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. 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. 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. 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). 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). 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

Summary: 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. 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. 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.