Temporary Assistance for Needy Families: An Overview of Spending, Federal Oversight, and Program Incentives
Published: 2015-04-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The TANF block grant provides $16.5 billion annually in federal funding to states for cash assistance as well as a variety of other benefits and services to meet the needs of low-income families. TANF requires states to maintain a specified level of their own past welfare spending to receive all of their TANF funds. In fiscal year 2013, states spent a total of $31.6 billion in federal TANF and related state funds on cash assistance and other services for low-income families. GAO was asked to provide information from its recent reports to inform a hearing on next steps for welfare reform.
This statement addresses (1) states' use of TANF funds, (2) TANF's accountability framework, and (3) innovation and evaluation in the TANF program, drawing primarily from GAO reports issued from 2010 to 2014. For these reports, GAO reviewed and analyzed state TANF data reported to HHS from fiscal year 1997 through 2013; reviewed relevant federal laws, regulations, and guidance; interviewed HHS and state TANF administrators; and conducted visits in selected states.
section_title: What GAO Found
paragraphs: While the Temporary Assistance for Needy Families (TANF) block grant serves as the nation's major cash assistance program for low-income families with children, states increasingly use it as a flexible funding stream for supporting a broad range of allowable services. For example, in December 2012 GAO found that nationwide, in fiscal year 1997, states spent about 23 percent of TANF funds on services other than cash assistance, such as child welfare or child care. In contrast, states spent more than 66 percent of TANF funds for these purposes in fiscal year 2013, according to the most recent available data from the Department of Health and Human Services (HHS).
TANF's accountability framework has limitations in both the approach used for measuring work participation and the information that is available on trends in services other than cash assistance. One program performance measure, the work participation rate, measures the extent to which states engage work-eligible TANF cash assistance recipients in work activities as defined by federal law. In May 2010, GAO found that states often relied on several options 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. Thus, GAO concluded that the rate's usefulness as an indicator of TANF performance is limited. There are also no reporting requirements mandating performance information specifically on families receiving services other than cash assistance. To fully assess how funds are being used, GAO suggested Congress should consider ways to improve performance information when TANF is being reauthorized. In response to GAO's 2012 recommendation that HHS develop a detailed plan to revise reporting categories for TANF expenditures to provide a more complete picture on the use of TANF funds, HHS has taken steps such as revising its reporting form and accounting methodology for expenditure data. HHS has also cited a statutory provision as preventing it from reporting an improper payment estimate for the TANF program, but says it will seek statutory modifications to allow for such an estimate when the program is reauthorized.
Incentives are often lacking for state and local TANF agencies to adopt and test promising approaches for moving cash assistance recipients from welfare to work, according to a November 2014 GAO report. State use of federal TANF funds for services that are not necessarily related to welfare-to-work activities may compete with funding for developing promising approaches for TANF cash assistance clients. Also, the federal work participation rate requirements may discourage states from pursuing approaches that incorporate longer-term education and training or treatment services, or from engaging hard-to-employ individuals in work activities as states can meet their work participation rate requirements by using the law's other options. In addition, little incentive exists for states to evaluate their TANF programs, and states are not required to do so, although these evaluations can provide useful information on program effectiveness. GAO recommended that HHS, in consultation with Congress, identify potential changes to address the lack of incentives to adopt and test promising approaches and submit a legislative proposal outlining those changes. HHS agreed with the recommendation but has not yet suggested program changes.
section_title: What GAO Recommends
paragraphs: In its prior work, GAO recommended that HHS take steps to improve TANF expenditure reporting and identify potential changes to address the lack of incentives in the TANF program. HHS has taken some action. GAO has also suggested Congress consider ways to improve performance information when TANF is reauthorized. Consequently, GAO is not making any new recommendations at this time.

section_title: Letter
paragraphs: I am pleased to submit this statement on our recent work covering key  aspects of the Temporary Assistance for Needy Families (TANF) block  grant. As you know, in 1996 the federal government made sweeping  changes to federal welfare policy by replacing the previous cash  assistance program with the 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, TANF provides $16.5 billion  per year in fixed federal funding to states to operate their own welfare  programs within federal guidelines. This funding 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. States are also required to maintain a  specified level of their own past welfare spending to receive all of their  TANF funds. In fiscal year 2013, states spent a total of $31.6 billion in  federal TANF and related state funds on cash assistance and other  services for low-income families, according to the most recent available  data from the U.S. Department of Health and Human Services (HHS). At  the federal level, HHS is responsible for overseeing TANF programs. We  were asked to provide information from our recent reports on TANF to  inform a hearing on next steps for welfare reform.
This statement is also based on updates to TANF expenditures. We obtained these  updates in April 2015 by consulting publicly available data. Reports are cited throughout  and include : GAO, 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: More Accountability Needed to Reflect Breadth of Block Grant Services, GAO- 13-33 (Washington, D.C.: Dec. 6, 2012); and Temporary Assistance for Needy Families:  Action Is Needed to Better Promote Employment-Focused Approaches, GAO-15-31   (Washington, D.C.: Nov. 19, 2014). from fiscal year 1997 through 2013; reviewed relevant federal laws,  regulations, and guidance; interviewed HHS officials; reviewed research  summaries and syntheses of rigorous research on promising approaches  for engaging TANF recipients in employment and increasing their  earnings; and collected information from TANF officials using different  methods for different studies, including interviewing state TANF  administrators and conducting visits in selected states. We assessed the  data we received and concluded that the data were sufficiently reliable for  the purposes of our reports. (More information on the scope and  methodology of our work is contained within our published reports.)
We conducted the work on which this statement is based 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: TANF Has Evolved from a Cash Assistance Program to a Flexible Funding Stream
paragraphs: Since PRWORA’s passage, cash assistance caseloads have declined,  freeing up TANF funds for states to use for other allowable purposes. In  May 2013, we reported that when states implemented TANF during fiscal  year 1997, an average of 3.9 million families a month 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. An average of about 1.5 million families received cash  assistance each month in 2014, according to the most recent available  data from HHS.
GAO-13-33. former welfare recipients increased their income through employment,  and employment rates among single parents increased. At the same time,  some families worked more and had higher incomes, others had incomes  that left them still eligible for cash assistance. However, many of these  eligible families were not participating in the program. According to our  estimates in a February 2010 report, about 87 percent of the caseload  decline through 2005 can be explained by the decline in eligible families  participating in the program, in part because of changes to state welfare   These changes included mandatory work requirements;  programs.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.
Our December 2012 report found that while the TANF block grant still  serves as the nation’s major cash assistance program for low-income  families with children, states have also increasingly used it as a flexible  funding stream for supporting a broad range of allowable services. the TANF block grant, states have generally maintained access to their  full TANF allocation each year. As the number of families receiving cash  assistance declined, states shifted their TANF priorities to other forms of  aid, or non-cash services, which can include any other services meeting  TANF purposes. We found that states spent significant amounts of TANF  funds on services such as child welfare or child care. We reported that  nationwide, in fiscal year 1997, states spent about 23 percent of TANF  funds on non-cash services. In contrast, states spent more than 66  percent of TANF funds for these purposes in fiscal year 2013, according  to the most recent available data from HHS.
GAO-13-33. spent federal TANF funds on existing or new programs according to state  legislative priorities and, as a result, funds are often allocated to and  administered through multiple state and local agencies (see fig. 1). This is  in contrast to TANF’s predecessor program, AFDC, which was typically  administered through state welfare agencies. Our work showed that the  multiple state and local agencies that receive TANF funds may serve low- income families beyond the TANF cash assistance caseload.
section_title: TANF’s Accountability Framework Has Limitations
subsections: section_title: States Have Generally Met Work Participation Rates by Using Credits Allowed by Law
paragraphs: Because job preparation and employment are key goals of TANF, one of  the federal measures of state TANF programs’ performance is the  proportion of TANF cash assistance recipients engaged in allowable work  activities. Generally, states are held accountable for ensuring that at  least 50 percent of all families receiving TANF cash assistance and  considered work-eligible participate in one or more of 12 specified work  activities for an average of 30 hours per week. Our work has shown that  over the years, states have engaged about one third of families receiving  TANF cash assistance in federally-defined work activities nationwide.For example, according to HHS data, in fiscal year 2011—the most recent  year for which data are available—states engaged 29.5 percent of work- eligible cash assistance families nationwide in work activities.
GAO-10-525.
1.  decreases in the number of families receiving TANF cash assistance,  2.  state spending on TANF-related services beyond what is required,3.  state policies that allow working families to continue receiving TANF  4.  state policies that provide nonworking families cash assistance  outside of the TANF program.
Beyond families’ participation in the 12 work activities, the factor that  states have commonly relied on to help them meet their required work  participation rates is the caseload reduction credit. Specifically,  decreases in the numbers of families receiving TANF cash assistance  over a specified time period are accounted for in each state’s caseload  reduction credit, which then essentially 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. While state caseload declines have generally been  smaller after a 2006 law changed the base year for the comparison from  fiscal year 1995 to fiscal year 2005, many states are still able to use  caseload declines to help them lower their required work participation  rates. In fiscal year 2011, the most recent year for which data are  available, 49 of 50 states received a caseload reduction credit, including  22 that reduced their state’s work participation rate requirement to 0  percent, according to HHS data.
In addition, states’ spending of their own funds on TANF-related services  has also been a factor in some states’ credits. As stated previously,  states are required to spend a certain amount of their funds every year— their maintenance of effort (MOE) funds—in order to receive all of their  federal TANF block grants. However, if states spend in excess of the  required amount (“excess MOE”), they are allowed to functionally  increase their caseload reduction credits. We reported in May 2012 that  MOE, including expenditures by third parties, is playing an expanded role  in TANF programs due, in part, to some states’ reliance on excess MOE  to help meet their work participation rates. We also noted that if states’  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.
In addition to the caseload reduction credits and excess MOE discussed  above, we also reported in May 2010 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 assistance to  non-working families outside of the TANF program, as providing TANF  assistance to such families would lower states’ work participation rates.  Given these various factors, we noted that the work participation rate  does not allow for clear comparisons across state TANF programs or  comparisons of individual state programs over time. Thus, 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.
section_title: Performance Information for Non-Cash Services is Incomplete
paragraphs: As stated above, we reported in December 2012 that the TANF block  grant has evolved into a flexible funding stream that states use to support  a broad range of allowable services. In that report, we also reported that  the accountability framework in place in federal law and regulations had  not kept pace with this evolution. While funding for non-cash services  represents the majority of TANF spending, there were no reporting  requirements mandating performance information specifically on families  receiving non-cash services or their outcomes. There was also little  information related to TANF’s role in filling needs in other areas such as  child welfare, even though this has become a more prominent spending  area for TANF funds in many states. We reported that while states  prepared state plans and expenditure reports that individually provided  some information on non-cash services, when considered together, these  did not provide a complete picture on state goals and strategies for uses  of TANF funds.
Thus, in our December 2012 report, we recommended that HHS develop  a detailed plan with specific timelines to assist it in monitoring its progress  on revising its financial reporting categories for expenditures of federal  TANF and state maintenance of effort funds. In response to our  recommendation, HHS has taken some steps to improve expenditure  reports from states. Specifically, HHS revised its reporting form and  accounting methodology to collect more detailed and accurate  expenditure data for the TANF program. The agency told us it also plans  to provide technical assistance to states to help make the transition to this  new reporting form and methodology easier.
Despite these efforts by HHS, without more information that  encompasses the 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 suggested that  Congress should consider ways to improve reporting and performance  information in our December 2012 report. Changes to the program could  be considered as part of a full reauthorization of TANF in the future.
section_title: HHS Has Not Reported an Improper Payment Estimate for the TANF Program
paragraphs: In March 2015, we reported that HHS did not report an improper payment  estimate for the TANF program in fiscal year 2014, even though the  program is considered susceptible to the risk of improper payments. In  general, federal executive branch agencies are required to report  improper payment estimates that include payments that should not have  been made or were made in the incorrect amount. We concluded that  the lack of an improper payment estimate for TANF and other risk- susceptible programs constrains the federal government’s ability to  determine the full extent to which improper payments occur and  reasonably assure that appropriate actions are taken to reduce them.  HHS cited a statutory provision as prohibiting it from requiring states to  estimate improper payments for TANF and stated that when legislation  is considered to reauthorize TANF, the agency plans to encourage  Congress to consider statutory modifications that would allow for a  reliable error rate measurement. In the meantime, the agency reported  that it has taken actions to assist states in reducing improper payments,  such as working with states to analyze noncompliance findings from  audits related to TANF and requiring more accurate information about the  ways states used TANF block grants.
section_title: Several Factors Limit Incentives for Innovation and Evaluation in the TANF Program
paragraphs: In a November 2014 report, we concluded that while selected state and  local programs are making use of some promising approaches for moving  TANF recipients into employment and increasing their earnings,  incentives are lacking for large numbers of state and local TANF agencies  to adopt and test such approaches under the structure of the TANF  program. We pointed to some of the factors outlined above—TANF’s  funding structure and accountability measures—as factors that may limit  incentives for states to experiment. Specifically, we found:
States face competing priorities for use of TANF funds. TANF allows  states to spend funds on a wide range of programs and services that  are not necessarily related to welfare-to-work activities as long as  these services support one of TANF’s four statutory purposes.  Our  December 2012 report found that states spent significant amounts of  TANF funds on services such as child welfare or child care, and we  noted that state use of federal TANF funds for these and other  services can create tensions and trade-offs in state funding  decisions.additional resources needed for implementing more costly promising  approaches for TANF cash assistance clients may compete with other  allowable uses of TANF funds. Officials we interviewed for that report  whose three programs exclusively used TANF funds to implement  elements of promising approaches said that their programs had been  continuously funded for many years and that it would be difficult to  find funding for the programs were they beginning at that time.
In our November 2014 report, we found that any
The federal work participation rate requirements do not necessarily  serve as an incentive for states to implement certain promising  approaches, according to our interviews and prior work. Work  participation rate requirements can play an important role in  encouraging states to move TANF recipients into work. However, our  November 2014 review indicated 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.  Some experts and HHS officials we interviewed suggested that limits  on the amount of time that certain job readiness and training activities  may be counted toward a state’s work participation rate may  discourage states from pursuing approaches that involve longer-term  treatment or education. In addition, our November 2014 report  included factors discussed above, such as the caseload reduction  credit, that have allowed states to reduce the percentage of families  they needed to engage in work to meet their work participation rate  requirements. We found that states may have less incentive to use  promising approaches to engage hard-to-employ individuals in work  activities as they can meet their work participation rate requirements  without them.
Additionally, we reported in November 2014 that state and local TANF  agencies have little incentive to test the effectiveness of new  approaches. impact evaluations of their TANF programs, although these evaluations  can provide useful information on program effectiveness. We have  previously found that although HHS has a strong tradition of leading and  supporting rigorous welfare research, there are fewer incentives for states  to evaluate their programs under TANF than existed under the previous  welfare program with its evaluation and funding provisions. Indeed,  although HHS maintains an active research agenda, TANF agency  participation in some recent and ongoing HHS evaluations has been  limited. An HHS official we interviewed reported that engaging TANF  programs in evaluations of promising approaches is difficult because of  the administrative burden on the state or locality. Officials added that  HHS has no authority to require state agency participation in research  and evaluation and no dedicated funding to provide states or localities  incentives to participate. We concluded that limited participation by TANF  agencies in HHS evaluations may slow the development and adoption of  new promising approaches, leaving TANF without a continuous  improvement process.
GAO-15-31.
Consequently, to encourage broader adoption and evaluation of  promising approaches, we recommended that HHS, in consultation with  Congress, identify potential changes that would address the lack of  incentives for states and localities to adopt promising approaches and  then develop and submit a legislative proposal outlining those changes.  HHS agreed with our recommendation and noted that in the  Administration’s Fiscal Year 2015 Budget Request, it stated, “when  Congress takes up reauthorization, the Administration will be prepared to  work with lawmakers to strengthen the program’s effectiveness in  accomplishing its goals. This effort should include using performance  indicators to drive program improvement and ensuring that states have  the flexibility to engage recipients in the most effective activities to  promote success in the workforce, including families with serious barriers  to employment.” HHS made this same statement in its Fiscal Year 2016  Budget Request. We maintain that HHS should develop more concrete  proposals to address the lack of incentives within the TANF program  itself, and noted that the agency need not wait for Congress to take up  reauthorization to do so.
Chairman Boustany, Ranking Member Doggett, and Members of the  Subcommittee, this concludes my statement for the record.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: If you or your staff have any questions about this statement, please  contact Kay E. Brown, Director, Education, Workforce, and Income  Security, 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 statement. GAO staff who made key contributions to  this statement include Alexander Galuten, Gale Harris, Kristen Jones,  Michael Pahr, and Walter Vance.
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