Temporary Assistance For Needy Families: Potential Options to Improve Performance and Oversight
Published: 2013-05-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 1996, Congress made sweeping changes to federal welfare policy by replacing the previous cash assistance program with the TANF block grant. Since then through fiscal year 2011, the federal government and states have spent a total of nearly $434 billion for TANF. The block grant was reauthorized under the Deficit Reduction Act of 2005, and is currently authorized through September 30, 2013. To inform a potential reauthorization of TANF, GAO was asked to discuss its key findings on TANF performance and oversight from its previous work and identify potential options that would address these findings. This report discusses issues and options in three selected areas: (1) TANF's role in providing cash assistance to low-income families, (2) measurement of TANF work participation, and (3) information on states' use of TANF funds. In addition to summarizing its previous work on these issues, GAO reviewed relevant federal laws, regulations, and agency documents as well as transcripts from relevant congressional hearings from 2009 through 2012 to identify potential options. GAO also spoke with HHS officials and selected three TANF experts with a range of views to share their perspectives on these issues.
section_title: What GAO Found
paragraphs: Temporary Assistance for Needy Families' (TANF) role in providing cash assistance has evolved; fewer eligible families receive cash assistance and the composition of the caseload has changed. GAO noted in 2010 that 87 percent of the dramatic decline from 1995 through 2005 in the number of families receiving cash assistance was due a decline in eligible families participating in TANF, rather than increased incomes. Changes to state TANF programs, such as mandatory work requirements and lower benefits, account in part for this decline. Relatively modest caseload increases in recent years nationwide, as well as decreases in some states, have raised questions about TANF's responsiveness to changing economic conditions. GAO also reported in 2011 that the composition of the TANF caseload has changed, with about 40 percent of cases now comprised of children only, with the adult not receiving benefits, and little known nationwide about state policies for aiding these children. Potential options to better understand TANF's role as a cash assistance program may include: improving information on the extent to which states provide cash assistance to eligible low-income families, and requiring states to include more information--for example in TANF state plans submitted to the Department of Health and Human Services (HHS)--on features such as benefit amounts and services provided.
The current approach used to measure the extent to which states engage TANF recipients in work activities as defined by federal law has limitations. GAO reported in 2010 and 2011 that most states relied on several factors allowed in law, including credits for caseload reductions, to reduce the percentage of families they needed to engage in work to meet their work participation rate requirements. GAO also reported that current policies may be discouraging states from serving some families who are not "work-ready" through TANF, such as those with significant barriers to employment or complex needs. Potential options to address these issues may include: eliminating, limiting, or modifying some of the credits states may use to reduce their work participation rate requirements; adjusting requirements to better ensure states engage those not work-ready; and developing an additional or alternate set of measures that focus on employment outcomes. However, more information may be needed to assess the potential impacts of any changes to work participation requirements.
Limitations exist in the information available to assess states' use of federal TANF funds and state expenditures related to minimum state spending requirements under TANF, known as maintenance of effort (MOE) requirements. GAO reported in 2012 that the TANF block grant has evolved into a flexible funding stream that states use to support a broad range of non-cash services, but information requirements for assessing TANF performance have not kept pace with this evolution. For example, there are no reporting requirements mandating performance information specifically on families receiving non-cash services or their outcomes. GAO also reported in 2012 that states have reported increased levels of MOE spending for a variety of reasons, including helping them reduce their work participation rate requirements as allowed by law. Potential options to better understand federal and state TANF spending may include: improving reporting and performance information to encompass the full breadth of states' use of TANF funds, and requiring a review of MOE expenditures used to meet TANF requirements.
section_title: What GAO Recommends
paragraphs: GAO is not making recommendations, but rather identifying some potential options that might improve TANF performance, depending on Congress' goals for the program. These options are not intended to be exhaustive, and there may be a number of other options that warrant further analysis. HHS provided technical comments on a draft of this report.

section_title: Letter
paragraphs: In 1996, the federal government made sweeping changes to federal  welfare policy by replacing the previous cash assistance program with the  Temporary Assistance for Needy Families (TANF) block grant to states.  The Personal Responsibility and Work Opportunity Reconciliation Act of  1996 (PRWORA), which created TANF, ended the Aid to Families with  Dependent Children (AFDC) program that had entitled eligible low-income  families to monthly cash assistance. Instead, Congress has provided  $16.5 billion per year in fixed federal TANF funding to states to operate  their own welfare programs within federal guidelines. This can help cover  the costs of cash benefits, administrative expenses, and services  primarily targeted to needy families; the amount does not vary according  to the number of cash assistance recipients, referred to as the TANF  caseload. States are also required to maintain a specified level of their  own past welfare spending to receive all of their TANF funds. At the  federal level, the U.S. Department of Health and Human Services (HHS)  is responsible for overseeing TANF programs. From fiscal years 1997 to  2011, the most recent year with data available, the federal government  and states have spent nearly $434 billion for TANF, about 60 percent of  which were federal funds. The Deficit Reduction Act of 2005 (DRA)reauthorized TANF, and the block grant is currently authorized through  September 30, 2013.
This federal-state partnership has undergone multiple changes, including  a dramatic drop in the number of families receiving monthly cash  assistance benefits, legislative actions that were generally expected to  strengthen TANF work requirements, and new trends in states’ TANF  spending. In recent years, several GAO reports and testimonies have  presented findings on TANF performance and oversight in these areas  (see Related Products appendix). To inform deliberations on a potential  extension or reauthorization of TANF, you asked us to discuss key  findings related to TANF performance and oversight from our previous  work and identify potential options that would address these findings. This  report discusses issues and potential options in our selected areas: (1)  TANF’s role in providing cash assistance to low-income families, (2)  measuring TANF work participation, and (3) information on states’ use of  TANF funds.
To conduct our work, we reviewed GAO reports published since TANF  became effective in 1997 and summarized findings related to TANF cash  assistance, work participation requirements, and TANF spending trends.  These reports generally reflected a variety of methodologies, including  national surveys of state TANF administrators, analyses of state data and  national statistical surveys, and interviews and visits to selected state and  local TANF program staff. These reports are cited throughout this report.  In addition, we reviewed recommendations we had made previously that  have not been implemented, but have continued relevance to current  circumstances. We also reviewed transcripts from relevant congressional  hearings from 2009 through 2012, which provided information on issues  and options identified by members of Congress and other witnesses in  addition to GAO. This information helped us identify potential options in  these areas that would address findings in our previous reports and would  not require changes to TANF purposes or the current financing structure  established by law. In our discussion of potential options, we included  considerations, such as advantages and disadvantages of  implementation and possible unintended consequences, as appropriate.  We used GAO guidance on performance measurement, GAO’s  Standards for Internal Control in the Federal Government, the  Government Performance and Results Act of 1993 (GPRA), and the  GPRA Modernization Act of 2010 as criteria to help identify potential  options and considerations for implementation. In addition, we selected  three individuals with TANF expertise, including researchers and  representatives from advocacy organizations, that represent a range of  viewpoints to provide their perspectives on our work. We also consulted  with cognizant GAO staff, reviewed relevant federal laws, regulations, and  agency documents, and spoke with HHS officials. The listed options are  not intended to be exhaustive. In this report, we are not recommending or  endorsing the adoption of any particular policy option or package of  options. Rather, we identify them as potential options for Congress to  consider, along with other relevant proposals, as it prepares to extend or  reauthorize the TANF program.
We conducted our work from January 2013 to May 2013 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.
subsections: section_title: Background
paragraphs: TANF, created as part of the 1996 welfare reforms, gives states the  authority to make key decisions about how to allocate federal and state  funds to assist low-income families. States generally determine cash  assistance benefit levels and eligibility requirements for low-income  families seeking support under state welfare programs. When states set  their TANF cash assistance benefit levels, the amount a family receives  depends, in part, on who is in the assistance unit. An assistance unit is a  group of people living together, often related by blood or some other legal  relationship. States can exclude adults from the assistance unit but still  allow the children to receive some assistance. In these child-only cases,  the adults in the family are excluded from the assistance unit and are  generally not considered when calculating the benefit amount. States are  also generally allowed to spend TANF funds on other services as long as  these services support TANF purposes, which are: (1) to provide  assistance to needy families so that children may be cared for in their  own homes or homes of relatives; (2) to end dependence of needy  parents on government benefits by promoting job preparation, work, and  marriage; (3) to prevent and reduce out-of-wedlock pregnancies; and (4)  to encourage two-parent families.
Federal law governing TANF generally refers to the term “assistance” and does not  make distinctions between different forms of aid funded by TANF. However, HHS draws  distinctions between “assistance” and “nonassistance.” HHS regulations define assistance  to include cash, payments, vouchers, or other forms of benefits designed to meet families’  ongoing, basic needs. 45 C.F.R. § 260.31. HHS also generally includes in assistance  services, such as child care and transportation assistance for parents who are  unemployed. HHS uses the term nonassistance to refer to TANF expenditures that fulfill  one of the four TANF purposes, but do not meet this regulatory definition. In our report, we  refer to HHS’s definition of assistance as “cash assistance” and its reference to  nonassistance as “non-cash services.” focused on participants gaining employment and work-related skills.  States that do not meet minimum work participation rates may be  penalized by a reduction in their block grant. Several factors may help  states meet their work participation rates, such as reductions in their cash  assistance caseloads and spending state funds for TANF purposes above  the required MOE amount. In addition, states are limited in the amount of  time they can provide federal cash assistance to families. In general,  states may not use federal TANF funds to provide cash assistance to a  family that includes an adult who has received cash assistance for 5  years or more.other TANF-funded services.
Such time limits do not apply to child-only cases or to  Federal law sets forth the basic TANF reporting requirements for states.  For example, states are required to provide information and report to HHS  on their use of TANF funds in TANF state plans outlining how each state  intends to run its TANF program (generally filed every 2 years), quarterly  reports on demographic and economic circumstances and work activities  of families receiving cash assistance, quarterly financial reports providing  data on federal TANF and state MOE expenditures, and annual reports  on state programs funded with MOE funds, among other things. HHS  reviews state information and reports to ensure that states meet the  conditions outlined in federal law. For example, HHS uses the reported  information to determine whether states are meeting work participation  rates.
In creating the TANF block grant, Congress emphasized the importance  of state flexibility, and restricted HHS's regulatory authority over the states  except to the extent expressly provided in the law. For example, HHS  generally has limited authority to impose new TANF reporting  requirements on states unless directed by Congress, so many changes to  the types of information that states are required to report would require  congressional action.
As a fixed federal funding stream, the federal TANF block grant amount  does not automatically adjust as caseloads or needs change, and the  level of the federal grant has not been adjusted for inflation since the  program’s creation in 1996. States may reserve federal TANF funds  under a “rainy day fund” for use in future years, providing states additional  flexibility in their budget decisions. In fact, we reported in 2010 that many  states had some TANF reserves that they drew down to meet increasing  needs in the recent economic downturn. The federal law that  established TANF also created a TANF Contingency Fund that states  could access in times of economic distress. Similarly, during the recent  economic recession, the federal government created a $5 billion  Emergency Contingency Fund for state TANF programs through the  American Recovery and Reinvestment Act of 2009, available in fiscal  years 2009 and 2010. In addition, TANF supplemental funds had been  awarded to 17 states with historically low welfare spending per person  and high population growth each year, although these grants expired in  June 2011.
section_title: TANF’s Role in Providing Cash Assistance to Needy Families Has Evolved
subsections: section_title: Fewer Eligible Families Receive Cash Assistance
paragraphs: A key TANF purpose stated in law is to provide assistance to needy  families so that children may be cared for in their own homes or homes of  relatives. With the TANF block grant in effect replacing AFDC—a key  federal cash welfare program for needy families—in fiscal year 1997,  much attention has focused since then on the decline in the number of  families receiving TANF cash assistance and the implications for poor  children and families. The law does not explicitly state that poverty  reduction is a TANF purpose, and there are generally no federal  requirements or benchmarks as to eligibility criteria or benefit amounts, or  on the percentage of low-income families who are to be covered by a  state’s TANF program.
When states implemented TANF during fiscal year 1997, a monthly  average of 3.9 million families were receiving cash assistance. This  number declined by over half within the first 5 years of TANF. Since that  time, the average number of families receiving cash assistance each  month has remained well below the initial number of 3.9 million families,  and averaged about 1.9 million families in 2011. Our previous work shows  that although TANF caseloads have declined, many families with incomes  still low enough to receive aid did not do so for a variety of reasons. In a  2010 report, we assessed changes in the number of families eligible for  and receiving cash assistance under AFDC and TANF from 1995 to 2005,  the most recent data available at that time. The strong economy of the  1990s, TANF's focus on work, and other factors such as additional  funding for child care and expansions in the Earned Income Tax Credit  contributed to increases in the share of single mothers working and fewer  families receiving TANF cash assistance.
While some families worked more, had higher incomes, and were not  eligible for cash assistance, others had income that left them still eligible;  however, many of these eligible families were not participating in the  program. According to our estimates, the majority—87 percent—of that  caseload decline can be explained by the decline in eligible families  participating in the program, in part because of changes to state welfare  programs. These changes include mandatory work requirements;  changes to application procedures; lower benefits; policies such as  lifetime limits on assistance; diversion strategies such as providing one- time, non-recurring benefits instead of monthly cash assistance to  families facing temporary hardships; and sanctions for non-compliance,  according to a review of the research. Among eligible families who did not  receive cash assistance, 11 percent did not work, did not receive means- tested disability benefits, and had very low incomes (see fig. 1). We have  not updated this analysis; however, some recent research shows that this  potentially vulnerable group may be growing.
We have also reported in 2012 that during and after the recent significant  recession, caseloads increased in most states, and the overall national  increase totaled about 15 percent from fiscal years 2008 to 2011. This  has been the first test of TANF—with its capped block grant structure— during severe economic times. We noted that almost 40 percent of  households with children and income below 200 percent of the federal  poverty threshold that had exhausted Unemployment Insurance benefits  received aid through the Supplemental Nutrition Assistance Program  (SNAP)(formerly known as food stamps); however, less than 10 percent  received TANF cash assistance in 2009. The relatively modest increase  in TANF caseloads—and decreases in some states—has raised  questions about the responsiveness of TANF to changing economic  conditions. After initial declines in the poverty rate among children— from 21 percent in 1995 (prior to TANF’s implementation) to 16 percent in  2000—the rate had risen to 22 percent in 2011, according to the Bureau  of the Census.
In our recent work, we identified several actions that states have taken to  address increased needs while also experiencing budgetary distress.  These include drawing down TANF reserves and accessing TANF  Contingency Funds. In addition, nearly all states received a combined  total of $4.3 billion of the $5 billion TANF Emergency Contingency Fund,  created by Congress under the American Recovery and Reinvestment  Act of 2009, in fiscal years 2009 through 2011. States used these funds  in part to create or expand subsidized employment programs.
Setting eligibility criteria and benefit levels are ways that states may  manage the costs of their TANF cash assistance programs, directly  affecting the number of families served and the amount of assistance they  receive. 2012 report cited tension between the need to provide cash assistance  and the need to provide other state services during the recent economic  downturn.
Eligibility criteria and benefit amounts for cash assistance can vary greatly by state. For  example, in Arkansas, as of July 2011, for a family of three, earnings had to be equal to or  below $279 per month in order to be eligible for cash assistance, and their maximum  benefit amount was $204. In contrast, in California, as of July 2011, a family of three’s  income had to be equal to or below $1,224 per month to be eligible for cash assistance,  and their maximum benefit amount was $714. See Urban Institute, Welfare Rules  Databook: State TANF Policies as of July 2011 (Washington, D.C.: Aug. 2012). stringent eligibility criteria and reduced benefit amounts for cash  assistance to help manage costs. We estimated in a 2010 report that had  certain 2005 TANF eligibility-related rules been in place in 1995, 1.6  percent fewer families overall would have been eligible for cash  assistance in 1995. We also noted in that report that the value of  TANF cash benefits had fallen over time; average cash benefits under  2005 TANF rules were 17 percent lower than they were under 1995  AFDC rules.
States are required to report on some features of their cash assistance  programs, but there is no requirement for them to report on eligibility  criteria, benefit amounts, or coverage rates. In 2012, HHS officials noted  that they do not have the authority to require states to provide basic  information about the cash assistance programs, including state TANF  eligibility criteria, benefits levels, and other program features. HHS provides support to the Urban Institute to create and maintain the Welfare  Rules Database on characteristics of state TANF programs, including  features such as eligibility criteria and benefit levels. Regarding  information on TANF coverage of low-income families, in our 2005 report  on several means-tested programs including TANF, we noted that having  participation or coverage rate information is an important tool for program  managers and policymakers, even among programs that were not  intended to serve everyone eligible for program benefits. However, HHS  generally does not include these rates in TANF annual performance plans  or the agency’s TANF Annual Report to Congress.
section_title: Composition of the Cash Assistance Caseload Has Changed
paragraphs: Much of the federal welfare policy discussion has focused on how to help  low-income parents caring for their children become employed and less  dependent on government assistance. Yet in 2010, over 40 percent of  families receiving TANF cash assistance were “child-only,” meaning the  adults in the household were not included in the benefit calculation, and  aid was provided only for the children. There are four main categories of  child-only cases in which the caregiver (a parent or non-parent) does not  receive TANF benefits: (1) the parent is receiving Supplemental Security   (2) the parent is a noncitizen or a recent legal immigrant; (3)  Income; the child is living with a non-parent caregiver, often a relative; and (4) the  parent has been sanctioned and removed from the assistance unit for  failing to comply with program requirements, and the family's benefit has  been correspondingly reduced. Families receiving child-only assistance  are generally not subject to federal work requirements and time limits.
HHS collects descriptive information from states on the number and  selected characteristics of child-only cases; however, information on state  policies and plans for specifically assisting these families is not required  and not available at the national level. As the number of TANF cases with  an adult in the assistance unit has declined significantly, child-only cases  have become more prominent. We reported in 2012 that the percentage  of child-only cases increased from about 23 percent from July through  September 1997 to over 40 percent in fiscal year 2010.
Our work and other research have pointed out the need for more attention  to child-only cases. Our 2011 report focused on non-parent caregivers in  TANF child-only cases, often relatives, who have stepped in to help raise  children for a variety of reasons, in some cases due to child abuse or  neglect by a parent. available to children living with non-parents depends on the extent to  which a child welfare agency becomes involved in the family’s situation,  among other things. However, we reported that information sharing  between TANF and child welfare services to better serve children living  with relative caregivers was a challenge. Another study, prepared under a  grant from HHS and issued in December 2012, noted that child-only  cases have not been a focus of TANF policies, yet the program can serve  as an important source of support for vulnerable children in these  situations, although this support is not uniform among the states. It also  noted the significant differences among the various types of child-only  cases, concluding that future attention needs to take into account the  varying policy contexts—child welfare, disability, and immigration  policies—involved.
section_title: Some Potential Options
paragraphs: GAO, TANF and Child Welfare Programs: Increased Data Sharing Could Improve  Access to Benefits and Services, GAO-12-2 (Washington, D.C.: Oct. 7, 2011).
Congress and program managers. Such information may also help  clarify states’ TANF policies for providing income support for low-income  families and children (see table 1).
section_title: Approach to Measuring Work Participation Has Limitations
subsections: section_title: States Have Generally Met Work Participation Rates by Using Credits Allowed by Law
paragraphs: One of the four TANF purposes is to end dependence of needy parents  on government benefits by promoting job preparation, work, and  marriage; TANF's work participation rate requirement is in keeping with  the purpose of helping parents prepare for and find jobs. PRWORA  established higher work participation rate requirements and eliminated  many exemptions from these requirements for recipients compared to  what was in place prior to TANF.mandatory work requirements could reduce welfare receipt and increase   This reflected research that found that  employment among single mothers and help address concerns about  long-term welfare receipt.
Pub. L. No. 109-171, 120 Stat. 4 (2006).
GAO-10-525 and GAO, Temporary Assistance for Needy Families: Update on Families  Served and Work Participation, GAO-11-880T (Washington, D.C.: Sept. 8, 2011). numbers of families receiving TANF cash assistance over a specified time  period are accounted for in each state’s caseload reduction credit, which  essentially then lowers the states’ required work participation rate from 50  percent.For example, if a state’s caseload decreases by 20 percent  during the relevant time period, the state receives a caseload reduction  credit equal to 20 percentage points, which results in the state work  participation rate requirement being adjusted from 50 to 30 percent.  Because of the dramatic declines in the number of families receiving cash  assistance after TANF implementation, caseload reduction credits  effectively eliminated work participation rate requirements in some states.  For example, we reported that in fiscal year 2006, 18 states had caseload  reductions that were at least 50 percent, which reduced their required  work participation rates to 0. We noted that state caseload declines have  generally been smaller after DRA changed the base year for measuring  caseload reductions from fiscal year 1995 to fiscal year 2005, among  other things.However, many states are still able to use caseload  declines to help them lower their required work participation rates. For  example, for the most recent data available in fiscal year 2009, 38 of the  45 states that met their required work participation rates for all TANF  families did so in part because of their caseload declines (see fig. 2).
Additionally, we reported that while states’ caseload reduction credits  before DRA were based primarily on their caseload declines, after DRA,  states’ spending of their own funds on TANF-related services also  became a factor in some states’ credits. Specifically, states are required  to spend a certain amount of funds every year—their MOE funds—in  order to receive all of their federal TANF block grant. However, if states  spend in excess of the required amount (“excess MOE”), they are allowed  to functionally increase their caseload reduction credits.that, in fiscal year 2009, 32 of the 45 states that met their required work  participation rates for all families receiving cash assistance claimed  excess MOE toward their caseload reduction credits. In addition, 17  states would not have met their rates without claiming these expenditures  (see fig. 2).
section_title: Measure Has Limitations as a National Performance Measure for TANF
paragraphs: In 2010, we concluded that because of the various factors that affect the  calculation of states’ work participation rates, the rate’s usefulness as a  national performance measure for TANF is limited, and changes intended  to improve data quality may be creating new challenges for states. In  addition to the caseload reduction credits and excess MOE discussed  above, we reported that some states have made changes to their TANF  programs that may affect which families are counted in their work  participation rates, such as providing some families assistance in non- TANF programs, discussed in the next section. Given these various  factors, we have noted that the work participation rate does not allow for  clear comparisons across state TANF programs or comparisons of  individual state programs over time. This is the same conclusion we  reached in our 2005 report that recommended changes to improve this  measure of states’ performance. In that report, we found differences  across states that contributed to an inconsistent measurement of work  participation. For example, we found that some states reported the hours  recipients were scheduled to work, rather than those actually worked, as  work participation. DRA contained changes generally expected to  increase internal controls and improve data quality, however it also  created new challenges for states. In our 2010 review of work  participation rates, many states cited challenges in meeting work  performance standards under DRA, such as new requirements to verify  participants’ actual activity hours and certain limitations on the types and  timing of activities that count toward meeting the requirements. Local  TANF officials noted that verification of TANF families’ work participation  requires significant time and collaboration between TANF staff and  employers and other staff at work activity sites. Because of this, some  noted that they have had to designate or hire specific staff to manage the  tracking and verification of families’ work participation, and yet these  activities also remain a routine part of all local TANF staff’s  responsibilities. We concluded at the time that the TANF work  participation rate requirements may not yet have achieved the appropriate  balance between flexibility for states and accountability for federal TANF  goals.
section_title: States May Not Serve Some Families that are Not Work-Ready
paragraphs: Work participation rate requirements can play an important role in  encouraging states to move TANF recipients into work; however, our  work indicates some ways that current policies may be discouraging  states from engaging some TANF recipients with complex needs and  from providing an appropriate mix of activities. According to the  preamble to a TANF final rule from 1999, several provisions of the law,  including time limits, higher participation rate requirements, and fewer  individual exemptions from participation requirements, taken together,  signal that states must broaden participation beyond the "job ready."  However, some state TANF officials we interviewed for a 2012 report said  the pressure to meet TANF work participation rate requirements causes  them to focus on the “ready to work” cash assistance population, which  can leave the “harder-to-serve” population without services. States may  generally only count a family’s participation in job readiness assistance,  which can include mental health and substance abuse treatment, towards  the work participation rate for six weeks in a year. A 2012 MDRC study  conducted for HHS suggested that combining work-focused strategies  with treatment or services may be more promising than using either  strategy alone, especially for people with disabilities and behavioral  health problems. Additionally, we have reported that some states find  the restrictions on the amount of time they are allowed to count vocational  educational training towards the work participation rate to be a challenge.  State TANF administrators have expressed concerns that the 12-month  lifetime limit on vocational educational training may be insufficient for  TANF participants to progress to higher-wage employment that will  prevent them from needing assistance in the future. Officials we  interviewed more recently also noted that the restrictions may not match  the needs of workers who lost jobs during the recession, who may require  more education or retraining to find a new job. Finally, we have reported  that many states choose to provide cash assistance to two-parent families  outside of TANF. State officials have told us that two-parent families often  have as many or more challenges as single parents, and states’ work  participation rate requirement for two-parent families is 90 percent minus  any caseload reduction credit the state receives. In 2010, we reported  that 28 states provide cash assistance to two-parent families through  separate programs funded solely with state dollars, and that families for  whom states use these programs to provide cash assistance are those  that typically have the most difficulty meeting the TANF work  requirements.
section_title: Some Potential Options
paragraphs: In view of our prior work that has identified limitations in the work  participation rate’s usefulness, potential options are available that may  motivate states to engage more families in work activities and provide a  more accurate picture of state performance (see table 2).
Additional information may be needed before adopting any of these  potential options. The work participation rate is complex and has affected  significant state policy decisions. Any adjustment to or replacement of the  measure would likely have a profound impact on state TANF programs.  For example, introducing an employment credit would constitute a  significant change in the way states may meet work participation  requirements, but the effects this approach would have on participation  rates and state TANF programs are unknown. Additionally, it is difficult to  anticipate ways that the potential options may interact with one another.  We have reported that allowing states to test approaches can foster  innovation and help identify possible unintended consequences.  Members of Congress have raised concerns about a 2012 announcement  by HHS that the agency would use waiver authority to allow states to test  various strategies, policies, and procedures designed to improve  employment outcomes for needy families.remains controversial and the House of Representatives passed a bill in   The potential for waivers  2013 aimed at preventing HHS from implementing them. According to  HHS, as of February 25, 2013, no state had formally submitted a request  for a waiver related to TANF work requirements. Still, state experience  with many of the potential options outlined above could provide valuable  information to policymakers about the effects of changes if they choose to  alter the work participation rate as it is currently implemented. If  Congress wanted to make changes, it could set parameters for testing  some approaches through pilots in selected states, for example, to gather  additional information for considering changes to TANF that would  maintain or improve its focus on work and self-sufficiency.
section_title: Information Available to Assess Recent Trends in TANF Spending is Limited
subsections: section_title: Performance Information for Non-Cash Services is Incomplete
paragraphs: We reported in 2012 that the TANF block grant has evolved into a flexible  funding stream that states use to support a broad range of allowable  services, but the accountability framework currently in place in federal law   Declining cash  and regulations has not kept pace with this evolution.assistance caseloads freed up federal TANF and state MOE funds for  states, and over time, states shifted spending to other forms of aid, which  we refer to as non-cash services. Non-cash services can include any  other services meeting TANF purposes, such as job preparation activities,  child care and transportation assistance for parents who are employed,  out-of-wedlock pregnancy prevention activities, and child welfare  services, as well as some cash benefits such as non-recurring short-term  benefits and refundable tax credits to low-income working families. In  fiscal year 1997, nationwide, states spent about 23 percent of federal  TANF and state MOE funds on non-cash services. In contrast, states  spent almost 64 percent of federal TANF and state MOE funds for these  purposes in fiscal year 2011. However, there are no reporting  requirements mandating performance information specifically on families  receiving non-cash services or their outcomes. There is also little  information related to TANF’s role in filling needs in other areas like child  welfare, even though this has become a more prominent spending area  for TANF funds in many states. We reported that while states prepare  state plans and expenditure reports that individually provide some  information on non-cash services, even when considered together, these  do not provide a complete picture on state goals and strategies for uses  of TANF funds. For instance, we noted that state plans currently provide  limited descriptions of a state’s goals and strategies for its TANF block  grant, including how non-cash services fit into these goals and strategies,  and the amount of information in each plan can vary by state. We  reported that HHS is taking some steps to improve expenditure reports  from states. Still, we concluded that without more information that  encompasses the full breadth of states’ uses of TANF funds, Congress  will not be able to fully assess how funds are being used, including who is  receiving services or what is being achieved. We included a Matter for  Congressional Consideration regarding ways to improve reporting and  performance information, though Congress has not yet enacted such  legislative changes.
section_title: Questions Exist on Whether Increases in State MOE Reflect New Spending on Low-Income Families
paragraphs: Increases in the expenditures states have claimed as MOE, including  expenditures by third parties, may warrant additional attention. We  reported in 2012 that MOE is now playing an expanded role in TANF  programs. As shown in figure 3, according to HHS data, until fiscal year  2006, MOE levels remained relatively stable, hovering around the 80  percent required minimum or the reduced rate of 75 percent for states   From fiscal years  that met their work participation rate requirements.2006 through 2009, they increased each year. We reported that several  reasons account for the increase during this period:
Many states claimed additional MOE to help them meet the work  participation rate requirements, as discussed above.
During the recession states accessed TANF Contingency Funds,  which required them to meet a higher MOE level, and Emergency  Contingency Funds, which required them to have had increases in  certain expenditures or in the number of families receiving cash  assistance.
An interim rule temporarily broadened the types of activities on which  states could spend state funds and be countable for MOE purposes.
We noted that this greater emphasis on the use of MOE increases the  importance of understanding whether effective accountability measures  are in place to ensure MOE funds are in keeping with requirements.
These recent increases in state MOE have raised questions about how to  ensure that state expenditures represent a sustained commitment to  spending in line with TANF purposes. We noted in 2012 that if MOE  claims do not actually reflect maintaining or increasing service levels, low- income families and children may not be getting the assistance they need  and federal funds may not be used in the most efficient manner.  However, the recent increases in state MOE spending which states have  used to access contingency funds and meet work participation rate  requirements may not represent new state spending. For example,  officials in one state told us in 2012 that they began claiming MOE  expenditures for an existing state early-childhood education program for  needy families in fiscal year 2008. Officials in two other states said they  hired consultants during the economic downturn to identify opportunities  to claim MOE expenditures from existing state programs that were not  originally used for TANF purposes. For example, one state found that  many of its programs could be counted under TANF as “prevention of out- of-wedlock pregnancies” so it claimed funds spent on these programs as  MOE.
Additionally, we reported in 2012 that many states have recently begun to  count third party nongovernmental expenditures to help meet TANF MOE  spending requirements. In addition to its own spending, a state may  count toward its MOE certain in-kind or cash expenditures by third  parties—such as nongovernmental organizations—as long as the  expenditures meet other MOE requirements, including those related to  eligible families and allowable activities. We reported that between fiscal  years 2007 and 2011, about half of all states reported counting third party  nongovernmental expenditures toward MOE in at least one year, and 17  states reported that they intend to count these expenditures in the future.
section_title: Some Potential Options
paragraphs: Potential options are available to provide additional information on non- cash services and state MOE expenditures that may be useful for making  decisions regarding the TANF block grant and better ensure  accountability for TANF funds (see table 3). In particular, requiring  additional information on non-cash services would be consistent with our  2012 Matter for Congressional Consideration on improving performance  and reporting information.
section_title: Concluding Observations
paragraphs: We have identified a number of potential options that could improve  TANF performance and oversight as the program is currently designed,  based on our prior work. These options are not intended to be exhaustive,  and it is not the purpose of this report to recommend or endorse any  particular policy option. In addition, there may be a number of other  options that would warrant further analysis. However, it is clear that TANF  has evolved beyond a traditional cash assistance program and now also  serves as a source of funding for a broad range of services states provide  to eligible families. The past 16 years has shown many changes in how  states use TANF funds and the populations they serve. Any extension or  reauthorization of TANF presents an opportunity to re-examine how it  provides assistance to needy families and whether TANF, as currently  structured, continues to address Congress’ vision for the program.
section_title: Agency Comments
paragraphs: We provided a draft of our report to HHS for review and comment. HHS  provided technical comments which we incorporated as appropriate.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Health and Human Services, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-7215 or brownke@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix I.
section_title: Appendix I: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgements
paragraphs: In addition to the contact named above, Gale Harris (Assistant Director),  Nhi Nguyen, and Michael Pahr made significant contributions to all  aspects of this report. Also contributing to this report were James  Bennett, Caitlin Croake, Alexander Galuten, Almeta Spencer, and Walter  Vance.
section_title: Related GAO Products
paragraphs: Temporary Assistance for Needy Families: More Accountability Needed  to Reflect Breadth of Block Grant Services. GAO-13-33. Washington,  D.C.: December 6, 2012.
Temporary Assistance for Needy Families: More States Counting Third  Party Maintenance of Effort Spending. GAO-12-929R. Washington, D.C.:  July 23, 2012.
Temporary Assistance for Needy Families: Update on Program  Performance. GAO-12-812T. Washington, D.C.: June 5, 2012.
Temporary Assistance for Needy Families: State Maintenance of Effort  Requirements and Trends. GAO-12-713T. Washington, D.C.: May 17,  2012.
Unemployment Insurance: Economic Circumstances of Individuals Who  Exhausted Benefits. GAO-12-408. Washington, D.C.: February 17, 2012.
TANF and Child Welfare Programs: Increased Data Sharing Could  Improve Access to Benefits and Services. GAO-12-2. Washington, D.C.:  October 7, 2011.
Temporary Assistance for Needy Families: Update on Families Served  and Work Participation. GAO-11-880T. Washington, D.C.: September 8,  2011.
Temporary Assistance for Needy Families: Implications of Caseload and  Program Changes for Families and Program Monitoring. GAO-10-815T.  Washington, D.C.: September 21, 2010.
Temporary Assistance for Needy Families: Implications of Recent  Legislative and Economic Changes for State Programs and Work  Participation Rates. GAO-10-525. Washington, D.C.: May 28, 2010.
Temporary Assistance for Needy Families: Fewer Eligible Families Have  Received Cash Assistance Since the 1990s, and the Recession’s Impact  on Caseloads Varies by State. GAO-10-164. Washington, D.C.: February  23, 2010.
Welfare Reform: Better Information Needed to Understand Trends in  States’ Uses of the TANF Block Grant. GAO-06-414. Washington, D.C.:  March 3, 2006.
Welfare Reform: HHS Should Exercise Oversight to Help Ensure TANF  Work Participation Is Measured Consistently across States. GAO-05-821.  Washington, D.C.: August 19, 2005.
Means-Tested Programs: Information on Program Access Can Be an  Important Management Tool. GAO-05-221. Washington, D.C.: March 11,  2005.
Welfare Reform: Federal Oversight of State and Local Contracting Can  Be Strengthened. GAO-02-661. Washington, D.C.: June 11, 2002.
Welfare Reform: States Provide TANF-Funded Services to Many Low- Income Families Who Do Not Receive Cash Assistance. GAO-02-564.  Washington, D.C.: April 5, 2002.
Welfare Reform: Challenges in Maintaining a Federal-State Fiscal  Partnership. GAO-01-828. Washington, D.C.: August 10, 2001.