or 
prepared a plan for informing and advising any significantly or 
uniquely impacted small government.

List of Subjects in 45 CFR Parts 270 through 275

    Administrative practice and procedure, Day care, Employment, Grant 
programs--Social programs, Loan programs--Social programs, Manpower 
training programs, Penalties, Public assistance programs, Reporting and 
recordkeeping requirements, Vocational education.

(Catalogue of Federal Domestic Assistance Programs: 93.558 TANF 
programs--State Family Assistance Grants, Assistance grants to 
Territories, Matching grants to Territories, Supplemental Grants for 
Population Increases and Contingency Fund; 93.559--Loan Fund; 
93.595--Welfare Reform Research, Evaluations and National Studies)

    Dated: August 14, 1997.
Olivia A. Golden,
Principal Deputy Assistant Secretary for Children and Families.

    Approved: September 2, 1997.
Donna E. Shalala,
Secretary, Department of Health and Human Services.

    For the reasons set forth in the preamble, we propose to amend 45 
CFR chapter II by adding parts 270 through 275 to read as follows:

PART 270--GENERAL TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) 
PROVISIONS

Sec.
270.10  What does this part cover?
270.20  What is the purpose of the TANF program?
270.30  What definitions apply under the TANF regulations?
270.40  When are these provisions in effect?

    Authority: 42 U.S.C. 601, 601 note, 603, 604, 606, 607, 608, 
609, 610, 611, 619, and 1308.


Sec. 270.10  What does this part cover?

    This part includes regulatory provisions that generally apply to 
the Temporary Assistance for Needy Families (TANF) program.


Sec. 270.20  What is the purpose of the TANF program?

    The TANF program has the following four purposes:
    (a) Provide assistance to needy families so that children may be 
cared for in their own homes or in the homes of relatives;
    (b) End the dependence of needy parents on government benefits by 
promoting job preparation, work, and marriage;
    (c) Prevent and reduce the incidence of out-of-wedlock pregnancies 
and establish annual numerical goals for preventing and reducing the 
incidence of these pregnancies;

[[Page 62182]]

    (d) Encourage the formation and maintenance of two-parent families.


Sec. 270.30  What definitions apply under the TANF regulations?

    The following definitions apply under parts 270 through 275 of this 
chapter:
    ACF means the Administration for Children and Families.
    Act means Social Security Act, unless otherwise specified.
    Adjusted State Family Assistance Grant, or adjusted SFAG, means the 
SFAG amount, minus any reductions for Tribal Family Assistance Grants 
paid to Tribal grantees on behalf of Indian families residing in the 
State.
    Adult means an individual who is not a ``minor child,'' as defined 
elsewhere in this section.
    AFDC means Aid to Families with Dependent Children.
    Aid to Families with Dependent Children means the welfare program 
in effect under title IV-A of prior law.
    Assistance means every form of support provided to families under 
TANF (including child care, work subsidies, and allowances to meet 
living expenses), except: Services that have no direct monetary value 
to an individual family and that do not involve implicit or explicit 
income support, such as counseling, case management, peer support, and 
employment services that do not involve subsidies or other forms of 
income support; and one-time, short-term assistance (i.e., assistance 
paid within a 30-day period, no more than once in any twelve-month 
period, to meet needs that do not extend beyond a 90-day period, such 
as automobile repair to retain employment and avoid welfare receipt and 
appliance repair to maintain living arrangements). This definition does 
not apply to the use of the term assistance at part 273, subpart A, of 
this chapter.
    CCDF means the Child Care and Development Fund, or those child care 
programs and services funded either under section 418(a) of the Act or 
the Child Care and Development Block Grant Act of 1990, 42 U.S.C. 9801.
    Commingled State TANF expenditures means expenditure of State funds 
that are made within the TANF program and commingled with Federal 
funds.
    Contingency Fund means Federal funds available at section 403(b) of 
the Act, and contingency funds means the Federal monies made available 
to States under that section. It does not include any State funds 
expended as a requirement of that section.
    Contingency Fund MOE means the MOE expenditures that a State must 
make in order to: Meet the MOE requirements at sections 403(b)(4) and 
409(a)(10) of the Act and subpart B of part 274 of this chapter; and 
retain contingency funds made available to the State. The only 
expenditures that qualify for Contingency Fund MOE are State TANF 
expenditures and, in certain cases, child care expenditures made under 
the Child Care and Development Fund (CCDF).
    EA means Emergency Assistance.
    Eligible State means a State that, during the 2-year period 
immediately preceding the fiscal year, has submitted a TANF plan that 
we have determined is complete.
    Emergency Assistance means the program option available to States 
under sections 403(a)(5) and 406(e) of prior law to provide short-term 
assistance to needy families with children.
    Family Violence Option (or FVO) means the provision at section 
402(a)(7) of the Act under which States may elect to implement 
comprehensive strategies for identifying and serving victims of 
domestic violence.
    FAMIS means the automated statewide management information system 
under sections 402(a)(30), 402(e), and 403 of prior law.
    Federal expenditures means expenditures by a State of Federal TANF 
funds.
    Federal funds and Federal TANF funds have the same meaning as TANF 
funds, as defined in this section.
    Fiscal year means the 12-month period beginning on October 1 of the 
preceding calendar year and ending on September 30.
    FY means fiscal year.
    Good cause domestic violence waiver means a waiver of one or more 
program requirements granted by a State to a victim of domestic 
violence under the Family Violence Option that is:
    (1) Granted appropriately, based on need, as determined by an 
individualized assessment;
    (2) Temporary, for a period not to exceed six months; and
    (3) Accompanied by an appropriate services plan designed to provide 
safety and lead to work.
    IEVS means the Income and Eligibility Verification System operated 
pursuant to the provisions in section 1137 of the Act.
    Inconsistent means that complying with a TANF requirement would 
necessitate that a State change a policy reflected in an approved 
waiver.
    Indian, Indian Tribe and Tribal Organization have the meaning given 
such terms by section 4 of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450b), except that the term ``Indian tribe'' 
means, with respect to the State of Alaska, only the Metlakatla Indian 
Community of the Annette Islands Reserve and the following Alaska 
Native regional nonprofit corporations:
    (1) Arctic Slope Native Association;
    (2) Kawerak, Inc.;
    (3) Maniilaq Association;
    (4) Association of Village Council Presidents;
    (5) Tanana Chiefs Council;
    (6) Cook Inlet Tribal Council;
    (7) Bristol Bay Native Association;
    (8) Aleutian and Pribilof Island Association;
    (9) Chugachmuit;
    (10) Tlingit Haida Central Council;
    (11) Kodiak Area Native Association; and
    (12) Copper River Native Association.
    Job Opportunities and Basic Skills Training Program means the 
program under title IV-F of prior law to provide education, training 
and employment services to welfare recipients.
    JOBS means the Job Opportunities and Basic Skills Training Program.
    Minor child means an individual who:
    (1) Has not attained 18 years of age; or
    (2) Has not attained 19 years of age and is a full-time student in 
a secondary school (or in the equivalent level of vocational or 
technical training).
    MOE means maintenance-of-effort.
    Needy State is a term that pertains to the provisions on the 
Contingency Fund and the penalty for failure to meet participation 
rates. It means, for a month, a State where:
    (1)(i) The average rate of total unemployment (seasonally adjusted) 
for the most recent 3-month period for which data are published for all 
States equals or exceeds 6.5 percent; and
    (ii) The average rate of total unemployment (seasonally adjusted) 
for such 3-month period equals or exceeds 110 percent of the average 
rate for either (or both) of the corresponding 3-month periods in the 
two preceding calendar years; or
    (2) The Secretary of Agriculture has determined that the average 
number of individuals participating in the Food Stamp program in the 
State has grown at least ten percent in the most recent three-month 
period for which data are available.
    Prior law means the provisions of title IV-A and IV-F of the Act in 
effect as of August 21, 1996. They include provisions related to Aid to 
Families with Dependent Children (or AFDC), Emergency Assistance (or 
EA), Job Opportunities and Basic Skills Training (or JOBS), and FAMIS.
    PRWORA means the Personal Responsibility and Work Opportunity

[[Page 62183]]

Reconciliation Act of 1996, or Pub. L. 104-193, 42 U.S.C. 1305.
    Qualified Aliens has the meaning prescribed under section 431 of 
PRWORA, as amended by the Illegal Immigration Reform and Immigrant 
Responsibility Act of 1996, or Pub. L. 104-208, 8 U.S.C. 1101.
    Qualified State Expenditures means the total amount of State funds 
expended during the fiscal year that count for TANF MOE purposes. It 
includes expenditures, under any State program, for any of the 
following with respect to eligible families:
    (1) Cash assistance;
    (2) Child care assistance;
    (3) Educational activities designed to increase self-sufficiency, 
job training, and work, excluding any expenditure for public education 
in the State except expenditures involving the provision of services or 
assistance of an eligible family that is not generally available to 
persons who are not members of an eligible family;
    (4) Any other use of funds allowable under subpart A of part 273 of 
this chapter; and
    (5) Administrative costs in connection with the matters described 
in paragraphs (1), (2), (3) and (4) of this definition, 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.
    Secretary means Secretary of the Department of Health and Human 
Services or any other Department official duly authorized to act on the 
Secretary's behalf.
    Segregated State TANF expenditures means the expenditure of State 
funds within the TANF program that are not commingled with Federal 
funds.
    Separate State program means a program operated outside of TANF in 
which the expenditures of State funds may count for TANF MOE purposes.
    SFAG means State Family Assistance Grant, as defined in this 
section.
    SFAG payable means the SFAG amount, reduced, as appropriate, for 
any Tribal Family Assistance Grants made on behalf of Indian families 
residing in the State and any penalties imposed on a State under this 
chapter.
    Single audit means an audit or supplementary review conducted under 
the authority of the Single Audit Act at 31 U.S.C. chapter 75.
    State means the 50 States of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, the United States Virgin 
Islands, Guam, and American Samoa, unless otherwise specified.
    State Family Assistance Grant means the amount of the basic block 
grant allocated to each eligible State under the formula at section 
403(a)(1) of the Act.
    State MOE expenditures means the expenditure of State funds that 
may count for purposes of the TANF MOE requirements at section 
409(a)(7) of the Act and the Contingency Fund MOE requirements at 
sections 403(b)(4) and 409(a)(10) of the Act.
    State TANF expenditures means the expenditure of State funds within 
the TANF program.
    TANF means The Temporary Assistance for Needy Families Program.
    TANF funds means all funds provided to the State under section 403 
of the Act, including the SFAG, any bonuses, supplemental grants, or 
contingency funds.
    TANF MOE means the expenditure of State funds that must be made in 
order to meet the MOE requirement at section 409(a)(7) of the Act.
    TANF program means a State program of family assistance operated by 
an ``eligible State'' under its State TANF plan.
    Territories means Puerto Rico, the Virgin Islands, Guam, and 
American Samoa.
    Title IV-A refers to the title and part of the Act that now 
includes TANF, but previously included AFDC and EA. For the purpose of 
the TANF program regulations, this term does not include child care 
programs authorized and funded under section 418 of the Act, or their 
predecessors, unless we specify otherwise.
    Tribal Family Assistance Grant means a grant paid to a Tribe that 
has an approved Tribal family assistance plan under section 412(a)(1) 
of the Act.
    Tribal grantee means a Tribe that receives Federal funds to operate 
a Tribal TANF program under section 412(a) of the Act.
    Tribal TANF program means a TANF program developed by an eligible 
Tribe, Tribal organization, or consortium and approved by us under 
section 412 of the Act.
    Tribe means Indian Tribe or Tribal organization, as defined 
elsewhere in this section. The definition may include Tribal consortia 
(i.e., groups of federally recognized Tribes or Alaska Native entities 
that have banded together in a formal arrangement to develop and 
administer a Tribal TANF program).
    Victim of domestic violence means an individual who is battered or 
subject to extreme cruelty under the definition at section 
408(a)(7)(B)(iii) of the Act.
    Waiver refers to a specific action taken by the Secretary under the 
authority of section 1115 of the Act to allow a State to operate a 
program that does not follow specific requirements of prior law. For 
the purpose of parts 270 through 275 of this chapter and section 415 of 
the Act, it consists of provisions necessary to achieve the State's 
policy objective. It includes the approved revised AFDC requirements, 
articulated in the State's waiver list. It also includes those 
provisions of prior law that:
    (1) Did not need to be waived as part of the waiver package; and
    (2) Were integral and necessary to achieve the State's policy 
objective for the approved waiver.
    We (and any other first person plural pronouns) means the Secretary 
of Health and Human Services or any of the following individuals or 
organizations acting in an official capacity on the Secretary's behalf: 
the Assistant Secretary for Children and Families, the Regional 
Administrators for Children and Families, the Department of Health and 
Human Services, and the Administration for Children and Families.
    Welfare-to-Work means the new program for funding work activities 
at section 403(a)(5) of the Act.
    WTW means Welfare-to-Work.


Sec. 270.40  When are these provisions in effect?

    (a) The TANF statutory requirements go into effect no sooner than a 
State's implementation of its TANF program. Each State must implement 
its TANF program no later than July 1, 1997.
    (b) In determining whether a State is subject to a penalty under 
parts 271 through 275 of this chapter, we will not apply the regulatory 
provisions in parts 270 through 275 of this chapter retroactively. We 
will judge State behavior and actions that occur prior to [effective 
date of final rules] only against a reasonable interpretation of the 
statutory provision in title IV-A of the Act.

PART 271--ENSURING THAT RECIPIENTS WORK

Sec.
271.1  What does this part cover?
271.2  What definitions apply to this part?

Subpart A--Individual Responsibility

271.10  What work requirements must an individual meet?
271.11  Which recipients must have an assessment under TANF?
271.12  What is an individual responsibility plan?
271.13  May an individual be penalized for not following an 
individual responsibility plan?
271.14  What is the penalty if an individual refuses to engage in 
work?
271.15  Can a family be penalized if a parent refuses to work 
because (s)he cannot find child care?

[[Page 62184]]

271.16  Does the imposition of a penalty affect an individual's work 
requirement?

Subpart B--State Accountability

271.20  How will we hold a State accountable for achieving the work 
objectives of TANF?
271.21  What overall work rate must a State meet?
271.22  How will we determine a State's overall work rate?
271.23  What two-parent work rate must a State meet?
271.24  How will we determine a State's two-parent work rate?
271.25  Does a State include Tribal families in calculating these 
rates?

Subpart C--Work Activities and How to Count Them

271.30  What are ``work activities''?
271.31  How many hours must an individual participate to count in 
the numerator of the overall rate?
271.32  How many hours must an individual participate to count in 
the numerator of the two-parent rate?
271.33  What are the special requirements concerning educational 
activities in determining monthly participation rates?
271.34  Are there any limitations in counting job search and job 
readiness assistance toward the participation rates?
271.35  Are there any special work provisions for single custodial 
parents?
271.36  Do welfare reform waivers affect what activities count as 
engaged in work?
Subpart D--Caseload Reduction Factor for Minimum Participation Rates
271.40  Is there a way for a State to reduce the work participation 
rates?
271.41  How will we determine the caseload reduction factor?
271.42  Which reductions count in determining the caseload reduction 
factor?
271.43  What is the definition of a ``case receiving assistance'' in 
calculating the caseload reduction factor?
271.44  When must a State report the required data on the caseload 
reduction factor?

Subpart E--State Work Penalties

271.50  What happens if a State fails to meet the participation 
rates?
271.51  Under what circumstances will we reduce the amount of the 
penalty below the maximum?
271.52  Is there a way to waive the State's penalty for failing to 
achieve either of the participation rates?
271.53  Can a State correct the problem before incurring a penalty?
271.54  Is a State subject to any other penalty relating to its work 
program?
271.55  Under what circumstances will we reduce the amount of the 
penalty for not properly imposing penalties on individuals?

Subpart F--Waivers

271.60  How do existing welfare waivers affect the participation 
rate?

Subpart G--Non-displacement

271.70  What safeguards are there to ensure that participants in 
work activities do not displace other workers?

    Authority: 42 U.S.C. 601, 602, 607, and 609.


Sec. 271.1  What does this part cover?

    This part includes the regulatory provisions relating to the 
mandatory work requirements of TANF.


Sec. 271.2  What definitions apply to this part?

    The general TANF definitions at Sec. 270.30 of this chapter apply 
to this part.

Subpart A--Individual Responsibility


Sec. 271.10  What work requirements must an individual meet?

    (a) A parent or caretaker receiving assistance must engage in work 
activities when the State has determined that the individual is ready 
to engage in work or when (s)he has received assistance for a total of 
24 months, whichever is earlier. The State must define what it means to 
engage in work for this requirement, which can include participation in 
work activities in accordance with section 407 of the Act.
    (b) If a parent or caretaker has received assistance for two 
months, (s)he must participate in community service employment, unless 
the State has exempted the individual from work requirements or (s)he 
is already engaged in work activities as described at Sec. 271.30. The 
State will determine the minimum hours per week and the tasks the 
individual must perform as part of the community service employment. 
This requirement takes effect no later than August 22, 1997, unless the 
governor of the State opts out of this provision by notifying HHS.


Sec. 271.11  Which recipients must have an assessment under TANF?

    (a) The State must make an initial assessment of the skills, prior 
work experience, and employability of each recipient who is at least 
age 18 or who has not completed high school (or equivalent) and is not 
attending secondary school.
    (b) The State may make any required assessments within 90 days (180 
days, at State option) of the date it implements the TANF program for 
anyone receiving assistance as of that date. For anyone else who must 
have an assessment, the State may assess an individual within 30 days 
(90 days, at State option) of the date (s)he becomes eligible for 
assistance.


Sec. 271.12  What is an individual responsibility plan?

    An individual responsibility plan is a plan developed at State 
option, in consultation with the individual, on the basis of the 
assessment made under Sec. 271.11. The plan:
    (a) Should set an employment goal for the individual and a plan for 
moving immediately into private sector employment;
    (b) Should describe the obligations of the individual. These could 
include going to school, maintaining certain grades, keeping school-age 
children in school, immunizing children, going to parenting or money 
management classes, or doing other things that will help the individual 
become and remain employed in the private sector;
    (c) Should be designed to move the individual into whatever private 
sector employment (s)he is capable of handling as quickly as possible, 
and to increase over time the responsibility and the amount of work the 
individual handles;
    (d) Should describe the services the State will provide the 
individual; and
    (e) May require the individual to undergo appropriate substance 
abuse treatment.


Sec. 271.13  May an individual be penalized for not following an 
individual responsibility plan?

    Yes. If an individual fails without good cause to comply with an 
individual responsibility plan that (s)he has signed, the State may 
reduce the amount of assistance otherwise payable to the family, by 
whatever amount it considers appropriate. This penalty is in addition 
to any other penalties under the State's TANF program.


Sec. 271.14  What is the penalty if an individual refuses to engage in 
work?

    If an individual refuses to engage in work required under section 
407 of the Act, the State must reduce or terminate the amount of 
assistance payable to the family, subject to any good cause or other 
exceptions the State may establish. A grant reduction must be at least 
prorated, based on the portion of the month in which the individual 
refuses to work, but could be greater.


Sec. 271.15  Can a family be penalized if a parent refuses to work 
because (s)he cannot find child care?

    (a) If the individual is a single custodial parent caring for a 
child under age six, the State may not reduce or terminate assistance 
for the parent's refusal to engage in required work if (s)he 
demonstrates an inability to obtain needed child care for one or more 
of the following reasons:

[[Page 62185]]

    (1) Appropriate child care within a reasonable distance from the 
home or work site is unavailable;
    (2) Informal child care by a relative or under other arrangements 
is unavailable or unsuitable; or
    (3) Appropriate and affordable formal child care arrangements are 
unavailable.
    (b)(1) The State will determine when the individual has 
demonstrated that (s)he cannot find child care, in accordance with 
criteria established by the State.
    (2) These criteria must:
    (i) Address the procedures that the State uses to determine if the 
parent has a demonstrated inability to obtain needed child care;
    (ii) Include definitions of the terms ``appropriate child care,'' 
``reasonable distance,'' ``unsuitability of informal care,'' and 
``affordable child care arrangements''; and
    (iii) Be submitted to us.


Sec. 271.16  Does the imposition of a penalty affect an individual's 
work requirement?

    A penalty imposed by a State against the family of an individual by 
reason of the failure of the individual to comply with a requirement 
under TANF shall not be construed to be a reduction in any wage paid to 
the individual, and shall not result in a reduction in the number of 
hours of work required.

Subpart B--State Accountability


Sec. 271.20  How will we hold a State accountable for achieving the 
work objectives of TANF?

    (a) Each State must meet two separate work participation rates, one 
based on how well it succeeds in helping adults in two-parent families 
find work activities described at Sec. 271.30 (the two-parent rate), 
the other based on how well it succeeds in finding those activities for 
adults in all families it serves (the overall rate).
    (b) Each State must submit data to allow us to measure its success 
in requiring adults to participate in work activities, as specified at 
Sec. 275.3 of this chapter.
    (c) If the data show that a State met both participation rates in a 
fiscal year, then the percentage of historic State expenditures that it 
must expend under TANF, pursuant to Sec. 273.1 of this chapter, 
decreases from 80 to 75 percent for that fiscal year. This is also 
known as the State's ``maintenance of effort'' requirement.
    (d) If the data show that a State did not meet either minimum work 
participation rate for a fiscal year, a State could be subject to a 
financial penalty.
    (e) Before we impose a penalty, a State will have the opportunity 
to claim reasonable cause or enter into a corrective compliance plan, 
pursuant to Secs. 272.5 and 272.6 of this chapter.


Sec. 271.21  What overall work rate must a State meet?

    Each State must achieve the following minimum overall participation 
rate:

------------------------------------------------------------------------
                                                             Then the   
                                                              minimum   
                 If the fiscal year is:                    participation
                                                             rate is:   
------------------------------------------------------------------------
1997....................................................              25
1998....................................................              30
1999....................................................              35
2000....................................................              40
2001....................................................              45
2002 and thereafter.....................................              50
------------------------------------------------------------------------

Sec. 271.22  How will we determine a State's overall work rate?

    (a) The overall participation rate for a fiscal year is the average 
of the State's overall participation rates for each month in the fiscal 
year.
    (b)(1) We determine a State's overall participation rate for a 
month as follows:
    (i) The number of families receiving TANF assistance that include 
an adult or a minor head-of-household who is engaged in work for the 
month (the numerator); divided by
    (ii) The number of families receiving TANF assistance during the 
month that include an adult or a minor head-of-household minus the 
number of families that are subject to a penalty for refusing to work 
in that month (the denominator). However, if a family has been 
sanctioned for more than three of the last 12 months, we will not 
deduct it from the denominator.
    (2) States may define families receiving TANF assistance . . . that 
include an adult or a minor child head-of household, but may not 
exclude families from the definition solely for the purpose of avoiding 
penalties under Sec. 271.50.
    (i) States shall report to us annually on the number of families 
excluded because of the State's definition and the circumstances 
underlying each exclusion.
    (ii) Where we find that a State has excluded families for the 
purpose of avoiding a penalty for work participation, we shall include 
those families in the calculation in paragraph (b)(1) of this section 
in determining whether a State is subject to the penalty described in 
Sec. 271.50.
    (c) A State has the option of not requiring a single custodial 
parent caring for a child under age one to engage in work. If the State 
adopts this option, it may disregard such a family in the participation 
rate calculation for a maximum of 12 months.
    (d) If a family receives assistance for only part of a month, the 
State may count it as a month of participation if an adult in the 
family is engaged in work for the minimum average number of hours in 
each full week that the family receives assistance in that month.


Sec. 271.23  What two-parent work rate must a State meet?

    A State receiving a TANF grant for a fiscal year must achieve the 
following minimum two-parent participation rate:

------------------------------------------------------------------------
                                                             Then the   
                                                              minimum   
                 If the fiscal year is:                    participation
                                                             rate is:   
------------------------------------------------------------------------
1997....................................................              75
1998....................................................              75
1999 and thereafter.....................................              90
------------------------------------------------------------------------

Sec. 271.24  How will we determine a State's two-parent work rate?

    (a) The two-parent participation rate for a fiscal year is the 
average of the State's two-parent participation rates for each month in 
the fiscal year.
    (b)(1) We determine a State's two-parent participation rate for a 
month as follows:
    (i) The number of two-parent families receiving TANF assistance 
that include an adult (or minor child head-of-household) and other 
parent who meet the requirements set forth in Sec. 271.32 for the month 
(the numerator); divided by
    (ii) The number of two-parent families receiving TANF assistance 
during the month minus the number of two-parent families that are 
subject to a penalty for refusing to work in that month (the 
denominator). However, if a family has been sanctioned for more than 
three of the last 12 months, we will not deduct it from the 
denominator.
    (2) States may define families receiving TANF assistance . . . that 
include an adult or a minor child head-of household, but may not 
exclude families from the definition solely for the purpose of avoiding 
penalties under Sec. 271.50.
    (i) States shall report to us annually on the number of families 
excluded because of the State's definition and the circumstances 
underlying each exclusion.
    (ii) Where we find that a State has excluded families for the 
purpose of avoiding a penalty for work participation, we shall include 
those families in the calculation in paragraph (b)(1) of this section 
in determining whether a State is subject to the penalty described in 
Sec. 271.50.

[[Page 62186]]

    (c) If a family receives assistance for only part of a month, the 
State may count it as a month of participation if an adult in the 
family (both adults, if they are both required to work) is engaged in 
work for the minimum average number of hours in each full week that the 
family receives assistance in that month.
    (d) If a family includes a disabled parent, the family is not 
considered a two-parent family for the participation rate. Such a 
family is not included in either the numerator or denominator of the 
two-parent rate.


Sec. 271.25  Does a State include Tribal families in calculating these 
rates?

    A State has the option of including families that are receiving 
assistance under an approved tribal family assistance plan or under a 
tribal work program in calculating the State's participation rates 
under Secs. 271.22 and 271.24.

Subpart C--Work Activities and How to Count Them


Sec. 271.30  What are ``work activities''?

    Work activities include:
    (a) Unsubsidized employment;
    (b) Subsidized private sector employment;
    (c) Subsidized public sector employment;
    (d) Work experience;
    (e) On-the-job training (OJT);
    (f) Job search and job readiness assistance;
    (g) Community service programs;
    (h) Vocational educational training;
    (i) Job skills training directly related to employment;
    (j) Education directly related to employment, in the case of a 
recipient who has not received a high school diploma or a certificate 
of high school equivalency;
    (k) Satisfactory attendance at secondary school or in a course of 
study leading to a certificate of general equivalence, if a recipient 
has not completed secondary school or received such a certificate; and
    (l) Providing child care services to an individual who is 
participating in a community service program.


Sec. 271.31  How many hours must an individual participate to count in 
the numerator of the overall rate?

    (a) An individual counts as engaged in work for a month for the 
overall rate if (s)he participates in work activities during the month 
for at least the minimum average number of hours per week listed in the 
following table:

------------------------------------------------------------------------
                                                             Then the   
                                                              minimum   
                 If the fiscal year is:                    average hours
                                                           per week is: 
------------------------------------------------------------------------
1997....................................................              20
1998....................................................              20
1999....................................................              25
2000 or thereafter......................................              30
------------------------------------------------------------------------

    (b)(1) In addition, for the individual to count as engaged in work, 
at least 20 per week of the above hours must come from participation in 
certain of the activities listed in Sec. 271.30. The following nine 
activities count for the first 20 hours of participation: Unsubsidized 
employment; subsidized private sector employment; subsidized public 
sector employment; work experience; on-the-job training; job search and 
job readiness assistance; community service programs; vocational 
educational training; and providing child care services to an 
individual who is participating in a community service program.
    (2) Above 20 hours per week, the following three activities may 
also count for participation: Job skills training directly related to 
employment; education directly related to employment; and satisfactory 
attendance at secondary school or in a course of study leading to a 
certificate of general equivalence.
    (c) The following chart below lists when each activity counts, for 
both the overall and the two-parent rates:

----------------------------------------------------------------------------------------------------------------
                                                                       When does the activity count?            
                                                         -------------------------------------------------------
                                                                 Overall rate                2-parent rate      
                                                         -------------------------------------------------------
                        Activity                                                       30/50 hours              
                                                                         hours above    (without/    Hours above
                                                            20 hours         20         with Fed        30/50   
                                                                                       child care)              
----------------------------------------------------------------------------------------------------------------
(a) unsubsidized employment.............................      <check>       <check>       <check>       <check> 
(b) subsidized private sector employment................      <check>       <check>       <check>       <check> 
(c) subsidized public sector employment.................      <check>       <check>       <check>       <check> 
(d) work experience.....................................      <check>       <check>       <check>       <check> 
(e) OJT.................................................      <check>       <check>       <check>       <check> 
(f) job search & job readiness..........................      <check>       <check>       <check>       <check> 
(g) community service programs..........................      <check>       <check>       <check>       <check> 
(h) vocational educational training.....................      <check>       <check>       <check>       <check> 
(i) job skills training.................................           No       <check>            No       <check> 
(j) education directly related to employment............       No \1\       <check>        No \1\       <check> 
(k) high school or GED..................................       No \1\       <check>        No \1\       <check> 
(l) providing child care services to a community service                                                        
 participant............................................      <check>       <check>       <check>       <check> 
----------------------------------------------------------------------------------------------------------------
\1\ Teen parents may count due to participation in these activities. Refer to Sec.  271.33.                     

Sec. 271.32  How many hours must an individual participate to count in 
the numerator of the two-parent rate?

    (a) If an individual and the other parent in the family are 
participating in work activities for an average of at least 35 hours 
per week during the month, then (s)he counts as engaged in work for a 
two-parent family for the month, subject to paragraph (c) of this 
section.
    (b)(1) In addition, at least 30 of the 35 hours per week must come 
from participation in certain of the activities listed in Sec. 271.30 
for the individual to count as engaged in work. The following nine 
activities count for the first 30 hours of participation: Unsubsidized 
employment; subsidized private sector employment; subsidized public 
sector employment; work experience; on-the-job training; job search and 
job readiness assistance; community service programs; vocational 
educational training; and providing child care services to an 
individual who is

[[Page 62187]]

participating in a community service program.
    (2) Above 30 hours per week, the following three activities may 
also count for participation: Job skills training directly related to 
employment; education directly related to employment; and satisfactory 
attendance at secondary school or in a course of study leading to a 
certificate of general equivalence.
    (c)(1) If the family receives federally-funded child care 
assistance and an adult in the family is not disabled or caring for a 
severely disabled child, then the individual and the other parent must 
be participating in work activities for an average of at least 55 hours 
per week for the individual to count as engaged in work for a two-
parent family for the month.
    (2) At least 50 of the 55 hours per week must come from 
participation in the activities listed in paragraph (b)(1) of this 
section.
    (3) Above 50 hours per week, the three activities listed in 
paragraph (b)(2) of this section may also count for participation.
    (d) The chart in Sec. 271.31 lists when each activity counts in the 
two-parent rate.


Sec. 271.33  What are the special requirements concerning educational 
activities in determining monthly participation rates?

    (a) Vocational educational training may only count for a total of 
12 months for any individual.
    (b) A married or single head-of-household under 20 years old counts 
as engaged in work in a month if (s)he:
    (1) Maintains satisfactory attendance at a secondary school or the 
equivalent during the month; or
    (2) Participates in education directly related to employment for an 
average of at least 20 hours per week during the month.
    (c) In counting individuals for each participation rate, not more 
than 30 percent of individuals engaged in work may be included because 
they are participating:
    (1) In vocational educational training; or
    (2) In fiscal year 2000 or thereafter, as a teen parent in 
educational activities described in paragraph (b) of this section.


Sec. 271.34  Are there any limitations in counting job search and job 
readiness assistance toward the participation rates?

    Yes. There are four limitations concerning job search and job 
readiness.
    (a) Except as provided in paragraph (b) of this section, an 
individual's participation in job search or job readiness assistance 
counts for only six weeks in any fiscal year.
    (b) If the State's total unemployment rate for a fiscal year is at 
least 50 percent greater than the United States' total unemployment 
rate for that fiscal year or if the State meets the definition of a 
needy State, specified at Sec. 270.30 of this chapter, then an 
individual's participation in job search or job readiness assistance 
counts for up to 12 weeks in that fiscal year.
    (c) An individual's participation in job search and job readiness 
assistance counts for no more than four consecutive weeks in a fiscal 
year.
    (d) Not more than once for any individual in a fiscal year, a State 
may count three or four days of job search and job readiness assistance 
during a week as a full week of participation.


Sec. 271.35  Are there any special work provisions for single custodial 
parents?

    Yes. A single custodial parent or caretaker relative with a child 
under age six will count as engaged in work if (s)he participates for 
at least an average of 20 hours per week.


Sec. 271.36  Do welfare reform waivers affect what activities count as 
engaged in work?

    A welfare reform waiver could affect what activities count as 
engaged in work, if it meets the requirements at Sec. 271.60.

Subpart D--Caseload Reduction Factor for Minimum Participation 
Rates


Sec. 271.40  Is there a way for a State to reduce the work 
participation rates?

    (a) If the average monthly number of cases receiving assistance, 
including assistance under a separate State program, in a State in the 
preceding fiscal year was lower than the average monthly number of 
cases that received assistance in FY 1995, the minimum participation 
rate the State must meet for the fiscal year will decrease by the 
number of percentage points the caseload fell in comparison to the FY 
1995 caseload. The number of percentage points by which the caseload 
falls is referred to as the caseload reduction factor.
    (b) The calculation in paragraph (a) of this section must disregard 
any caseload reductions due either to requirements of Federal law or to 
changes that a State has made in its eligibility criteria in comparison 
to its criteria in effect in FY 1995.
    (c) To establish the caseload base for fiscal year 1995, we will 
use the number of AFDC cases reported on ACF-3697, Statistical Report 
on Recipients Under Public Assistance. For subsequent years, we will 
use AFDC data from this same report, supplemented by caseload 
information from the TANF Data Report and the TANF MOE Data Report for 
appropriate States beginning with the fourth quarter of fiscal year 
1997. To qualify for a caseload reduction, a State must have reported 
monthly caseload information, including cases in separate State 
programs, for the preceding year for cases receiving assistance as 
defined at Sec. 271.43.


Sec. 271.41  How will we determine the caseload reduction factor?

    (a) We will determine the appropriate caseload reduction that 
applies to each State based on reliable, validated information and 
estimates reported to us by the State. We will determine whether the 
information and estimates provided are acceptable, based on the 
criteria listed in paragraph (d) of this section. We will also conduct 
periodic, on-site reviews and inspect administrative records on 
applications and terminations to validate the accuracy of the State 
estimates.
    (b) In order to receive a reduction in the overall participation 
rate, a State must submit the Caseload Reduction Report to us 
containing the following information:
    (1) A complete listing of and implementation dates for all 
eligibility changes, as defined at Sec. 271.42, made by the State since 
the beginning of FY 1995, all changes in Federal requirements and 
implementation dates for each change since FY 1995, and a listing of 
the reasons (such as found employment) for case closures;
    (2) A numerical estimate of the impact on the caseload of each 
eligibility change or case closure reason;
    (3) A description of the methodology and the supporting data that 
it used to calculate its caseload reduction estimates; and
    (4) A certification from the Governor that it has taken into 
account all reductions resulting from changes in Federal and State 
eligibility.
    (c) A State requesting a caseload reduction shall provide separate 
estimates and information for the overall and two-parent family rates.
    (1) The State must base its estimate for the overall case rate on 
decreases in its overall caseload compared to the AFDC caseload in FY 
1995.
    (2) The State must base its estimate for two-parent cases on 
decreases in its two-parent caseload compared to the AFDC Unemployed 
Parent caseload in FY 1995.
    (d)(1) For each State, we will assess the adequacy of information 
and estimates using the following criteria: Methodology, estimates and 
impact

[[Page 62188]]

compared to other States; quality of data; and completeness and 
adequacy of the documentation.
    (2) If we request additional information, the State must provide 
the information within two weeks of the date of our request.
    (3) The State must provide sufficient data to document the 
information submitted under paragraph (b) of this section.
    (e) We will not consider a caseload reduction factor for approval 
unless the State reports case-record data on individuals and families 
served by any separate State program, as required under Sec. 275.3(d) 
of this chapter.
    (f) A State may only apply the caseload reduction factor that we 
have determined to its participation rate. If a State disagrees with 
our caseload reduction factor, then the determination may be considered 
an adverse action; therefore, a State has the right to appeal such a 
decision, as specified at Sec. 272.7 of this chapter.


Sec. 271.42  Which reductions count in determining the caseload 
reduction factor?

    (a)(1) Each State's estimate must factor out any caseload decreases 
due to Federal requirements or State changes in eligibility rules since 
FY 1995 that directly affect a family's eligibility for assistance 
(e.g., more stringent income and resource limitations, time limits).
    (2) A State need not factor out calculable effects of enforcement 
mechanisms or procedural requirements that are used to enforce existing 
eligibility criteria (e.g., fingerprinting or other verification 
techniques) to the extent that such mechanisms or requirements identify 
or deter families ineligible under existing rules.
    (b) States must include cases receiving assistance in separate 
State programs as part of its caseload. However, we will consider 
excluding cases in the separate State program under the following 
circumstances, if adequately documented:
    (1) The cases overlap with or duplicate cases in the TANF caseload;
    (2) They are cases made ineligible for Federal benefits by Pub. L. 
104-193 that are receiving only State-funded cash assistance, nutrition 
assistance, or other benefits; or
    (3) They are cases that are receiving only State earned income tax 
credits, child care, transportation subsidies or benefits for working 
families that are not directed at their basic needs.


Sec. 271.43  What is the definition of a ``case receiving assistance'' 
in calculating the caseload reduction factor?

    (a) The caseload reduction factor is based on decreases in caseload 
(other than those excluded pursuant to Sec. 271.42) in both a State's 
TANF program and in any separate State programs that are used to meet 
the maintenance-of-effort requirement.
    (b)(1) For fiscal year 1995, we will use AFDC caseload data.
    (2) For all other fiscal years, we will determine the caseload 
based on all cases in a State receiving assistance (according to the 
definition of assistance at Sec. 270.30).


Sec. 271.44  When must a State report the required data on the caseload 
reduction factor?

    (a) A State must report the necessary documentation on the caseload 
reduction factor for the preceding fiscal year by November 15.
    (b) We will notify the State of whether we approve or reject the 
proposed reduction factor by the following February 15.

Subpart E--State Work Penalties


Sec. 271.50  What happens if a State fails to meet the participation 
rates?

    (a) If we determine that a State did not achieve one of the 
required minimum work participation rates, we must reduce the SFAG 
payable to the State.
    (b)(1) If there was no penalty for the preceding fiscal year, the 
penalty for the current fiscal year is five percent of the adjusted 
SFAG.
    (2) For each consecutive year that the State is subject to a 
penalty under this part, we will increase the amount of the penalty by 
two percentage points over the previous year's penalty. However, the 
penalty can never exceed 21 percent of the State's adjusted SFAG.
    (c) We impose a penalty by reducing the SFAG payable for the fiscal 
year that immediately follows our final determination that a State is 
subject to a penalty and our final determination of the penalty amount.
    (d) In accordance with the procedures specified at Sec. 272.4 of 
this chapter, a State may dispute our determination that it is subject 
to a penalty.


Sec. 271.51  Under what circumstances will we reduce the amount of the 
penalty below the maximum?

    (a) In order to qualify for a penalty reduction under paragraphs 
(b)(3) and (c) of this section, the State must demonstrate that it has 
not diverted cases to a separate State program for the purpose of 
avoiding the work participation requirements.
    (b) We will reduce the amount of the penalty based on the degree of 
the State's noncompliance.
    (1) If the State fails only the two-parent participation rate 
specified at Sec. 271.23, its maximum penalty will be a percentage of 
the penalty specified at Sec. 271.50. This percentage will equal the 
percentage of the State's two-parent cases.
    (2) If the State fails the overall participation rate specified at 
Sec. 271.21, or both rates, its maximum penalty will be the penalty 
specified at Sec. 271.50.
    (3)(i) In order to receive a reduction of the penalty amounts 
determined under paragraphs (b)(1) or (b)(2) of this section, the State 
must achieve participation rates equal to a threshold level defined as 
90 percent of the applicable minimum participation rate, at Sec. 271.23 
or Sec. 271.21. If a State met this threshold, we would base its 
reduction on the severity of the failure.
    (ii) For this purpose, we will calculate the severity of the 
State's failure as the ratio of:
    (A) The difference between the participation rate achieved by the 
State and the 90 percent ``threshold'' level; and
    (B) The difference between the minimum applicable participation 
rate and the threshold level.
    (c)(1) We may reduce the penalty if the State failed to achieve a 
participation rate because:
    (i) It meets the definition of a needy State, specified at 
Sec. 270.30 of this chapter, or
    (ii) Noncompliance is due to extraordinary circumstances such as a 
natural disaster or regional recession.
    (2) In determining noncompliance under paragraph (c)(1)(ii) of this 
section, we will consider objective evidence of extraordinary 
circumstances if the State chooses to submit it.


Sec. 271.52  Is there a way to waive the State's penalty for failing to 
achieve either of the participation rates?

    (a) We will not impose a penalty under this part if we determine 
that the State has reasonable cause for its failure.
    (b) In addition to the general reasonable cause criteria specified 
at Sec. 272.5 of this chapter, a State may also submit a request for a 
reasonable cause exemption from the requirement to meet the minimum 
participation rate in two specific case situations, if it demonstrates 
that it has not diverted cases to a separate State program for the 
purpose of avoiding the work participation rates.
    (1) We will determine that a State has reasonable cause if it 
demonstrates that failure to meet the work participation rates is 
attributable to its provision of good cause domestic violence waivers 
as follows:
    (i) To demonstrate reasonable cause, a State must provide evidence 
that it

[[Page 62189]]

achieved the applicable work rates, except with respect to any 
individuals receiving good cause waivers of work requirements (i.e., 
when cases with good cause waivers are removed from the calculations in 
Secs. 271.22(b) and 271.24(b)); and
    (ii) A State must grant good cause domestic violence waivers 
appropriately, in accordance with the criteria specified at Sec. 270.30 
of this chapter. If a State fails to meet the criteria for ``good cause 
domestic violence waivers'' specified at Sec. 270.30 of this chapter, 
the Secretary will not grant reasonable cause under this paragraph (b).
    (2) We will determine that a State has reasonable cause if it 
demonstrates that its failure to meet the work participation rates is 
attributable to its provision of assistance to refugees in federally-
approved alternative projects under section 412(e)(7) of the 
Immigration and Nationality Act (8 U.S.C. 1522(e)(7)).
    (c) In accordance with the procedures specified at Sec. 272.4 of 
this chapter, a State may dispute our determination that it is subject 
to a penalty.


Sec. 271.53  Can a State correct the problem before incurring a 
penalty?

    (a) Yes. A State may enter into a corrective compliance plan to 
remedy a problem that caused its failure to meet a participation rate, 
as specified at Sec. 272.6 of this chapter.
    (b) To qualify for a penalty reduction under Sec. 272.6(i)(1) of 
this chapter, based on significant progress in discontinuing a 
violation, a State must reduce the difference between the participation 
rate it achieved in the year for which it is subject to a penalty and 
the rate applicable during the penalty year by 50 percent.


Sec. 271.54  Is a State subject to any other penalty relating to its 
work program?

    (a) If we determine that, during a fiscal year, a State has 
violated section 407(e) of the Act, relating to imposing penalties 
against individuals, we must reduce the SFAG payable to the State.
    (b) The penalty amount for a fiscal year will equal between one and 
five percent of the adjusted SFAG.
    (c) We impose a penalty by reducing the SFAG payable for the fiscal 
year that immediately follows our final determination that a State is 
subject to a penalty and our final determination of the penalty amount.


Sec. 271.55  Under what circumstances will we reduce the amount of the 
penalty for not properly imposing penalties on individuals?

    (a) We will reduce the amount of the penalty based on the degree of 
the State's noncompliance.
    (b) In determining the size of any reduction, we will consider 
objective evidence of:
    (1) Whether the State has established a control mechanism to ensure 
that the grants of individuals are reduced for refusing to engage in 
required work; and
    (2) The percentage of cases for which the grants have not been 
appropriately reduced.
    (c) Neither the reasonable cause provisions at Sec. 272.5 of this 
chapter nor the corrective compliance plan provisions at Sec. 272.6 of 
this chapter applies to this penalty.

Subpart F--Waivers


Sec. 271.60  How do existing welfare waivers affect the participation 
rate?

    (a) If a State is implementing policies in accordance with an 
approved waiver that meets the provisions of section 415(a)(1)(A) of 
the Act and the definition of a waiver at Sec. 270.30 of this chapter, 
the provisions of section 407 of the Act do not apply, to the extent 
that they are inconsistent with the waiver.
    (b)(1) In the case of waivers addressing activities in which an 
individual may participate in order to be ``engaged in work'' and count 
toward the minimum participation rates (as specified at Sec. 271.30):
    (i) We will include provisions of prior law as part of such 
waivers; and
    (ii) We will recognize such waivers as inconsistent.
    (2) In the case of waivers addressing minimum average hours of work 
per week necessary to be ``engaged in work'' for a month (as specified 
at Secs. 271.31 and 271.32):
    (i) We will recognize the waiver as inconsistent if it specifies an 
individual's mandated hours of participation in accordance with his/her 
particular circumstances, either as specified by criteria described in 
the waiver or under an individualized plan or similar agreement for 
achieving self-sufficiency; and
    (ii) We will not recognize as inconsistent any waiver designed to 
increase the mandatory work hours for a class of recipients under the 
former JOBS program.
    (c) Except as applicable to research cases in paragraph (d) of this 
section, we will not recognize any prior law exemptions as part of the 
waiver with respect to the denominator of the participation rates, 
found at Secs. 271.21 and 271.23.
    (d) If a State is continuing research group policies in order to 
complete an impact evaluation of a waiver demonstration, the 
demonstration's control group may be subject to prior law and its 
experimental treatment group may be also subject to prior law, except 
as modified by the waiver.
    (e) The additional requirements at Sec. 272.8 of this chapter apply 
to the use of continuing waiver alternative work requirements in the 
calculation of the work participation penalty.

Subpart G--Non-displacement


Sec. 271.70  What safeguards are there to ensure that participants in 
work activities do not displace other workers?

    (a) An adult taking part in a work activity outlined in Sec. 271.30 
may not fill a vacant employment position if:
    (1) Another individual is on layoff from the same or any 
substantially equivalent job; or
    (2) The employer has terminated the employment of any regular 
employee or caused an involuntary reduction in its work force in order 
to fill the vacancy with an adult taking part in a work activity.
    (b) A State must establish and maintain a grievance procedure to 
resolve complaints of alleged violations of the displacement rule in 
this section.
    (c) This section does not preempt or supersede State or local laws 
providing greater protection for employees from displacement.

PART 272--ACCOUNTABILITY PROVISIONS--GENERAL

Sec.
272.0  What definitions apply to this part?
272.1  What penalties will apply to States?
272.2  When do the TANF penalty provisions apply?
272.3  How will we determine if a State is subject to a penalty?
272.4  What happens if we determine that a State is subject to a 
penalty?
272.5  Under what general circumstances will we determine that a 
State has reasonable cause?
272.6  What if a State does not demonstrate reasonable cause?
272.7  How can a State appeal our decision to take a penalty?
272.8  What is the relationship of continuing waivers on the penalty 
process for work participation and time limits?

    Authority: 31 U.S.C. 7501 et seq.; 42 U.S.C. 606, 609, and 610.


Sec. 272.0  What definitions apply to this part?

    The general TANF definitions at Sec. 270.30 of this chapter apply 
to this part.


Sec. 272.1  What penalties will apply to States?

    (a) We will assess fiscal penalties against States under 
circumstances defined in parts 271 through 275 of this chapter. The 
penalties are:
    (1) A penalty of the amount by which a State misused its TANF 
funds;

[[Page 62190]]

    (2) A penalty of five percent of the adjusted SFAG for intentional 
misuse of such funds;
    (3) A penalty of four percent of the adjusted SFAG for failure to 
submit an accurate, complete and timely required report;
    (4) A penalty of up to 21 percent of the adjusted SFAG for failure 
to satisfy the minimum participation rates;
    (5) A penalty of no more than two percent of the adjusted SFAG for 
failure to participate in IEVS;
    (6) A penalty of no more than five percent of the adjusted SFAG for 
failure to enforce penalties on recipients who are not cooperating with 
the State Child Support Enforcement (IV-D) Agency;
    (7) A penalty equal to the outstanding loan amount, plus interest, 
for failure to repay a Federal loan;
    (8) A penalty equal to the amount by which a State fails to meet 
its TANF MOE requirement;
    (9) A penalty of five percent of the adjusted SFAG for failure to 
comply with the five-year limit on Federal assistance;
    (10) A penalty equal to the amount of contingency funds unremitted 
by a State for a fiscal year;
    (11) A penalty of no more than five percent of the adjusted SFAG 
for the failure to maintain assistance to an adult single custodial 
parent who cannot obtain child care for a child under age six;
    (12) A penalty of no more than two percent of the adjusted SFAG 
plus the amount a State has failed to expend of its own funds to 
replace the reduction to its SFAG due to the assessment of penalties in 
this section in the year of the reduction;
    (13) A penalty equal to the amount of the State's Welfare-to-Work 
formula grant for failure to meet its TANF MOE requirement during a 
year in which the formula grant is received; and
    (14) A penalty equal to not less than one percent and not more than 
five percent of the adjusted SFAG for failure to reduce assistance for 
recipients refusing without good cause to work.
    (b) In the event of multiple penalties for a fiscal year, we will 
add all applicable penalty percentages together. We will then assess 
the penalty amount against the adjusted SFAG that would have been 
payable to the State if no penalties were assessed. As a final step, we 
will subtract other (fixed) penalty amounts from the adjusted SFAG.
    (c)(1) We will take the penalties specified in paragraphs (a)(1), 
(a)(2) and (a)(6) of this section by reducing the SFAG payable for the 
quarter that immediately follows our final decision.
    (2) We will take the penalties specified in paragraphs (a)(3), 
(a)(4), (a)(5), (a)(7), (a)(8), (a)(9), (a)(10), (a)(11), (a)(12), 
(a)(13), and (a)(14) of this section by reducing the SFAG payable for 
the fiscal year that immediately follows our final decision.
    (d) When imposing the penalties in paragraph (a) of this section, 
the total reduction in an affected State's grant must not exceed 25 
percent. If this 25 percent limit prevents the recovery of the full 
penalty amount imposed on a State during a fiscal year, we will apply 
the remaining amount of the penalty to the SFAG payable for the 
immediately succeeding fiscal year.
    (e)(1) In the same fiscal year, a State must expend additional 
State funds to replace any reduction in the SFAG resulting from 
penalties.
    (2) The State must document compliance with this provision on its 
TANF Financial Report (or Territorial Financial Report).


Sec. 272.2  When do the TANF penalty provisions apply?

    (a) A State will be subject to the penalties specified in 
Secs. 272.1(a)(1), (2), (7), (8), (9), (10), (11), (12), (13), and (14) 
for conduct occurring on and after the first day the State operates the 
TANF program.
    (b) A State will be subject to the penalties specified in 
Secs. 272.1(a)(3), (4), (5), and (6) for conduct occurring on and after 
July 1, 1997, or the date that is six months after the first day the 
State operates the TANF program, whichever is later.
    (c) For the period of time prior to [effective date of final 
rules], we will assess State conduct as specified in Sec. 270.40(b) of 
this chapter.


Sec. 272.3  How will we determine if a State is subject to a penalty?

    (a) We will use the single audit, as implemented through OMB 
Circular A-133, to determine if a State is subject to a penalty for 
misusing Federal TANF funds (Sec. 273.10 of this chapter), 
intentionally misusing Federal TANF funds (Sec. 273.12 of this 
chapter), failing to participate in IEVS (Sec. 274.10 of this chapter), 
failing to comply with paternity establishment and child support 
requirements (Sec. 274.31 of this chapter), failing to maintain 
assistance to an adult single custodial parent who cannot obtain child 
care for child under six (Sec. 274.20 of this chapter), and failing to 
reduce assistance to a recipient who refuses without good cause to work 
(Sec. 271.14 of this chapter).
    (b) We will use data reports required under part 275 of this 
chapter to determine if a State failed to meet participation rates 
(Sec. 271.21 of this chapter) or failed to comply with the five-year 
limit on Federal assistance (Sec. 274.1 of this chapter).
    (1) Data in these reports are subject to our verification in 
accordance with Sec. 275.7 of this chapter.
    (2) States may not revise the sampling frames or program 
designations for cases in the quarterly TANF and TANF MOE Data Reports 
retroactively (i.e., after submission).
    (c) We will use the TANF Financial Report (or, as applicable, the 
Territorial Financial Report) to determine if a State should be 
penalized for failure to meet the TANF MOE requirement (Sec. 273.7 of 
this chapter), the Contingency Fund MOE requirement (Sec. 274.76 of 
this chapter), and to replace SFAG reductions with State-only funds 
(Sec. 274.50 of this chapter). Data in these reports are subject to our 
verification in accordance with Sec. 275.6 of this chapter.
    (d) We will determine that a State is subject to the specific 
penalties for failure to perform, if we find information in the reports 
under paragraphs (b) and (c) of this section to be insufficient or if 
we determine that the State has not adequately documented actions 
verifying that it has met the participation rates.
    (e) To determine if a State has met its TANF MOE requirement, we 
will use the additional information listed at Sec. 273.7 of this 
chapter.
    (f) States should maintain records in accordance with Sec. 92.42 of 
this title.


Sec. 272.4  What happens if we determine that a State is subject to a 
penalty?

    (a) If we determine that a State is subject to a penalty, we will 
notify the State in writing, specifying which penalty we will impose 
and the reasons for the penalty.
    (b) Within 60 days of when it receives our notification, the State 
may submit to ACF, a written response that:
    (1) Demonstrates that our determination is incorrect because our 
data or the method we used in determining the penalty was in error or 
was insufficient, or that the State acted, prior to [effective date of 
final regulations], on a reasonable interpretation of the statute;
    (2) Demonstrates that the State had reasonable cause for failing to 
meet the requirement(s); and/or
    (3) Provides a corrective compliance plan, pursuant to Sec. 272.6.
    (c) If we find that we determined the penalty erroneously, or that 
the State has adequately demonstrated that it had reasonable cause for 
failing to meet one or more requirements, we will not impose the 
penalty.

[[Page 62191]]

    (d) Reasonable cause and a corrective compliance plan are not 
available for failing to repay a Federal loan; failing to meet the TANF 
MOE requirement; failing to maintain 100 percent TANF MOE after 
receiving Contingency Funds; failing to expend additional State funds 
to replace adjusted SFAG reductions due to the imposition of one or 
more penalties listed in Sec. 272.1; or failing to maintain 80, or 75, 
percent, as appropriate, TANF MOE during a year in which a Welfare-to-
Work grant is received.
    (e) We will notify the State in writing of our findings regarding 
its response.
    (f) If we request additional information from a State, it must 
provide the information within two weeks of the date of our request.


Sec. 272.5  Under what general circumstances will we determine that a 
State has reasonable cause?

    (a) We will not impose a penalty against a State if we determine 
that the State had reasonable cause for its failure. The general 
factors a State may use to claim reasonable cause are limited to the 
following:
    (1) Natural disasters and other calamities (e.g., hurricanes, 
earthquakes, fire) whose disruptive impact was so significant as to 
cause the State's failure;
    (2) Formally issued Federal guidance that provided incorrect 
information resulting in the State's failure; or
    (3) Isolated, non-recurring problems of minimal impact that are not 
indicative of a systemic problem.
    (b) A State may also use the additional factors for claiming 
reasonable cause for failure to satisfy the five-year limit at 
Sec. 274.3 of this chapter and to meet the minimum participation rates 
at Sec. 271.52 of this chapter.
    (c) We will not forgive a State penalty under Secs. 272.1(a)(4), 
(a)(9), (a)(11), or (a)(14) based on reasonable cause if we detect a 
significant pattern of diversion of families to a separate State 
program that achieves the effect of avoiding the work participation 
rates at Secs. 271.22 or 271.24.
    (d) We will not forgive a State penalty under Secs. 272.1(a)(4), 
(a)(6), (a)(9), or (a)(14) based on reasonable cause if we detect a 
significant pattern of diversion of families to a separate State 
program that achieves the effect of diverting the Federal share of 
child support collections.


Sec. 272.6  What if a State does not demonstrate reasonable cause?

    (a) A State may accept the penalty or enter into a corrective 
compliance plan that will correct or discontinue the violation within 
six months in order to avoid the penalty if:
    (1) A State does not claim reasonable cause; or
    (2) We find that the State does not have reasonable cause.
    (b) A State that does not claim reasonable cause will have 60 days 
from receipt of our notice described in Sec. 272.4(a) to submit its 
corrective compliance plan.
    (c) A State that unsuccessfully claimed reasonable cause will have 
60 days from the date it received our second notice, described in 
Sec. 272.4(f), to submit its corrective compliance plan.
    (d) The corrective compliance plan must include:
    (1) A complete analysis of why the State did not meet the 
requirements;
    (2) A detailed description of how the State will correct or 
discontinue, as appropriate, the violation in a timely manner;
    (3) The milestones, including interim process and outcome goals, 
the State will achieve to assure it comes into compliance within the 
specified time period; and
    (4) A certification by the Governor that the State is committed to 
correcting or discontinuing the violation, in accordance with the plan.
    (e) During the 60-day period following our receipt of the State's 
corrective compliance plan, we may request additional information and 
consult with the State on modifications to the plan.
    (f) If an acceptable corrective compliance plan is not submitted on 
time, we will assess the penalty immediately.
    (g) A corrective compliance plan is deemed to be accepted if we 
take no action during the 60-day period following our receipt of the 
plan.
    (h) We will not impose a penalty against a State with respect to 
any violation covered by a corrective compliance plan that we accept if 
the State completely corrects or discontinues, as appropriate, the 
violation within the period covered by the plan. This period must be no 
longer than six months from the date we accept a State's compliance 
plan.
    (i)(1) Under limited circumstances, and subject to paragraph (i)(2) 
of this section, we may reduce the penalty if the State fails to 
completely correct or discontinue the violation pursuant to its 
corrective compliance plan and in a timely manner. To receive a reduced 
penalty, the State must demonstrate that it met one or both of the 
following conditions:
    (i) Although it did not achieve full compliance, the State made 
substantial progress towards correcting or discontinuing the violation; 
or
    (ii) The State's failure to comply fully was attributable to either 
a natural disaster or regional recession.
    (2) We will not reduce a State's penalty:
    (i) Under Secs. 272.1(a)(4), (a)(9), (a)(11), or (a)(14) if we 
detect a significant pattern of diversion of families to a separate 
State program that achieves the effect of avoiding the work 
participation rates and the State fails to correct the diversion; or
    (ii) Under Secs. 272.1(a)(4), (a)(6), (a)(9), or (a)(11) if we 
detect a significant pattern of diversion of families to a separate 
State program that achieves the effect of diverting the Federal share 
of child support collections and the State fails to correct the 
diversion.


Sec. 272.7  How can a State appeal our decision to take a penalty?

    (a) We will formally notify the chief executive officer of the 
State of an adverse action (i.e., the reduction in the SFAG) within 
five days after we determine that a State is subject to a penalty under 
parts 271 through 275 of this chapter.
    (b) The State may file an appeal of the action, in whole or in 
part, to the HHS Departmental Appeals Board (the Board) within 60 days 
after the date it receives notice of the adverse action. The State must 
include the brief and all supporting documents with its appeal when it 
is filed. The State must send a copy of the appeal to the Office of the 
General Counsel, Children, Families and Aging Division, Room 411-D, 200 
Independence Avenue, S.W., Washington, D.C. 20201.
    (c) ACF must file its reply brief and supporting documentation 
within 30 days after the State files its appeal.
    (d) The appeal to the Board must follow the provisions of the rules 
under this section and those at Secs. 16.2, 16.9, 16.10, and 16.13 
through 16.22 of this title.
    (e) The Board will consider an appeal filed by a State on the basis 
of the documentation and briefs submitted, along with any additional 
information the Board may require to support a final decision. In 
deciding whether to uphold an adverse action or any portion of such 
action, the Board will conduct a thorough review of the issues and make 
a final determination within 60 days after the appeal is filed.
    (f)(1) The filing date shall be the date materials are received by 
the Board in a form acceptable to it.
    (2) If the Board requires additional documentation to reach its 
decision, the 60 days shall be tolled for a reasonable period, 
specified by the Board, to allow production of the documentation.

[[Page 62192]]

    (g)(1) A State may obtain judicial review of a final decision by 
the Board by filing an action within 90 days after the date of such 
decision. It should file this action with the district court of the 
United States in the judicial district where the State agency is 
located or in the United States District Court for the District of 
Columbia.
    (2) The district court will review the final decision of the Board 
on the record established in the administrative proceeding, in 
accordance with the standards of review prescribed by 5 U.S.C. 706(2). 
The court will base its review on the documents and supporting data 
submitted to the Board.


Sec. 272.8  What is the relationship of continuing waivers on the 
penalty process for work participation and time limits?

    (a) In order for the State's alternative waiver requirements to be 
considered in the calculation of the work participation rate and the 
time limit requirement, the Governor must certify in writing to the 
Secretary:
    (1) The specific inconsistencies (i.e., alternative waiver 
requirements) that the State chooses to continue;
    (2) The reasons for continuing the alternative waiver requirements, 
including how their continuation is consistent with the purposes of the 
waiver; and
    (3) Consistent with the waiver and its purpose, the standards that 
the State will use to:
    (i) Assign individuals to the alternative waiver work activities or 
to an alternative number of hours; and
    (ii) Determine exemptions from or extensions to the time limit.
    (b) If a State using the alternative waiver requirements fails to 
meet the work participation rate or the time limit requirement:
    (1) The State is not eligible for a reasonable cause exception from 
the applicable penalty under Secs. 272.2 (a)(4) or (a)(9), nor for any 
reduction of the work penalty under Secs. 271.51 (b)(3) or (c) of this 
chapter;
    (2) The State must consider modification of its alternative waiver 
requirements as part of its corrective compliance plan; and
    (3) If the State continues waivers related to the failure to 
achieve compliance with the work requirements described in subparts B 
and C of part 271 of this chapter or the time limits described in 
Secs. 274.1 and 274.2 of this chapter and still fails to correct the 
violation, it will not be eligible for a reduced penalty for related 
noncompliance under Sec. 272.6(i)(1).
    (c) The Secretary will use the data submitted by the States 
pursuant to Sec. 275.3 of this chapter to calculate and make public the 
work participation rates and the percentage of families with an adult 
that received Federal TANF benefits for more than 60 months under both 
the TANF requirement and the State's alternative waiver requirement.

PART 273--STATE TANF EXPENDITURES

Subpart A--What Rules Apply to a State's Maintenance of Effort?

Sec.
273.0  What definitions apply to this part?
273.1  How much State money must a State expend annually to meet the 
TANF MOE requirement?
273.2  What kinds of State expenditures count toward meeting a 
State's annual MOE expenditure requirement?
273.3  When do child care expenditures count?
273.4  When do educational expenditures count?
273.5  When do expenditures in separate State programs count?
273.6  What kinds of expenditures do not count?
273.7  How will we determine the level of State expenditures?
273.8  What happens if a State fails to meet the TANF MOE 
requirement?
273.9  May a State avoid a TANF MOE penalty because of reasonable 
cause or through corrective compliance?

Subpart B--What Rules Apply to the Use of Federal Funds?

273.10  What actions are to be taken against a State if it uses 
Federal TANF funds in violation of the Act?
273.11  What uses of Federal TANF funds are improper?
273.12  How will we determine if a State intentionally misused 
Federal TANF funds?
273.13  What types of activities are subject to the administrative 
cost limit on Federal TANF grants?

Subpart C--What Rules Apply to Individual Development Accounts?

273.20  What definitions apply to Individual Development Accounts 
(IDAs)?
273.21  May a State use the TANF grant to fund IDAs?
273.22  Are there any restrictions on IDA funds?
273.23  How does a State prevent a recipient from using the IDA 
account for unqualified purposes?

    Authority: 42 U.S.C. 604, 607, 609, and 862a.

Subpart A--What Rules Apply to a State's Maintenance of Effort?


Sec. 273.0  What definitions apply to this part?

    (a) Except as noted in Sec. 273.2(d), the general TANF definitions 
at Sec. 270.30 of this chapter apply to this part.
    (b) Administrative costs means costs necessary for the proper 
administration of the TANF program or separate State programs. It 
includes the costs for general administration and coordination of these 
programs, including indirect (or overhead) costs. Examples of 
administrative costs include:
    (1) Salaries and benefits and all other indirect (or overhead) 
costs not associated with providing program services (such as 
diversion, assessment, development of employability plans, work 
activities and post-employment services, and supports) to individuals;
    (2) Preparation of program plans, budgets, and schedules;
    (3) Monitoring of programs and projects;
    (4) Fraud and abuse units;
    (5) Procurement activities;
    (6) Public relations;
    (7) Services related to accounting, litigation, audits, management 
of property, payroll, and personnel;
    (8) Costs for goods and services required for administration of the 
program such as rental and purchase of equipment, utilities, office 
supplies, postage, and rental and maintenance of office space;
    (9) Travel costs incurred for official business;
    (10) Management information systems not related to the tracking and 
monitoring of TANF requirements (e.g., for a personnel and payroll 
system for State staff); and
    (11) Preparing reports and other documents related to program 
requirements.


Sec. 273.1  How much State money must a State expend annually to meet 
the TANF MOE requirement?

    (a)(1) The minimum TANF MOE for a fiscal year is 80 percent of a 
State's historic State expenditures.
    (2) However, if a State meets the minimum work participation rate 
requirements in a fiscal year, as required under Secs. 271.21 and 
271.23 of this chapter, then for that fiscal year, the minimum TANF MOE 
is 75 percent of the State's historic State expenditures.
    (b) The TANF MOE level also depends on whether a Tribe or 
consortium of Tribes residing in a State has received approval to 
operate its own TANF program. The State's TANF MOE level for a fiscal 
year will be reduced the same percentage as the SFAG was reduced as the 
result of any Tribal Family Assistance Grants awarded to Tribal 
grantees in the State for that year.


Sec. 273.2  What kinds of State expenditures count toward meeting a 
State's annual MOE expenditure requirement?

    (a) Expenditures of State funds in TANF or separate State programs 
may

[[Page 62193]]

count if they were made for the following types of services:
    (1) Cash assistance, including assigned child support collected by 
the State, distributed to the family, and disregarded in determining 
eligibility for, and amount of the TANF assistance payment;
    (2) Child care assistance (see Sec. 273.3);
    (3) Education activities designed to increase self-sufficiency, job 
training, and work (see Sec. 273.4);
    (4) Any other use of funds allowable under section 404(a)(1) of the 
Act and consistent with the goals at Sec. 270.20 of this chapter; and
    (5) Administrative costs for activities listed in paragraphs (a)(1) 
through (a)(4) of this section, if these costs do not exceed 15 percent 
of the total amount of countable expenditures. Information technology 
and computerization needed for tracking or monitoring services are 
excluded from this determination. ``Administrative costs'' has the 
meaning specified at Sec. 273.0(b).
    (b) The services listed under paragraph (a) of this section may be 
counted only if they have been provided to or on behalf of eligible 
families. An ``eligible family,'' as defined by the State, must:
    (1) Be comprised of citizens, qualified aliens (as defined in 
Sec. 270.30 of this chapter), non-immigrants under the Immigration and 
Nationality Act, aliens paroled into the U.S. for less than one year, 
or, in the case of aliens not lawfully present in the U.S., provided 
that the State enacted a law after August 22, 1996, that 
``affirmatively provides'' for such services; and
    (2) Include a child living with a custodial parent or other adult 
caretaker relative (or consist of a pregnant individual); and
    (3) Be financially eligible according to the TANF income and 
resource standards established by the State under its TANF plan.
    (c) Services listed under paragraph (a) of this section may also be 
provided to a family that meets the criteria under paragraphs (b) (1) 
and (2) of this section, but which became ineligible solely due to the 
time limitation given under Sec. 274.1 of this chapter.
    (d) Assistance does not have the meaning given in Sec. 270.30 of 
this chapter, but for MOE purposes can be ongoing, short-term or one-
time only and may include services.
    (e) The expenditures for services in separate State programs listed 
under paragraph (a) of this section only count if they also meet the 
requirements of Sec. 273.5. Expenditures that fall within the 
prohibitions in Sec. 273.6 do not count.


Sec. 273.3  When do child care expenditures count?

    (a) State funds expended to meet the requirements of the Matching 
Fund of the Child Care and Development Fund (i.e., match and MOE 
amounts) that also count as TANF MOE expenditures are limited to the 
State's child care MOE amount pursuant to section 418(a)(2)(C) of the 
Act.
    (b) The child care expenditures must be made to or on behalf of 
eligible families, as defined in Sec. 273.2(b).


Sec. 273.4  When do educational expenditures count?

    (a) Expenditures for educational activities or services count if:
    (1) They are targeted to eligible families (as defined in 
Sec. 273.2(b)) to increase self-sufficiency, job training, and work; 
and
    (2) They are not generally available to other residents of the 
State.
    (b) Expenditures on behalf of eligible families for educational 
services or activities provided through the public education system do 
not count unless they meet the requirements under paragraph (a) of this 
section.


Sec. 273.5  When do expenditures in separate State programs count?

    (a) If the expenditures in the separate State program(s) were 
previously authorized and were allowable under section 403 of prior 
law, then they may count in their entirety.
    (b) If the expenditures under the separate State program(s) had not 
been previously authorized and allowable under section 403 of prior 
law, then only the amount expended in excess of money expended on such 
program(s) in FY 1995 may count.


Sec. 273.6  What kinds of expenditures do not count?

    The following kinds of expenditures do not count:
    (a) Expenditures of funds that originated with the Federal 
government;
    (b) State funds that are used to match
    Federal funds (or expenditures of State funds that support claims 
for Federal matching funds), including State expenditures under the 
Medicaid program under title XIX of the Act;
    (c) Expenditures that States make as a condition of receiving 
Federal funds under other programs except as provided under Sec. 273.3;
    (d) Expenditures made in a prior fiscal year;
    (e) Expenditures used to match Federal Welfare-to-Work funds 
provided under section 403(a)(5) of the Act; and
    (f) Expenditures made in the TANF program to replace the reductions 
in the SFAG as a result of penalties pursuant to Sec. 274.50 of this 
chapter.


Sec. 273.7  How will we determine the level of State expenditures?

    (a) Each State must report its expenditures quarterly to us as 
required under part 275 of this chapter.
    (b) Each State must also submit an annual addendum to its TANF 
Financial Report (or, as applicable, its Territorial Financial Report) 
on separate State programs for the fourth quarter containing:
    (1) A description of the specific State-funded program activities 
provided to eligible families;
    (2) Each program's statement of purpose (how the program serves 
eligible families);
    (3) The definitions of each work activity in which families in the 
program are participating;
    (4) A statement whether the program/activity had been previously 
authorized and allowable as of August 21, 1996, under section 403 of 
prior law;
    (5) The FY 1995 State expenditures for each program/activity not 
authorized and allowable as of August 21, 1996 (see Sec. 273.5(b));
    (6) The total number of eligible families served by each program as 
of the end of the fiscal year;
    (7) The eligibility criteria for the families served under each 
program/activity; and
    (8) A certification that those families served met the State's 
criteria for ``eligible families.''


Sec. 273.8  What happens if a State fails to meet the TANF MOE 
requirement?

    (a) If any State fails to meet its TANF MOE requirement for any 
fiscal year, then we will reduce dollar-for-dollar the amount of the 
SFAG payable to the State for the following fiscal year.
    (b) If a State fails to meet its TANF MOE requirement for any 
fiscal year, and the State received a Welfare-to-Work formula grant 
provided under section 403(a)(5)(A) of the Act for the same fiscal 
year, we will reduce the amount of the SFAG payable to the State for 
the following fiscal year by the amount of the Welfare-to-Work formula 
grant paid to the State.


Sec. 273.9  May a State avoid a TANF MOE penalty because of reasonable 
cause or through corrective compliance?

    The reasonable cause and corrective compliance provisions at 
Secs. 272.4, 272.5, and 272.6 of this chapter do not apply.

[[Page 62194]]

Subpart B--What Rules Apply to the Use of Federal Funds?


Sec. 273.10  What actions are to be taken against a State if it uses 
Federal TANF funds in violation of the Act?

    (a) If a State misuses such funds, we will reduce the SFAG payable 
for the immediately succeeding fiscal year quarter by the amount 
misused.
    (b) If we determine that the misuse was intentional, we will reduce 
the SFAG payable for the immediately succeeding fiscal year quarter in 
an amount equal to five percent of the adjusted SFAG.
    (c) The reasonable cause and corrective compliance provisions of 
Secs. 272.4 through 272.6 of this chapter apply to penalties under 
paragraphs (a) and (b) of this section.


Sec. 273.11  What uses of Federal TANF funds are improper?

    (a) States may use Federal TANF funds for expenditures that:
    (1) Are reasonably related to the purposes of TANF, as specified at 
Sec. 270.20 of this chapter; or
    (2) The State was authorized to use IV-A or IV-F funds under prior 
law, as in effect on September 30, 1995, or (at the option of the 
State) August 21, 1996.
    (b) We will consider use of funds in violation of paragraph (a) of 
this section, the provisions of the Act, section 115 of PRWORA, the 
provisions of part 92 of this title, or OMB Circular A-87 to be misuse 
of funds.


Sec. 273.12  How will we determine if a State intentionally misused 
Federal TANF funds?

    (a) The State must show, to our satisfaction, that it used the 
funds for purposes that a reasonable person would consider to be within 
the purposes of the TANF program (as specified at Sec. 270.20 of this 
chapter) and the provisions listed in Sec. 273.11.
    (b) We will consider funds to be misused intentionally if there is 
supporting documentation, such as Federal guidance or policy 
instructions, indicating that Federal TANF funds could not be used for 
that purpose.
    (c) We will also consider funds to be misused intentionally if, 
after notification that we have determined such use to be improper, the 
State continues to use the funds in the same or similarly improper 
manner.


Sec. 273.13  What types of activities are subject to the administrative 
cost limit on Federal TANF grants?

    (a) Activities that fall within the definition of ``administrative 
costs'' at Sec. 273.0(b) are subject to this limit.
    (b) Information technology and computerization for tracking and 
monitoring are not administrative costs for this purpose.

Subpart C--What Rules Apply to Individual Development Accounts?


Sec. 273.20  What definitions apply to Individual Development Accounts 
(IDAs)?

    The following definitions apply with respect to IDAs:
    Date of acquisition means the date on which a binding contract to 
obtain, construct, or reconstruct the new principal residence is 
entered into.
    Eligible educational institution means an institution described in 
section 481(a)(1) or section 1201(a) of the Higher Education Act of 
1965 (20 U.S.C. 1088(a)(1) or 1141(a)), as such sections were in effect 
on August 21, 996. Also, an area vocational education school (as 
defined in subparagraph (C) or (D) of section 521(4) of the Carl D. 
Perkins Vocational and Applied Technology Education Act (20 U.S.C. 
2471(4)) that is in any State (as defined in section 521(33) of such 
Act), as such sections were in effect on August 22, 1996.
    Individual Development Account (IDA) means an account established 
by or for an individual who is eligible for TANF assistance to allow 
the individual to accumulate funds for specific purposes.
    Post-secondary educational expenses means a student's tuition and 
fees required for the enrollment or attendance at an eligible 
educational institution, and required course fees, books, supplies, and 
equipment required at an eligible educational institution.
    Qualified acquisition costs means the cost of obtaining, 
constructing, or reconstructing a residence. The term includes any 
usual or reasonable settlement, financing, or other closing costs.
    Qualified business means any business that does not contravene 
State law or public policy.
    Qualified business capitalization expenses means business expenses 
pursuant to a qualified plan.
    Qualified entity means a non-profit, tax-exempt organization, or a 
State or local government agency that works cooperatively with a non-
profit, tax-exempt organization.
    Qualified expenditures means expenses entailed in a qualified plan, 
including capital, plant equipment, working capital, and inventory 
expenses.
    Qualified first-time home buyer means a taxpayer (and, if married, 
the taxpayer's spouse) who has not owned a principal residence during 
the three-year period ending on the date of acquisition of the new 
principal residence.
    Qualified plan means a business plan that is approved by a 
financial institution, or by a nonprofit loan fund having demonstrated 
fiduciary integrity. It includes a description of services or goods to 
be sold, a marketing plan, and projected financial statements, and it 
may require the eligible recipient to obtain the assistance of an 
experienced entrepreneurial advisor.
    Qualified principal residence means the place a qualified first-
time home buyer will reside in in accordance with the meaning of 
section 1034 of the Internal Revenue Code of 1986 (26 U.S.C. 1034). The 
qualified acquisition cost of the residence cannot exceed the average 
purchase price of similar residences in the area.


Sec. 273.21  May a State use the TANF grant to fund IDAs?

    States may use TANF grants to fund IDAs for individuals who are 
eligible for TANF assistance.


Sec. 273.22  Are there any restrictions on IDA funds?

    (a) A recipient may deposit only earned income into an IDA.
    (b) A recipient's contributions to an IDA may be matched only by a 
qualified entity.
    (c) A recipient may withdraw funds only for the following reasons:
    (1) To cover post-secondary education expenses, if the amount is 
paid directly to an eligible educational institution;
    (2) For the recipient to purchase a first home, if the amount is 
paid directly to the person to whom the amounts are due and it is a 
qualified acquisition cost for a qualified principal residence by a 
qualified first-time home buyer; or
    (3) For business capitalization, if the amounts are paid directly 
to a business capitalization account in a federally-insured financial 
institution and used for a qualified business capitalization expense.


Sec. 273.23  How does a State prevent a recipient from using the IDA 
account for unqualified purposes?

    To prevent recipients from using the IDA account improperly, States 
may do the following:
    (a) Count withdrawals as earned income in the month of withdrawal 
(unless already counted as income);
    (b) Count withdrawals as resources in determining eligibility; or
    (c) Take such other steps as the State has established in its State 
plan or written State policies to deter inappropriate use.

[[Page 62195]]

PART 274--OTHER ACCOUNTABILITY PROVISIONS

Subpart A--What Specific Rules Apply for Other Program Penalties?

Sec.
274.0  What definitions apply to this part?
274.1  What restrictions apply to the length of time Federal TANF 
assistance may be provided?
274.2  What happens if a State does not comply with the five-year 
limit?
274.3  How can a State avoid a penalty for failure to comply with 
the five-year limit?
274.10  Must States do computer matching of data records under IEVS 
to verify recipient information?
274.11  How much is the penalty for not participating in IEVS?
274.20  What happens if a State sanctions a single parent of a child 
under six who cannot get needed child care?
274.30  What procedures exist to ensure cooperation with the child 
support enforcement requirements?
274.31  What happens if a State does not comply with the IV-D 
sanction requirement?
274.40  What happens if a State does not repay a Federal loan?
274.50  What happens if, in a fiscal year, a State does not expend, 
with its own funds, an amount equal to the reduction to the adjusted 
SFAG resulting from a penalty?
Subpart B--What are the Funding Requirements for the Contingency Fund?
274.70  What funding restrictions apply to the use of contingency 
funds?
274.71  How will we determine 100 percent of historic State 
expenditures, the MOE level, for the annual reconciliation?
274.72  For the annual reconciliation requirement, what restrictions 
apply in determining qualifying State expenditures?
274.73  What other requirements apply to qualifying State 
expenditures?
274.74  When must a State remit contingency funds under the annual 
reconciliation?
274.75  What action will we take if a State fails to remit funds as 
required?
274.76  How will we determine if a State has met its Contingency 
Fund reconciliation MOE level requirement and made expenditures that 
exceed its MOE requirement?
274.77  Are contingency funds subject to the same restrictions that 
apply to other Federal TANF funds?
Subpart C--What Rules Pertain Specifically to the Spending Levels of 
the Territories?
274.80  If a Territory receives Matching Grant funds, what funds 
must it expend?
274.81  What expenditures qualify for Territories to meet the 
Matching Grant MOE requirement?
274.82  What expenditures qualify for meeting the Matching Grant FAG 
amount requirement?
274.83  How will we know if a Territory failed to meet the Matching 
Grant funding requirements at Sec. 274.80?
274.84  What will we do if a Territory fails to meet the Matching 
Grant funding requirements at Sec. 274.80?
274.85  What rights of appeal are available to the Territories?

    Authority: 31 U.S.C. 7501 et seq.; 42 U.S.C. 609, 654, 1302, 
1308, and 1337.

Subpart A--What Specific Rules Apply for Other Program Penalties?


Sec. 274.0  What definitions apply to this part?

    The general TANF definitions at Sec. 270.30 of this chapter apply 
to this part.


Sec. 274.1  What restrictions apply to the length of time Federal TANF 
assistance may be provided?

    (a)(1) Subject to the exceptions in this section, no State may use 
any of its Federal TANF funds to provide assistance (as defined in 
Sec. 270.30 of this chapter) to a family that includes an adult who has 
received assistance for a total of five years (60 cumulative months, 
whether or not consecutive).
    (2) Assistance provided under section 403(a)(5) of the Act (WTW) is 
not subject to the time limit in paragraph (a)(1) of this section.
    (3) States may define ``a family that includes an adult,'' but may 
not exclude families from their definition solely for the purpose of 
avoiding penalties under Sec. 274.2.
    (i) States shall report to us annually on the number of families 
excluded because of the State's definition and the circumstances 
underlying each exclusion.
    (ii) Where we find that a State has excluded families for the 
purpose of avoiding a penalty for the five-year time limit, we shall 
include those families in the calculation under paragraph (c) of this 
section in determining whether a State has complied with time-limit 
extension rules and is subject to the penalty described in Sec. 274.2.
    (b) States must not count towards the five-year limit:
    (1) Any month of receipt of assistance by an individual when she 
was a minor who was not the head-of-household or married to the head-
of-household;
    (2) Any month in which an adult lived in Indian country (as defined 
in section 1151 of title 18, United States Code) or Native Alaskan 
Village and at least 50 percent of the adults were not employed; and
    (3) Non-cash assistance provided under section 403(a)(5) of the Act 
(WTW).
    (c) States have the option to extend assistance from Federal TANF 
funds beyond the five-year limit for up to 20 percent of their cases. 
This provision requires computation of an average monthly percentage 
for each fiscal year, with the numerator for each month equal to the 
number of families that includes an adult receiving assistance beyond 
the five-year limit and the denominator equal to the average monthly 
number of families that includes an adult receiving assistance during 
the fiscal year or the immediately preceding fiscal year, whichever the 
State elects. States are permitted to extend assistance to a family 
only on the basis of:
    (1) Hardship, as defined by the State; or
    (2) The fact that the family includes someone who has been 
battered, or subject to extreme cruelty based on the fact that the 
individual has been subjected to:
    (i) Physical acts that resulted in, or threatened to result in, 
physical injury to the individual;
    (ii) Sexual abuse;
    (iii) Sexual activity involving a dependent child;
    (iv) Being forced as the caretaker relative of a dependent child to 
engage in non-consensual sexual acts or activities;
    (v) Threats of, or attempts at, physical or sexual abuse;
    (vi) Mental abuse; or
    (vii) Neglect or deprivation of medical care.
    (d) If a State opts to extend assistance to part of its caseload as 
permitted under paragraph (c) of this section, it only determines 
whether or not the extension applies to a specific family once an adult 
in the family has received 60 cumulative months of assistance.
    (e) If the five-year limit is inconsistent with a State's waiver 
granted under section 1115 of the Act, which was submitted before 
August 22, 1996, and was approved by July 1, 1997, the State need not 
comply with the inconsistent provisions of the five-year limit until 
the waiver expires.
    (1) The five-year limit would be inconsistent with the State's 
waiver:
    (i) If the State has an approved waiver that provides for 
terminating cash assistance to individuals or families because of the 
receipt of assistance for a period of time, specified by the approved 
waiver; and
    (ii) The State would have to change its waiver policy in order to 
comply with the five-year limit.
    (2)(i) Generally, under an approved waiver, a State will count, 
toward the five-year limit, all months for which the adult subject to a 
State waiver time limit receives assistance with Federal TANF

[[Page 62196]]

funds, just as it would if it did not have an approved waiver.
    (ii) The State need not count, toward the five-year limit, any 
months for which an adult receives assistance with Federal TANF funds 
while the adult is exempt from the State's time limit under the terms 
of the State's approved waiver.
    (3) The State may continue to provide assistance with Federal TANF 
funds for more than 60 cumulative months, without a numerical limit, to 
families provided extensions to the time limit, under the provisions of 
the terms and conditions of its approved waiver, as long as the State's 
waiver authority has not expired.
    (4) The five-year limit would also be inconsistent with a State's 
waiver to the extent that the State needs to maintain prior law 
policies for control group or experimental treatment cases in order to 
continue an experimental research design for the purpose of completing 
an impact evaluation of the waiver policies.
    (5) The additional requirements at Sec. 272.8 of this chapter apply 
to the use of continuing waivers with alternative time-limit 
requirements in the calculation of the time limit penalty.


Sec. 274.2  What happens if a State does not comply with the five-year 
limit?

    If we determine that a State has not complied with the requirements 
of Sec. 274.1, we will reduce the SFAG payable to the State for the 
immediately succeeding fiscal year by five percent of the adjusted SFAG 
unless the State demonstrates to our satisfaction that it had 
reasonable cause or we approve a corrective compliance plan.


Sec. 274.3  How can a State avoid a penalty for failure to comply with 
the five-year limit?

    (a) We will not impose the penalty if the State demonstrates to our 
satisfaction that it had reasonable cause for failing to meet the five-
year limit or it completes a corrective compliance plan pursuant to 
Secs.  272.5 and 272.6 of this chapter.
    (b)(1) In addition, we will determine a State has reasonable cause 
if it demonstrates that it exceeded the 20 percent limitation on 
exceptions to the time limit because of good cause waivers provided to 
victims of domestic violence.
    (2)(i) To demonstrate reasonable cause under paragraph (b)(1) of 
this section, a State must provide evidence that, when individuals with 
active good cause waivers and their families are excluded from the 
calculation, the percentage of families receiving federally-funded 
assistance for more than 60 months did not exceed 20 percent of the 
total.
    (ii) To qualify for exclusion, such families must have good cause 
domestic violence waivers that:
    (A) Reflect the State's assessment that an individual in the family 
was, at the time the waiver was granted, temporarily unable to work 
because of domestic violence;
    (B) Were in effect after the family had received a hardship 
exemption from the limit on receiving federally-funded assistance for 
60 or more months; and
    (C) Were granted appropriately, in accordance with the criteria 
specified at Sec. 270.30 of this chapter.
    (iii) If a State fails to meet the criteria specified for ``good 
cause domestic violence waivers'' at Sec. 270.30 of this chapter or any 
of the other conditions in paragraph (b)(2)(ii) of this section, the 
Secretary will not grant reasonable cause under paragraph (b)(1) of 
this section.


Sec. 274.10  Must States do computer matching of data records under 
IEVS to verify recipient information?

    (a) States must meet the requirements of IEVS pursuant to section 
1137 of the Act and request the following information from the Internal 
Revenue Service (IRS), the State Wage Information Collections Agencies 
(SWICA), the Social Security Administration (SSA), and the Immigration 
and Naturalization Service (INS):
    (1) IRS unearned income;
    (2) SWICA employer quarterly reports of income and unemployment 
insurance benefit payments;
    (3) IRS earned income maintained by SSA; and
    (4) Immigration status information maintained by the INS. (States 
may request a waiver of this match under the authority of 42 U.S.C. 
1320-1327, note.)
    (b) The requirements at Secs. 205.51 through 205.62 of this chapter 
also apply to the TANF IEVS requirement.


Sec. 274.11  How much is the penalty for not participating in IEVS?

    If we determine that the State has not complied with the 
requirements of Sec. 274.10, we will reduce the SFAG payable for the 
immediately succeeding fiscal year by two percent of the adjusted SFAG 
unless the State demonstrates to our satisfaction that it had 
reasonable cause or we approve a corrective compliance plan pursuant to 
Secs. 272.5 and 272.6 of this chapter.


Sec. 274.20  What happens if a State sanctions a single parent of a 
child under six who cannot get needed child care?

    (a) If we determine that a State has not complied with the 
requirements of Sec. 271.15 of this chapter, we will reduce the SFAG 
payable to the State by no more than five percent for the immediately 
succeeding fiscal year unless the State demonstrates to our 
satisfaction that it had reasonable cause or we approve a corrective 
action plan pursuant to Secs. 272.5 and 272.6 of this chapter.
    (b) We will impose the maximum penalty if:
    (1) The State does not have a statewide process in place that 
enables families to demonstrate that they have been unable to obtain 
child care; or
    (2) There is a pattern of substantiated complaints from parents or 
organizations verifying that a State has reduced or terminated 
assistance in violation of this requirement.
    (c) We will impose a reduced penalty if the State demonstrates that 
the violations were isolated or that they affected a minimal number of 
families.


Sec. 274.30  What procedures exist to ensure cooperation with the child 
support enforcement requirements?

    (a) The State (the IV-A agency) must refer all appropriate 
individuals in the family of a child, for whom paternity has not been 
established or for whom a child support order needs to be established, 
modified or enforced, to the child support enforcement agency (the IV-D 
agency). Those individuals must cooperate in establishing paternity and 
in establishing, modifying, or enforcing a support order with respect 
to the child.
    (b) If the IV-D agency determines that an individual is not 
cooperating, and the individual does not qualify for a good cause or 
other exception established by the State in accordance with section 
454(29) of the Act, then the IV-D agency must notify the IV-A agency 
promptly.
    (c) The IV-A agency must then take appropriate action by:
    (1) Deducting from the assistance that would otherwise be provided 
to the family of the individual an amount equal to not less than 25 
percent of the amount of such assistance; or
    (2) Denying the family any assistance under the program.


Sec. 274.31  What happens if a State does not comply with the IV-D 
sanction requirement?

    (a)(1) If we find, for a fiscal year, that the State IV-A agency 
did not enforce the penalties against recipients required under 
Sec. 274.30(c), we will reduce the SFAG payable for the next fiscal 
year by one percent of the adjusted SFAG.
    (2) Upon a finding for a second fiscal year, we will reduce the 
SFAG by two percent of the adjusted SFAG for the following year.

[[Page 62197]]

    (3) A third or subsequent finding will result in the maximum 
penalty of five percent.
    (b) We will not impose a penalty if the State demonstrates to our 
satisfaction that it had reasonable cause or we approve a corrective 
compliance plan pursuant to Secs. 272.5 and 272.6 of this chapter.


Sec. 274.40  What happens if a State does not repay a Federal loan?

    (a) If a State fails to repay the amount of principal and interest 
due at any point under a loan agreement:
    (1) The entire outstanding loan balance, plus all accumulated 
interest, becomes due and payable immediately; and
    (2) We will reduce the SFAG payable for the immediately succeeding 
fiscal year quarter by the outstanding loan amount plus interest.
    (b) Neither the reasonable cause provisions at Sec. 272.5 of this 
chapter nor the corrective compliance plan provisions at Sec. 272.6 of 
this chapter apply when a State fails to repay a Federal loan.


Sec. 274.50  What happens if, in a fiscal year, a State does not 
expend, with its own funds, an amount equal to the reduction to the 
adjusted SFAG resulting from a penalty?

    (a) We will assess a penalty of no more than two percent of the 
adjusted SFAG plus the amount equal to the difference between the 
amount the State was required to expend and the amount it actually 
expended in the fiscal year.
    (1) We will take the full two percent of the adjusted SFAG plus the 
amount the State was required to expend if the State made no additional 
expenditures to compensate for reductions to its adjusted SFAG 
resulting from penalties.
    (2) We will reduce the percentage portion of the penalty if the 
State has expended some of the amount required. In such case, we will 
calculate the applicable percent by multiplying the percentage of the 
required expenditures actually made in the fiscal year by two percent.
    (b) The reasonable cause and corrective compliance plan provisions 
at Secs. 272.4, 272.5, and 272.6 of this chapter do not apply to this 
penalty.
    (c) State expenditures that are used to replace reductions to the 
SFAG as the result of TANF penalties must be used for expenditures made 
under the State TANF program, not under ``separate State programs.''

Subpart B--What are the Funding Requirements for the Contingency 
Fund?


Sec. 274.70  What funding restrictions apply to the use of contingency 
funds?

    (a) Contingency funds are available to a State only if expenditures 
by the State, excluding all Federal funds but the contingency funds, 
exceed the State's historic State expenditures.
    (b) The maximum amount payable to a State in a fiscal year may not 
exceed an amount equal to \1/12\ times 20 percent of that State's SFAG 
for that fiscal year, multiplied by the number of eligible months for 
which the State has requested contingency funds.


Sec. 274.71  How will we determine 100 percent of historic State 
expenditures, the MOE level, for the annual reconciliation?

    (a)(1) The State historic State expenditures, the MOE level, 
include the State share of expenditures for AFDC benefit payments, 
administration, FAMIS, EA, and the JOBS programs for FY 1994.
    (2) We will use the same data sources and date, i.e., April 28, 
1995, that we used to determine the TANF MOE levels for FY 1994. We 
will exclude the State share of expenditures from the former IV-A child 
care programs (AFDC/JOBS, Transitional and At-Risk child care) in the 
calculation.
    (b) We will reduce a State's MOE level for the Contingency Fund by 
the same percentage that we reduce the TANF MOE level for any fiscal 
year in which the State's SFAG annual allocation is reduced to provide 
funding to Tribal grantees operating a Tribal TANF program.


Sec. 274.72  For the annual reconciliation requirement, what 
restrictions apply in determining qualifying State expenditures?

    Qualifying State expenditures are expenditures of State funds made 
in the State TANF program, excluding child care expenditures.


Sec. 274.73  What other requirements apply to qualifying State 
expenditures?

    The regulations at Secs. 273.2 (except for Sec. 273.2(a)(2)), 
273.4, and 273.6 of this chapter apply.


Sec. 274.74  When must a State remit contingency funds under the annual 
reconciliation?

    (a) A State may retain its contingency funds only if it matches 
them with the expenditure of State funds above a specified MOE level. 
If the amount of contingency funds paid to a State for a fiscal year 
exceeds the amount equal to qualifying State expenditures (as defined 
at Sec. 274.72), plus contingency funds, minus the MOE level, 
multiplied by the Federal Medical Assistance Percentage (FMAP), then 
multiplied by \1/12\ times the number of months the State received 
contingency funds, then such excess amount must be remitted.
    (b) If a State does not meet its MOE requirement, all contingency 
funds paid to a State for a fiscal year must be remitted.
    (c) If required to remit funds, the State must remit all (or a 
portion) of the funds paid to it for a fiscal year within one year 
after it has failed to meet either the Food Stamp trigger or the 
Unemployment trigger for three consecutive months.


Sec. 274.75  What action will we take if a State fails to remit funds 
as required?

    (a) If a State fails to remit funds as required, we will reduce the 
SFAG payable for the next fiscal year by the amount of funds not 
remitted.
    (b) A State may appeal this decision as provided in Sec. 272.7 of 
this chapter.
    (c) The reasonable cause exceptions and corrective compliance 
regulations at Secs. 272.5 and 272.6 of this chapter do not apply to 
this penalty.


Sec. 274.76  How will we determine if a State has met its Contingency 
Fund reconciliation MOE level requirement and made expenditures that 
exceed its MOE requirement?

    (a) States receiving contingency funds for a fiscal year must 
complete the quarterly TANF Financial Report (or, as applicable, the 
Territorial Financial Report). As part of the fourth quarter's report, 
a State must complete its annual reconciliation.
    (b) The TANF Financial Report and State reporting on expenditures 
are subject to our review.


Sec. 274.77  Are contingency funds subject to the same restrictions 
that apply to other Federal TANF funds?

    As Federal TANF funds, contingency funds are subject to the 
restrictions and prohibitions in effect for Federal TANF funds. The 
provisions of Sec. 273.11 of this chapter apply.

Subpart C--What Rules Pertain Specifically to the Spending Levels 
of the Territories?


Sec. 274.80  If a Territory receives Matching Grant funds, what funds 
must it expend?

    (a) If a Territory receives Matching Grant funds under section 
1108(b) of the Act, it must:
    (1) Contribute 25 percent of expenditures funded under the Matching 
Grant for title IV-A or title IV-E expenditures;
    (2) Expend up to 100 percent of the amount of historic expenditures 
for FY

[[Page 62198]]

1995 for the AFDC program (including administrative costs and FAMIS), 
the EA program, and the JOBS program; and
    (3) Expend up to 100 percent of the amount of the Family Assistance 
Grant annual allocation using Federal TANF, title IV-E funds and/or 
Territory-only funds.
    (b) Territories may not use the same Territorial expenditures to 
satisfy the requirements of paragraph (a) of this section.


Sec. 274.81  What expenditures qualify for Territories to meet the 
Matching Grant MOE requirement?

    To meet the Matching Grant MOE requirements, Territories may count:
    (a) Territorial expenditures made pursuant to Secs. 273.2, 273.3, 
273.4, and 273.6 of this chapter that are commingled with Federal TANF 
funds or made under a segregated TANF program; and
    (b) Territorial expenditures made pursuant to the regulations at 45 
CFR parts 1355 and 1356 for the Foster Care and Adoption Assistance 
programs and section 477 of the Act for the Independent Living program.


Sec. 274.82  What expenditures qualify for meeting the Matching Grant 
FAG amount requirement?

    To meet the Matching Grant FAG amount requirement, Territories may 
count:
    (a) Expenditures made with Federal TANF funds pursuant to 
Sec. 273.11 of this chapter;
    (b) Expenditures made pursuant to Secs. 273.2, 273.3, 273.4, and 
273.6 of this chapter that are commingled with Federal TANF funds or 
made under a segregated TANF program;
    (c) Amounts transferred from TANF funds pursuant to section 404(d) 
of the Act; and
    (d) The Federal and Territorial shares of expenditures made 
pursuant to the regulations at 45 CFR parts 1355 and 1356 for the 
Foster Care and Adoption Assistance programs and section 477 of the Act 
for the Independent Living program.


Sec. 274.83  How will we know if a Territory failed to meet the 
Matching Grant funding requirements at Sec. 274.80?

    We will require the Territories to report the expenditures required 
by Sec. 274.80 (a)(2) and (a)(3) on the quarterly Territorial Financial 
Report.


Sec. 274.84  What will we do if a Territory fails to meet the Matching 
Grant funding requirements at Sec. 274.80?

    If a Territory does not meet the requirements at either or both of 
Sec. 274.80 (a)(2) and (a)(3), we will disallow all Matching Grant 
funds received for the fiscal year.


Sec. 274.85  What rights of appeal are available to the Territories?

    The Territories may appeal our decisions to the Departmental 
Appeals Board in accordance with our regulations at part 16 of this 
title if we decide to take disallowances under 1108(b).

PART 275--DATA COLLECTION AND REPORTING REQUIREMENTS

Sec.
275.1  What does this part cover?
275.2  What definitions apply to this part?
275.3  What reports must the State file on a quarterly basis?
275.4  When are quarterly reports due?
275.5  May States use sampling?
275.6  Must States file reports electronically?
275.7  How will we determine if the State is meeting the quarterly 
reporting requirements?
275.8  Under what circumstances will a State be subject to a 
reporting penalty for failure to submit quarterly reports?
275.9  What information must the State file annually?
275.10  When are annual reports due?

    Authority: 42 U.S.C. 603, 605, 607, 609, 611, and 613.


Sec. 275.1  What does this part cover?

    (a) This part explains how we will collect the information required 
by section 411(a) of the Act (data collection and reporting); the 
information required to implement section 407 of the Act (work 
participation requirements), as authorized by section 
411(a)(1)(A)(xii); the information required to implement section 409 
(penalties), section 403 (grants to States), section 405 
(administrative provisions), section 411(b) (report to Congress), and 
section 413 (research and annual rankings); and the data necessary to 
carry out our financial management and oversight responsibilities.
    (b) This part describes the information in the quarterly and annual 
reports that each State must file, as follows:
    (1) The case record information (disaggregated and aggregated) on 
individuals and families in the quarterly TANF Data Report;
    (2) The expenditure data in the quarterly TANF Financial Report 
(or, as applicable, the Territorial Financial Report);
    (3) The annual information related to definitions and expenditures 
that must be filed with the fourth quarter Financial Report; and
    (4) The annual information on State programs and performance for 
the report to Congress.
    (c) If a State claims MOE expenditures under a separate State 
program, this part specifies the circumstances under which the State 
must collect and report case-record information on individuals and 
families served by the separate State program.
    (d) This part describes when reports are due, how we will determine 
if reporting requirements have been met, and how we will apply the 
statutory penalty for failure to file a timely report. It also 
specifies electronic filing and sampling requirements.\1\
---------------------------------------------------------------------------

    \1\ The Appendices contain the specific data elements in the 
quarterly Data Report and the quarterly Financial Report, as well as 
the instructions for filing these reports. The Appendices also 
contain a summary of the applicable sampling specifications and 
three reference tables that summarize the statutory basis and 
rationale for collecting the data elements in the Data Report.
---------------------------------------------------------------------------


Sec. 275.2  What definitions apply to this part?

    (a) Except as provided in paragraph (b) of this section, the 
general TANF definitions at Sec. 270.30 of this chapter apply to this 
part.
    (b) For data collection and reporting purposes only, TANF family 
means:
    (1) All individuals receiving assistance as part of a family under 
the State's TANF or separate State program; and
    (2) The following additional persons living in the household, if 
not included under paragraph (b)(1) of this section:
    (i) Parent(s) or caretaker relative(s) of any minor child receiving 
assistance;
    (ii) Minor siblings of any child receiving assistance; and
    (iii) Any person whose income or resources would be counted in 
determining the family's eligibility for or amount of assistance.


Sec. 275.3  What reports must the State file on a quarterly basis?

    (a) Quarterly reports. Each State must collect on a monthly basis, 
and file on a quarterly basis, the data specified in the TANF Data 
Report and the TANF Financial Report (or, as applicable, the 
Territorial Financial Report). Under the circumstances described in 
paragraph (d)(1) of this section, the State must collect and file the 
data specified in the TANF-MOE Data Report.
    (b) TANF Data Report. The TANF Data Report consists of three 
sections. Two sections contain disaggregated data elements and one 
section contains aggregated data elements.
    (1) TANF Data Report: Disaggregated Data--Sections one and two. 
Each State must file disaggregated information on families receiving 
TANF assistance (section one) and families no longer receiving TANF 
assistance (section

[[Page 62199]]

two).\2\ These two sections specify identifying and demographic data 
such as the individual's Social Security Number; and information such 
as the type and amount of assistance received, educational level, 
employment status, work participation activities, citizenship status, 
and earned and unearned income. These reports also specify items 
pertaining to child care and child support. The data requested cover 
adults (including non-custodial parents who are participating in work 
activities) and children.
---------------------------------------------------------------------------

    \2\ See Appendices A and B for the specific data elements we are 
proposing.
---------------------------------------------------------------------------

    (2) TANF Data Report: Aggregated Data--Section three. Each State 
must file aggregated information on families receiving, applying for, 
and no longer receiving TANF assistance.\3\ This section of the Report 
asks for aggregate figures in the following areas: the total number of 
applications and their disposition; the total number of recipient 
families, adult recipients, and child recipients; the total number of 
births, out-of-wedlock births, and minor child heads-of-households; the 
total number of non-custodial parents participating in work activities; 
and the total amount of TANF assistance provided.
---------------------------------------------------------------------------

    \3\ See Appendix C for the specific data elements we are 
proposing.
---------------------------------------------------------------------------

    (c) The TANF Financial Report (or Territorial Financial Report). 
(1) Each State must file quarterly expenditure data on the State's use 
of Federal TANF funds, State TANF expenditures, and State expenditures 
of MOE funds in separate State programs.\4\
---------------------------------------------------------------------------

    \4\ See Appendix D for the proposed content of the TANF 
Financial Report.
---------------------------------------------------------------------------

    (2) In addition, each State must file annually with the fourth 
quarter TANF Financial Report (or, as applicable, the Territorial 
Financial Report) definitions and descriptive information on the TANF 
program and descriptive and expenditure-related information on the 
State's separate MOE program as specified in Sec. 275.9.
    (3) If a State makes a substantive change in its definition of work 
activities, its description of transitional services provided to 
families no longer receiving assistance due to employment under the 
TANF program, or how it reduces the amount of assistance when an 
individual refuses to engage in work, as specified in Sec. 275.9, it 
must file a copy of the changed definition or description with the next 
quarterly report. The State must also indicate the effective date of 
the change.
    (4) If a State is expending TANF funds received in prior fiscal 
years, it must file a separate quarterly TANF Financial Report (or, as 
applicable, Territorial Financial Report) for each fiscal year that 
provides information on the expenditures of that year's TANF funds.
    (5) Territories must report their expenditure and other fiscal data 
on the Territorial Financial Report, as provided at Sec. 274.85 of this 
chapter, in lieu of the TANF Financial Report.
    (d) TANF--MOE Data Report. (1) If a State claims MOE expenditures 
under a separate State program, it must collect and file similar 
disaggregated and aggregated information on families receiving and 
families no longer receiving assistance under the separate State 
program if it wishes to:
    (i) Receive a high performance bonus;
    (ii) Qualify for work participation caseload reduction credit; or
    (iii) Be considered for a reduction in the penalty for failing to 
meet the work participation requirements.
    (2) The TANF-MOE Data Report consists of three sections. Two 
sections contain disaggregated data elements and one contains 
aggregated data elements.\5\ Except for data elements that do not apply 
to individuals and families under the MOE program, such as time limits, 
the data elements in the TANF-MOE Data Report are the same as those in 
the TANF Data Report as described in paragraph (b) of this section.
---------------------------------------------------------------------------

    \5\ See Appendices E through G for the proposed reporting 
requirements.
---------------------------------------------------------------------------


Sec. 275.4  When are quarterly reports due?

    (a) Each State must file the TANF Data Report and the TANF 
Financial Report (or, as applicable, the Territorial Financial Report), 
including the addendum to the fourth quarter Financial Report, within 
45 days following the end of the quarter.
    (b) The State may collect and submit its TANF-MOE Data Report 
quarterly at the same time as it submits its TANF Data Report, or the 
State may submit this report at the time it seeks to be considered for 
a high performance bonus, a caseload reduction credit, or a reduction 
in the work participation rate penalty as long as the data submitted 
are for the full period for which these decisions will be made.
    (c) The effective date for filing these reports depends on when the 
State implemented the TANF program as follows:
    (1) If a State implemented the TANF program by January 1, 1997, the 
first reports cover the July-September 1997 quarter and are due 
November 14, 1997.
    (2) If a State implemented its TANF program between January 1, 
1997, and July 1, 1997, the first reports cover the period that begins 
six months after the date of implementation and are due 45 days 
following the end of the applicable quarter.


Sec. 275.5  May States use sampling?

    (a) Each State may report the disaggregated data in the TANF Data 
Report and in the TANF-MOE Data Report on all recipient families or on 
a sample of families selected through the use of a scientifically 
acceptable sampling method that we have approved. States may not use a 
sample to generate the aggregated data.\6\
---------------------------------------------------------------------------

    \6\ See Appendix H for a summary of the applicable sampling 
specifications.
---------------------------------------------------------------------------

    (b) ``Scientifically acceptable sampling method'' means a 
probability sampling method in which every sampling unit in the 
population has a known, non-zero chance to be included in the sample 
and our sample size requirements are met.


Sec. 275.6  Must States file reports electronically?

    Each State must file all quarterly reports (i.e., the TANF Data 
Report, the TANF Financial Report (or, as applicable, the Territorial 
Financial Report), and the TANF-MOE Data Report) electronically, based 
on format specifications that we will provide.


Sec. 275.7  How will we determine if the State is meeting the quarterly 
reporting requirements?

    (a) Each State's quarterly reports (the TANF Data Report, the TANF 
Financial Report (or Territorial Financial Report), and the TANF-MOE 
Data Report) must be complete and accurate and filed by the due date.
    (b) For a disaggregated data report, ``a complete and accurate 
report'' means that:
    (1) The reported data accurately reflect information available to 
the State in its case records, financial records, and automated data 
systems;
    (2) The data are free from computational errors and are internally 
consistent (e.g., items that should add to totals do so);
    (3) The data are reported for all elements (i.e., no data are 
missing);
    (4)(i) The data are provided for all families; or
    (ii) If the State opts to use sampling, the data are provided for 
all families selected in a sample that meets the minimum sample size 
requirements (except for families listed in error); and
    (5) Where estimates are necessary (e.g., some types of assistance 
may require cost estimates), the State uses reasonable methods to 
develop these estimates.

[[Page 62200]]

    (c) For an aggregated data report, ``a complete and accurate 
report'' means that:
    (1) The reported data accurately reflect information available to 
the State in its case records, financial records, and automated data 
systems;
    (2) The data are free from computational errors and are internally 
consistent (e.g., items that should add to totals do so);
    (3) The data are reported for all applicable elements; and
    (4) Monthly totals are unduplicated counts for all families (e.g., 
the number of families and the number of out-of-wedlock births are 
unduplicated counts).
    (d) For the TANF Financial Report (or, as applicable, the 
Territorial Financial Report), ``a complete and accurate report'' means 
that:
    (1) The reported data accurately reflect information available to 
the State in its case records, financial records, and automated data 
systems;
    (2) The data are free from computational errors and are internally 
consistent (e.g., items that should add to totals do so);
    (3) The data are reported for all applicable elements; and
    (4) All expenditures have been made in accordance with 
Sec. 92.20(a) of this title.
    (e) We will review the data filed in the quarterly reports to 
determine if they meet these standards. In addition, we will use audits 
and reviews to verify the accuracy of the data filed by the States.
    (f) States must maintain records to adequately support any report 
in accordance with Sec. 92.42 of this title.


Sec. 275.8  Under what circumstances will a State be subject to a 
reporting penalty for failure to submit quarterly reports?

    (a) We will impose a reporting penalty under Sec. 272.1(a)(3) of 
this chapter if:
    (1) A State fails to file the TANF Data Report and the TANF 
Financial Report (or, as applicable, the Territorial Financial Report) 
on a timely basis;
    (2) The disaggregated data in the TANF Data Report is not accurate 
or does not include all the data required by section 411(a) of the Act 
(other than section 411(a)(1)(A)(xii) of the Act) or those nine 
additional elements necessary to carry out the data collection system 
requirements;
    (3) The aggregated data in the TANF Data Report does not include 
complete and accurate information on the data elements required by 
section 411(a) of the Act and the data elements necessary to carry out 
the data collection system requirements and verify and validate 
disaggregated data;
    (4) The TANF Financial Report (or, as applicable, the Territorial 
Financial Report) does not contain complete and accurate information on 
total expenditures and expenditures on administrative costs and 
transitional services; or
    (5) The addendum to the fourth quarter TANF Financial Report (or, 
as applicable, the Territorial Financial Report) does not contain the 
information required under Secs. 271.22, 271.24, and 274.1 of this 
chapter on families excluded from the calculations in those sections 
because of the State's definition of families receiving assistance; the 
definition of work activities; and the description of transitional 
services provided by a State to families no longer receiving assistance 
due to employment.
    (b) We will not apply the reporting penalty to the TANF-MOE Data 
Report, the annual program and performance report specified in 
Sec. 275.9, or other information on individuals and families required 
by section 411(b) of the Act.
    (c) If we determine that a State meets one or more of the 
conditions set forth in paragraph (a) of this section, we will notify 
the State that we intend to reduce the SFAG payable for the immediately 
succeeding fiscal year.
    (d) We will not impose the penalty at Sec. 272.1(a)(3) of this 
chapter if the State files the complete and accurate reports before the 
end of the fiscal quarter that immediately succeeds the fiscal quarter 
for which the reports were required.
    (e) If the State does not file all reports as required by the end 
of the immediately succeeding fiscal quarter, the penalty provisions of 
Secs. 272.4 through 272.6 of this chapter will apply.
    (f) For each quarter for which the State fails to meet a reporting 
requirement, we will reduce the SFAG payable by an amount equal to four 
percent of the adjusted SFAG.


Sec. 275.9  What information must the State file annually?

    (a) Each State must file annually, as an addendum to the fourth 
quarter TANF Financial Report (or, as applicable, the Territorial 
Financial Report), the following definitions and information with 
respect to the TANF program for that year:
    (1) The number of families excluded from the calculations at 
Secs. 271.22, 271.24, and 274.1 of this chapter because of the State's 
definition of families receiving assistance, together with the basis 
for such exclusions;
    (2) The State's definition of each work activity;
    (3) A description of the transitional services provided to families 
no longer receiving assistance due to employment; and
    (4) A description of how a State will reduce the amount of 
assistance payable to a family when an individual refuses to engage in 
work without good cause.
    (b) Each State must also file with the fourth quarter TANF 
Financial Report (or, as applicable, the Territorial Financial Report) 
the information on separate State MOE programs for that year specified 
at Sec. 273.7 of this chapter.\7\
---------------------------------------------------------------------------

    \7\ See Section 3 of Appendix D for the specific information we 
are proposing to collect.
---------------------------------------------------------------------------

    (c) Each State must file an annual program and performance report 
that provides information about the characteristics and achievements of 
each State program; the design and operation of the program; the 
services, benefits, assistance provided; the eligibility criteria; and 
the extent to which the State has met its goals and objectives for the 
program. Each State may also include a description of any unique 
features, accomplishments, innovations, or additional information 
appropriate for the Department's annual report to Congress.


Sec. 275.10  When are annual reports due?

    (a) The annual report of State definitions and expenditures 
required by Sec. 275.9 (a) and (b) is due at the same time as the 
fourth quarter TANF Financial Report (or, as applicable, the 
Territorial Financial Report).
    (b) The annual program and performance report to meet the 
requirements of section 411(b) of the Act (report to Congress) is due 
90 days after the end of the fiscal year. The first report, covering FY 
1997, is due December 30, 1997.

    Note: The following appendixes will not appear in the Code of 
Federal Regulations.

Appendices

Appendix A--Proposed TANF Data Report--Section One (Disaggregated 
Data Collection for Families Receiving Assistance under the TANF 
Program)
Appendix B--Proposed TANF Data Report--Section Two (Disaggregated 
Data Collection for Families No Longer Receiving Assistance under 
the TANF Program)
Appendix C--Proposed TANF Data Report--Section Three (Aggregated 
Data Collection for Families Applying for, Receiving, and No Longer 
Receiving Assistance under the TANF Program)
Appendix D--Proposed TANF Financial Report and Fourth Quarter 
Addendum
Appendix E--Proposed TANF MOE Data Report--Section One 
(Disaggregated Data Collection for Families Receiving Assistance 
under the Separate State Programs)

[[Page 62201]]

Appendix F--Proposed TANF MOE Data Report--Section Two 
(Disaggregated Data Collection for Families No Longer Receiving 
Assistance under the Separate State Programs)
Appendix G--Proposed TANF MOE Data Report--Section Three (Aggregated 
Data Collection for Families Receiving Assistance under the Separate 
State Programs)
Appendix H--Sampling Specifications
Appendix I--Statutory Reference Table for Appendix A
Appendix J--Statutory Reference Table for Appendix B
Appendix K--Statutory Reference Table for Appendix C

Appendix A--TANF Data Report--Section One--Disaggregated Data 
Collection for Families Receiving Assistance Under the TANF Program

Instructions and Definitions

    General Instruction: The State agency or Tribal grantee should 
collect and report data for each data element, unless explicitly 
instructed to leave the field blank.
    1. State FIPS Code: Enter your two-digit State code from the 
following listing. These codes are the standard codes used by the 
National Institute of Standards and Technology. Tribal grantees 
should leave this field blank.

------------------------------------------------------------------------
                           State                                 Code   
------------------------------------------------------------------------
Alabama....................................................           01
Alaska.....................................................           02
American Samoa.............................................           60
Arizona....................................................           04
Arkansas...................................................           05
California.................................................           06
Colorado...................................................           08
Connecticut................................................           09
Delaware...................................................           10
District of Columbia.......................................           11
Florida....................................................           12
Georgia....................................................           13
Guam.......................................................           66
Hawaii.....................................................           15
Idaho......................................................           16
Illinois...................................................           17
Indiana....................................................           18
Iowa.......................................................           19
Kansas.....................................................           20
Kentucky...................................................           21
Louisiana..................................................           22
Maine......................................................           23
Maryland...................................................           24
Massachusetts..............................................           25
Michigan...................................................           26
Minnesota..................................................           27
Mississippi................................................           28
Missouri...................................................           29
Montana....................................................           30
Nebraska...................................................           31
Nevada.....................................................           32
New Hampshire..............................................           33
New Jersey.................................................           34
New Mexico.................................................           35
New York...................................................           36
North Carolina.............................................           37
North Dakota...............................................           38
Ohio.......................................................           39
Oklahoma...................................................           40
Oregon.....................................................           41
Pennsylvania...............................................           42
Puerto Rico................................................           72
Rhode Island...............................................           44
South Carolina.............................................           45
South Dakota...............................................           46
Tennessee..................................................           47
Texas......................................................           48
Utah.......................................................           49
Vermont....................................................           50
Virgin Islands.............................................           78
Virginia...................................................           51
Washington.................................................           53
West Virginia..............................................           54
Wisconsin..................................................           55
Wyoming....................................................           56
------------------------------------------------------------------------

    2. County FIPS Code: Enter the three-digit code established by 
the National Institute of Standards and Technology for 
classification of counties and county equivalents. Codes were 
devised by listing counties alphabetically and assigning 
sequentially odd codes is available in Appendix F of the TANF 
Sampling and Statistical Methods Manual. Tribal grantees should 
leave this field blank.
    3. Tribal Code: For Tribal grantees, enter the three-digit 
Tribal code that represents your Tribe (See Appendix E of the TANF 
Sampling and Statistical Methods Manual for a complete listing of 
Tribal Codes). State agencies should leave this field blank.
    4. Reporting Month: Enter the four-digit year and two-digit 
month code that identifies the year and month for which the data are 
being reported.
    5. Stratum:
    Guidance: All TANF families selected in the sample from the same 
stratum must be assigned the same stratum code. Valid stratum codes 
may range from ``00'' to ``99.'' States and Tribes with stratified 
samples should provide the ACF Regional Office with a listing of the 
numeric codes utilized to identify any stratification. If a State or 
Tribe opts to provide data for its entire caseload, enter the same 
stratum code (any two-digit number) for each TANF family.
    Instruction: Enter the two-digit stratum code.

Family-Level Data

    Definition: For reporting purposes, the TANF family means (a) 
all individuals receiving assistance as part of a family under the 
State's TANF Program; and (b) the following additional persons 
living in the household, if not included under (a) above:
    (1) Parent(s) or caretaker relative(s) of any minor child 
receiving assistance;
    (2) Minor siblings (including unborn children) of any child 
receiving assistance; and
    (3) Any person whose income or resources would be counted in 
determining the family's eligibility for or amount of assistance.
    6. Case Number--TANF:
    Guidance: If the case number is less than the allowable eleven 
characters, a State may use lead zeros 1to fill in the number.
    Instruction: Enter the number assigned by the State agency or 
Tribal grantee to uniquely identify the case after formal approval 
to receive assistance.
    7. ZIP Code: Enter the five-digit ZIP code for the TANF family's 
place of residence for the reporting month.
    8. Funding Stream: For States that bifurcate their caseloads, 
enter the appropriate code for the funding stream used to provide 
assistance to this TANF family. If the State (Tribe) does not 
bifurcate its caseload, enter code ``1.''

1=Funded, in whole or in part, with Federal TANF block grant funds
2=Funded entirely from State-only funds (segregated State TANF 
program) which are subject to TANF rules.

    9. Disposition:
    Guidance: A family that did not receive any assistance for the 
reporting month but was listed on the monthly sample frame for the 
reporting month is ``listed in error.'' States are to complete data 
collection for all sampled cases that are not listed in error.
    Instruction: Enter one of the following codes for each TANF 
sampled case.

1=Data collection completed
2=Not subject to data collection/listed in error

    10. New Applicant:
    Guidance: A newly-approved applicant means the current reporting 
month is the first month for which the TANF family has received TANF 
assistance (and thus has had a chance to be selected into the TANF 
sample). This may be either the first month that the TANF family has 
ever received assistance or the first month of a new spell on 
assistance. A TANF family that is reinstated from a suspension is 
not a newly, approved applicant.
    Instruction: Enter the one-digit code that indicates whether or 
not the TANF family is a newly-approved applicant.

1=Yes, a newly-approved application
2=No

    11. Number of Family Members: Enter two digits that represent 
the number of members in the family receiving assistance under the 
State's (Tribe's) TANF Program during the reporting month.
    12. Type of Family for Work Participation:
    Guidance: This data element will be used to identify the type of 
family (i.e., the number of parents or care-taker relatives in the 
family receiving assistance) in order to calculate the all family 
and the two-parent family work participation rates. A family with a 
minor child head-of-household should be coded as either a single-
parent family or two-parent family, whichever is appropriate. A 
family that includes a disabled parent will not be considered a two-
parent family for purposes of the work participation rate. A 
noncustodial parent, who lives in the State, may participate in work 
activities funded under the State TANF Program and receive other 
assistance. In order for the noncustodial parent to participate in 
work activities and receive assistance, (s)he must be a member of 
the eligible family receiving assistance and be reported as part of 
the TANF family. However, it is up to the State to consider whether 
a family with a non-custodial parent is a one-parent or two-parent 
family for the purposes of calculating the work participation rate.

[[Page 62202]]

    Instruction: Enter the one-digit code that represents the type 
of family for purposes of calculating the work participation rates.

1=Single-Parent Family for participation rate purposes
2=Two-Parent Family for participation rate purposes
3=No Parent Family for participation rate purposes (does not include 
parents, care-taker relatives, or minor child heads-of-household

    13. Receives Subsidized Housing:
    Guidance: Subsidized housing refers to housing for which money 
was paid by the Federal, State, or Local government or through a 
private social service agency to the family or to the owner of the 
housing to assist the family in paying rent. Two families sharing 
living expenses does not constitute subsidized housing.
    Instruction: Enter the one-digit code that indicates whether or 
not the TANF family received subsidized housing for the reporting 
month.

1=Public housing
2=HUD rent subsidy
3=Other rent subsidy
4=No housing subsidy

    14. Receives Medical Assistance: Enter ``1'' if, for the 
reporting month, any TANF family member is eligible to receive 
(i.e., a certified recipient of) medical assistance under the State 
plan approved under Title XIX or ``2'' if no TANF family member is 
eligible to receive medical assistance under the State plan approved 
under Title XIX.

1=Yes, receives medical assistance
2=No

    15. Receives Food Stamps: If the TANF family received Food 
Stamps for the reporting month, enter the one-digit code indicating 
the type of Food Stamp assistance. Otherwise, enter ``4.''

1=Yes, Food Stamp coupon allotment
2=Yes, cash
3=Yes, wage subsidy
4=No

    16. Amount of Food Stamp Assistance:
    Guidance: For situations in which the Food Stamp household 
differs from the TANF family, code this element in a manner that 
most accurately reflects the resources available to the TANF family.
    Instruction: Enter the TANF family's authorized dollar amount of 
Food Stamp assistance for the reporting month.
    17. Receives Subsidized Child Care:
    Guidance: For the purpose of coding this data element, ubsidized 
Child Care funded under the Child Care and Development Fund with 
funds that were transferred from the State TANF Program should be 
coded as ``2.''
    Instruction: If the TANF family receives subsidized child care 
for the reporting month, enter code ``1'', ``2'', ``3'', or ``4'', 
whichever is appropriate. Otherwise, enter code ``5.''

1=Yes, funded under the State (Tribal) TANF Program
2=Yes, funded under the Child Care and Development Fund
3=Yes, funded under another Federal program (e.g., SSBG)
4=Yes, funded under a State, Tribal, or local program
5=No
    18. Amount of Subsidized Child Care:
    Guidance: Subsidized child care means a grant by the Federal, 
State or Local government to a parent (or care-taker relative) to 
support, in part or whole, the cost of child care services provided 
by an eligible provider to an eligible child. The grant may be paid 
directly to the parent (or care-taker relative) or to a child care 
provider on behalf of the parent (or care-taker relative).
    Instruction: Enter the dollar amount of subsidized child care 
that the TANF family has received for services in the reporting 
month. If the TANF family did not receive any subsidized child care 
for the reporting month, enter ``00.''
    19. Amount of Child Care Disregard: Enter the total dollar 
amount of the TANF family's actual disregard allowed for child care 
expenses during the reporting month. If there is no child care 
disregard, enter ``0'' as the amount.
    20. Amount of Child Support: Enter the total dollar value of 
child support received on behalf of the TANF family in the reporting 
month, which includes arrearages, recoupments, and pass-through 
amounts whether paid to the State or the family.
    21. Amount of the Family's Cash Resources: Enter the total 
dollar amount of the TANF family's cash resources for the reporting 
month.
    Amount of Assistance Received and the Number of Months that the 
Family Has Received Each Type of Assistance under the State (Tribal) 
TANF Program:
    Guidance: Assistance means every form of support provided to 
TANF families under the State (Tribal) TANF Program (including child 
care, work subsidies, and allowances to meet living expenses), 
except for the following:
    (1) services that have no direct monetary value to an individual 
family and that do not involve implicit or explicit income support, 
such as counseling, case management, peer support and employment 
services that do not involve subsidies or other forms of income 
support; and
    (2) one-time, short-term assistance (i.e., assistance paid 
within a 30-day period, no more than once in any twelve-month 
period, to meet needs that do not extend beyond a 90-day period, 
such as automobile repair to retain employment and avoid welfare 
receipt and appliance repair to maintain living arrangements).
    Instruction: For each type of assistance provided under the 
State's (Tribal) TANF Program, enter the dollar amount of assistance 
that the TANF family received or that was paid on behalf of the TANF 
family for the reporting month and the number of months that the 
TANF family has received assistance under the State's (Tribe's) TANF 
program. If, for a ``type of assistance'', no dollar amount of 
assistance was provided during the reporting month, enter ``0'' as 
the amount. If, for a ``type of assistance'', no assistance has been 
received (since the State began its TANF Program) by the TANF 
eligible family, enter ``0'' as the number of months of assistance.
    22. Cash and Cash Equivalents:

A. Amount
B. Number of Months

    23. Educational:

A. Amount
B. Number of Months

    24. Employment Services: 

A. Amount 
B. Number of Months

    25. Work Subsidies: 

A. Amount
B. Number of Months 

    26. TANF Child Care:
    Guidance: Include only the child care funded directly by the 
State (Tribal) TANF Program. Do not include child care funded under 
the Child Care and Development Fund, even though some of the funds 
were transferred to the CCDF from the TANF program.

A. Amount
B. Number of Months

    27. Transportation:

A. Amount
B. Number of Months

    28. Other Supportive Services and Special Needs, including 
Assistance with Meeting Home Heating and Air Conditioning Costs: 

A. Amount
B. Number of Months

    29. Transitional Services:

A. Amount
B. Number of Months

    30. Contributions to Individual Development Accounts: 

A. Amount
B. Number of Months

    31. Other:

A. Amount
B. Number of Months

    Reason for and Amount of Reduction in Assistance. For each 
reason for which the TANF family received a reduction in assistance 
for the reporting month, enter the dollar amount of the reduction in 
assistance. Otherwise, enter ``0.''
    32. Work Requirements Sanction 
    33. Family Sanction for an Adult with No High School Diploma or 
Equivalent
    34. Sanction for Teen Parent not Attending School
    35. Non-Cooperation with Child Support
    36. Failure to Comply with an Individual Responsibility Plan
    37. Other Sanction
    38. Recoupment of Prior Overpayment
    39. Family Cap
    40. Reduction Based on Family Moving into State From Another 
State
    41. Reduction Based on Length of Receipt of Assistance
    42. Other, Non-sanction
    43. Waiver Evaluation Research Group:
    Guidance: In connection with waivers, approved to allow States 
to implement Welfare Reform Demonstrations, a State assigned a 
portion of its cases to a research group consisting of a control 
group (subject to the provisions of the regular, statutory AFDC 
program as defined by prior law) and an experimental group (subject 
to the provisions of the regular, statutory AFDC

[[Page 62203]]

program as defined by prior law as modified by waivers). A state may 
choose, for the purpose of completing impact analyses, to continue a 
research group and thus maintain applicable control and experimental 
group treatment policies as they were implemented under their 
welfare reform demonstration (including prior law policies not 
modified by waivers), even if such policies are inconsistent with 
TANF. However, cases assigned to a non-experimental treatment group 
(i.e., not part of the research group) may not apply prior law 
policies inconsistent with TANF unless such policies are 
specifically linked to approved waivers. Where a state continues 
waivers, but does not continue a research group for impact 
evaluation purposes, all cases in the demonstration site will be 
treated as non-experimental treatment group cases regardless of 
their original assignment as control or experimental cases.
    Instruction: Enter the one-digit code that indicates the 
family's waiver evaluation case status.

Blank=Not applicable (no waivers apply to this case)
1=Control group (for impact analysis purposes)
2=Experimental group
3=Non-experimental treatment group

    44. Is the TANF Family Exempt from the Federal Time Limit 
Provisions:
    Guidance: Under TANF rules, an eligible family that does not 
include an adult (or minor child head-of-household) recipient, who 
has received assistance for 60 countable months, may continue to 
receive assistance. A countable month is a month of assistance for 
which the adult (or minor child head-of-household) is not exempt 
from the Federal time limit provisions. TANF rules provide for two 
categories of exceptions. First, a family which does not include an 
adult (or minor child head-of-household) who has received 60 
countable months of assistance may be exempt from the accrual of 
months of assistance (i.e., clock not ticking). Second, a family 
with an adult (or minor child head-of-household), who has received 
60 countable months of assistance may be exempt from termination of 
assistance. Exemptions from termination of assistance include a 
hardship exemption which allows up to 20% of the families to receive 
assistance beyond the 60 month time limit. In lieu of the 20% 
hardship exemptions, States may choose to employ extension policies 
prescribed under approved waivers.
    Instruction: If the TANF family has no exemption from the 
Federal five-year time limit, enter code ``1.'' If the TANF family 
does not include an adult (or minor child head-of-household) who has 
received assistance for 60 countable months and is exempt from 
accrual of months of assistance under the Federal five-year time 
limit for the reporting month, enter ``2'', ``3'', or ``4'', 
whichever is appropriate. If the TANF family includes an adult (or 
minor child head-of-household) who has received assistance for 60 
countable months and the family is exempt from termination of 
assistance, enter code ``5'', ``6'', ``7'' or ``8'', whichever is 
appropriate.

01=Family is not exempt from Federal time limit.

    Family does not include an adult (or minor child head-of-
household) who has received assistance for 60 countable months

02=Yes, family is exempt from accrual of months under the Federal 
five-year time limit for the reporting month because no adult or 
minor child head-of-household in eligible family receiving 
assistance.
03=Yes, family is exempt from accrual of months under the Federal 
five-year time limit for the reporting month because assistance to 
family is funded entirely from State-only funds.
04=Yes, family is exempt from accrual of months under the Federal 
five-year time limit for the reporting month because the family is 
living on an Indian country of at least 1,000 persons at least 50 
percent of whose adults are unemployed.
05=Yes, family is exempt from accrual of months under the Federal 
five-year time limit for the reporting month based on an approved 
waiver policy.

    Family includes an adult (or minor child head-of-household) who 
has received assistance for 60 countable month

06=Yes, family is exempt from termination of assistance under the 
Federal five-year time limit for the reporting month because 
assistance to family is funded entirely from State-only funds.
07=Yes, family is exempt from termination of assistance under the 
Federal five-year time limit for the reporting month due to a 
temporary good cause domestic violence waiver (and an inability to 
work).
08=Yes, family is exempt from termination of assistance under the 
Federal five-year time limit for the reporting month due to a 
hardship exemption for reason other than domestic violence.
09=Yes, family is exempt from termination of assistance under the 
Federal five-year time limit for the reporting month because the 
adult's (minor child head-of-household's) residence is on an Indian 
country of at least 1,000 persons at least 50 percent of whose 
adults are unemployed.
10=Yes, family (including adults) is exempt from termination of 
assistance under the Federal five-year time limit for the reporting 
month in accordance with extension policies prescribed under 
approved waivers.
11=Yes, the children in the family are receiving assistance beyond 
the 60 countable months and the family is exempt from termination of 
assistance under the Federal five-year time limit for the reporting 
month in accordance with extension policies prescribed under 
approved waivers (i.e., adult-only time limit).

Person-Level Data

    Person-level data has two sections: the adult and minor child 
head-of-household characteristic section and the child 
characteristics section. Section 419 of the Act defines adult and 
minor child. An adult is an individual that is not a minor child. A 
minor child is an individual who (a) has not attained 18 years of 
age or (b) has not attained 19 years of age and is a full-time 
student in a secondary school (or in the equivalent level of 
vocational or technical training.)

Adult and Minor Child Head-of-Household Characteristics

    This section allows for coding up to six adults (or a minor 
child who is either a head-of-household or married to the head-of-
household and up to five adults) in the TANF family. A minor child 
who is either a head-of-household or married to the head-of-
household should be coded as an adult and will hereafter be referred 
to as a ``minor child head-of-household.'' For each adult (or minor 
child head-of-household) in the TANF family, complete the adult 
characteristics section. If a noncustodial parent is participating 
in work activities funded under the State (Tribal) TANF Program for 
the reporting month, the noncustodial parent must also be reported 
in this section as a member of the family receiving assistance.
    If there are more than six adults (or a minor child head-of-
household and five adults) in the TANF family, use the following 
order to identify the persons to be coded: (1) the head-of-
household; (2) parents in the eligible family receiving assistance; 
(3) other adults in the eligible family receiving assistance; (4) 
Parents not in the eligible family receiving assistance; (5) 
caretaker relatives not in the eligible family receiving assistance; 
and (6) other persons, whose income or resources count in 
determining eligibility for or amount of assistance of the eligible 
family receiving assistance, in descending order the person with the 
most income to the person with least income.
    45. Family Affiliation:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for adults.
    Instruction: Enter the one-digit code that shows the adult's (or 
minor child head-of-household's) relation to the eligible family 
receiving assistance.

1=Member of the eligible family receiving assistance

    Not in eligible family receiving assistance, but in the 
household

2=Parent of minor child in the eligible family receiving assistance
3=Caretaker relative of minor child in the eligible family receiving 
assistance
4=Minor sibling of child in the eligible family receiving assistance
5=Person whose income or resources are considered in determining 
eligibility for or amount of assistance for the eligible family 
receiving assistance

    46. Noncustodial Parent Indicator:
    Guidance: A noncustodial parent means a parent who does not live 
with his/her child(ren). A noncustodial parent, who lives in the 
State, may participate in work activities funded under the State 
TANF

[[Page 62204]]

Program. In order for the noncustodial parent to participate in work 
activities, (s)he must be a member of the eligible family receiving 
assistance and be reported as part of the TANF family.
    Instruction: Enter the one-digit code that indicates the adult's 
(or minor child head-of-household's) noncustodial parent status.

1=Yes, a noncustodial parent
2=No

    47. Date of Birth: Enter the eight-digit code for date of birth 
for the adult (or minor child head-of-household) under the State 
(Tribal) TANF Program in the format YYYYMMDD.
    48. Social Security Number: Enter the nine-digit Social Security 
Number for the adult (or minor child head-of-household) in the 
format nnnnnnnnn.
    49. Race: Enter the one-digit code for the race of the TANF 
adult (or minor child head-of-household).

1=White, not of Hispanic origin
2=Black, not of Hispanic origin
3=Hispanic
4=American Indian or Alaska Native
5=Asian or Pacific Islander
6=Other
9=Unknown

    50. Gender: Enter the one-digit code that indicates the adult's 
(or minor child head-of-household's) gender.

1=Male
2=Female

Receives Disability Benefits

    The Act specifies five types of disability benefits. For each 
type of disability benefits, enter the one-digit code that indicates 
whether or not the adult (or minor child head-of-household) received 
the benefit.
    51. Receives Federal Disability Insurance Benefits: Enter the 
one-digit code that indicates the adult (or minor child head-of-
household) received Federal disability insurance benefits for the 
reporting month.

1=Yes, received Federal disability insurance
2=No

    52. Receives Benefits Based on Federal Disability Status: Enter 
the one-digit code that indicates the adult (or minor child head-of-
household) received benefits based on Federal disability status for 
the reporting month.

1=Yes, received benefits based on Federal disability status
2=No

    53. Receives Aid Under Title XIV-APDT: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XIV for the reporting 
month.

1=Yes, received aid under Title XIV-APDT
2=No

    54. Receives Aid Under Title XVI-AABD: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XVI-AABD for the 
reporting month.

1=Yes, received aid under Title XVI-AABD
2=No

    55. Receives Aid Under Title XVI-SSI: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XVI-SSI for the 
reporting month.

1=Yes, received aid under Title XVI-SSI
2=No

    56. Marital Status: Enter the one-digit code for the adult's (or 
minor child head-of-household's) marital status for the reporting 
month.

1=Single, never married
2=Married, living together
3=Married, but separated
4=Widowed
5=Divorced

    57. Relationship to Head-of-Household:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for adults.
    Instruction: Enter the two-digit code that shows the adult's 
relationship (including by marriage) to the head of the household, 
as defined by the Food Stamp Program or as determined by the State 
(Tribe), (i.e., the relationship to the principal person of each 
person living in the household). If minor child head-of-household, 
enter code ``01.''

01=Head of household
02=Spouse
03=Parent
04=Daughter or son
05=Stepdaughter or stepson
06=Grandchild or great grandchild
07=Other related person (brother, niece, cousin)
08=Foster child
09=Unrelated child
10=Unrelated adult

    58. Teen Parent With Child In the Family:
    Guidance: A teen parent is a person who is under 20 years of age 
and that person's child is also a member of the TANF family.
    Instruction: Enter the one-digit code that indicates the adult's 
(or minor child head-of-household's) teen parent status.

1=Yes, a teen parent
2=No

Educational Level

    Educational level is divided into two parts: the highest level 
of education attained and the highest degree attained.
    59. Highest Level of Education Attained: Enter the two-digit 
code to indicate the highest level of education attained by the 
adult (or minor child head-of-household).

00=No formal education
01-12=Grade level completed in primary/secondary school including 
secondary level vocational school or adult high school

    60. Highest Degree Attained: If the adult (or minor child head-
of-household) has a degree(s), enter the one-digit code that 
indicates the adult's (or minor child head-of-household's) highest 
degree attained. Otherwise, leave the field blank.

0=No degree
1=High school diploma, GED, or National External Diploma Program
2=Awarded Associate's Degree
3=Awarded Bachelor's Degree
4=Awarded graduate degree (Master's or higher)
5=Other credentials (degree, certificate, diploma, etc.)
    61. Citizenship/Alienage:
    Guidance: As described in TANF-ACF-PA-97-1, States have the 
flexibility to: (1) use State MOE funds to serve ``qualified'' 
aliens, including those who enter on or after August 22, 1996; (2) 
use Federal TANF funds to serve ``qualified'' aliens who arrived 
prior to the enactment of the PRWORA on August 22, 1996 [such aliens 
who arrived after enactment are barred from receiving Federal TANF 
funds for five years from the date of entry, except for certain 
aliens such as refugees and asylees]; (3) use State MOE funds to 
serve legal aliens who are not ``qualified''; and (4) use, under 
section 411(d) of PRWORA, State MOE funds to serve aliens who are 
not lawfully present in the U.S., but only through enactment of a 
State law, after the date of PRWORA enactment, which ``affirmatively 
provides'' for such benefits.
    The citizenship/alienage is divided into four groups: 
individuals eligible (for the TANF Program based on citizenship/
alienage), individuals eligible at State option, individuals not 
eligible, and status unknown.
    Instruction: Enter the two-digit code that indicates the adult's 
(or minor child head-of-household's) citizenship/alienage.
    Individuals Eligible for the TANF Program

01=U.S. citizen, including naturalized citizens
02=Permanent resident who has worked forty qualifying quarters; 
alien who is a veteran with an honorable discharge from the U.S. 
Armed Forces or is on active duty in the U.S. Armed Forces, or 
spouse or unmarried dependent children of such alien
03=Qualified alien accorded refugee, Cuban or Haitian entrant, or 
Amerasian immigrant status (INS Form I-94) who has resided in the 
U.S. five years or less
04=Qualified alien granted political asylum five or less years ago; 
qualified alien granted a withholding of deportation by INS (under 
sec. 243(h) or sec. 241(b)(3) of the INA) five or less years ago.

    Individuals Eligible for the TANF Program at State Option

05=Qualified alien, (including immigrant accorded permanent resident 
status (``green card''), parolee granted parole for at least one 
year under sec. 212(d)(5) of the INA, and certain battered aliens 
and their children who are determined to be qualified), who arrived 
in the U.S. prior to enactment (August 22, 1996) or who arrived in 
the U.S. on or after enactment and has resided in the U.S. more than 
five years
06=Qualified alien accorded refugee, Cuban or Haitian entrant, or 
Amerasian immigrant status (INS Form I-94) who has resided in the 
U.S. more than five years
07=Qualified alien granted political asylum or granted withholding 
of deportation by INS (under sec. 243(h) or sec. 241(b)(3) of the 
INA) more than five years ago;


[[Page 62205]]


    Individuals Not Eligible for the TANF Program

08=Qualified alien (other than a refugee, Cuban or Haitian entrant, 
Amerasian immigrant, asylee, or alien whose deportation has been 
withheld under sec. 243(h) or sec. 241(b)(3) of the INA) who arrived 
in the U.S. on or after enactment and has resided in the U.S. less 
than 5 years.
09=Any alien who is not a qualified alien.

    Status Unknown

99=Unknown

    62. Number of Months Countable toward Federal Time Limit in Own 
State (Tribe): Enter the number of months countable toward the 
adult's (or minor child head-of-household's) Federal five-year time 
limit based on assistance received from the State (Tribe).
    63. Number of Months Countable toward Federal Time Limit in 
Other States or Tribes: Enter the number of months countable toward 
the adult's (or minor child head-of-household's) Federal five-year 
time limit based on assistance received from other States or Tribes.
    64. Number of Countable Months Remaining Under State's (Tribe's) 
Time Limit: Enter the number of months that remain countable toward 
the adult's (or minor child head-of-household's) State (Tribal) time 
limit.
    65. Is Current Month Exempt from the State's (Tribe's) Time 
Limit: Enter the one-digit code that indicates the adult's (or minor 
child head-of-household's) current exempt status from State's 
(Tribe's) time limit.

1=Yes, adult (or minor child head-of-household) is exempt from the 
State's (Tribe's) time limit for the reporting month
2=No

    66. Employment Status: Enter the one-digit code that indicates 
the adult's (or minor child head-of-household's) employment status.

1=Employed
2=Unemployed, looking for work
3=Not in labor force (i.e, unemployed, not looking for work, 
includes discouraged workers)

    67. Work Participation Status:
    Guidance: Disregarded from the participation rate means the TANF 
family is not included in the calculation of the work participation 
rate.
    Exempt means that the individual will not be penalized for 
failure to engage in work (i.e., good cause exception); however, the 
TANF family is included in the calculation of the work participation 
rate.
    Instruction: Enter the two-digit code that indicates the adult's 
(or minor child head-of-household's) work participation status.

01=Disregarded from participation rate, single custodial parent with 
child under 12 months
02=Disregarded from participation rate because all of the following 
apply: required to participate, but not participating, sanctioned 
for the reporting month, but not sanctioned for more than 3 months 
within the preceding 12-month period
03=Disregarded, family is part of an ongoing research evaluation (as 
a member of a control group or experimental treatment group) 
approved under Section 1115 of the Social Security Act
04=Disregarded from participation rate, is participating in a Tribal 
Work Program, and State has opted to exclude all Tribal Work Program 
participants from its work participation rate
05=Exempt, single custodial parent with child under age 6 and 
unavailability of child care
06=Exempt, disabled (not using an extended definition under a State 
waiver)
07=Exempt, caring for a severely disabled child (not using an 
extended definition under a State waiver)
08=A temporary good cause domestic violence waiver (not using an 
extended definition under a State waiver)
09=Exempt, State waiver
10=Exempt, other
11=Required to participate, but not participating, sanctioned for 
the reporting month and sanctioned for more than 3 months within the 
preceding 12-month period
12=Required to participate, but not participating, sanctioned for 
the reporting month but not sanctioned for more than 3 months within 
the preceding 12-month period
13=Required to participate, but not participating and not sanctioned 
for the reporting month
14=Deemed engaged in work, teen head-of-household who maintains 
satisfactory school attendance
15=Deemed engaged in work, single parent with child under age 6 and 
parent engaged in work activities for at least 20 hours per week
16=Required to participate, participating but not meeting minimum 
participation requirements
17=Required to participate, and meeting minimum participation 
requirements
99=Not applicable (e.g., person living in household and whose income 
or resources are counted in determining eligibility for or amount of 
assistance of the family receiving assistance, but not in eligible 
family receiving assistance)

Adult Work Participation Activities

    Guidance: To calculate the average number of hours per week of 
participation in a work activity, add the number of hours of 
participation across all weeks in the month and divide by the number 
of weeks in the month. Round to the nearest whole number.
    Some weeks have days in more than one month. Include such a week 
in the calculation for the month that contains the most days of the 
week (e.g., the week of July 27-August 2, 1997 would be included in 
the July calculation). Acceptable alternatives to this approach must 
account for all weeks in the fiscal year. One acceptable alternative 
is to include the week in the calculation for whichever month the 
Friday falls (i.e., the JOBS approach.) A second acceptable 
alternative is to count each month as having 4.33 weeks.
    During the first or last month of any spell of assistance, a 
family may happen to receive assistance for only part of the month. 
If a family receives assistance for only part of a month, the State 
(Tribe) may count it as a month of participation if an adult (or 
minor child head-of-household) in the family (both adults, if they 
are both required to work) is engaged in work for the minimum 
average number of hours for the full week(s) that the family 
receives assistance in that month.
    Special Rules: Each adult (or minor child head-of-household) has 
a life-time limit for vocational educational training. Vocational 
educational training may only count as a work activity for a total 
of 12 months. For any adult (or minor child head-of-household) that 
has exceeded this limit, enter ``0'' as the average number of hours 
per week of participation in vocational education training, even if 
(s)he is engaged in vocational education training. The additional 
participation in vocational education training may be coded under 
``Other.''
    The exception to the above 12 month rule may be a State that 
received a waiver which is inconsistent with the provision limiting 
vocational education training. In this case the State would adhere 
to the terms and conditions of the waiver.
    Limitations: The four limitations concerning job search and job 
readiness are: (1) Job search and job readiness assistance only 
count for 6 weeks in any fiscal year; (2) An individual's 
participation in job search and job readiness assistance counts for 
no more than 4 consecutive weeks; (3) If the State's (Tribe's) total 
unemployment rate for a fiscal year is at least 50 percent greater 
than the United States' total unemployment rate for that fiscal year 
or the State is a needy State (within the meaning of Section 403 
(b)(6), then an individual's participation in job search or job 
readiness assistance counts for up to 12 weeks in that fiscal year; 
and (4) A State may count 3 or 4 days of job search and job 
readiness assistance during a week as a full week of participation, 
but only once for any individual.
    For each week in which an adult (or minor child head-of-
household) exceeds any of these limitations, use ``0'' as the number 
of hours in calculating the average number of hours per week of job 
search and job readiness, even if (s)he may be engaged in job search 
or job readiness activities.
    If a State is operating its TANF Program under a waiver which 
permits broader rules for participation in job search and job 
readiness training, the TANF rules apply for coding this element and 
any additional participation in job search and job readiness 
training permitted under the waiver rules

[[Page 62206]]

should be coded under the item ``Additional Work Activities 
Permitted Under Waiver Demonstration.''
    Instruction: For each work activity in which the adult (or minor 
child head-of-household) participated during the reporting month, 
enter the average number of hours per week of participation, except 
as noted above. For each work activity in which the adult (or minor 
child head-of-household) did not participate, enter zero as the 
average number of hours per week of participation.
    68. Unsubsidized Employment
    69. Subsidized Private Sector Employment
    70. Subsidized Public Sector Employment
    71. Work Experience
    72. On-the-job Training
    73. Job Search and Job Readiness Assistance
    Instruction: Do not count hours of participation in job search 
and job readiness training beyond the TANF limit where allowed by 
waivers in this item. Instead count the hours of participation 
beyond the TANF limit in the item ``Additional Work Activities 
Permitted Under Waiver Demonstration.'' Otherwise, count the 
additional hours of work participation under the work activity 
``Other Work Activities.''
    74. Community Service Programs
    75. Vocational Educational Training
    Instruction: Do not count hours of participation in vocational 
educational training beyond the TANF 12 month life-time limit where 
allowed by waivers in this item. Instead count the hours of 
participation beyond the TANF limit in the item ``Additional Work 
Activities Permitted Under Waiver Demonstration.'' Otherwise, count 
the additional hours of work participation under the work activity 
``Other Work Activities.''
    76. Job Skills Training Directly Related to Employment
    77. Education Directly Related to Employment for Individuals 
with no High School Diploma or Certificate of High School 
Equivalency
    78. Satisfactory School Attendance for Individuals with No High 
School Diploma or Certificate of High School Equivalency
    79. Providing Child Care Services to an Individual Who Is 
Participating in a Community Service Program
    80. Additional Work Activities Permitted Under Waiver 
Demonstration
    Instruction: Hours of participation in job search, job readiness 
training, or other work activities beyond the TANF limits as 
permitted by the State waiver should be counted in this item. 
Otherwise, count the additional hours of work participation in the 
work activity ``Other Work Activities.''
    81. Other Work Activities
    Guidance: Reporting on this data element is optional. States may 
want to demonstrate their additional efforts at helping individuals 
become self-sufficient even though these activities are not 
considered in the calculation of the work participation rates.
    82. Required Hours of Work Under Waiver Demonstration:
    Guidance: In approving waivers, ACF specified hours of 
participation in several instances. One type of hour change in the 
welfare reform demonstrations, was the recognition, as part of a 
change in work activities and/or exemptions, that the hours 
individuals worked should be consistent with their abilities and in 
compliance with an employability or personal responsibility plan or 
other criteria in accordance to waiver terms and conditions. As the 
hour requirement in this case was integral and necessary to achieve 
the waiver purpose of appropriately requiring work activities to 
move individuals to self-sufficiency, the State could show 
inconsistency and could use the waiver hours instead of the hours in 
section 407. A waiver that merely increased work hour requirements 
would not be deemed inconsistent.
    Instruction: If applicable, enter the two-digit number that 
represents the average number of hours per week of work 
participation required of the individual as described in the 
demonstration terms or in an employability or personal 
responsibility plan. Otherwise, leave blank or enter ``0.''

Amount of Earned Income

    Earned income has two categories. For each category of earned 
income, enter the dollar amount of the adult's (or minor child head-
of-household's) earned income.
    83. Earned Income Tax Credit (EITC):
    Guidance: Earned Income Tax Credit is a refundable tax credit 
for families and dependent children. EITC payments are received 
either monthly (as advance payment through the employer), annually 
(as a refund from IRS), or both.
    Instruction: Enter the total dollar amount of the earned income 
tax credit actually received, whether received as an advance payment 
or a single payment (e.g., tax refund), by the adult (minor child 
head-of-household) during the reporting month. If the State counts 
the EITC as a resource, report it here as earned income in the month 
received. If the State assumes an advance payment is applied for and 
obtained, only report what is actually received for this item.
    84. Wages, Salaries, and Other Earnings

Amount of Unearned Income

    Unearned income has four categories. For each category of 
unearned income, enter the dollar amount of the adult's (or minor 
child head-of-household's) unearned income.
    85. Social Security: Enter the dollar amount of Social Security 
that the adult in the State (Tribal) TANF family has received for 
the reporting month.
    86. SSI: Enter the dollar amount of SSI that the adult in the 
State (Tribal) TANF family has received for the reporting month.
    87. Worker's Compensation: Enter the dollar amount of Worker's 
Compensation that the adult in the State (Tribal) TANF family has 
received for the reporting month.
    88. Other Unearned Income:
    Guidance: Other unearned income includes (but is not limited to) 
RSDI benefits, Veterans benefits, Unemployment Compensation, other 
government benefits, housing subsidy, contribution/income-in-kind, 
deemed income, Public Assistance or General Assistance, educational 
grants/scholarships/loans, other. Do not include Social Security, 
SSI, Worker's Compensation, value of Food Stamps assistance, the 
amount of the Child Care subsidy, and the amount of Child Support.
    Instruction: Enter the dollar amount of other unearned income 
that the adult in the State TANF family has received for the 
reporting month.

Child Characteristics

    This section allows for coding up to ten children in the TANF 
family. A minor child head-of-household should be coded as an adult, 
not as a child. The youngest child should be coded as the first 
child in the family, the second youngest child as the second child, 
and so on. If the needs of an unborn child are included in the 
amount of assistance provided to the family, code the unborn child 
as one of the children. Do this by entering the Date-of-Birth as 
``99999999'' and leave the other Child Characteristics fields blank.
    If there are more than ten children in the TANF family, use the 
following order to identify the persons to be coded: (1) children in 
the eligible family receiving assistance in order from youngest to 
oldest; (2) minor siblings of child in the eligible family receiving 
assistance from youngest to oldest; and (3) any other children.
    89. Family Affiliation:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for children.
    Instruction: Enter the one-digit code that shows the Child's 
relation to the eligible family receiving assistance.

1=Member of the eligible family receiving assistance

    Not in eligible family receiving assistance, but in the 
household

    2=Parent of minor child in the eligible family receiving 
assistance
    3=Caretaker relative of minor child in the eligible family 
receiving assistance
    4=Minor sibling of child in the eligible family receiving 
assistance
    5=Person whose income or resources are considered in determining 
eligibility for or amount of assistance for the eligible family 
receiving assistance

    90. Date of Birth: Enter the eight-digit code for date of birth 
for this child under the State (Tribal) TANF Program in the format 
YYYYMMDD.
    91. Social Security Number: Enter the nine-digit Social Security 
Number for the child in the format nnnnnnnnn.
    92. Race: Enter the one-digit code for the race of the TANF 
child.

1=White, not of Hispanic origin
2=Black, not of Hispanic origin
3=Hispanic
4=American Indian or Alaska Native
5=Asian or Pacific Islander
6=Other
9=Unknown

    93. Gender: Enter the one-digit code that indicates the child's 
gender.

1=Male
2=Female

[[Page 62207]]

Receives Disability Benefits

    The Act specifies five types of disability benefits. Two of 
these types of disability benefits are applicable to children. For 
each type of disability benefits, enter the one-digit code that 
indicates whether or not the child received the benefit.
    94. Receives Benefits Based on Federal Disability Status: Enter 
the one-digit code that indicates the child received benefits based 
on Federal disability status for the reporting month.

1=Yes, received benefits based on Federal disability status
2=No

    95. Receives Aid Under Title XVI-SSI: Enter the one-digit code 
that indicates the child received aid under a State plan approved 
under Title XVI-SSI for the reporting month.

1=Yes, received aid under Title XVI-SSI
2=No

    96. Relationship to Head-of-Household:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for children.
    Instruction: Enter the two-digit code that shows the child's 
relationship (including by marriage) to the head of the household, 
as defined by the Food Stamp Program or as determined by the State 
(Tribe), (i.e., the relationship to the principal person of each 
person living in the household.)

01=Head-of-household
02=Spouse
03=Parent
04=Daughter or son
05=Stepdaughter or stepson
06=Grandchild or great grandchild
07=Other related person (brother, niece, cousin)
08=Foster child
09=Unrelated child
10=Unrelated adult

    97. Teen Parent With Child In the Family:
    Guidance: A teen parent is a person who is under 20 years of age 
and that person's child is also a member of the TANF family.
    Instruction: Enter the one-digit code that indicates the child's 
teen parent status.

1=Yes, a teen parent
2=No

Educational Level

    Educational level is divided into two parts: the highest level 
of education attained and the highest degree attained.
    98. Highest Level of Education Attained: Enter the two-digit 
code to indicate the highest level of education attained by the 
child.

00=no formal education
01-12=Grade level completed in primary/secondary school including 
secondary level vocational school or adult high school

    99. Highest Degree Attained:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for children.
    Instruction: If the child has a degree(s), enter the one-digit 
code that indicates the child's highest degree attained. Otherwise, 
leave the field blank.

0=No degree
1=High school diploma, GED, or National External Diploma Program
2=Awarded Associate's Degree
3=Awarded Bachelor's Degree
4=Awarded graduate degree (Master's or higher)
5=Other credentials (degree, certificate, diploma, etc.)
9=Not applicable

    100. Citizenship/Alienage: Enter the two-digit code that 
indicates the child's citizenship/alienage. The coding for this data 
element is the same as for item number 56, on page 439.
    101. Cooperation with Child Support: Enter the one-digit code 
that indicates this child's parent has cooperated with child support 
for this child.

1=Yes, child's parent has cooperated with child support
2=No
3=Not applicable

Amount of Unearned Income

    Unearned income has two categories. For each category of 
unearned income, enter the dollar amount of the child's unearned 
income.
    102. SSI: Enter the dollar amount of SSI that the child in the 
State (Tribal) TANF family has received for the reporting month.
    103. Other Unearned Income: Enter the dollar amount of other 
unearned income that the child in the State (Tribal) TANF family has 
received for the reporting month.

Child Care Reporting Section

    Complete this section for each child in the TANF family for 
which a TANF child care subsidy is received (i.e., funded under the 
State or Tribal TANF Program). If child care is provided by more 
than one provider, enter the child care data for the greatest number 
of hours on the Primary Care line, and the next highest number of 
child care hours on the Secondary Care line.
    104. Type of Child Care:
    Definition: Provider types are divided into two broad categories 
of licensed/regulated and legally operating (no license category 
available in State or locality). Under each of these categories are 
four types of providers: in-home, family home, group home, and 
centers. A relative provider is defined as one who is at least 18 
years of age and who is a grandparent, great-grandparent, aunt or 
uncle, or sibling living outside the child's home.
    Instruction: Enter the two-digit code indicating the type of 
care for each child. The following codes specify who cared for the 
child and where such care took place during the reporting month.

01=Licensed/regulated in-home child care
02=Licensed/regulated family child care
03=Licensed/regulated group home child care
04=Licensed/regulated center-based child care
05=Legally operating (no license category available in State or 
locality) in-home child care provided by a non-relative
06=Legally operating (no license category available in State or 
locality) in-home child care provided by a relative
07=Legally operating (no license category available in State or 
locality) family child care provided by a non-relative
08=Legally operating (no license category available in State or 
locality) family child care provided by a relative
09=Legally operating (no license category available in State or 
locality) group child care provided by a non-relative
10=Legally operating (no license category available in State or 
locality) group child care provided by a relative
11=Legally operating (no license category available in State or 
locality) center-based child care

A. Primary
B. Secondary

    105. Total Monthly Cost of Child Care: For each child receiving 
child care, enter the total dollar amount (round to the nearest 
dollar) that the provider charges for the service. Include both the 
fee the family pays and the child care subsidy.

A. Primary
B. Secondary

    106. Total Monthly Hours of Child Care Provided During the 
Reporting Month: Enter the three-digit number for the total monthly 
number of child care hours provided for the reporting month.
    States (Tribes) may use their own formula to estimate the number 
of child care hours provided. If the State payment system is based 
on daily or part day rates, the calculated number of hours of 
service would be based on the number of full or part days given in 
each week (as defined by the State) multiplied by the number of 
hours for the full or part day. The calculated number should be 
reported as the actual number of hours provided.

Example:

    Full day=8 hours
    Part day=5 hours
    Care given=3 full days and 2 part days
    Average hours of care provided=(3*8+2*5)=34
    A. Primary
    B. Secondary

Appendix B--TANF Data Report--Section Two--Disaggregated Data 
Collection for Families No Longer Receiving Assistance Under the TANF 
Program

Instructions and Definitions

    General Instruction: The State agency or Tribal grantee should 
collect and report data for each data element, unless explicitly 
instructed to leave the field blank.
    1. State FIPS Code: Enter your two-digit State code from the 
following listing. These codes are the standard codes used by the 
National Institute of Standards and Technology. Tribal grantees 
should leave this field blank.

[[Page 62208]]



------------------------------------------------------------------------
                           State                                 Code   
------------------------------------------------------------------------
Alabama....................................................           01
Alaska.....................................................           02
American Samoa.............................................           60
Arizona....................................................           04
Arkansas...................................................           05
California.................................................           06
Colorado...................................................           08
Connecticut................................................           09
Delaware...................................................           10
District of Columbia.......................................           11
Florida....................................................           12
Georgia....................................................           13
Guam.......................................................           66
Hawaii.....................................................           15
Idaho......................................................           16
Illinois...................................................           17
Indiana....................................................           18
Iowa.......................................................           19
Kansas.....................................................           20
Kentucky...................................................           21
Louisiana..................................................           22
Maine......................................................           23
Maryland...................................................           24
Massachusetts..............................................           25
Michigan...................................................           26
Minnesota..................................................           27
Mississippi................................................           28
Missouri...................................................           29
Montana....................................................           30
Nebraska...................................................           31
Nevada.....................................................           32
New Hampshire..............................................           33
New Jersey.................................................           34
New Mexico.................................................           35
New York...................................................           36
North Carolina.............................................           37
North Dakota...............................................           38
Ohio.......................................................           39
Oklahoma...................................................           40
Oregon.....................................................           41
Pennsylvania...............................................           42
Puerto Rico................................................           72
Rhode Island...............................................           44
South Carolina.............................................           45
South Dakota...............................................           46
Tennessee..................................................           47
Texas......................................................           48
Utah.......................................................           49
Vermont....................................................           50
Virgin Islands.............................................           78
Virginia...................................................           51
Washington.................................................           53
West Virginia..............................................           54
Wisconsin..................................................           55
Wyoming....................................................           56
------------------------------------------------------------------------

    2. County FIPS Code: Enter the three-digit code established by 
the National Institute of Standards and Technology for 
classification of counties and county equivalents. Codes were 
devised by listing counties alphabetically and assigning 
sequentially odd integers; e.g., 001, 003, 005, * * *. A complete 
list of codes is available in Appendix F of the TANF Sampling and 
Statistical Methods Manual. Tribal grantees should leave this field 
blank.
    3. Tribal Code: For Tribal grantees, enter the three-digit 
Tribal code that represents your Tribe (See Appendix E of the TANF 
Sampling and Statistical Methods Manual for a complete listing of 
Tribal Codes). State agencies should leave this field blank.
    4. Reporting Month: Enter the four-digit year and two-digit 
month code that identifies the year and month for which the data are 
being reported.
    5. Stratum:
    Guidance: All families selected in the sample from the same 
stratum must be assigned the same stratum code. Valid stratum codes 
may range from ``00'' to ``99.'' States and Tribes with stratified 
samples should provide the ACF Regional Office with a listing of the 
numeric codes utilized to identify any stratification. If a State or 
Tribe uses a non-stratified sample design or opts to provide data 
for its entire caseload, enter the same stratum code any two-digit 
number) for each family.
    Instruction: Enter the two-digit stratum code.

Family-Level Data

    Definition: For reporting purposes, the TANF family means (a) 
all individuals receiving assistance as part of a family under the 
State's TANF Program; and (b) the following additional persons 
living in the household, if not included under (a) above:
    (1) Parent(s) or caretaker relative(s) of any minor child 
receiving assistance;
    (2) Minor siblings (including unborn children) of any child 
receiving assistance; and
    (3) Any person whose income or resources would be counted in 
determining the family's eligibility for or amount of assistance.
    6. Case Number--TANF:
    Guidance: If the case number is less than the allowable eleven 
characters, a State may use lead zeros to fill in the number.
    Instruction: Enter the number that was assigned by the State 
agency or Tribal grantee to uniquely identify the TANF family.
    7. ZIP Code: Enter the five-digit ZIP code for the family's 
place of residence for the reporting month.
    8. Disposition: Enter one of the following codes for each TANF 
family.

1=Data collection completed
2=Not subject to data collection/listed in error

    9. Reason for Closure:

    Guidance: A closed case is a family whose assistance was 
terminated for the reporting month, but received assistance under 
the State's TANF Program in the prior month. A temporally suspended 
case is not a closed case. If there is more than one applicable 
reason for closure, determine the principal (i.e., most relevant) 
reason. If two or more reasons are equally relevant, use the reason 
with the lowest numeric code.
    Instruction: Enter the one-digit code that indicates the reason 
for the TANF family no longer receiving assistance.

1=Employment
2=Marriage
3=Five-Year Time Limit
4=Sanction
5=State (Tribal) policy
6=Minor child absent from the home for a significant time period
7=Transfer to Separate State MOE Program
8=Other

    10. Number of Family Members: Enter two digits that represent 
the number of members in the family, which received assistance under 
the State's (Tribe's) TANF Program.
    11. Receives Subsidized Housing:
    Guidance: Subsidized housing refers to housing for which money 
was paid by the Federal, State, or Local government or through a 
private social service agency to the family or to the owner of the 
housing to assist the family in paying rent. Two families sharing 
living expenses does not constitute subsidized housing.
    Instruction: Enter the one-digit code that indicates whether or 
not the TANF family received subsidized housing for the reporting 
month.

1=Public housing
2=HUD rent subsidy
3=Other rent subsidy
4=No housing subsidy

    12. Receives Medical Assistance: Enter ``1'' if, for the 
reporting month, any TANF family member is eligible to receive 
(i.e., a certified recipient of) medical assistance under the State 
plan approved under Title XIX or ``2'' if no TANF family member is 
eligible to receive medical assistance under the State plan approved 
under Title XIX.

1=Yes, receives medical assistance
2=No

    13. Receives Food Stamps: If the TANF family received Food 
Stamps for the sample month, enter the one-digit code indicating the 
type of Food Stamp assistance. Otherwise, enter ``4.''

1=Yes, Food Stamp coupon allotment
2=Yes, cash
3=Yes, wage subsidy
4=No

    14. Amount of Food Stamp Assistance:
    Guidance: For situations in which the Food Stamp household 
differs from the TANF family, code this element in a manner that 
most accurately reflects the resources available to the TANF family.
    Instruction: Enter the TANF family's authorized dollar amount of 
Food Stamp assistance for the reporting month.
    15. Receives Subsidized Child Care:
    Guidance: For the purpose of coding this data element, 
subsidized child care funded under the Child Care and Development 
Fund with funds that were transferred from the State TANF Program 
should be coded as ``2.''
    Instruction: If the TANF family receives subsidized child care 
for the reporting month, enter code ``1'', ``2'', ``3'', or ``4'', 
whichever is appropriate. Otherwise, enter code ``5.''

1=Yes, funded under the State (Tribal) TANF Program
2=Yes, funded under the Child Care and Development Fund
3=Yes, funded under another Federal program (e.g., SSBG)
4=Yes, funded under a State, Tribal, or local program
5=No

    16. Amount of Subsidized Child Care:
    Guidance: Subsidized child care means a grant by the Federal, 
State or Local government to a parent (or care-taker relative) to 
support, in part or whole, the cost of child care services provided 
by an eligible provider to an eligible child. The grant may be paid 
directly to the parent (or care-taker relative) or to a child care 
provider on behalf of the parent (or care-taker relative).

[[Page 62209]]

    Instruction: Enter the dollar amount of subsidized child care 
that the TANF family has received for services in the reporting 
month. If the TANF family did not receive any subsidized child care 
for the reporting month, enter ``00.''

Person-Level Data

    Person-level data has two sections: the adult and minor child 
head-of-household characteristic section and the child 
characteristics section. Section 419 of the Act defines adult and 
minor child. An adult is an individual that is not a minor child. A 
minor child is an individual who (a) has not attained 18 years of 
age or (b) has not attained 19 years of age and is a full-time 
student in a secondary school (or in the equivalent level of 
vocational or technical training.)

Adult and Minor Child Head-of-Household Characteristics

    This section allows for coding up to six adults (or a minor 
child head-of-household and up to five adults) in the TANF family. A 
minor child head-of-household should be coded as an adult. For each 
adult (or minor child head-of-household) in the TANF family, 
complete the adult characteristics section. If a noncustodial parent 
is participating in work activities funded under the State (Tribal) 
TANF Program for the reporting month, the noncustodial parent must 
also be reported in this section as a member of the family receiving 
assistance.
    If there are more than six adults (or a minor child head-of-
household and five adults) in the TANF family, use the following 
order to identify the persons to be coded: (1) the head-of-
household; (2) parents in the eligible family receiving assistance; 
(3) other adults in the eligible family receiving assistance; (4) 
Parents not in the eligible family receiving assistance; (5) 
caretaker relatives not in the eligible family receiving assistance; 
and (6) other persons, whose income or resources count in 
determining eligibility for or amount of assistance of the eligible 
family receiving assistance, in descending order the person with the 
most income to the person with least income.
    17. Family Affiliation:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for adults.
    Instruction: Enter the one-digit code that shows the adult's 
relation to the eligible family receiving assistance.

1=Member of the eligible family receiving assistance

    Not in eligible family receiving assistance, but in the 
household

2=Parent of minor child in the eligible family receiving assistance
3=Caretaker relative of minor child in the eligible family receiving 
assistance
4=Minor sibling of child in the eligible family receiving assistance
5=Person whose income or resources are considered in determining 
eligibility for or amount of assistance for the eligible family 
receiving assistance

    18. Date of Birth: Enter the eight-digit code for date of birth 
for this adult (or minor child head-of-household) under TANF in the 
format YYYYMMDD.
    19. Social Security Number: Enter the nine-digit Social Security 
Number for the adult (or minor child head-of-household) in the 
format nnnnnnnnn.
    20. Race: Enter the one-digit code for the race of the TANF 
adult (or minor child head-of-household).

1=White, not of Hispanic origin
2=Black, not of Hispanic origin
3=Hispanic
4=American Indian or Alaska Native
5=Asian or Pacific Islander
6=Other
9=Unknown

    21. Gender: Enter the one-digit code that indicates the adult's 
(or minor child head-of-household's) gender.

1=Male
2=Female

Receives Disability Benefits

    The Act specifies five types of disability benefits.For each 
type of disability benefits, enter the one-digit code that indicates 
whether or not the adult (or minor child head-of-household) received 
the benefit.
    22. Receives Federal Disability Insurance Benefits: Enter the 
one-digit code that indicates the adult (or minor child head-of-
household) received Federal disability insurance benefits for the 
reporting month.

1=Yes, received Federal disability insurance
2=No

    23. Receives Benefits Based on Federal Disability Status: Enter 
the one-digit code that indicates the adult (or minor child head-of-
household) received benefits based on Federal disability status for 
the reporting month.

1=Yes, received benefits based on Federal disability status
2=No

    24. Receives Aid Under Title XIV-APDT: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XIV for the reporting 
month.

1=Yes, received aid under Title XIV-APDT
2=No

    25. Receives Aid Under Title XVI-AABD: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XVI-AABD for the 
reporting month.

1=Yes, received aid under Title XVI-AABD
2=No

    26. Receives Aid Under Title XVI-SSI: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XVI-SSI for the 
reporting month.

1=Yes, received aid under Title XVI-SSI
2=No

    27. Marital Status: Enter the one-digit code for the marital 
status of the recipient.

1=Single, never married
2=Married, living together
3=Married, but separated
4=Widowed
5=Divorced

    28. Relationship to Head-of-Household:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for adults.
    Instruction: Enter the two-digit code that shows the adult's 
relationship (including by marriage) to the head of the household, 
as defined by the Food Stamp Program or as determined by the State 
(Tribe), (i.e., the relationship to the principal person of each 
person living in the household.) If a minor child head-of-household, 
enter code ``01.''

01=Head of household
02=Spouse
03=Parent
04=Daughter or son
05=Stepdaughter or stepson
06=Grandchild or great grandchild
07=Other related person (brother, niece, cousin)
08=Foster child
09=Unrelated child
10=Unrelated adult

    29. Teen Parent With Child In the Family:
    Guidance: A teen parent is a person who is under 20 years of age 
and that person's child is also a member of the TANF family.
    Instruction: Enter the one-digit code that indicates the adult's 
(or minor child head-of-household's) teen parent status.

1=Yes, a teen parent
2=No

Educational Level

    Educational level is divided into two parts: the highest level 
of education attained and the highest degree attained.
    30. Highest Level of Education Attained: Enter the two-digit 
code to indicate the highest level of education attained by the 
adult (or minor child head-of-household).

00=No formal education
01-12=Grade level completed in primary/secondary school including 
secondary level vocational school or adult high school

    31. Highest Degree Attained: If the adult (or minor child head-
of-household) has a degree(s), enter the one-digit code that 
indicates the adult's (or minor child head-of-household's) highest 
degree attained. Otherwise, leave the field blank.

0=No degree
1=High school diploma, GED, or National External Diploma Program
2=Awarded Associate's Degree
3=Awarded Bachelor's Degree
4=Awarded graduate degree (Master's or higher)
5=Other credentials (degree, certificate, diploma, etc.)

    32. Citizenship/Alienage:
    Guidance: As described in TANF-ACF-PA-97-1, States have the 
flexibility to: (1) use State MOE funds to serve ``qualified'' 
aliens, including those who enter on or after August 22, 1996; (2) 
use Federal TANF funds to serve ``qualified'' aliens who arrived 
prior to the enactment of the PRWORA on August 22, 1996 [such aliens 
who arrived after

[[Page 62210]]

enactment are barred from receiving Federal TANF funds for five 
years from the date of entry, except for certain aliens such as 
refugees and asylees]; (3) use State MOE funds to serve legal aliens 
who are not ``qualified''; and (4) use, under section 411(d) of 
PRWORA, State MOE funds to serve aliens who are not lawfully present 
in the U.S., but only through enactment of a State law, after the 
date of PRWORA enactment, which ``affirmatively provides'' for such 
benefits.
    The citizenship/alienage is divided into four groups: 
individuals eligible (for the TANF Program based on citizenship/
alienage), individuals eligible at State option, individuals not 
eligible, and status unknown.
    Instruction: Enter the two-digit code that indicates the adult's 
(or minor child head-of-household's) citizenship/alienage.
    Individuals Eligible for the TANF Program

01=U.S. citizen, including naturalized citizens
02=Permanent resident who has worked forty qualifying quarters; 
alien who is a veteran with an honorable discharge from the U.S. 
Armed Forces or is on active duty in the U.S. Armed Forces, or 
spouse or unmarried dependent children of such alien
03=Qualified alien accorded refugee, Cuban or Haitian entrant, or 
Amerasian immigrant status (INS Form I-94) who has resided in the 
U.S. five years or less
04=Qualified alien granted political asylum five or less years ago; 
qualified alien granted a withholding of deportation by INS (under 
sec. 243(h) or sec. 241(b)(3) of the INA) five or less years ago.

    Individuals Eligible for the TANF Program at State Option

05=Qualified alien, (including immigrant accorded permanent resident 
status (``green card''), parolee granted parole for at least one 
year under sec. 212(d)(5) of the INA, and certain battered aliens 
and their children who are determined to be qualified), who arrived 
in the U.S. prior to enactment (August 22, 1996) or who arrived in 
the U.S. on or after enactment and has resided in the U.S. more than 
five years
06=Qualified alien accorded refugee, Cuban or Haitian entrant, or 
Amerasian immigrant status (INS Form I-94) who has resided in the 
U.S. more than five years
07=Qualified alien granted political asylum or granted withholding 
of deportation by INS (under sec. 243(h) or sec. 241(b)(3) of the 
INA) more than five years ago;

    Individuals Not Eligible for the TANF Program

08=Qualified alien (other than a refugee, Cuban or Haitian entrant, 
Amerasian immigrant, asylee, or alien whose deportation has been 
withheld under sec. 243(h) or sec. 241(b)(3) of the INA) who arrived 
in the U.S. on or after enactment and has resided in the U.S. less 
than 5 years.
09=Any alien who is not a qualified alien.

    Status Unknown

99=Unknown

    33. Number of Months Countable toward Federal Time Limit in Own 
State (Tribe): Enter the number of months countable toward the 
adult's (or minor child head-of-household's) Federal five-year time 
limit based on assistance received from the State (Tribe).
    34. Number of Months Countable toward Federal Time Limit in 
Other States or Tribes: Enter the number of months countable toward 
the adult's (or minor child head-of-household's) Federal five-year 
time limit based on assistance received from other States or Tribes.
    35. Number of Countable Months Remaining Under State's (Tribe's) 
Time Limit: Enter the number of months that remain countable toward 
the adult's (or minor child head-of-household's) State (Tribal) time 
limit.
    36. Employment Status: Enter the one-digit code that indicates 
the adult's (or minor child head-of-household's) employment status.

1=Employed
2=Unemployed, looking for work
3=Not in labor force (i.e, unemployed, not looking for work, 
includes discouraged workers)

Amount of Earned Income

    For each category of earned income, enter the amount of the 
adult's (or minor child head-of-household's) earned income.
    37. Earned Income Tax Credit (EITC):
    Guidance: Earned Income Tax Credit is a refundable tax credit 
for families and dependent children. EITC payments are received 
either monthly (as advance payment through the employer), annually 
(as a refund from IRS), or both.
    Instruction: Enter the total dollar amount of the earned income 
tax credit actually received, whether received as an advance payment 
or a single payment (e.g., tax refund), by the adult (minor child 
head-of-household) during the reporting month. If the State counts 
the EITC as a resource, report it here as earned income in the month 
received. If the State assumes an advance payment is applied for and 
obtained, only report what is actually received for this item.
    38. Wages, Salaries, and Other Earnings:

Amount of Unearned Income

    39. Unearned Income: Enter the amount of the adult's (or minor 
child head-of-household's) unearned income.

Child Characteristics

    This section allows for coding up to ten children in the TANF 
family. A minor child head-of-household should be coded as an adult, 
not as a child. The youngest child should be coded as the first 
child in the family, the second youngest child as the second child, 
and so on. If the needs of an unborn child are included in the 
amount of assistance provided to the family, code the unborn child 
as one of the children. Do this by entering the Date-of-Birth as 
``99999999'' and leave the other Child Characteristics fields blank.
    If there are more than ten children in the TANF family, use the 
following order to identify the persons to be coded: (1) children in 
the eligible family receiving assistance in order from youngest to 
oldest; (2) minor siblings of child in the eligible family receiving 
assistance from youngest to oldest; and (3) any other children.
    40. Family Affiliation:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for children.
    Instruction: Enter the one-digit code that shows the Child's 
relation to the eligible family receiving assistance.

1=Member of the eligible family receiving assistance

    Not in eligible family receiving assistance, but in the 
household

2=Parent of minor child in the eligible family receiving assistance
3=Caretaker relative of minor child in the eligible family receiving 
assistance
4=Minor sibling of child in the eligible family receiving assistance
5=Person whose income or resources are considered in determining 
eligibility for or amount of assistance for the eligible family 
receiving assistance

    41. Date of Birth: Enter the eight-digit code for date of birth 
for this child under TANF in the format YYYYMMDD.
    42. Social Security Number: Enter the nine-digit Social Security 
Number for the child in the format nnnnnnnnn.
    43. Race: Enter the one-digit code for the race of the TANF 
child.

1=White, not of Hispanic origin
2=Black, not of Hispanic origin
3=Hispanic
4=American Indian or Alaska Native
5=Asian or Pacific Islander
6=Other
9=Unknown

    44. Gender: Enter the one-digit code that indicates the child's 
gender.

1=Male
2=Female

Receives Disability Benefits

    The Act specifies five types of disability benefits. Two of 
these types of disability benefits are applicable to children. For 
each type of disability benefits, enter the one-digit code that 
indicates whether or not the child received the benefit.
    45. Receives Benefits Based on Federal Disability Status: Enter 
the one-digit code that indicates the child received benefits based 
on Federal disability status for the reporting month.

1=Yes, received benefits based on Federal disability status
2=No

    46. Receives Aid Under Title XVI-SSI: Enter the one-digit code 
that indicates the child received aid under a State plan approved 
under Title XVI-SSI for the reporting month.

1=Yes, received aid under Title XVI-SSI
2=No

    47. Relationship to Head-of-Household:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-

[[Page 62211]]

 household section and (2) the minor child section. The same coding 
schemes are used in both sections. Some of these codes may not be 
applicable for children.
    Instruction: Enter the two-digit code that shows the child's 
relationship (including by marriage) to the head of the household, 
as defined by the Food Stamp Program or as determined by the State 
(Tribe), (i.e., the relationship to the principal person of each 
person living in the household.)

01=Head of household
02=Spouse
03=Parent
04=Daughter or son
05=Stepdaughter or stepson
06=Grandchild or great grandchild
07=Other related person (brother, niece, cousin)
08=Foster child
09=Unrelated child
10=Unrelated adult

    48. Teen Parent With Child In the Family: 
    Guidance: A teen parent is a person who is under 20 years of age 
and that person's child is also a member of the TANF family.
    Instruction: Enter the one-digit code that indicates the child's 
teen parent status.

1=Yes, a teen parent
2=No

Educational Level

    Educational level is divided into two parts: the highest level 
of education attained and the highest degree attained.
    49. Highest Level of Education Attained: Enter the two-digit 
code to indicate the highest level of education attained by the 
child.

00=No formal education
01-12=Grade level completed in primary/secondary school including 
secondary level vocational school or adult high school

    50. Highest Degree Attained:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for children.
    Instruction: If the child has a degree(s), enter the one-digit 
code that indicates the child's highest degree attained. Otherwise, 
leave the field blank.

0=No degree
1=High school diploma, GED, or National External Diploma Program
2=Awarded Associate's Degree
3=Awarded Bachelor's Degree
4=Awarded graduate degree (Master's or higher)
5=Other credentials (degree, certificate, diploma, etc.)
9=Not applicable

    51. Citizenship/Alienage: Enter the two-digit code that 
indicates the child's citizenship/alienage. The coding for this data 
element is the same as for item number 27, on page 486.
    52. Cooperation with Child Support: Enter the one-digit code 
that indicates whether this child's parent has cooperated with child 
support for this child.

1=Yes, child's parent has cooperated with child support
2=No, child's parent has not cooperated with child support
3=Not applicable

    53. Unearned Income: Enter the dollar amount of the child's 
unearned income.

Appendix C--TANF Data Report--Section Three--Aggregated Data Collection 
for Families Applying for, Receiving, and No Longer Receiving 
Assistance Under the TANF Program

Instructions and Definitions

    1. State FIPS Code: Enter your two-digit State code. Tribal 
grantees should leave this field blank.
    2. Tribal Code: For Tribal grantees only, enter the three-digit 
Tribal code that represents your Tribe (See Appendix E of the TANF 
Sampling and Statistical Methods Manual for a complete listing of 
Tribal Codes). State agencies should leave this field blank.
    3. Calendar Quarter: The four calendar quarters are as follows:

First quarter........................  January-March.                   
Second quarter.......................  April-June.                      
Third quarter........................  July-September.                  
Fourth quarter.......................  October-December.                
                                                                        

    Enter the four-digit year and one-digit quarter code (in the 
format YYYYQ) that identifies the calendar year and quarter for 
which the data are being reported (e.g., first quarter of 1997 is 
entered as ``19971'').

Applications

    Guidance: The term ``application'' means the action by which an 
individual indicates in writing to the agency administering the 
State (or Tribal) TANF Program his/her desire to receive assistance.
    Instruction: All counts of applications should be unduplicated 
monthly totals.
    4. Total Number of Applications: Enter the total number of 
approved and denied applications received for each month of the 
quarter. For each month in the quarter, the total in this item 
should equal the sum of the number of approved applications (in item 
#5) and the number of denied applications (in item #6).

A. First Month:
B. Second Month:
C. Third Month:

    5. Total Number of Approved Applications: Enter the number of 
applications approved during each month of the quarter.
A. First Month:
B. Second Month:
C. Third Month:

    6. Total Number of Denied Applications: Enter the number of 
applications denied (or otherwise disposed of) during each month of 
the quarter.

A. First Month:
B. Second Month:
C. Third Month:

Active Cases

    For purposes of completing this report, include all TANF 
eligible cases receiving assistance (i.e., cases funded under the 
TANF block grant and State MOE funded TANF cases) as cases receiving 
assistance under the State (Tribal) TANF Program. All counts of 
families and recipients should be unduplicated monthly totals.
    7. Total Amount of Assistance: Enter the dollar value of all 
assistance (cash and non-cash) provided to TANF families under the 
State (Tribal) TANF Program for each month of the quarter. Round the 
amount of assistance to the nearest dollar.

A. First Month:
B. Second Month:
C. Third Month:
    8. Total Number of Families: Enter the number of families 
receiving assistance under the State (Tribal) TANF Program for each 
month of the quarter. The total in this item should equal the sum of 
the number of two-parent families (in item #9), the number of one-
parent families (in item <greek-i>10) and the number of no-parent 
families (in item #11).

A. First Month:
B. Second Month:
C. Third Month:
    9. Total Number of Two-parent Families: Enter the total number 
of 2-parent families receiving assistance under the State (Tribal) 
TANF Program for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month: 
    10. Total Number of One-Parent Families: Enter the total number 
of one-parent families receiving assistance under the State (Tribal) 
TANF Program for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:
    11. Total Number of No-Parent Families: Enter the total number 
of no-parent families receiving assistance under the State (Tribal) 
TANF Program for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    12. Total Number of Recipients: Enter the total number of 
recipients receiving assistance under the State (Tribal) TANF 
Program for each month of the quarter. The total in this item should 
equal the sum of the number of adult recipients (in item #13) and 
the number of child recipients (in item #14).

A. First Month:
B. Second Month:
C. Third Month:

    13. Total Number of Adult Recipients: Enter the total number of 
adult recipients receiving assistance under the State (Tribal) TANF 
Program for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    14. Total Number of Child Recipients: Enter the total number of 
child recipients receiving assistance under the State (Tribal) TANF 
Program for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:


[[Page 62212]]


    15. Total Number of Non-Custodial Parents Participating in Work 
Activities: Enter the total number of non-custodial parents 
participating in work activities under the State (Tribal) TANF 
Program for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    16. Total Number of Minor Child Heads-of-Household: Enter the 
total number of minor child head-of-household families receiving 
assistance under the State (Tribal) TANF Program for each month of 
the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    17. Total Number of Births: Enter the total number of births for 
families receiving assistance under the State (Tribal) TANF Program 
for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    18. Total Number of Out-of-Wedlock Births: Enter the total 
number of out-of-wedlock births for families receiving assistance 
under the State (Tribal) TANF Program for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

Closed Cases

    19. Total Number of Closed Cases: Enter the total number of 
closed cases for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

BILLING CODE 4184-01-P

[[Page 62213]]

[GRAPHIC] [TIFF OMITTED] TP20NO97.000



BILLING CODE 4184-01-C

[[Page 62214]]

Appendix D--Section 2--Instruction for Completion of Form ACF-196

Financial Reporting Form for the Temporary Assistance for Needy 
Families (TANF) Program
    All States must complete and submit this report in accordance 
with these instructions on behalf of the State agency administering 
the TANF Program.
    Due Dates: This form must be submitted quarterly by February 14, 
May 15, August 14 and November 14.
    States must submit quarterly reports for each fiscal year until 
all Federal TANF funds are expended. A State may be submitting 
reports simultaneously to cover two or more fiscal years.
    Distribution: The original copy (with original signatures) 
should be submitted to: Administration for Children and Families, 
Office of Program Support, Division of Formula, Entitlement and 
Block Grants, Aerospace Building, 7th Floor, 370 L'Enfant Promenade, 
S.W., Washington, D.C. 20447. An additional copy should be submitted 
to the ACF Regional Administrator.

General Instructions

--Round all entries to the nearest dollar. Omit cents.
--Enter State name.
--Enter the Fiscal Year for which this report is being submitted. 
Funding for each fiscal year is available until expended. Therefore, 
for each fiscal year, a State may be submitting reports 
simultaneously to cover two or more fiscal years. It is important to 
indicate the year for which information is being reported.
--Enter the ending dates for the current quarter (the quarter just 
ended for which this constitutes the report of actual expenditures 
and obligations) and the ending date of the next quarter (the 
upcoming quarter for which estimates are being requested on line 
11).

    Example: The State is reporting for the 1st quarter of the 
Federal fiscal year (10/1 through 12/31), the report is due February 
14, the current quarter ending date is 12/31, the next quarter 
ending date for which estimates are requested is 6/30. The estimate 
submitted by the State will be for the quarter of 4/1 through 6/30. 
Estimates are not required on quarterly reports submitted for prior 
fiscal years.

--Enter whether this report is being used for annual reconciliation 
of the Contingency Fund.
--Enter the Federal Medical Assistance Percentage Rate used by the 
State for the fiscal year for which Contingency Funds were received.
--Indicate whether this is a new report or a revision of a report 
previously submitted for the same period.
--Entries are not required or are not applicable to blocks that are 
shaded.

    Columns: All amounts reported in columns (A) through (D) must be 
actual expenditures or obligations made in accordance with all 
applicable statutes and regulations. Amounts reported in the 
estimates section are Federal estimates of expenditures to be made 
during the quarter indicated based on the best information available 
to the State.

Explanation of Columns

    Column (A) lines 1 through 4 refer to the Federal State Family 
Assistance Grant (SFAG) awards, amounts transferred to the Child 
Care and Development Fund (CCDF) (Discretionary Fund) and the Social 
Services Block Grant (SSBG) program, and the amount available for 
TANF.
    Column (A) lines 5 through 10 refer to the Federal SFAG funds 
the State expended and obligated under its TANF program.
    Column (A) line 11 is the SFAG grant award amount or percentage 
the State estimates it will need for the next quarter ending 
referenced at the top of the form. (See page 6 of Line Item 
Instructions)
    Column (B) lines 5 through 8 refer to State TANF expenditures 
the State is making to meet its TANF Maintenance of Effort (MOE) 
requirement. Includes State funds that are commingled with Federal 
funds; or State funds expended on the State program funded under 
TANF.

    Note: States receiving Contingency Funds under section 403(b) 
for the fiscal year must also use this same column to report State 
TANF expenditures made to meet the Contingency Fund (CF) MOE 
requirement and matching expenditures made above the 100 percent MOE 
requirement. Expenditures made to meet the CF MOE requirement and 
expenditures made above the MOE level (for matching purposes) must 
be expenditures made under the State TANF program only; they cannot 
include expenditures made under ``separate State programs.'' In 
addition, child care expenditures cannot be included as MOE 
expenditures or expenditures that are matched with Contingency 
Funds.

    Column (C) lines 5 through 8 refer to State expenditures the 
State is making in Separate State Programs outside the State TANF 
program to meet its TANF MOE requirement.

    Note: For the TANF MOE requirement, the cumulative total 
expenditures (Sum of 8(B)+8(C)) reported at the end of the Federal 
fiscal year should add up to 75% of fiscal year 1994 historic State 
expenditures if the State met the TANF participation requirements, 
or 80% of fiscal year 1994 historic State expenditures if the State 
did not meet the TANF participation requirements. TANF MOE 
requirements and tables were published in Program Instruction No. 
TANF-ACF-PI-96-2, dated December 6, 1996.

    For States that received Contingency Funds, line 8(B) minus line 
5c(B) (child care) must exceed 100 percent of the CF MOE 
requirement.

    Note: The State must submit an addendum attached to the fourth 
quarter report for each fiscal year that provides ``separate State 
program'' information as required under parts 273 and 274 of the 
proposed rules.

    Column (D) line 1 refers to the Federal Contingency Fund grant 
awards.
    Column (D) lines 5 through 10 refer to the Federal share of 
expenditures for which Federal funding is available at the FMAP rate 
for the fiscal year for which Contingency Funds were received. 
Contingency Funds are available for match for State expenditures in 
excess of 100% of CF MOE requirements as explained in the ``Note'' 
above.

    Example: The State received Contingency Funds of $100,000 for 6 
months of the fiscal year; the FMAP rate is 60% Federal and 40% 
State; the CF 100% MOE requirement is $1,000,000; the State reported 
expenditures under Columns (B) and (D) of $1,200,000. To determine 
how much of the Contingency Funds the State can keep, the 
expenditures of $1,000,000 (CF MOE requirement) must be subtracted 
from the total expenditures of $1,200,000. That difference 
($200,000) is to be multiplied by 60 percent, i.e., 
$200,000 x 60%=$120,000. The $120,000 must then be multiplied by 1/
12 times the number of months a State received Contingency Funds, 
i.e., $120,000 x 1/12 x 6=$60,000. The State may keep only $60,000 
of the $100,000 ACF awarded it for the Contingency Fund.
    Determining how much, if any, a State can keep of the 
Contingency Funds awarded to it for a fiscal year, is known only 
after annual reconciliation of the Contingency Fund account is 
completed. This form will serve as the annual reconciliation report 
when submitted for the fourth quarter of the fiscal year. Based on 
the example above, line 8 of Column (D) (Total Expenditures-
Contingency Fund) must equal $60,000.
    It is possible that a State will have received Contingency Funds 
after the end of the fiscal year that apply to expenditures made in 
the prior fiscal year. For a State receiving Contingency Funds for a 
fiscal year after it has ended, the State will be required to submit 
a revised fourth quarter report within 45 days of receipt of the 
additional Contingency Funds. There is no carryover from one fiscal 
year to the next.

State Replacement of Grant Reductions Resulting From Penalties

    If a State's State Family Assistance Grant is reduced because of 
the imposition of a penalty under section 409, section 409(a)(12) 
provides that the State must maintain a level of spending at the 
SFAG amount. In place of SFAG funds withheld for a penalty, the 
State must substitute with its own funds an amount that is no less 
than the amount withheld. The State replacement funds must be 
included in Column (B).
Line Item Instructions--Cumulative Fiscal Year Expenditures and 
Obligations
    Line 1. Awarded. Enter in column (A) the cumulative total of 
State Family Assistance Grant (SFAG) funds awarded to the State from 
October 1 of the Federal fiscal year for which the report is being 
submitted through the current quarter being reported. Enter in 
column (D) the cumulative total of Contingency Funds awarded to the 
State from October 1 of the Federal fiscal year for which the report 
is being submitted through the current quarter being reported.
    Line 2. Transferred to Child Care and Development Fund (CCDF). 
Enter in column (A) the cumulative total of funds the State 
transferred to the Discretionary Fund of the Child Care and 
Development Fund from October 1 of the Federal fiscal year for which 
the report is being submitted through the current quarter being 
reported. Section

[[Page 62215]]

404(d)(1) of the Act governs the transfer of SFAG funds to the 
Discretionary Fund. In compliance with section 404(d)(1), a State 
may not transfer more than 30% of its total annual SFAG grant. A 
State may transfer this entire amount to the Discretionary Fund of 
the CCDF program. All funds transferred to the Discretionary Fund of 
the CCDF program take on the rules and regulations of that recipient 
Fund.
    Line 3. Transferred to SSBG. Enter in column (A) the cumulative 
total of funds the State transferred to the Social Services Block 
Grant (SSBG) program from October 1 of the Federal fiscal year for 
which the report is being submitted through the current quarter 
being reported. Section 404(d)(2) of the Act governs the transfer of 
SFAG funds to the SSBG program; it limits the amount a State may 
transfer to no more than 10% of its total annual SFAG to SSBG. 
(Also, the combined amount transferred to SSBG and the Discretionary 
Fund may not exceed 30% of the annual SFAG. In other words, for all 
financial reports applicable to grant funds for one fiscal year, the 
sum of the total cumulative amount reported on line 3 and the total 
cumulative amount reported on line 2 cannot exceed 30% of the annual 
SFAG.) All funds transferred to the SSBG program are subject to the 
statute and regulations of the recipient SSBG program.
    Line 4. Available for TANF. Enter in column (A) the cumulative 
total of funds available for TANF after subtracting the amounts 
transferred to the CCDF program (Discretionary Fund) (line 2(A)) 
and/or the SSBG program (line 3(A)) from October 1 of the Federal 
fiscal year for which the report is being submitted through the 
current quarter being reported.
    Line 5. Expenditures on Assistance. Blocks are shaded. 
Expenditures in this category must be included in Lines 5a. through 
5d.
    Line 5a. Cash Assistance. Enter in columns (A), (B), (C) and (D) 
the cumulative total expenditures for cash assistance from October 1 
of the Federal fiscal year for which the report is being submitted 
through the current quarter being reported.
    Line 5b. Work Subsidies. Enter in columns (A), (B), (C) and (D) 
the cumulative total expenditures for work subsidies from October 1 
of the Federal fiscal year for which the report is being submitted 
through the current quarter being reported.
    Line 5c. Child Care. Enter in columns (A), (B), (C) and (D) the 
cumulative total expenditures for child care from October 1 of the 
Federal fiscal year for which the report is being submitted through 
the current quarter being reported. The amounts reported in this 
category do not include funds transferred to the CCDF (Discretionary 
Fund) or SSBG programs.
    Line 5d. Other. Enter in columns (A), (B), (C) and (D) the 
cumulative total expenditures for other expenditures considered 
``expenditures on assistance'' that were not included on Lines 5a-5c 
from October 1 of the Federal fiscal year for which the report is 
being submitted through the current quarter being reported.

    Note: The State must submit as an addendum attached to the 
fourth quarter report for each fiscal year which identifies the 
activities for which the ``other expenditures'' under this line item 
applies.
    Line 6. Expenditures on Non-Assistance. Blocks are shaded. 
Expenditures in this category must be included in Lines 6a through 
6e.
    Line 6a. Work Activities. Enter in columns (A), (B), (C) and (D) 
the cumulative total expenditures for work activities from October 1 
of the Federal fiscal year for which the report is being submitted 
through the current quarter being reported.

    Note: The State must submit as an addendum attached to the 
fourth quarter report for each fiscal year (or more frequently, if 
there are changes) the State's definition of each work activity.

    Line 6b. Administration. Enter in columns (A), (B), (C) and (D) 
the cumulative total expenditures for administrative costs from 
October 1 of the Federal fiscal year for which the report is being 
submitted through the current quarter being reported.
    For State Family Assistance Grants (SFAG), the 15% 
administrative cost cap applies to the amount Available for TANF 
reported on line 4(A) of this form. For the Contingency Fund, the 
15% administrative cost cap applies to the amount of total Federal 
expenditures reported on line 8(D). For State expenditures reported 
in columns (B) and (C), the 15% administrative cost cap applies to 
the amount of Total Expenditures (line 8) reported for each of these 
columns.
    Line 6c. Systems. Enter in columns (A), (B), (C) and (D) the 
cumulative total expenditures for systems costs from October 1 of 
the Federal fiscal year for which the report is being submitted 
through the current quarter being reported.

    Note: Section 404(b)(1) of the Act limits States to which a 
grant is made under section 403 to expend no more than 15% of the 
grant for administrative costs. In addition, section 404(b)(2) of 
the Act states that the 15% administrative cost cap shall not apply 
to the use of a grant for information technology and computerization 
needed for tracking or monitoring required by or under this part.

    Line 6d. Transitional Services for Employed. Enter in columns 
(A), (B), (C) and (D) the cumulative total expenditures to provide 
transitional services to families that cease to receive assistance 
under the TANF program because of employment from October 1 of the 
Federal fiscal year for which the report is being submitted through 
the current quarter being reported.

    Note: The State must submit as an addendum attached to the 
fourth quarter report for each fiscal year which describes the types 
of services the State provided under this line item.

    Line 6e. Other. Enter in columns (A), (B), (C) and (D) the 
cumulative total expenditures for other expenditures considered 
``expenditures on non-assistance'' that were not included on Lines 
6a-6d. from October 1 of the Federal fiscal year for which the 
report is being submitted through the current quarter being 
reported.

    Note: The State must submit as an addendum attached to the 
fourth quarter report for each fiscal year which identifies the 
activities for which the ``other expenditures'' under this line item 
applies.

    Line 7. Other Expenditures. Enter in columns (A), (B), (C) and 
(D) the cumulative total other expenditures from October 1 of the 
Federal fiscal year for which the report is being submitted through 
the current quarter being reported. ``Other expenditures'' are those 
expenditures that cannot be reported under any other category on 
this form.

    Note: The State must submit as an addendum attached to the 
fourth quarter report for each fiscal year which identifies the 
activities for which the ``other expenditures'' under this line item 
applies.

    Line 8. Total Expenditures. Enter in columns (A), (B), (C) and 
(D) the cumulative total expenditures (Sum of Line 5a through Line 
7) from October 1 of the Federal fiscal year for which the report is 
being submitted through the current quarter being reported.
    Line 9. Federal Unliquidated Obligations. Enter in columns (A) 
and (D) the cumulative total Federal unliquidated obligations from 
October 1 of the Federal fiscal year for which the report is being 
submitted through the current quarter being reported.
    For the Contingency Fund, this line should indicate $0 for the 
report submitted for the fourth quarter.
    Line 10. Unobligated Balance. Enter in columns (A) and (D) the 
cumulative total Federal unobligated balances from October 1 of the 
Federal fiscal year for which the report is being submitted through 
the current quarter being reported. After the end of the Federal 
fiscal year any amount reported in column (D) as an unobligated 
balance will be de-obligated by ACF.
    Line 11. Estimate for Next Quarter Ended. Enter in column (A) 
the estimate of SFAG grant award funds requested for the next 
quarter ending (refer to the next quarter ending entered at the top 
of this report).

    Note: Section 405(c)(1) of the Act states ACF shall estimate the 
amount to be paid to each eligible State for each quarter, such 
estimate is to be based on a report filed by the State containing an 
estimate by the State of the total sum to be expended by the State 
in the quarter under the State program funded under section 403.

Appendix D--Section 3

Information To Be Reported as an Addendum to the Fourth Quarter TANF 
Financial Report
    A. The following definitions and information with respect to the 
TANF program:
    (1) The number of cases excluded from the overall work 
participation rate, the two-parent work participation rate, and the 
time-limit calculations because of the State's definition of 
``families receiving assistance,'' together with an explanation of 
the basis for such exclusions;
    (2) The State's definition of each work activity;
    (3) A description of the transitional services provided to 
families no longer receiving assistance due to employment; and
    (4) The State's description of how it will reduce the amount of 
assistance otherwise

[[Page 62216]]

payable to the family prorata (or more) with respect to any period 
during a month in which the individual refuses to engage in work 
without good cause.
    B. The following information on separate State programs whose 
expenditures are counted by the State as MOE:
    (1) A description of the specific program activities provided to 
eligible families;
    (2) Each MOE program's statement of purpose (i.e., how the 
program activity serves eligible families);
    (3) The applicable definitions of each work activity;
    (4) Whether the program activity had been previously authorized 
and allowable as of August 21, 1996, under section 403 of prior law;
    (5) The FY 1995 State expenditures for each program activity not 
authorized and allowable as of August 21, 1996;
    (6) The total number of eligible families served by each program 
activity as of the end of the fiscal year;
    (7) The eligibility criteria for the families served under each 
program; and
    (8) A certification that those families served met the State's 
criteria for eligible families.

Appendix E--TANF MOE Data Report--Section One--Disaggregated Data 
Collection for Families Receiving Assistance Under the Separate State 
Programs

Instructions and Definitions

    General Instruction: The State agency should collect and report 
data for each data element shown below.
    1. State FIPS Code: Enter your two-digit State code from the 
following listing. These codes are the standard codes used by the 
National Institute of Standards and Technology.

------------------------------------------------------------------------
                           State                                 Code   
------------------------------------------------------------------------
Alabama....................................................           01
Alaska.....................................................           02
American Samoa.............................................           60
Arizona....................................................           04
Arkansas...................................................           05
California.................................................           06
Colorado...................................................           08
Connecticut................................................           09
Delaware...................................................           10
District of Columbia.......................................           11
Florida....................................................           12
Georgia....................................................           13
Guam.......................................................           66
Hawaii.....................................................           15
Idaho......................................................           16
Illinois...................................................           17
Indiana....................................................           18
Iowa.......................................................           19
Kansas.....................................................           20
Kentucky...................................................           21
Louisiana..................................................           22
Maine......................................................           23
Maryland...................................................           24
Massachusetts..............................................           25
Michigan...................................................           26
Minnesota..................................................           27
Mississippi................................................           28
Missouri...................................................           29
Montana....................................................           30
Nebraska...................................................           31
Nevada.....................................................           32
New Hampshire..............................................           33
New Jersey.................................................           34
New Mexico.................................................           35
New York...................................................           36
North Carolina.............................................           37
North Dakota...............................................           38
Ohio.......................................................           39
Oklahoma...................................................           40
Oregon.....................................................           41
Pennsylvania...............................................           42
Puerto Rico................................................           72
Rhode Island...............................................           44
South Carolina.............................................           45
South Dakota...............................................           46
Tennessee..................................................           47
Texas......................................................           48
Utah.......................................................           49
Vermont....................................................           50
Virgin Islands.............................................           78
Virginia...................................................           51
Washington.................................................           53
West Virginia..............................................           54
Wisconsin..................................................           55
Wyoming....................................................           56
------------------------------------------------------------------------

    2. County FIPS Code: Enter the three-digit code established by 
the National Institute of Standards and Technology for 
classification of counties and county equivalents. Codes were 
devised by listing counties alphabetically and assigning 
sequentially odd integers; e.g., 001, 003, 005, * * * A complete 
list of codes is available in Appendix F of the TANF Sampling and 
Statistical Methods Manual.
    3. Reporting Month: Enter the four-digit year and two-digit 
month code that identifies the year and month for which the data are 
being reported.
    4. Stratum:
    Guidance: All families that receive assistance under separate 
State Programs (i.e, State MOE families) and are selected in the 
sample from the same stratum must be assigned the same stratum code. 
Valid stratum codes may range from ``00'' to ``99.'' States with 
stratified samples should provide the ACF Regional Office with a 
listing of the numeric codes utilized to identify any 
stratification. If a State opts to provide data for its entire 
caseload, enter the same stratum code (any two-digit number) for 
each State MOE family.
    Instruction: Enter the two-digit stratum code.

Family-Level Data

    Definition: For reporting purposes, the State MOE family means 
(a) all individuals receiving assistance as part of a family under 
the Separate State Programs; and (b) the following additional 
persons living in the household, if not included under (a) above:
    (1) Parent(s) or caretaker relative(s) of any minor child 
receiving assistance;
    (2) Minor siblings (including unborn children) of any child 
receiving assistance; and
    (3) Any person whose income or resources would be counted in 
determining the family's eligibility for or amount of assistance.
    5. Case Number--Separate State MOE:
    Guidance: If the case number is less than the allowable eleven 
characters, a State may use lead zeros to fill in the number.
    Instruction: Enter the number assigned by the State agency to 
uniquely identify the case.
    6. ZIP Code: Enter the five-digit ZIP code for the State MOE 
family's place of residence for the reporting month.
    7. Disposition:
    Guidance: A family that did not receive any assistance for the 
reporting month but was listed on the monthly sample frame for the 
reporting month is ``listed in error.'' States are to complete data 
collection for all sampled cases that are not listed in error.
    Instruction: Enter one of the following codes for each State MOE 
sampled case.

1 = Data collection completed
2 = Not subject to data collection/listed in error

    8. Number of Family Members: Enter two digits that represent the 
number of members in the family receiving assistance under the 
Separate State Programs.
    9. Type of Family for Work Participation:
    Guidance: This data element will be used to identify the type of 
family (i.e., the number of parents or care-taker relatives in the 
family receiving assistance) in order to calculate the all family 
and the two-parent family work participation rates. A family with a 
minor child head-of-household should be coded as either a one-parent 
family or two-parent family, whichever is appropriate. A family that 
includes a disabled parent will not be considered a two-parent 
family for purposes of the work participation rate. It is up to the 
State to consider whether a family with a non-custodial parent is a 
one-parent or two-parent family for the purposes of calculating the 
work participation rate.
    Instruction: Enter the one-digit code that represents the type 
of family for purposes of calculating the work participation rates.

1=Single-Parent Family for participation rate purposes
2=Two-Parent Family for participation rate purposes
3=No Parent Family for participation rate purposes (does not include 
parents, care-taker relatives, or minor child heads-of-household

    10. Has the family received assistance under a State (Tribal) 
TANF Program within the past six months: If the State MOE family has 
received assistance under a State (Tribal) TANF Program within the 
past six months, enter code ``1.'' Otherwise, enter ``2.''

1=Yes, family has received assistance under a State (Tribal) TANF 
program within the past six months.
2=No

    11. Receives Subsidized Housing:
    Guidance: Subsidized housing refers to housing for which money 
was paid by the Federal, State, or Local government or through a 
private social service agency to the family or to the owner of the 
housing to assist the family in paying rent. Two families sharing 
living expenses does not constitute subsidized housing.
    Instruction: Enter the one-digit code that indicates whether or 
not the State MOE

[[Page 62217]]

family received subsidized housing for the reporting month.

1=Public housing
2=HUD rent subsidy
3=Other rent subsidy
4=No Housing subsidy

    12. Receives Medical Assistance: Enter ``1'' if, for the 
reporting month, any State MOE family member is eligible to receive 
(i.e., a certified recipient of) medical assistance under the State 
plan approved under Title XIX or ``2'' if no State MOE family member 
is eligible to receive medical assistance under the State plan 
approved under Title XIX.

1=Yes, receives Medical Assistance
2=No

    13. Receives Food Stamps: If the State MOE family received Food 
Stamps for the reporting month, enter the one-digit code indicating 
the type of Food Stamp assistance. Otherwise, enter ``4.''

1=Yes, Food Stamp coupon allotment
2=Yes, cash
3=Yes, wage subsidy
4=No

    14. Amount of Food Stamp Assistance:
    Guidance: For situations in which the Food Stamp household 
differs from the State MOE family, code this element in a manner 
that most accurately reflects the resources available to the State 
MOE family.
    Instruction: Enter the State MOE eligible family's authorized 
dollar amount of Food Stamps assistance for the reporting month. If 
the State MOE family did not receive any food stamps for the 
reporting month, enter ``0.''
    15. Receives Subsidized Child Care: 
    Guidance: For the purpose of coding this data element, 
subsidized child care funded under the Child Care and Development 
Fund with funds that were transferred from the State TANF Program 
should be coded as ``2.''
    Instruction: If the State MOE family receives subsidized child 
care for the reporting month, enter code ``1'', ``2'', ``3'', or 
``4'', whichever is appropriate. Otherwise, enter code ``5.''

1=Yes, funded under the Separate State Programs
2=Yes, funded under the Child Care and Development Fund
3=Yes, funded under other Federal program (e.g., TANF or SSBG)
4=Yes, funded under other State or local program 5=No

    16. Amount of Subsidized Child Care:
    Guidance: Subsidized child care means a grant by the Federal, 
State or Local government to a parent (or care-taker relative) to 
support, in part or whole, the cost of child care services provided 
by an eligible provider to an eligible child. The grant may be paid 
directly to the parent (or care-taker relative) or to a child care 
provider on behalf of the parent (or care-taker relative).
    Instruction: Enter the dollar amount of subsidized child care 
that the State MOE family has received for services in the reporting 
month. If State MOE family did not receive any subsidized child 
care, enter ``0'' as the amount.
    17. Amount of Child Care Disregard: Enter the total dollar 
amount of the State MOE family's actual disregard allowed for child 
care expenses.
    18. Amount of Child Support: Enter the total dollar value of 
child support received on behalf of the State MOE family in the 
reporting month, which includes arrearages, recoupments, and pass-
through amounts whether paid to the State or the family.
    19. Amount of the Families' Cash Resources: Enter the total 
dollar amount of the State MOE family's cash resources for the 
reporting month.

Amount of Assistance Received and the Number of Months that the 
Family Has Received Each Type of Assistance Under the Separate 
State Programs

    Guidance: Assistance means every form of support provided to 
State MOE families under the Separate State Program (including child 
care, work subsidies, and allowances to meet living expenses), 
except for the following:
    (1) services that have no direct monetary value to an individual 
family and that do not involve implicit or explicit income support, 
such as counseling, case management, peer support and employment 
services that do not involve subsidies or other forms of income 
support; and
    (2) one-time, short-term assistance (i.e., assistance paid 
within a 30-day period, no more than once in any twelve-month 
period, to meet needs that do not extend beyond a 90-day period, 
such as automobile repair to retain employment and avoid welfare 
receipt and appliance repair to maintain living arrangements).
    Instruction: For each type of assistance provided under the 
State's MOE Program, enter the dollar amount of assistance that the 
State MOE family received or that was paid on behalf of the State 
MOE family for the reporting month and the number of months that the 
State MOE family has received assistance under the State's Separate 
MOE programs. If, for a ``type of assistance'', no dollar amount of 
assistance was provided during the reporting month, enter ``0'' as 
the amount. If, for a ``type of assistance'', no assistance has ever 
been received by the TANF eligible family, enter ``0'' as the number 
of months of assistance.
    20. Cash and Cash Equivalents:

A. Amount
B. Number of Months

    21. Educational:

A. Amount
B. Number of Months

    22. Employment Services:

A. Amount
B. Number of Months

    23. Work Subsidies:

A. Amount
B. Number of Months

    24. Child Care:

    Guidance: Include only the child care funded directly by the 
Separate State Programs. Do not include child care funded under the 
TANF Program or the Child Care and Development Fund, even though 
some of the funds were transferred to the CCDF from the State TANF 
program.

A. Amount
B. Number of Months
    25. Transportation:

A. Amount
B. Number of Months

    26. Other Supportive Services and Special Needs, including 
Assistance with Meeting Home Heating and Air Conditioning Costs:

A. Amount
B. Number of Months

    27. Transitional Services:

A. Amount
B. Number of Months

    28. Contributions to Individual Development Accounts:

A. Amount
B. Number of Months

    29. Other:

A. Amount
B. Number of Months

Reason for and Amount of Reduction in Assistance

    For each reason for which the State MOE family received a 
reduction in assistance for the reporting month, enter the dollar 
amount of the reduction in assistance. Otherwise, enter ``0.''
    30. Work Requirements Sanction
    31. Family Sanction for an Adult with No High School Diploma or 
Equivalent
    32. Sanction for Teen Parent not Attending School
    33. Non-Cooperation with Child Support
    34. Failure to Comply with an Individual Responsibility Plan
    35. Other Sanction
    36. Recoupment of Prior Overpayment
    37. Family Cap
    38. Reduction Based on Family Moving into State From Another 
State
    39. Reduction Based on Length of Receipt of Assistance
    40. Other, Non-Sanction
    41. Waiver Evaluation Research Group
    Guidance: In connection with waivers, approved to allow States 
to implement Welfare Reform Demonstrations, a State assigned a 
portion of its cases to a research group consisting of a control 
group (subject to the provisions of the regular, statutory AFDC 
program as defined by prior law) and an experimental group (subject 
to the provisions of the regular, statutory AFDC program as defined 
by prior law as modified by waivers). A state may choose, for the 
purpose of completing impact analyses, to continue a research group 
and thus maintain applicable control and experimental group 
treatment policies as they were implemented under their welfare 
reform demonstration (including prior law policies not modified by 
waivers), even if such policies are inconsistent with TANF. However, 
cases assigned to a non-experimental treatment group (i.e., not part 
of the research group) may not apply prior law policies inconsistent 
with TANF unless such policies are specifically linked to approved 
waivers. Where a state continues waivers, but does not continue a 
research group for impact evaluation purposes, all cases in the 
demonstration site will be treated as non-experimental treatment 
group cases regardless of their original assignment as control or 
experimental cases.

[[Page 62218]]

    Instruction: Enter the one-digit code that indicates the 
family's waiver evaluation case status.

Blank=Not applicable (no waivers apply to this case)
1=Control group (for impact analysis purposes)
2=Experimental group
3=Non-experimental treatment group

Person-Level Data

    Person-level data has two sections: the adult and minor child 
head-of-household characteristic section and the child 
characteristics section. Section 419 of the Act defines adult and 
minor child. An adult is an individual that is not a minor child. A 
minor child is an individual who (a) has not attained 18 years of 
age or (b) has not attained 19 years of age and is a full-time 
student in a secondary school (or in the equivalent level of 
vocational or technical training.)

Adult and Minor Child Head-of-Household Characteristics

    This section allows for coding up to six adults (or a minor 
child who is either a head-of-household or married to the head-of-
household and up to five adults) in the State MOE family. A minor 
child who is either a head-of-household or married to the head-of-
household should be coded as an adult and will hereafter be referred 
to as a ``minor child head-of-household.'' For each adult (or minor 
child head-of-household) in the State MOE family, complete the adult 
characteristics section.
    If there are more than six adults (or a minor child head-of-
household and five adults) in the State MOE family, use the 
following order to identify the persons to be coded: (1) the head-
of-household; (2) parents in the eligible family receiving 
assistance; (3) other adults in the eligible family receiving 
assistance; (4) Parents not in the eligible family receiving 
assistance; (5) caretaker relatives not in the eligible family 
receiving assistance; and (6) other persons, whose income or 
resources count in determining eligibility for or amount of 
assistance of the eligible family receiving assistance, in 
descending order the person with the most income to the person with 
least income.
    42. Family Affiliation:
    Guidance: This data element is used both for (1) the adult or minor 
child head-of-household section and (2) the minor child section. The 
same coding schemes are used in both sections. Some of these codes may 
not be applicable for adults.
    Instruction: Enter the one-digit code that shows the adult's (or 
minor child head-of-household's) relation to the eligible family 
receiving assistance.

1= Member of the eligible family receiving assistance

    Not in eligible family receiving assistance, but in the 
household

2= Parent of minor child in the eligible family receiving assistance
3= Caretaker relative of minor child in the eligible family 
receiving assistance
4= Minor sibling of child in the eligible family receiving 
assistance
5= Person whose income or resources are considered in determining 
eligibility for or amount of assistance for the eligible family 
receiving assistance

    43. Noncustodial Parent Indicator:
    Guidance: A noncustodial parent means a parent who does not live 
with his/her child(ren). A noncustodial parent who lives in the 
State, may participate in work activities funded under the Separate 
State Programs. If the noncustodial parent participates in work 
activities, (s)he must be a member of the eligible family receiving 
assistance and be reported as part of the State MOE family.
    Instruction: Enter the one-digit code that indicates the adult's 
(or minor child head-of-household's) noncustodial parent status.

1= Yes, a noncustodial parent
2= No, not a noncustodial parent

    44. Date of Birth: Enter the eight-digit code for date of birth 
for the adult (or minor child head-of-household) under the Separate 
State Program in the format YYYYMMDD.
    45. Social Security Number: Enter the nine-digit Social Security 
Number for the adult (or minor child head-of-household) in the 
format nnnnnnnnn.
    46. Race: Enter the one-digit code for the race of the adult (or 
minor child head-of-household).

1= White, not of Hispanic origin
2= Black, not of Hispanic origin
3= Hispanic
4= American Indian or Alaska Native
5= Asian or Pacific Islander
6= Other
9= Unknown
    47. Gender: Enter the one-digit code that indicates the adult's 
(or minor child head-of-household's) gender.

1= Male
2= Female

Receives Disability Benefits

    The Act specifies five types of disability benefits. For each 
type of disability benefits, enter the one-digit code that indicates 
whether or not the adult (or minor child head-of-household) received 
the benefit.
    48. Receives Federal Disability Insurance Benefits: Enter the 
one-digit code that indicates the adult (or minor child head-of-
household) received Federal disability insurance benefits for the 
reporting month.
1=Yes, received benefits based on Federal disability status
2=No

    49. Receives Benefits Based on Federal Disability Status: Enter 
the one-digit code that indicates the adult (or minor child head-of-
household) received benefits based on Federal disability status for 
the reporting month.
1=Yes, received benefits based on Federal disability status
2=No

    50. Receives Aid Under Title XIV-APDT: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XIV for the reporting 
month.

1=Yes, received aid under Title XIV-APDT
2=No

    51. Receives Aid Under Title XVI-AABD: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XVI-AABD for the 
reporting month.

1=Yes, received aid under Title XVI-AABD
2=No
    52. Receives Aid Under Title XVI-SSI: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XVI-SSI for the 
reporting month.

1=Yes, received aid under Title XVI-SSI
2=No

    53. Marital Status: Enter the one-digit code for the adult's (or 
minor child head-of-household's) marital status for the reporting 
month.

1=Single, never married
2=Married, living together
3=Married, but separated
4=Widowed
5=Divorced
    54. Relationship to Head-of-Household:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for adults.
    Instruction: Enter the two-digit code that shows the adult's (or 
minor child head-of-household's) relationship (including by 
marriage) to the head of the household, as defined by the Food Stamp 
Program or as determined by the State, (i.e., the relationship to 
the principal person of each person living in the household.) If a 
minor child head-of-household, enter code ``01.''

01=Head of household
02=Spouse
03=Parent
04=Daughter or son (Natural or adoptive)
05=Stepdaughter or stepson
06=Grandchild or great grandchild
07=Other related person (brother, niece, cousin)
08=Foster child
09=Unrelated child
10=Unrelated adult
    55. Teen Parent With Child In the Family:
    Guidance: A teen parent is a person who is under 20 years of age 
and that person's child is also a member of the State MOE family.
    Instruction: Enter the one-digit code that indicates the adult's 
(or minor child head-of-household's) teen parent status.
1=Yes, a teen parent
2=No

Educational Level

    Educational level is divided into two parts; the highest level 
of education attained and the highest degree attained.
    56. Highest Level of Education Attained: Enter the two-digit 
code to indicate the

[[Page 62219]]

highest level of education attained by the adult (or minor child 
head-of-household).

00=No formal education
01-12=Grade level completed in primary/secondary school including 
secondary level vocational school or adult high school

    57. Highest Degree Attained: If the adult (or minor child head-
of-household) has a degree(s), enter the one-digit code that 
indicates the highest degree attained. Otherwise, leave the field 
blank.

0=No degree
1=High school diploma, GED, or National External Diploma Program
2=Awarded Associate's Degree
3=Awarded Bachelor's Degree
4=Awarded graduate degree (Master's or higher)
5=Other credentials (degree, certificate, diploma, etc.)

    58. Citizenship/Alienage:
    Guidance: As described in TANF-ACF-PA-97-1, States have the 
flexibility to: (1) use State MOE funds to serve ``qualified'' 
aliens, including those who enter on or after August 22, 1996; (2) 
use Federal TANF funds to serve ``qualified'' aliens who arrived 
prior to the enactment of the PRWORA on August 22, 1996 [such aliens 
who arrived after enactment are barred from receiving Federal TANF 
funds for five years from the date of entry, except for certain 
aliens such as refugees and asylees]; (3) use State MOE funds to 
serve legal aliens who are not ``qualified''; and (4) use, under 
section 411(d) of PRWORA, State MOE funds to serve aliens who are 
not lawfully present in the U.S., but only through enactment of a 
State law, after the date of PRWORA enactment, which ``affirmatively 
provides'' for such benefits.
    Instruction: Enter the two-digit code that indicates the adult's 
(or minor child head-of-household's) citizenship/alienage.

01=U.S. citizen, including naturalized citizens
02=Permanent resident who has worked forty qualifying quarters; 
alien who is a veteran with an honorable discharge from the U.S. 
Armed Forces or is on active duty in the U.S. Armed Forces, or 
spouse or unmarried dependent children of such alien
03=Qualified alien accorded refugee, Cuban or Haitian entrant, or 
Amerasian immigrant status (INS Form I-94) who has resided in the 
U.S. five years or less
04=Qualified alien granted political asylum five or less years ago; 
qualified alien granted a withholding of deportation by INS (under 
sec. 243(h) or sec. 241(b)(3) of the INA) five or less years ago.
05=Qualified alien, (including immigrant accorded permanent resident 
status (``green card''), parolee granted parole for at least one 
year under sec. 212(d)(5) of the INA, and certain battered aliens 
and their children who are determined to be qualified), who arrived 
in the U.S. prior to enactment (August 22, 1996) or who arrived in 
the U.S. on or after enactment and has resided in the U.S. more than 
five years
06=Qualified alien accorded refugee, Cuban or Haitian entrant, or 
Amerasian immigrant status (INS Form I-94) who has resided in the 
U.S. more than five years
07=Qualified alien granted political asylum or granted withholding 
of deportation by INS (under sec. 243(h) or sec. 241(b)(3) of the 
INA) more than five years ago;
08=Qualified alien (other than a refugee, Cuban or Haitian entrant, 
Amerasian immigrant, asylee, or alien whose deportation has been 
withheld under sec. 243(h) or sec. 241(b)(3) of the INA) who arrived 
in the U.S. on or after enactment and has resided in the U.S. less 
than 5 years.
09=Any alien who is not a qualified alien.
99=Unknown

    59. Employment Status: Enter the one-digit code that indicates 
the adult's (or minor child head-of-household's) employment status.

1=Employed
2=Unemployed, looking for work
3=Not in labor force (i.e, unemployed, not looking for work, 
includes discouraged workers)

    60. Work Participation Status:
    Guidance: Disregarded from the participation rate means the 
State MOE family is not included in the calculation of the work 
participation rate.
    Exempt means that the individual will not be penalized for 
failure to engage in work (i.e., good cause exception); however, the 
State MOE family is included in the calculation of the work 
participation rate.
    Instruction: Enter the two-digit code that indicates the adult's 
(or minor child head-of-household's) work participation status.

01=Disregarded from participation rate, single custodial parent with 
child under 12 months
02=Disregarded from participation rate because all of the following 
apply: required to participate, but not participating, sanctioned 
for the reporting month, but not sanctioned for more than 3 months 
within the preceding 12-month period
03=Disregarded, family is part of an ongoing research evaluation (as 
a member of a control group or experimental treatment group) 
approved under section 1115 of the Social Security Act
04=Disregarded from participation rate, is participating in a Tribal 
Work Program, and State has opted to exclude all Tribal Work Program 
participants from its Work Participation rate
05=Exempt, single custodial parent with child under age 6 and 
unavailability of child care
06=Exempt, disabled (not using an extended definition under a State 
waiver)
07=Exempt, caring for a severely disabled child (not using an 
extended definition under a State waiver)
08=A temporary good cause domestic violence waiver (not using an 
extended definition under a State waiver)
09=Exempt, State waiver
10=Exempt, other
11=Required to participate, but not participating, sanctioned for 
the reporting month and sanctioned for more than 3 months within the 
preceding 12-month period.
12=Required to participate, but not participating, sanctioned for 
the reporting month but not sanctioned for more than 3 months within 
the preceding 12-month period
13=Required to participate, but not participating and not sanctioned 
for the reporting month
14=Deemed engaged in work, single teen head-of-household or married 
teen who maintains satisfactory school attendance or is 
participating in education directly related to employment for an 
average of at least 20 hours per week during the reporting month
15=Deemed engaged in work, parent or relative (who is the only 
parent or caretaker relative in the family) with child under age 6 
and parent engaged in work activities for at least 20 hours per week
16=Required to participate, participating but not meeting minimum 
participation requirements
17=Required to participate, and meeting minimum participation 
requirements
99=Not applicable (e.g., person in household, but not in eligible 
family receiving assistance)

Adult Work Participation Activities

    Guidance: To calculate the average number of hours per week of 
participation in a work activity, add the number of hours of 
participation across all weeks in the month and divide by the number 
of weeks in the month. Round to the nearest whole number.
    Some weeks have days in more than one month. Include such a week 
in the calculation for the month that contains the most days of the 
week (e.g., the week of July 27-August 2, 1997 would be included in 
the July calculation). Acceptable alternatives to this approach must 
account for all weeks in the fiscal year. One acceptable alternative 
is to include the week in the calculation for the month in which the 
Friday falls (i.e., the JOBS approach). A second acceptable 
alternative is to count each month as having 4.33 weeks.
    During the first or last month of any spell of assistance, a 
family may happen to receive assistance for only part of the month. 
If a family receives assistance for only part of a month, the State 
(Tribe) may count it as a month of participation if an adult (or 
minor child head-of-household) in the family (both adults, if they 
are both required to work) is engaged in work for the minimum 
average number of hours for the full week(s) that the family 
receives assistance in that month.
    Instruction: For each work activity in which the adult (or minor 
child head-of-household) participated during the reporting month, 
enter the average number of hours per week of participation. For 
each work activity in which the adult (or minor child head-of-
household) did not participate, enter zero as the average number of 
hours per week of participation.
    61. Unsubsidized Employment

[[Page 62220]]

    62. Subsidized Private Sector Employment
    63. Subsidized Public Sector Employment
    64. Work Experience
    65. On-the-job Training
    66. Job Search and Job Readiness Assistance
    Instruction: Do not count hours of participation in job search 
and job readiness training beyond the TANF limit where allowed by 
waivers in this item. Instead count the hours of participation 
beyond the TANF limit in the item ``Additional Work Activities 
Permitted Under Waiver Demonstration.'' Otherwise, count the 
additional hours of work participation under the work activity 
``Other Work Activities.''
    67. Community Service Programs
    68. Vocational Educational Training
    Instruction: Do not count hours of participation in vocational 
educational training beyond the TANF 12 month life-time limit where 
allowed by waivers in this item. Instead count the hours of 
participation beyond the TANF limit in the item ``Additional Work 
Activities Permitted Under Waiver Demonstration.'' Otherwise, count 
the additional hours of work participation under the work activity 
``Other Work Activities.''
    69. Job Skills Training Directly Related to Employment
    70. Education Directly Related to Employment for Individuals 
with no High School Diploma or Certificate of High School 
Equivalency
    71. Satisfactory School Attendance for Individuals with No High 
School Diploma or Certificate of High School Equivalency
    72. Providing Child Care Services to an Individual who is 
Participating in a Community Service Program
    73. Additional Work Activities Permitted Under Waiver 
Demonstration
    Instruction: Hours of participation in job search and job 
readiness training beyond the TANF limits as permitted by State 
waiver should be counted in this item. Otherwise, count such 
additional hours of work participation under the work activity 
``Other Work Activities.''
    74. Other Work Activities
    75. Required Hours of Work Under Waiver Demonstration:
    Guidance: In approving waivers, ACF specified hours of 
participation in several instances. One type of hour change in the 
welfare reform demonstrations, was the recognition, as part of a 
change in work activities and/or exemptions, that the hours 
individuals worked should be consistent with their abilities and in 
compliance with an employability or personal responsibility plan or 
other criteria in accordance to waiver terms and conditions. As the 
hour requirement in this case was integral and necessary to achieve 
the waiver purpose of appropriately requiring work activities to 
move individuals to self-sufficiency, the State could show 
inconsistency and could use the waiver hours instead of the hours in 
section 407. The waiver that increase work hour requirements would 
not be deemed inconsistent.
    Instruction: If applicable, enter the two-digit number that 
represents the average number of hours per week of work 
participation required of the individual as described in the 
demonstration terms or in an employability or personal 
responsibility plan. Otherwise, leave blank or enter ``00.''

Amount of Earned Income

    Earned income has two categories. For each category of earned 
income, enter the dollar amount of the adult's (or minor child head-
of-household's) earned income.
    76. Earned Income Tax Credit (EITC):
    Guidance: Earned Income Tax Credit is a refundable tax credit 
for families and dependent children. EITC payments are received 
either monthly (as advance payment through the employer), annually 
(as a refund from IRS), or both.
    Instruction: Enter the total dollar amount of the earned income 
tax credit actually received, whether received as an advance payment 
or a single payment (e.g., tax refund), by the adult (minor child 
head-of-household) during the reporting month. If the State counts 
the EITC as a resource, report it here as earned income in the month 
received. If the State assumes an advance payment is applied for and 
obtained, only report what is actually received for this item.
    77. Wages, Salaries, and Other Earnings:

Amount of Unearned Income

    Unearned income has four categories. For each category of 
unearned income, enter the dollar amount of the adult's (minor child 
head-of-household's) unearned income.
    78. Social Security: Enter the dollar amount of Social Security 
that the adult in the State MOE family has received for the 
reporting month.
    79. SSI: Enter the dollar amount of SSI that the adult in the 
State MOE family has received for the reporting month.
    80. Worker's Compensation: Enter the dollar amount of Worker's 
Compensation that the adult in the State MOE family has received for 
the reporting month.
    81. Other Unearned Income:
    Guidance: Other unearned income includes RSDI benefits, Veterans 
benefits, Unemployment Compensation, other government benefits, 
housing subsidy, contribution/income-in-kind, deemed income, Public 
Assistance or General Assistance, educational grants/scholarships/
loans, other. Do not include Social Security, SSI, Worker's 
Compensation, value of Food Stamps assistance, the amount of the 
Child Care subsidy, and the amount of Child Support.
    Instruction: Enter the dollar amount of other unearned income 
that the adult in the State MOE family has received for the 
reporting month.

Child Characteristics

    This section allows for coding up to ten children in the State 
MOE family. A minor child head-of-household should be coded as an 
adult, not as a child. The youngest child should be coded as the 
first child in the family, the second youngest child as the second 
child, and so on. If the needs of an unborn child are included in 
the amount of assistance provided to the family, code the unborn 
child as one of the children. Do this by entering the Date-of-Birth 
as ``99999999'' and leave the other Child Characteristics fields 
blank.
    If there are more than ten children in the State MOE family, use 
the following order to identify the persons to be coded: (1) 
children in the eligible family receiving assistance in order from 
youngest to oldest; (2) minor siblings of child in the eligible 
family receiving assistance from youngest to oldest; and (3) any 
other children.
    82. Family Affiliation:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for children.
    Instruction: Enter the one-digit code that shows the Child's 
relation to the eligible family receiving assistance.
1=Member of the eligible family receiving assistance

    Not in eligible family receiving assistance, but in the 
household

2=Parent of minor child in the eligible family receiving assistance
3=Caretaker relative of minor child in the eligible family receiving 
assistance
4=Minor sibling of child in the eligible family receiving assistance
5=Person whose income is considered in determining eligibility for 
and amount of assistance for the eligible family receiving 
assistance

    83. Date of Birth: Enter the eight-digit code for date of birth 
for this child under the Separate State Programs in the format 
YYYYMMDD.
    84. Social Security Number: Enter the nine-digit Social Security 
Number for the child in the format nnnnnnnnn.
    85. Race: Enter the one-digit code for the race of the State MOE 
child.

1=White, not of Hispanic origin
2=Black, not of Hispanic origin
3=Hispanic
4=American Indian or Alaska Native
5=Asian or Pacific Islander
6=Other
9=Unknown

86. Gender: Enter the one-digit code that indicates the child's 
gender.

1=Male
2=Female

Receives Disability Benefits

    The Act specifies five types of disability benefits. Two of 
these types of disability benefits are applicable to children. For 
each type of disability benefits, enter the one-digit code that 
indicates whether or not the child received the benefit.
    87. Receives Benefits Based on Federal Disability Status: Enter 
the one-digit code that indicates the child received benefits based 
on Federal disability status for the reporting month.

1=Yes, received benefits based on Federal disability status
2=No

    88. Receives Aid Under Title XVI-SSI: Enter the one-digit code 
that indicates the child received aid under a State plan

[[Page 62221]]

approved under Title XVI-SSI for the reporting month.

1=Yes, received aid under Title XVI-SSI
2=No

    89. Relationship to Head-of-Household:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for children.
    Instruction: Enter the two-digit code that shows the child's 
relationship (including by marriage) to the head of the household, 
as defined by the Food Stamp Program or, principal person of each 
person living in the household.

01=Head of household
02=Spouse
03=Parent
04=Daughter or son (Natural or adoptive)
05=Stepdaughter or stepson
06=Grandchild or great grandchild
07=Other related person (brother, niece, cousin)
08=Foster child
09=Unrelated child
10=Unrelated adult

90. Teen Parent With Child In the Family:
    Guidance: A teen parent is a person who is under 20 years of age 
and that person's child is also a member of the State MOE family.
    Instruction: Enter the one-digit code that indicates the child's 
teen parent status.

1=Yes, a teen parent
2=No

Educational Level

    Educational level is divided into two parts; the highest level 
of education attained and the highest degree attained.
    91. Highest Level of Education Attained: Enter the two-digit 
code to indicate the highest level of education attained by the 
child.

00=No formal education
01-12=Grade level completed in primary/secondary school including 
secondary level vocational school or adult high school

    92. Highest Degree Attained:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for children.
    Instruction: If the child has a degree(s), enter the one-digit 
code that indicates the child's highest degree attained. Otherwise, 
leave the field blank.

0=No degree
1=High school diploma, GED, or National External Diploma Program
2=Awarded Associate's Degree
3=Awarded Bachelor's Degree
4=Awarded graduate degree (Master's or higher)
5=Other credentials (degree, certificate, diploma, etc.)
9=Not applicable

    93. Citizenship/Alienage: Enter the two-digit code that 
indicates the child's citizenship/alienage. The coding for this data 
element is the same as for item number 52, on page 548.
    94. Cooperation with Child Support: Enter the one-digit code 
that indicates whether this child's parent has cooperated with child 
support for this child.

1=Yes, parent cooperates with child support
2=No
3=Not applicable

Amount of Unearned Income

    Unearned income has two categories. For each category of 
unearned income, enter the dollar amount of the child's unearned 
income.
    95. SSI: Enter the dollar amount of SSI that the child in the 
State MOE family has received for the reporting month.
    96. Other Unearned Income: Enter the dollar amount of other 
unearned income that the child in the State MOE family has received 
for the reporting month.

Appendix F--TANF MOE Data Report--Section Two Disaggregated Data 
Collection for Families No Longer Receiving Assistance Under the 
Separate State Programs

Instructions and Definitions

    General Instruction: The State agency should collect and report 
data for each data element shown below.
    1. State FIPS Code: Enter your two-digit State code from the 
following listing. These codes are the standard codes used by the 
National Institute of Standards and Technology.

------------------------------------------------------------------------
                           State                                 Code   
------------------------------------------------------------------------
Alabama....................................................           01
Alaska.....................................................           02
American Samoa.............................................           60
Arizona....................................................           04
Arkansas...................................................           05
California.................................................           06
Colorado...................................................           08
Connecticut................................................           09
Delaware...................................................           10
District of Columbia.......................................           11
Florida....................................................           12
Georgia....................................................           13
Guam.......................................................           66
Hawaii.....................................................           15
Idaho......................................................           16
Illinois...................................................           17
Indiana....................................................           18
Iowa.......................................................           19
Kansas.....................................................           20
Kentucky...................................................           21
Louisiana..................................................           22
Maine......................................................           23
Maryland...................................................           24
Massachusetts..............................................           25
Michigan...................................................           26
Minnesota..................................................           27
Mississippi................................................           28
Missouri...................................................           29
Montana....................................................           30
Nebraska...................................................           31
Nevada.....................................................           32
New Hampshire..............................................           33
New Jersey.................................................           34
New Mexico.................................................           35
New York...................................................           36
North Carolina.............................................           37
North Dakota...............................................           38
Ohio.......................................................           39
Oklahoma...................................................           40
Oregon.....................................................           41
Pennsylvania...............................................           42
Puerto Rico................................................           72
Rhode Island...............................................           44
South Carolina.............................................           45
South Dakota...............................................           46
Tennessee..................................................           47
Texas......................................................           48
Utah.......................................................           49
Vermont....................................................           50
Virgin Islands.............................................           78
Virginia...................................................           51
Washington.................................................           53
West Virginia..............................................           54
Wisconsin..................................................           55
Wyoming....................................................           56
------------------------------------------------------------------------

    2. County FIPS Code: Enter the three-digit code established by 
the National Institute of Standards and Technology for 
classification of counties and county equivalents. Codes were 
devised by listing counties alphabetically and assigning 
sequentially odd integers; e.g., 001, 003, 005, . . . . A complete 
list of codes is available in Appendix F of the TANF Sampling and 
Statistical Methods Manual.
    3. Reporting Month: Enter the four-digit year and two-digit 
month code that identifies the year and month for which the data are 
being reported.
    4. Stratum: 
    Guidance: All families that receive assistance under separate 
State Programs (i.e., State MOE families) and are selected in the 
sample from the same stratum must be assigned the same stratum code. 
Valid stratum codes may range from ``00'' to ``99.'' States with 
stratified samples should provide the ACF Regional Office with a 
listing of the numeric codes utilized to identify any 
stratification. If a State opts to provide data for its entire 
caseload, enter the same stratum code (any two-digit number) for 
each State MOE family.
    Instruction: Enter the two-digit stratum code.

Family-Level Data

    Definition: For reporting purposes, the State MOE family means 
(a) all individuals receiving assistance as part of a family under 
the Separate State Programs; and (b) the following additional 
persons living in the household, if not included under (a) above:
    (1) Parent(s) or caretaker relative(s) of any minor child 
receiving assistance;
    (2) Minor siblings (including unborn children) of any child 
receiving assistance; and
    (3) Any person whose income or resources would be counted in 
determining the family's eligibility for or amount of assistance.
    5. Case Number:
    Guidance: If the case number is less than the allowableeleven 
characters, a State may use lead zeros to fill in thenumber.

[[Page 62222]]

    Instruction: Enter the number that was assigned by theState 
agency to uniquely identify the State MOE family.
    6. ZIP Code: Enter the five-digit ZIP code for the family's 
place of residence for the reporting month.
    7. Disposition: Enter one of the following codes for each State 
MOE family.

1=Data collection completed
2=Not subject to data collection/listed in error

    8. Reason for Closure:
    Guidance: A closed case is a family whose assistance was 
terminated for the reporting month, but received assistance under 
the State's MOE Program in the prior month. A temporally suspended 
case is not a closed case. If there is more than one applicable 
reason for closure, determine the principal (i.e., most relevant) 
reason. If two or more reasons are equally relevant, use the reason 
with the lowest numeric code.
    Instruction: Enter the one-digit code that indicates the reason 
for the State MOE family no longer receiving assistance.

1=Employment
2=Marriage
3=Five-Year Time Limit
4=Sanction
5=State policy
6=Minor child absent from the home for a significant time period
7=Transfer to State TANF Program
8=Other

    9. Number of Family Members: Enter two digits that represent the 
number of members in the State MOE family, which received assistance 
under the Separate State Programs.
    10. Receives Subsidized Housing:
    Guidance: Subsidized housing refers to housing for which money 
was paid by the Federal, State, or Local government or through a 
private social service agency to the family or to the owner of the 
housing to assist the family in paying rent. Two families sharing 
living expenses does not constitute subsidized housing.
    Instruction: Enter the one-digit code that indicates whether or 
not the State MOE family received subsidized housing for the sample 
month.

1=Public housing
2=HUD rent subsidy
3=Other rent subsidy
4=No housing subsidy

    11. Receives Medical Assistance: Enter ``1'' if, for the sample 
month, any State MOE family member is eligible to receive (i.e., a 
certified recipient of) medical assistance under the State plan 
approved under Title XIX or ``2'' if no State MOE family member is 
eligible to receive medical assistance under the State plan approved 
under Title XIX.

1=Yes, receives medical assistance
2=No

    12. Receives Food Stamps: If the State MOE family received Food 
Stamps for the sample month, enter the one-digit code indicating the 
type of Food Stamp assistance. Otherwise, enter ``4.''

1=Yes, Food Stamp coupon allotment
2=Yes, cash
3=Yes, wage subsidy
4=No

    13. Amount of Food Stamp Assistance:
    Guidance: For situations in which the Food Stamp household 
differs from the TANF family, code this element in a manner that 
most accurately reflects the resources available to the TANF family.
    Instruction: Enter the State MOE family's authorized dollar 
amount of Food Stamp assistance for the reporting month. If the 
State MOE family did not receive any food stamps for the reporting 
month, enter ``0.''
    14. Receives Subsidized Child Care:
    Guidance: For the purpose of coding this data element, ubsidized 
child care funded under the Child Care and Development Fund with 
funds that were transferred from the State TANF Program should be 
coded as ``2.''
    Instruction: If the State MOE family receives subsidized child 
care for the reporting month, enter code ``1'', ``2'', ``3'', or 
``4'', whichever is appropriate. Otherwise, enter code ``5.''

1=Yes, funded under the Separate State Programs
2=Yes, funded under the Child Care and Development Fund
3=Yes, funded under other Federal program (e.g., TANF or SSBG)
4=Yes, funded under other State or local program
5=No

    15. Amount of Subsidized Child Care:
    Guidance: Subsidized child care means a grant by the Federal, 
State or Local government to a parent (or care-taker relative) to 
support, in part or whole, the cost of child care services provided 
by an eligible provider to an eligible child. The grant may be paid 
directly to the parent (or care-taker relative) or to a child care 
provider on behalf of the parent (or care-taker relative).
    Instruction: Enter the dollar amount of subsidized child care 
that the State MOE family has received for services in the reporting 
month. If the State MOE family did not receive any subsidized child 
care for the reporting month, enter ``0.''

Person-Level Data

    Person-level data has two sections: the adult and minor child 
head-of-household characteristic section and the child 
characteristics section. Section 419 of the Act defines adult and 
minor child. An adult is an individual that is not a minor child. A 
minor child is an individual who (a) has not attained 18 years of 
age or (b) has not attained 19 years of age and is a full-time 
student in a secondary school (or in the equivalent level of 
vocational or technical training.)

Adult and Minor Child Head-of-Household Characteristics

    This section allows for coding up to six adults (or a minor 
child head-of-household and up to five adults) in the State MOE 
family. A minor child head-of-Household should be coded as an adult. 
For each adult (or minor child head-of-household) in the State MOE 
family, complete the adult characteristics section.
    If there are more than six adults (or a minor child head-of-
household and five adults) in the State MOE family, use the 
following order to identify the persons to be coded: (1) the head-
of-household; (2) parents in the eligible family receiving 
assistance; (3) other adults in the eligible family receiving 
assistance; (4) Parents not in the eligible family receiving 
assistance; (5) caretaker relatives not in the eligible family 
receiving assistance; and (6) other persons, whose income or 
resources count in determining eligibility for or amount of 
assistance of the eligible family receiving assistance, in 
descending order the person with the most income to the person with 
least income.
    16. Family Affiliation:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for adults.
    Instruction: Enter the one-digit code that shows the adult's 
(minor child head-of-household's) relation to the eligible family 
receiving assistance.

1=Member of the eligible family receiving assistance

    Not in eligible family receiving assistance, but in the 
household

2=Parent of minor child in the eligible family receiving assistance
3=Caretaker relative of minor child in the eligible family receiving 
assistance
4=Minor sibling of child in the eligible family receiving assistance
5=Person whose income or resources are considered in determining 
eligibility for or amount of assistance for the eligible family 
receiving assistance

    17. Date of Birth: Enter the eight-digit code for date of birth 
for this adult (or minor child head-of-household) under Separate 
State Programs in the format YYYYMMDD.
    18. Social Security Number: Enter the nine-digit Social Security 
Number for the adult (or minor child head-of-household) in the 
format nnnnnnnnn.
    19. Race: Enter the one-digit code for the race of the State MOE 
adult (or minor child head-of-household).

1=White, not of Hispanic origin
2=Black, not of Hispanic origin
3=Hispanic
4=American Indian or Alaska Native
5=Asian or Pacific Islander
6=Other
9=Unknown

    20. Gender: Enter the one-digit code that indicates the adult's 
(or minor child head-of-household's) gender.

1=Male
2=Female

Receives Disability Benefits

    The Act specifies five types of disability benefits. For each 
type of disability benefits, enter the one-digit code that indicates 
whether or not the adult (or minor child head-of-household) received 
the benefit.
    21. Receives Federal Disability Insurance Benefits: Enter the 
one-digit code that indicates the adult (or minor child head-of-
household) received Federal disability insurance benefits for the 
reporting month.

1=Yes, received Federal disability insurance
2=No


[[Page 62223]]


    22. Receives Benefits Based on Federal Disability Status: Enter 
the one-digit code that indicates the adult (or minor child head-of-
household) received benefits based on Federal disability status for 
the reporting month.

1=Yes, received benefits based on Federal disability status
2=No

    23. Receives Aid Under Title XIV-APDT: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XIV for the reporting 
month.

1=Yes, received aid under Title XIV-APDT
2=No

    24. Receives Aid Under Title XVI-AABD: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XVI-AABD for the 
reporting month.

1=Yes, received aid under Title XVI-AABD
2=No

    25. Receives Aid Under Title XVI-SSI: Enter the one-digit code 
that indicates the adult (or minor child head-of-household) received 
aid under a State plan approved under Title XVI-SSI for the 
reporting month.

1=Yes, received aid under Title XVI-SSI
2=No

    26. Marital Status: Enter the one-digit code for the marital 
status of the adult (or minor child head-of-household).

1=Single, never married
2=Married, living together
3=Married, but separated
4=Widowed
5=Divorced

    27. Relationship to Head-of-Household:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for adults.
    Instruction: Enter the two-digit code that shows the adult's (or 
minor child head-of-household's) relationship (including by 
marriage) to the head of the household, as defined by the Food Stamp 
Program or, principal person of each person living in the household. 
If a minor child head-of-household, enter code ``01.''

01=Head of household
02=Spouse
03=Parent
04=Daughter or son
05=Stepdaughter or stepson
06=Grandchild or great grandchild
07=Other related person (brother, niece, cousin)
08=Foster child
09=Unrelated child
10=Unrelated adult

    28. Teen Parent With Child In the Family:
    Guidance: A teen parent is a person who is under 20 years of age 
and that person's child is also a member of the State MOE family.
    Instruction: Enter the one-digit code that indicates the adult's 
(or minor child head-of-household's) teen parent status.

1=Yes, a teen parent
2=No

Educational Level

    Educational level is divided into two parts: the highest level 
of education attained and the highest degree attained.
    29. Highest Level of Education Attained: Enter the two-digit 
code to indicate the highest level of education attained by the 
adult (or minor child head-of-household).

00=No formal education
01-12=Grade level completed in primary/secondary school including 
secondary level vocational school or adult high school

    30. Highest Degree Attained: If the adult (or minor child head-
of-household) has a degree(s), enter the one-digit code that 
indicates the adult's (or minor child head-of-household's) highest 
degree attained. Otherwise, leave the field blank.

0=No degree
1=High school diploma, GED, or National External Diploma Program
2=Awarded Associate's Degree
3=Awarded Bachelor's Degree
4=Awarded graduate degree (Master's or higher)
5=Other credentials (degree, certificate, diploma, etc.)

    31. Citizenship/Alienage:
    Guidance: As described in TANF-ACF-PA-97-1, States have the 
flexibility to: (1) use State MOE funds to serve ``qualified'' 
aliens, including those who enter on or after August 22, 1996; (2) 
use Federal TANF funds to serve ``qualified'' aliens who arrived 
prior to the enactment of the PRWORA on August 22, 1996 [such aliens 
who arrived after enactment are barred from receiving Federal TANF 
funds for five years from the date of entry, except for certain 
aliens such as refugees and asylees]; (3) use State MOE funds to 
serve legal aliens who are not ``qualified''; and (4) use, under 
section 411(d) of PRWORA, State MOE funds to serve aliens who are 
not lawfully present in the U.S., but only through enactment of a 
State law, after the date of PRWORA enactment, which ``affirmatively 
provides'' for such benefits.
    Instruction: Enter the two-digit code that indicates the adult's 
(or minor child head-of-household's) citizenship/alienage.

01=U.S. citizen, including naturalized citizens
02=Permanent resident who has worked forty qualifying quarters; 
alien who is a veteran with an honorable discharge from the U.S. 
Armed Forces or is on active duty in the U.S. Armed Forces, or 
spouse or unmarried dependent children of such alien
03=Qualified alien accorded refugee, Cuban or Haitian entrant, or 
Amerasian immigrant status (INS Form I-94) who has resided in the 
U.S. five years or less
04=Qualified alien granted political asylum five or less years ago; 
qualified alien granted a withholding of deportation by INS (under 
sec. 243(h) or sec. 241(b)(3) of the INA) five or less years ago.
05=Qualified alien, (including immigrant accorded permanent resident 
status (``green card''), parolee granted parole for at least one 
year under sec. 212(d)(5) of the INA, and certain battered aliens 
and their children who are determined to be qualified), who arrived 
in the U.S. prior to enactment (August 22, 1996) or who arrived in 
the U.S. on or after enactment and has resided in the U.S. more than 
five years
06=Qualified alien accorded refugee, Cuban or Haitian entrant, or 
Amerasian immigrant status (INS Form I-94) who has resided in the 
U.S. more than five years
07=Qualified alien granted political asylum or granted withholding 
of deportation by INS (under sec. 243(h) or sec. 241(b)(3) of the 
INA) more than five years ago;
08=Qualified alien (other than a refugee, Cuban or Haitian entrant, 
Amerasian immigrant, asylee, or alien whose deportation has been 
withheld under sec. 243(h) or sec. 241(b)(3) of the INA) who 
1arrived in the U.S. on or after enactment and has resided in the 
U.S. less than 5 years.
09=Any alien who is not a qualified alien.
99=Unknown

    32. Employment Status: Enter the one-digit code that indicates 
the adult's (or minor child head-of-household's) employment status.

1=Employed
2=Unemployed, looking for work
3=Not in labor force (i.e, unemployed, not looking for work, 
includes discouraged workers))

Amount of Earned Income

    For each category of earned income, enter the dollar amount of 
the adult's (or minor child head-of-household's) earned income.
    33. Earned Income Tax Credit (EITC):
    Guidance: Earned Income Tax Credit is a refundable tax credit 
for families and dependent children. EITC payments are received 
either monthly (as advance payment through the employer), annually 
(as a refund from IRS), or both.
    Instruction: Enter the total dollar amount of the earned income 
tax credit actually received, whether received as an advance payment 
or a single payment (e.g., tax refund), by the adult (minor child 
head-of-household) during the reporting month. If the State counts 
the EITC as a resource, report it here as earned income in the month 
received. If the State assumes an advance payment is applied for and 
obtained, only report what is actually received for this item.
    34. Wages, Salaries, and Other Earnings

Amount of Unearned Income

    35. Unearned Income: Enter the dollar amount of the adult's (or 
minor child head-of-household's) unearned income.

Child Characteristics

    This section allows for coding up to ten children in the State 
MOE family. A minor child head-of-household should be coded as an 
adult, not as a child. The youngest child should be coded as the 
first child in the family, the second youngest child as the

[[Page 62224]]

second child, and so on. If the needs of an unborn child are 
included in the amount of assistance provided to the family, code 
the unborn child as one of the children. Do this by entering the 
Date-of-Birth as ``99999999'' and leave the other Child 
Characteristics fields blank.
    If there are more than ten children in the State MOE family, use 
the following order to identify the persons to be coded: (1) 
children in the eligible family receiving assistance in order from 
youngest to oldest; (2) minor siblings of child in the eligible 
family receiving assistance from youngest to oldest; and (3) any 
other children.
    36. Family Affiliation:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for children.
    Instruction: Enter the one-digit code that shows the Child's 
relation to the eligible family receiving assistance.

1=Member of the eligible family receiving assistance

    Not in eligible family receiving assistance, but in the 
household

2=Parent of minor child in the eligible family receiving assistance
3=Caretaker relative of minor child in the eligible family receiving 
assistance
4=Minor sibling of child in the eligible family receiving assistance
5=Person whose income is considered in determining eligibility for 
and amount of assistance for the eligible family receiving 
assistance

    37. Date of Birth: Enter the eight-digit code for date of birth 
for this child under the Separate State Programs in the format 
YYYYMMDD.
    38. Social Security Number: Enter the nine-digit Social Security 
Number for the child in the format nnnnnnnnn.
    39. Race: Enter the one-digit code for the race of the State MOE 
child.

1=White, not of Hispanic origin
2=Black, not of Hispanic origin
3=Hispanic
4=American Indian or Alaska Native
5=Asian or Pacific Islander
6=Other
9=Unknown

    40. Gender: Enter the one-digit code that indicates the child's 
gender.

1=Male
2=Female

Receives Disability Benefits

    The Act specifies five types of disability benefits. Two of 
these types of disability benefits are applicable to children. For 
each type of disability benefits, enter the one-digit code that 
indicates whether or not the child received the benefit.
    41. Receives Benefits Based on Federal Disability Status: Enter 
the one-digit code that indicates the child received benefits based 
on Federal disability status for the reporting month.

1=Yes, received benefits based on Federal disability status
2=No

    42. Receives Aid Under Title XVI-SSI: Enter the one-digit code 
that indicates the child received aid under a State plan approved 
under Title XVI-SSI for the reporting month.

1=Yes, received aid under Title XVI-SSI
2=No

    43. Relationship to Head-of-Household:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for children.
    Instruction: Enter the two-digit code that shows the 
relationship (including by marriage) to the head of the household, 
as defined by the Food Stamp Program or, principal person of each 
person living in the household.

01=Head of household
02=Spouse
03=Parent
04=Daughter or son
05=Stepdaughter or stepson
06=Grandchild or great grandchild
07=Other related person (brother, niece, cousin)
08=Foster child
09=Unrelated child
10=Unrelated adult

    44. Teen Parent With Child In the Family:
    Guidance: A teen parent is a person who is under 20 years of age 
and that person's child is also a member of the State MOE family.
    Instruction: Enter the one-digit code that indicates the child's 
teen parent status.

1=Yes, a teen parent
2=No

Educational Level

    Educational level is divided into two parts; the highest level 
of education attained and the highest degree attained.
    45. Highest Level of Education Attained: Enter the two-digit 
code to indicate the highest level of education attained by the 
child.

00=No formal education
01-12=Grade level completed in primary/secondary school including 
secondary level vocational school or adult high school

    46. Highest Degree Attained:
    Guidance: This data element is used both for (1) the adult or 
minor child head-of-household section and (2) the minor child 
section. The same coding schemes are used in both sections. Some of 
these codes may not be applicable for children.
    Instruction: If the child has a degree(s), enter the one-digit 
code that indicates the child's highest degree attained. Otherwise, 
leave the field blank.

0=No degree
1=High school diploma, GED, or National External Diploma Program
2=Awarded Associate's Degree
3=Awarded Bachelor's Degree
4=Awarded graduate degree (Master's or higher)
5=Other credentials (degree, certificate, diploma, etc.)

    47. Citizenship/Alienage: Enter the two-digit code that 
indicates the child's citizenship/alienage. The coding for this data 
element is the same as for item number 26, on page 583.
    48. Cooperation with Child Support: Enter the one-digit code 
that indicates this child's parent has cooperated with child support 
for this child.

1=Yes, child's parent has cooperated with child support
2=No, child's parent has not cooperated with child support
3=Not applicable

    49. Unearned Income: Enter the dollar amount of the child 's 
unearned income.

Appendix G--TANF MOE Data Report--Section Three--Aggregated Data 
Collection for Families Receiving Assistance Under the Separate State 
Programs

Instructions and Definitions

    1. State FIPS Code: Enter your two-digit State code.
    2. Calendar Quarter: The four calendar quarters are as follows:

First quarter........................  January-March.                   
Second quarter.......................  April-June.                      
Third quarter........................  July-September.                  
Fourth quarter.......................  October-December.                
                                                                        

    Enter the four-digit year and one-digit quarter code (in the 
format YYYYQ) that identifies the calendar year and quarter for 
which the data are being reported (e.g., first quarter of 1997 is 
entered as ``19971'').

Active Cases

    For purposes of completing this report, include all TANF 
eligible families receiving assistance under the Separate State 
programs, i.e., State MOE families. All counts of families and 
recipients should be unduplicated monthly totals.
    3. Total Number of Families: Enter the number of families 
receiving assistance under the Separate State Programs for each 
month of the quarter. The total in this item should equal the sum of 
the number of two-parent families (in item #4), the number of one-
parent families (in item #5) and the number of no-parent families 
(in item #6).

A. First Month:
B. Second Month:
C. Third Month:


    4. Total Number of Two-parent Families: Enter the total number 
of two-parent families receiving assistance under the Separate State 
Programs for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    5. Total Number of One-Parent Families: Enter the total number 
of one-parent families receiving assistance under the Separate State 
Programs for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    6. Total Number of No-Parent Families: Enter the total number of 
no-parent families

[[Page 62225]]

receiving assistance under the Separate State Programs for each 
month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    7. Total Number of Recipients: Enter the total number of 
recipients receiving assistance under the Separate State Programs 
for each month of the quarter. The total in this item should equal 
the sum of the number of adult recipients (in item #8) and the 
number of child recipients (in item #9).

A. First Month:
B. Second Month:
C. Third Month:

    8. Total Number of Adult Recipients: Enter the total number of 
adult recipients receiving assistance under the Separate State 
Programs for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    9. Total Number of Child Recipients: Enter the total number of 
child recipients receiving assistance under the Separate State 
Programs for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    10. Total Number of Non-Custodial Parents Participating in Work 
Activities: Enter the total number of non-custodial parents 
participating in work activities under the Separate State Programs 
for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    11. Total Number of Minor Child Heads-of-Household: Enter the 
total number of minor child head-of-household families receiving 
assistance under the Separate State Programs for each month of the 
quarter.

A. First Month:
B. Second Month:
C. Third Month:

    12. Total Number of Births: Enter the total number of births for 
families receiving assistance under the Separate State Programs for 
each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    13. Total Number of Out-of-Wedlock Births: Enter the total 
number of out-of-wedlock births for families receiving assistance 
under the Separate State Programs for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

    14. Total Amount of Assistance: Enter the dollar value of all 
assistance (cash and non-cash) provided to families under the 
Separate State Programs for each month of the quarter. Round the 
amount of assistance to the nearest dollar.

A. First Month:
B. Second Month:
C. Third Month:

Closed Cases

    15. Total Number of Closed Cases: Enter the total number of 
closed cases for each month of the quarter.

A. First Month:
B. Second Month:
C. Third Month:

Appendix H--Sampling Specifications

1. Sample Methodology

    The sample methodology must conform to principles of probability 
sampling, i.e., each family in the population of interest must have 
a known, non-zero probability of selection and computational methods 
of estimation must lead to a unique estimate. The State must 
construct a sample frame for each month in the annual sample period 
and must select approximately one-twelfth of the required minimum 
annual sample size from each monthly sample frame.
    The recommended method of sample selection is stratified 
systematic random sampling.

2. Sample frame requirements for

    a. families receiving assistance under the state TANF Program 
(i.e., the active TANF sample) are:
    The monthly TANF sample frame must consist of an unduplicated 
list of all families who receive assistance under the State TANF 
Program for the reporting month by the end of the reporting month. 
Only families with a minor child who resides with a custodial parent 
or other adult relative or a pregnant woman may receive assistance.
    b. families no longer receiving assistance under the State TANF 
Program (i.e., the closed TANF sample) are:
    For closed cases, the monthly TANF sample frame must consist of 
an unduplicated list of all families whose assistance under the 
State TANF Program was terminated for the reporting month (do not 
include families whose assistance was temporarily suspended), but 
received assistance under the State's TANF Program in the prior 
month. Thus, TANF eligible families that are transferred to a 
Separate State Program are closed cases for the State TANF Program.
    c. families receiving assistance under the Separate State 
Programs (i.e., the active Separate State sample) are:
    The monthly Separate State sample frame must consist of an 
unduplicated list of all TANF-eligible families who receive 
assistance under the Separate State Programs for the reporting month 
by the end of the reporting month.
    d. families no longer receiving assistance under the Separate 
State Programs (i.e., the closed Separate State sample) are:
    For closed cases, the monthly Separate State sample frame must 
consist of an unduplicated list of all families who assistance under 
the Separate State Programs was terminated for the reporting month 
(do not include families whose assistance was temporarily 
suspended), but received assistance under the Separate State 
Programs in the prior month. Thus, State MOE families that are 
transferred to a State TANF Program are closed cases for the 
Separate State Programs.

3. Sample Size Requirement

    a. for families receiving assistance under a State TANF Program 
are:
    The minimum required annual sample size for families receiving 
assistance is 3000 families, of which 600 families must be newly, 
approved applicants. Of the 2400 families that have received ongoing 
assistance approximately 25% (600 families) must be two-parent TANF 
families. We established the minimum required sample sizes to 
provide reasonably precise estimates (e.g., a precision of about 
plus or minus 2 percentage points at a 95% confidence level) for 
such proportions as the work participation rates for all families 
and for two-parent families, as well as for demographic and case 
characteristics of newly, approved TANF families and all TANF 
families.
    b. for families no longer receiving assistance under a State 
TANF Program are:
    The minimum required annual sample size for the sample of 
families no longer receiving assistance (i.e., closed cases) is 800 
families.
    c. for families receiving assistance under a Separate State 
Programs are:
    The minimum required annual sample size for families receiving 
assistance under the Separate State Programs is 3000 families, of 
which 600 families must be newly, approved applicants. Of the 2400 
families that have received ongoing assistance approximately 25% 
(600 families) must be two-parent TANF-eligible families. We 
established the minimum required sample sizes to provide reasonably 
precise estimates (e.g., a precision of about plus or minus 2 
percentage points at a 95% confidence level) for such proportions as 
the work participation rates for all families and for two-parent 
families, as well as for demographic and case characteristics of 
State MOE families.
    d. for families no longer receiving assistance under a Separate 
State Programs are:
    The minimum required annual sample size for the sample of 
families no longer receiving assistance (i.e., closed cases) under 
the Separate State Programs is 800 families.

4. What must States submit to ACF?

    Each State that opts to sample its caseloads must submit the 
following:
    a. Each State must submit for approval its annual sampling plan 
or any changes to its currently approved sampling plan at least 
sixty (60) calendar days before the start of the annual period. If 
the State's sampling plan is unchanged from the previous year, the 
State is not required to resubmit the sampling plan. The sampling 
plan must satisfy the requirements for plan approval as specified in 
Section 1300 of the TANF Sampling and Statistical Methods Manual and 
includes the following:
    i. Documentation of methods for constructing and maintaining the 
sample frame(s), including assessment of frame completeness and any 
potential problems associated with using the sample frame(s);
    ii. Documentation of methods for selecting the sample cases from 
the sample frame(s); and
    iii. Documentation of methods for estimating case 
characteristics and their

[[Page 62226]]

sampling errors, including the computation of weights, where 
appropriate.
    b. Each State must submit the estimated average monthly caseload 
for the annual sample period and the computed sample interval (if 
applicable) to the ACF Regional Administrator thirty (30) calendar 
days before the beginning of the annual sample period, i.e., by 
September 1 for the October sample selection. States must submit the 
monthly list of selected sample cases (including reserve pool cases, 
if applicable) within 10 days of the date of selection specified in 
the State sampling plan.
    c. Each State must submit the total number of families receiving 
assistance under the State TANF Program by stratum for each month in 
the annual sample period, the total number of families no longer 
receiving assistance under the State TANF Program (if stratified, by 
stratum) for each month in the annual sample period, the total 
number of families receiving assistance under the Separate State 
Programs by stratum for each month in the annual sample period, and 
the total number of families no longer receiving assistance under 
the Separate State Programs (if stratified, by stratum) for each 
month in the annual sample period. This data is required for 
weighting the sample results in order to produce estimates for the 
entire caseload.

Appendix I--Statutory Reference Table for Appendix A

------------------------------------------------------------------------
             Data elements                        Justification         
------------------------------------------------------------------------
1. State FIPS Code.....................  Implicit in administering data 
                                          collection system.            
2. County FIPS Code....................  411(a)(1)(A)(i).               
3. Tribal Code.........................  Implicit in administering data 
                                          collection system.            
4. Reporting Month.....................  Implicit in administering data 
                                          collection system.            
5. Stratum.............................  Implicit in administering data 
                                          collection system.            
------------------------------------------------------------------------
                      Family Level Data--Items 6-44.                    
------------------------------------------------------------------------
6. Case Number.........................  Implicit in administering data 
                                          collection system.            
7. ZIP Code............................  Needed for geographic coding   
                                          (and rural/urban analyses) and
                                          is readily available.         
8. Funding Stream......................  411(a)(1)(A)(xii): Use in      
                                          calculation of participation  
                                          rate.                         
9. Disposition.........................  Implicit in administering data 
                                          collection system.            
10. New Applicant......................  411(b), requires the Secretary 
                                          to report to Congress on      
                                          families applying for TANF    
                                          assistance. This element      
                                          identifies applicants that are
                                          newly, approved families      
                                          receiving assistance.         
11. Number of Family Members...........  411(a)(1)(A)(iv).              
12. Type of Family for Work              411(a)(1)(A)(xii): Use in      
 Participation.                           calculation of participation  
                                          rate.                         
13. Receives Subsidized Housing........  411(a)(1)(A)(ix).              
14. Receives Medical Assistance........  411(a)(1)(A)(ix).              
15. Receives Food Stamps...............  411(a)(1)(A)(ix).              
16. Amount of Food Stamp Assistance....  411(a)(1)(A)(ix).              
17. Receives Subsidized Child Care.....  411(a)(1)(A)(ix).              
18. Amount of Subsidized Child Care....  411(a)(1)(A)(ix).              
19. Amount of Child Care Disregard.....  The CCDF sample will not       
                                          capture children whose child  
                                          care is funded by TANF. The   
                                          data element is collected here
                                          because it is required under  
                                          CCDF and this is the most cost-
                                          effective way to capture TANF 
                                          Child Care information. (See  
                                          Sec. 658K(a)(2)(C)).          
20. Amount of Child Support............  411(a)(1)(A)(xiv): Break-out of
                                          unearned income.              
21. Amount of the Families' Cash         411(b), requires the Secretary 
 Resources.                               to report to Congress on      
                                          financial circumstances of    
                                          families receiving TANF       
                                          assistance.                   
------------------------------------------------------------------------
  Amount of Assistance Received and Number of Months the Family Received
 Assistance by Type under the State TANF Program--Items 22-31 are types 
                             of assistance.                             
------------------------------------------------------------------------
22. Cash and Cash Equivalents..........  411(a)(1)(A) (x) & (xiii).     
23. Educational........................  411(a)(1)(A) (x) & (xiii).     
24. Employment Services................  411(a)(1)(A) (x) & (xiii).     
25. Work Subsidies.....................  411(a)(1)(A) (x) & (xiii).     
26. TANF Child Care....................  411(a)(1)(A) (x) & (xiii).     
27. Transportation.....................  411(a)(1)(A) (x) & (xiii).     
28. Other Supportive Services and        411(a)(1)(A) (x) & (xiii).     
 Special Needs, Including Assistance                                    
 with Meeting Home Heating and Air                                      
 Conditioning Costs.                                                    
29. Transitional Services..............  411(a)(1)(A) (x) & (xiii).     
30. Contributions to Individual          411(a)(1)(A) (x) & (xiii).     
 Development Accounts.                                                  
31. Other..............................  411(a)(1)(A) (x) & (xiii).     
------------------------------------------------------------------------
  Reason for and Amount of Reduction in Assistance--Items 32-42 are the 
                   reasons for reduction in assistance                  
------------------------------------------------------------------------
32. Work Requirements Sanction.........  411(a)(1)(A)(xiii).            
33. Family Sanction for an Adult with    411(a)(1)(A)(xiii).            
 No High School Diploma or Equivalent.                                  
34. Sanction for Teen Parent Not         411(a)(1)(A)(xiii).            
 Attending School.                                                      
35. Non-Cooperation with Child Support.  411(a)(1)(A)(xiii).            
36. Failure to Comply with an            411(a)(1)(A)(xiii).            
 Individual Responsibility Plan.                                        
37. Other Sanction.....................  411(a)(1)(A)(xiii).            
38. Recoupment of Prior Overpayment....  411(a)(1)(A)(xiii).            
39. Family Cap.........................  411(a)(1)(A)(xiii).            
40. Reduction Based on Family Moving     411(a)(1)(A)(xiii).            
 into State From Another State.                                         
41. Reduction Based on Length of         411(a)(1)(A)(xiii).            
 Receipt of Assistance.                                                 

[[Page 62227]]

                                                                        
42. Other, Non-sanction................  411(a)(1)(A)(xiii).            
43. Waiver Evaluation Research Group...  411(a)(1)(A)(xii): Use to      
                                          calculate the participation   
                                          rate for States with an       
                                          ongoing waiver evaluation for 
                                          impact analysis purposes.     
44. Is the TANF Family Exempt from the   409 (a)(9).                    
 Federal Time Limit.                                                    
------------------------------------------------------------------------
                   Adult Characteristics--Items 45-88.                  
------------------------------------------------------------------------
45. Family Affiliation.................  411(a)(1)(A)(iv) and 411(b):   
                                          Needed to identify persons in 
                                          eligible family receiving     
                                          assistance and other          
                                          individuals living in the     
                                          household.                    
46. Noncustodial Parent Indicator......  411(a)(4): Report on Non-      
                                          custodial Parents requires the
                                          number of non-custodial       
                                          Parents. To provide assistance
                                          to non-custodial parents under
                                          the State TANF Program, States
                                          must include them in the      
                                          family. Data could be         
                                          collected under the element   
                                          Relationship to Head-of-      
                                          Household. Element was broken 
                                          out to make the coding cleaner
                                          and easier for States to      
                                          report.                       
47. Date of Birth......................  411(a)(1)(A)(iii): Age--Date of
                                          birth gives the same          
                                          information but is a constant.
48. Social Security Number.............  This information is also       
                                          readily available. States use 
                                          Social Security Numbers to    
                                          carry out the requirements of 
                                          IEVS (see sections 409(a)(4)  
                                          and 1137 of the Act). We need 
                                          this information also for     
                                          research on the circumstances 
                                          of children and families as   
                                          required in section 413(g) of 
                                          the Act (i.e., to track       
                                          individual members of the TANF
                                          family).                      
49. Race...............................  411(a)(1)(A)(vii).             
50. Gender.............................  Data could be collected under  
                                          the element Relationship to   
                                          Head-of-Household (e.g.,      
                                          husband, wife, daughter, son, 
                                          etc.). Element was broken out 
                                          to make the coding cleaner and
                                          easier for States to report.  
                                          Used the Secretary's Report to
                                          the Congress.                 
------------------------------------------------------------------------
           Receives Federal Disability Benefits--Items 51-55.           
------------------------------------------------------------------------
51. Receives Federal Disability          411(a)(1)(A)(ii) as revised by 
 Insurance Benefits.                      P.L. 105-33.                  
52. Receives Benefits Based on Federal   411(a)(1)(A)(ii) as revised by 
 Disability Status.                       P.L. 105-33.                  
53. Receives Aid Under Title XIV-APDT..  411(a)(1)(A)(ii) as revised by 
                                          P.L. 105-33.                  
54. Receives Aid Under Title XVI-AABD..  411(a)(1)(A)(ii) as revised by 
                                          P.L. 105-33.                  
55. Receives Aid Under Title XVI-SSI...  411(a)(1)(A)(ii) as revised by 
                                          P.L. 105-33.                  
56. Marital Status.....................  411(a)(1)(A)(vi).              
57. Relationship to Head-of-Household..  411(a)(1)(A)(iv) as revised by 
                                          P.L. 105-33.                  
58. Teen Parent with Child in the        411(a)(1)(A)(xvii) as revised  
 Family.                                  by P.L. 105-33.               
------------------------------------------------------------------------
               Adult Educational Level--Items 59 and 60.                
------------------------------------------------------------------------
59. Highest Level of Education Attained  411(a)(1)(A)(vii).             
60. Highest Degree Attained............  411(a)(1)(A)(vii).             
61. Citizenship/Alienage...............  411(a)(1)(A)(xv): We have      
                                          updated our prior coding of   
                                          citizenship status to reflect 
                                          the complexity of TANF; also  
                                          409(a)(1).                    
62. Number of Months Countable toward    409(a)(9).                     
 Federal Time Limit in Own State                                        
 (Tribe).                                                               
63. Number of Months Countable toward    409(a)(9).                     
 Federal Time Limit in Other States or                                  
 Tribes.                                                                
64. Number of Countable Months           409(a)(9).                     
 Remaining Under State's Time Limit.                                    
65. Is Current Month Exempt from the     409(a)(9).                     
 State's Time Limit.                                                    
66. Employment Status..................  411(a)(1)(A)(v).               
67. Work Participation Status..........  411(a)(1)(A)(xii): Needed to   
                                          calculate the work            
                                          participation rate.           
------------------------------------------------------------------------
      Adult Work Participation Activities--Items 68-81 are the work     
      participation activities and are needed to calculate the work     
                           participation rate.                          
------------------------------------------------------------------------
68. Unsubsidized Employment............  411(a)(1)(A)(xi)(III).         
69. Subsidized Private Sector            411(a)(1)(A)(xi)(II).          
 Employment.                                                            
70. Subsidized Public Sector Employment  411(a)(1)(A)(xi)(IV).          
71. Work Experience....................  411(a)(1)(A)(xi)(IV).          
72. On-the-job Training................  411(a)(1)(A)(xi)(VI).          
73. Job Search and Job Readiness         411(a)(1)(A)(xi)(V).           
 Assistance.                                                            
74. Community Service Programs.........  411(a)(1)(A)(xi)(IV).          
75. Vocational Educational Training....  411(a)(1)(A)(xi)(VII).         
76. Job Skills Training Directly         411(a)(1)(A)(xi)(VI).          
 Related to Employment.                                                 
77. Education Directly Related to        411(a)(1)(A)(xi)(I).           
 Employment for Individuals with no                                     
 High School Diploma or Certificate of                                  
 High School Equivalency.                                               
78. Satisfactory School Attendance for   411(a)(1)(A)(xi)(I).           
 Individuals with no High School                                        
 Diploma or Certificate of High School                                  
 Equivalency.                                                           
79. Providing Child Care Services to an  411(a)(1)(A)(xi).              
 Individual who is Participating in a                                   
 Community Service Program.                                             
80. Additional Work Activities           411(a)(1)(A)(xii): Use to      
 Permitted Under Waiver.                  calculate work participation  
                                          rate, when approved 1115      
                                          waiver permits other work     
                                          activities.                   

[[Page 62228]]

                                                                        
81. Other Work Activities..............  Related to 411(a)(1)(A)(xii)   
                                          and 409(a)(3).                
82. Required Hours of Work Under Waiver  411(a)(1)(A)(xii): Use to      
                                          calculate the Work            
                                          participation rate, when      
                                          approved 1115 waiver permits a
                                          different number of hours of  
                                          work participation to count as
                                          engaged in work.              
------------------------------------------------------------------------
      Adult Earned Income--Items 83 and 84 break out earned income.     
------------------------------------------------------------------------
83. Earned Income Tax Credit (EITC)....  411(a)(1)(A)(v).               
84. Wages, Salaries, and Other Earnings  411(a)(1)(A)(v).               
------------------------------------------------------------------------
    Adult Unearned Income--Items 85 and 88 break out Unearned income.   
------------------------------------------------------------------------
85. Amount of Social Security..........  411(a)(1)(A)(xiv).             
86. Amount of SSI......................  411(a)(1)(A)(xiv).             
87. Amount of Worker's Compensation....  411(a)(1)(A)(xiv).             
88. Amount of Other Unearned Income....  411(a)(1)(A)(xiv).             
------------------------------------------------------------------------
                  Child Characteristics--Items 89-109.                  
------------------------------------------------------------------------
89. Family Affiliation.................  411(a)(1)(A)(iv) and 411(b):   
                                          Needed to identify persons in 
                                          eligible family receiving     
                                          assistance and other          
                                          individuals living in the     
                                          household.                    
90. Date of Birth......................  411(a)(1)(A)(iii): Age--Date of
                                          birth gives the same          
                                          information but is a constant.
91. Social Security Number.............  This information is also       
                                          readily available. States use 
                                          Social Security Numbers to    
                                          carry out the requirements of 
                                          IEVS (see sections 409(a)(4)  
                                          and 1137 of the Act). We need 
                                          this information also for     
                                          research on the circumstances 
                                          of children and families as   
                                          required in section 413(g) of 
                                          the Act (i.e., to track       
                                          individual members of the TANF
                                          family).                      
92. Race...............................  411(a)(1)(A)(viii).            
93. Gender.............................  Data could be collected under  
                                          the element Relationship to   
                                          Head-of-Household (e.g.,      
                                          husband, wife, daughter, son, 
                                          etc.). Element was broken out 
                                          to make the coding cleaner and
                                          easier for States to report.  
                                          Used the Secretary's Report to
                                          the Congress.                 
------------------------------------------------------------------------
                  Receives Federal Disability Benefits                  
------------------------------------------------------------------------
94. Receives Benefits Based on Federal   411(a)(1)(A)(ii) as revised by 
 Disability Status.                       P.L. 105-33.                  
95. Receives Aid Under Title XVI-SSI...  411(a)(1)(A)(ii) as revised by 
                                          P.L. 105-33.                  
96. Relationship to Head-of-household..  411(a)(1)(A)(iv) as revised by 
                                          P.L. 105-33.                  
97. Teen Parent with Child in the        411(a)(1)(A)(xvii) as revised  
 Family.                                  by P.L. 105-33.               
------------------------------------------------------------------------
               Child Educational Level--Items 101 and 102.              
------------------------------------------------------------------------
98. Highest Level of Education Attained  411(a)(1)(A)(viii).            
99. Highest Degree Attained............  411(a)(1)(A)(viii).            
100. Citizenship/Alienage..............  411(a)(1)(A)(xv): We have      
                                          updated our prior coding of   
                                          citizenship status to reflect 
                                          TANF; also 409(a)(1).         
101. Cooperation with Child Support....  409(a)(5).                     
------------------------------------------------------------------------
                Child Unearned Income--Items 105 and 106.               
------------------------------------------------------------------------
102. Amount of SSI.....................  411(a)(1)(A)(xiv).             
103. Amount of Other Unearned Income...  411(a)(1)(A)(xiv)--rather than 
                                          breaking out unearned income  
                                          into its parts, we ask for an 
                                          indicator that the recipient  
                                          has certain types of unearned 
                                          income.                       
------------------------------------------------------------------------
               Child Care Reporting Section--Items 107-109.             
------------------------------------------------------------------------
104. Type of Child Care................  The CCDF sample will not       
                                          capture children whose child  
                                          care is funded by TANF. The   
                                          data element is collected here
                                          because it is required under  
                                          CCDF and this is the most cost-
                                          effective way to capture TANF 
                                          Child Care information. See   
                                          Sec. 658K(a)(2)(C).           
105. Total Monthly Cost of Child Care..  The CCDF sample will not       
                                          capture children whose child  
                                          care is funded by TANF. The   
                                          data element is collected here
                                          because it is required under  
                                          CCDF and this is the most cost-
                                          effective way to capture TANF 
                                          Child Care information. (See  
                                          Sec. 658K(a)(2)(C)). The Total
                                          Amount of the Child Care      
                                          Subsidy (required by 411(a))  
                                          may be derived from this item 
                                          and the total Monthly cost of 
                                          child Care.                   
106. Total Monthly Hours of Child Care   The CCDF sample will not       
 Provided During the Reporting Month.     capture children whose child  
                                          care is funded by TANF. The   
                                          data element is collected here
                                          because it is required under  
                                          CCDF and this is the most cost-
                                          effective way to capture TANF 
                                          Child Care information. See   
                                          Sec. 658K(a)(2)(C).           
------------------------------------------------------------------------


[[Page 62229]]

Appendix J--Statutory Reference Table for Appendix B

------------------------------------------------------------------------
             Data elements                        Justification         
------------------------------------------------------------------------
1. State FIPS Code.....................  Implicit in administering data 
                                          collection system.            
2. County FIPS Code....................  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
3. Tribal Code.........................  Implicit in administering data 
                                          collection system.            
4. Reporting Month.....................  Implicit in administering data 
                                          collection system.            
5. Stratum.............................  Implicit in administering data 
                                          collection system.            
------------------------------------------------------------------------
                     Family Level Data--Items 6-16.                     
------------------------------------------------------------------------
6. Case Number.........................  Implicit in administering data 
                                          collection system.            
7. ZIP Code............................  Needed for geographic coding   
                                          (and rural/urban analyses) and
                                          is readily available.         
8. Disposition.........................  Implicit in administering data 
                                          collection system.            
9. Reason for Closure..................  411(a)(1)(A)(xvi).             
10. Number of Family Members...........  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
11. Receives Subsidized Housing........  411 (b): Use to construct      
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
12. Receives Medical Assistance........  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
13. Receives Food Stamps...............  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
14. Amount of Food Stamp Assistance....  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
15. Receives Subsidized Child Care.....  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
16. Amount of Subsidized Child Care....  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
------------------------------------------------------------------------
                   Adult Characteristics--Items 17-39.                  
------------------------------------------------------------------------
17. Family Affiliation.................  Needed to identify persons in  
                                          State-defined family and other
                                          individuals living in the     
                                          household.                    
18. Date of Birth......................  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
19. Social Security Number.............  This information is also       
                                          readily available. States use 
                                          Social Security Numbers to    
                                          carry out the requirements of 
                                          IEVS (see sections 409(a)(4)  
                                          and 1137 of the Act). We need 
                                          this information also for     
                                          research on the circumstances 
                                          of children and families as   
                                          required in section 413(g) of 
                                          the Act (i.e., to track       
                                          individual members of the TANF
                                          family).                      
20. Race...............................  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
21. Gender.............................  Data could be collected under  
                                          the element Relationship to   
                                          Head-of-Household (e.g.,      
                                          husband, wife, daughter, son, 
                                          etc.). Element was broken out 
                                          to make the coding cleaner and
                                          easier for States to report.  
                                          Used the Secretary's Report to
                                          the Congress.                 
------------------------------------------------------------------------
           Receives Federal Disability Benefits--Items 22-26.           
------------------------------------------------------------------------
22. Receives Federal Disability          411(b): Use to construct       
 Insurance Benefits.                      comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
23. Receives Benefits Based on Federal   411(b): Use to construct       
 Disability Status.                       comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
24. Receives Aid Under Title XIV-APDT..  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
25. Receives Aid Under Title XVI-AABD..  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
26. Receives Aid Under Title XVI-SSI...  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
27. Marital Status.....................  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
28. Relationship to Head-of-Household..  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
29. Teen Parent with Child in the        411(b): Use to construct       
 Family.                                  comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
------------------------------------------------------------------------
                Adult Educational Level--Items 30 and 31.               
------------------------------------------------------------------------
30. Highest Level of Education Attained  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         

[[Page 62230]]

                                                                        
31. Highest Degree.....................  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
32. Citizenship/Alienage...............  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A) and 409(a)(1),   
                                          for families receiving        
                                          assistance.                   
33. Number of Months Countable toward    411(b): Use to construct       
 Federal Time Limit in Own State          comparable statistics based on
 (Tribe).                                 409(a)(9), for families       
                                          receiving assistance.         
34. Number of Months Countable toward    411(b): Use to construct       
 Federal Time Limit in Other States or    comparable statistics based on
 Tribes.                                  409(a)(9), for families       
                                          receiving assistance.         
35. Number of Countable Months           411(b): Use to construct       
 Remaining Under State's Time Limit.      comparable statistics based on
                                          409(a)(9), for families       
                                          receiving assistance.         
36. Employment Status..................  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
------------------------------------------------------------------------
       Adult Earned Income--Items 37 and 38 break out earned income     
------------------------------------------------------------------------
37. Earned Income Tax Credit (EITC)....  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
38. Wages, Salaries, and Other Earnings  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
39. Unearned Income....................  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
------------------------------------------------------------------------
                   Child Characteristics--Items 40-52.                  
------------------------------------------------------------------------
40. Family Affiliation.................  Needed to identify persons in  
                                          State-defined family and other
                                          individuals living in the     
                                          household.                    
41. Date of Birth......................  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
42. Social Security Number.............  This information is also       
                                          readily available. States use 
                                          Social Security Numbers to    
                                          carry out the requirements of 
                                          IEVS (see sections 409(a)(4)  
                                          and 1137 of the Act). We need 
                                          this information also for     
                                          research on the circumstances 
                                          of children and families as   
                                          required in section 413(g) of 
                                          the Act (i.e., to track       
                                          individual members of the TANF
                                          family).                      
43. Race...............................  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
44. Gender.............................  Data could be collected under  
                                          the element Relationship to   
                                          Head-of-Household (e.g.,      
                                          husband, wife, daughter, son, 
                                          etc.). Element was broken out 
                                          to make the coding cleaner and
                                          easier for States to report.  
                                          Used the Secretary's Report to
                                          the Congress.                 
------------------------------------------------------------------------
            Receives Federal Disability Benefits--Items 45-49.          
------------------------------------------------------------------------
45. Receives Benefits Based on Federal   411(b): Use to construct       
 Disability Status.                       comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
46. Receives Aid Under Title XVI-SSI...  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
47. Relationship to Head-of-Household..  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
48. Teen Parent with Child in the        411(b): Use to construct       
 Family.                                  comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
49. Highest Level of Education Attained  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
------------------------------------------------------------------------
                Child Educational Level--Items 52 and 53.               
------------------------------------------------------------------------
50. Highest Degree.....................  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
51. Citizenship/Alienage...............  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A) and 409(a)(1),   
                                          for families receiving        
                                          assistance.                   
52. Cooperation with Child Support.....  411(b): Use to construct       
                                          comparable statistics based on
                                          409(a)(5), for families       
                                          receiving assistance.         
53. Unearned Income....................  411(b): Use to construct       
                                          comparable statistics based on
                                          411(a)(1)(A), for families    
                                          receiving assistance.         
------------------------------------------------------------------------

Appendix K--Statutory Reference Table for Appendix C

------------------------------------------------------------------------
             Data elements                       Statutory basis        
------------------------------------------------------------------------
1. State FIPS Code.....................  Implicit in administering data 
                                          collection system.            
2. Tribal Code.........................  Implicit in administering data 
                                          collection system.            
3. Calendar Quarter....................  Implicit in administering data 
                                          collection system.            
4. Total Number of Applications........  411(b): Use in Report to       
                                          Congress.                     

[[Page 62231]]

                                                                        
5. Total Number of Approved              411(a): Implicit in use of     
 Applications.                            samples. Needed to weight     
                                          sample data report for the    
                                          newly, approved applicants    
                                          portion of the sample.        
                                         411(b): Use in Report to       
                                          Congress.                     
6. Total Number of Denied Applications.  411(b): Use in Report to       
                                          Congress.                     
7. Total Amount of Assistance..........  411(a)(6) as revised by P.L.   
                                          105-33.                       
8. Total Number of Families............  411(a)(6) as revised by P.L.   
                                          105-33.                       
                                         407(b)(3): Use in calculation  
                                          of caseload reduction for     
                                          adjusting the participation   
                                          rate standard.                
                                         411(a): Implicit in use of     
                                          samples to weight State data  
                                          to national totals.           
9. Total Number of Recipients..........  411(a)(6) as revised by P.L.   
                                          105-33.                       
10. Total Number of Adult Recipients...  411(a)(6) as revised by P.L.   
                                          105-33.                       
11. Total Number of Child Recipients...  411(a)(6) as revised by P.L.   
                                          105-33.                       
12. Total Number of Two-Parent Families  411(a)(6) as revised by P.L.   
                                          105-33.                       
                                         407(b)(3): Use in calculation  
                                          of caseload reduction for     
                                          adjusting the participation   
                                          rate standard.                
13. Total Number of One-Parent Families  411(a)(6) as revised by P.L.   
                                          105-33.                       
14. Total Number of No-Parent Families.  411(a)(6) as revised by P.L.   
                                          105-33.                       
15. Total Number of Non-custodial        411(a)(4).                     
 Parents Participating in Work                                          
 Activities.                                                            
16. Total Number of Minor Child Heads-   Used to test the reliability   
 of-Household.                            and representativeness of the 
                                          sample.                       
                                         411(b): Use in Report to       
                                          Congress.                     
17. Total Number of Births.............  413(e): Needed to calculate the
                                          Annual Ranking of States      
                                          related to Out-of-Wedlock     
                                          Births.                       
18. Total Number of Out-of-Wedlock       413(e): Needed to calculate the
 Births.                                  Annual Ranking of States      
                                          related to Out-of-Wedlock     
                                          Births.                       
19. Total Number of Closed Cases.......  411(a): Implicit in use of     
                                          samples. Needed to weight     
                                          sample data report for        
                                          families no longer receiving  
                                          assistance.                   
------------------------------------------------------------------------

[FR Doc. 97-30195 Filed 11-17-97; 8:45 am]
BILLING CODE 4184-01-P