PRWORA ended AFDC, which provided states with federal funds to share states’ costs for monthly cash assistance to eligible low-income families, and created TANF. Congress has provided states with $16.5 billion per year in fixed federal TANF funding to cover 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. Under TANF, states are given flexibility in setting various welfare program policies. For example, states generally determine cash assistance benefit levels and eligibility requirements. States are also generally allowed to spend TANF funds on other services as long as these services meet 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 sets some conditions for states receiving federal funds for TANF. For example, states are required to maintain a specified level of their own past spending on certain welfare programs to receive all of their TANF funds, referred to as state maintenance of effort (MOE). In addition, states must ensure that a minimum percentage of families receiving cash assistance meet work participation requirements set in law, referred to as the work participation rate. Activities creditable towards meeting work participation rates are defined in federal law and are generally focused on participants gaining employment, work-related skills, and vocational education. States that do not meet minimum work participation rates may be penalized by a reduction in their block grant. States can use various policy options to help them meet their work participation rates, such as by reducing 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. Such time limits do not apply to other TANF-funded services. The Deficit Reduction Act of 2005 reauthorized the TANF block grantand included changes expected to strengthen the work participation rate requirement for states, among other changes. TANF is authorized through March 27, 2013. Federal law sets forth the basic TANF reporting requirements for states. For example, states are required to provide information and report on their use of TANF funds to HHS through quarterly reports on demographic and economic circumstances and work activities of families receiving cash assistance, state TANF plans outlining how each state intends to run its TANF program, and quarterly financial reports providing data on federal TANF and state MOE expenditures, among other things. HHS reviews state information and reports to ensure that states meet the conditions outlined in federal law. For example, HHS uses information on demographic and economic circumstances and work activities of families receiving cash assistance to determine whether states are meeting work participation rates. For quarterly financial reports, HHS collects information on two types of state expenditures. 1. Assistance, which we refer to throughout the report as cash assistance, primarily includes monthly cash payments directed at ongoing, basic needs. 2. Nonassistance, which we refer to throughout the report as non-cash services, can include any other services meeting TANF purposes. These include services such as job preparation activities, child care and transportation assistance for parents who are employed, family formation efforts, 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. The distinction between cash assistance and non-cash services is important because only families that receive cash assistance are included in the work participation rate calculation and are subject to time limits on receiving federally-funded cash assistance. Such conditions do not apply to families who receive non-cash services. Amid concerns regarding limited information on TANF expenditures, Congress included additional reporting requirements in the Claims Resolution Act of 2010, which extended TANF authorization through September 2011. The act required states to submit additional information to HHS on nonassistance (or non-cash services) broadly categorized on HHS’s expenditure reporting form as either “other” or “authorized solely under prior law” for March 2011 and April through June 2011. The act only required these reports in 2011, and did not require on-going reporting for following years. Expenditures in these categories made up nearly 28 percent of all federal TANF and state MOE spending for non- cash services nationwide in fiscal year 2011, and the resulting reports indicated that over half of them were for child welfare services. The major contrasts between the funding structure of the TANF block grant and its predecessor became apparent in the early years of TANF. When TANF was first implemented in fiscal year 1997, on average over 3.9 million families were receiving cash assistance every month. This number declined by over half within the first 5 years of TANF, and averaged about 1.9 million families in fiscal year 2011. The composition of the overall TANF caseload also changed, with the percentage of “child- only” cases increasing from about 23 percent from July through September 1997 to over 40 percent in fiscal year 2010. These cases consist of families receiving cash assistance on behalf of children only, in contrast to other cases in which adults in the families also receive benefits on their own behalf. Generally, in child-only cases, the parent or adult caregiver is not eligible for benefits for one or more of a variety of reasons, such as receipt of other federal benefits or immigration status. With the financial structure of the block grant, states have generally maintained access to their full TANF block grant allocation each year and have still been required to meet minimum MOE requirements, even as cash assistance caseloads declined. We examined issues related to the federal-state fiscal partnership under TANF in 2001 amid concerns that states would replace their own spending with federal TANF funds— thereby freeing up state funds for other purposes, including tax relief. Although we have not updated this work, we found at that time that the MOE requirement, in many cases, limited the extent to which states used their federal funds to replace state funds. Declining cash assistance caseloads also freed up federal TANF funds that states could save 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. Over time, states also used TANF flexibility to shift spending to non-cash services. 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 (see fig. 1). The shift in combined federal TANF and MOE spending over time is also reflected in federal and state spending when considered separately. In fiscal year 1997, nationwide, states spent about 23 percent of federal TANF funds for non-cash services, compared to about 58 percent in fiscal year 2011 (see fig. 2). An even greater shift occurred in MOE spending patterns over time. While in fiscal year 1997, nationwide, states spent about 23 percent of state MOE funds for non-cash services, this rose to about 70 percent in fiscal year 2011. The increased emphasis on non-cash services is widespread among the states. Thirty-four states spent half or more of their federal TANF funds for non-cash services in fiscal year 2011. Fifteen of these states spent three-quarters or more of their federal TANF funds in this way (see fig. 3). The move away from traditional cash assistance toward non-cash services by states is not necessarily driven by reduced need for cash assistance among low-income families. Several factors have affected the early decline and continued low levels of cash assistance since states implemented TANF. The initial decline occurred during a strong economy where federal support for work supports like child care increased and TANF provided new program emphasis on work. Many former welfare recipients increased their income through employment, and employment rates among single parents increased. At the same time that 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 2010 report, the vast majority—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 programs. These changes included 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. While we have not updated this analysis, some recent research shows that this potentially vulnerable group may be growing.number of families in poverty and those receiving cash assistance through TANF is not as strong as it has been in the past (see fig. 4). In fiscal year 2011, nationwide, the top areas of state spending of federal TANF funds for non-cash services were child welfare, emergency aid, and other services; job preparation and work activities; and work supports including child care.populations for services and delivery methods differed within and across these three spending areas. State decisions on how to allocate funding for non-cash services were influenced by state priorities and TANF’s funding structure, according to officials we interviewed. In fiscal year 2011, nationwide, states spent federal TANF funds for non- cash services in common areas including child welfare, emergency aid, and other services; job preparation and work activities; and work supports including child care. These spending areas accounted for 70 percent of over $8.7 billion in federal TANF funds spent on non-cash services nationwide that year (see fig. 5). As shown in figure 6, based on each state’s spending for non-cash services, these areas—child welfare, emergency aid, and other services; job preparation and work activities; and work supports—also represented the three areas most frequently emphasized by states. For example, 18 states spent the largest percentage of their federal TANF funds for non- cash services for child welfare, emergency aid, and other services and 17 states spent the largest percentage for job preparation and work activities. The spending area referred to as child welfare, emergency aid, and other services includes a range of services categorized as “authorized solely under prior law” and “other,” which were primarily child welfare services. According to expenditures reported by states in HHS’s report to Congress required by the Claims Resolution Act of 2010 for April through June 2011, states spent over 54 percent of federal funds categorized as “authorized solely under prior law” and “other” combined on child welfare services. States spent an average of 29 percent of their federal TANF funds for non-cash services in this area, ranging from under 5 percent in 12 states to over 85 percent in 2 states. TANF requires each state to engage a specified percentage of families receiving cash assistance in work or work-related activities, and combined, states had spending on job preparation and work activities totaling over $1.9 billion in fiscal year 2011. Nationwide, 17 states had these services as a top spending area for federal TANF funds for non- cash services that same year. Overall, states spent an average of about 25 percent of their federal TANF funds for non-cash services in this area, ranging from under 5 percent in eight states to 79 percent in one state.Expenditures are not reported in a way to determine what portion of spending in this area is spent on those receiving cash assistance versus other eligible low-income individuals. Eight states had work supports as a top spending area for federal TANF funds for non-cash services in fiscal year 2011. We reported in 2006 that growth in TANF spending for work supports, particularly for child care, reflected state efforts to support employment as these supports helped many families formerly receiving cash assistance maintain jobs. States spent an average of about 13 percent of their federal TANF funds for non- cash services in this area, ranging from under 5 percent in 25 states to 67 percent in 1 state. While states spent a large portion of their federal TANF funds in these areas, we found in our interviews with selected states that target populations for services and delivery methods can differ. The following provides examples of these differences in our selected states for child welfare, emergency aid, and other services; job preparation and work activities; and work supports. Among our selected states, federal TANF funds were used to support child welfare services, such as child abuse hotlines, investigative and legal services, child protection, and preventive services as well as emergency aid, such as clothing and shelter. Child welfare services are generally provided to children and their families to prevent the occurrence of child abuse or neglect, to help stabilize the family and prevent the need to remove the child from the home if abuse has occurred, and to improve the home and enable the child to reunite with his or her family if the child has been removed from the home. Officials in several of our ten selected states said that TANF funds helped expand existing child welfare programs that were also funded with other federal sources, such as Title IV-E of the Social Security Act for foster care payments and adoption assistance, Medicaid for health care coverage for low-income individuals including children, Title IV-B of the Social Security Act for child and family services to promote the welfare of children, and Social Services Block Grant (SSBG) funds for states to provide social services to meet certain needs of individuals residing within each state. The officials noted that TANF’s flexibility allowed them to meet budgetary needs in this area. One study shows that states rely on federal TANF funds to help support children and families served by state child welfare agencies (see fig. 7). In addition to child welfare services, selected states used funds in this spending area to provide a variety of other services. For example, the District of Columbia used federal TANF funds to support homeless shelters, provide case management, and conduct home visits to families formerly receiving cash assistance. Among our selected states, job preparation and work activities included job readiness training related to resume-writing and interview preparation, help with the job search process, skills training, and subsidized employment. These activities provided work-related assistance that typically counts toward the state’s work participation requirement, and that the state must track for reporting and compliance purposes. Officials in one selected state noted that they also provided activities such as English as a Second Language courses that do not count toward meeting work participation requirements. Officials in 5 of our 10 selected states said they provide services like resume and interview assistance through contractors or directly through the state. While selected states provided similar services, the populations served and delivery methods often differed. For example, California targets its non-cash services to families receiving cash assistance, with the exception of those receiving short-term aid in an effort to divert them from the caseload. Its TANF-funded services promote job preparation and work activities directed at this population. Other states we reviewed said they provide certain non-cash services to low-income families regardless of whether they receive cash assistance. For example, Arkansas and Washington use federal funds from TANF to partner with local colleges and businesses to provide tailored education and training opportunities designed to meet the needs of local industries. Arkansas officials said that the state’s Career Pathways program provides eligible individuals who have children, such as cash assistance recipients and those with with education incomes up to 250 percent of the federal poverty line,and career training at participating community colleges for high demand jobs. Arkansas officials noted that the program was originally going to be supported using federal funds under the Workforce Investment Act, but these funds were not available, so TANF funds were used instead. Meanwhile, Florida and Utah coordinate work-related services with those provided through the Workforce Investment Act one-stop center system, through which job seekers can access most federally-funded employment and training programs and services. Among our selected states, work supports primarily included child care subsidies or vouchers for low-income families that are working, which may include those receiving cash assistance. Selected states provided child care services similarly through statewide child care systems, counties, or contract vendors. Officials in several selected states said they use TANF funds to provide child care services in combination with federal funds from the Child Care and Development Fund (CCDF), which helps states provide child care subsidies for low-income families. This practice of using both TANF and CCDF funds for child care services was also noted in our previous work, which indicated that states use a combination of TANF, CCDF, TANF funds transferred to CCDF, SSBG, and state funds to provide child care subsidies to low-income families. Officials in several of our selected states said that TANF funds helped them address unmet needs and expand services provided through CCDF to larger populations. However, they also noted that even with these combined funding sources, they have had waitlists for child care subsidies in their state. Our prior work shows that waitlists are not always an accurate indicator of need. For example, in our 2005 and 2010 reports on the decline of the number of children served by CCDF, we noted that states have made changes since 2001 that could decrease the number of families that can access child care but could also provide larger subsidies to those who receive services. These included eligibility and enrollment changes, increased provider payment amounts, and increased co- payment amounts for families (see fig. 8). An official we spoke with in one state said that they do not use waitlists, and instead adjust key features of their child care subsidy program, such as eligibility criteria, to match the resources they have available. These adjustments allow them to avoid waitlists but also make some families that could potentially benefit from the program unable to participate. For additional information on selected states’ TANF programs and spending for non-cash services, see appendix III. TANF’s funding structure has given states flexibility in making decisions regarding non-cash services. As mentioned earlier, the dramatic caseload declines during the first few years of TANF’s implementation allowed states to spend federal funds not used on cash assistance for new or existing non-cash services. For example, Louisiana officials said their state’s caseload declines freed up federal TANF funds for new programs to encourage marriage, provide pre-kindergarten services, and help prevent out-of-wedlock pregnancies. In fiscal year 2010, Louisiana spent 71 percent of its federal TANF funds for non-cash services on these efforts. Further, they noted that caseloads continued to decline or stayed the same, since many families that would have been eligible for cash assistance left the state following Hurricane Katrina. Officials in several other selected states also said that federal TANF funds were spent 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. This is in contrast to TANF’s predecessor program, AFDC, which was typically administered through state welfare agencies. More specifically, in 2 of our 10 selected states, officials said that federal TANF funds were allocated directly to a lead agency, usually the state TANF office, which may have allowed it to focus funds in specific areas. For example in Utah, federal TANF funds were generally provided first to its Department of Workforce Services. While the department had agreements with other state agencies to provide services, 63 percent of its federal TANF funds for non-cash services in fiscal year 2010 were used for job preparation and work activities. Similarly, in Louisiana, federal TANF funds were generally provided to the state Department of Child and Family Services, which used interagency agreements to support its emphasis on the family formation and out-of-wedlock pregnancy prevention efforts mentioned above. In contrast, federal TANF funds can be allocated to multiple agencies through a state’s annual legislative budget process. For example in Florida, federal TANF funds went to several agencies that provided a variety of services to low-income families as well as those receiving cash assistance (see fig. 9). Florida officials said legislative priorities can shift from year to year, and recent emphasis has been on out-of-wedlock pregnancy prevention programs and child welfare initiatives, such as protective investigations and adoption subsidies. States’ use of federal TANF funds for a broad array of non-cash services beyond traditional cash assistance can create tensions and trade-offs in state funding decisions, particularly in times of severe fiscal constraints. Officials in three of our selected states cited tensions between the need to provide cash assistance and the need to provide other state services. They noted that this has become more apparent as the number of families needing cash assistance increased during the recent economic downturn. Officials in five selected states cited recent spending reductions in non-cash areas including job preparation and work activities, and officials in one state noted the need to reduce family formation efforts, particularly after American Recovery and Reinvestment Act of 2009 funds were no longer available. To help manage costs, states may make changes to key elements of their cash assistance programs, such as adjusting eligibility criteria, benefit levels, and other features. For example, officials in one selected state said that instead of reducing spending for non-cash services to meet increased need for cash assistance during the recession, the state recently enacted more stringent eligibility criteria and reduced benefit amounts for cash assistance. They explained that their state legislature allocates TANF funds to the cash assistance program just like any other program for non-cash services and thus, funding is not shifted between programs to accommodate increased need. Almost no federal requirements or benchmarks exist as to eligibility criteria or benefit amounts or on the percentage of low-income families who are to be covered by a state’s cash assistance program. Officials in 9 of our 10 selected states said that the state allocates funds for cash assistance based on caseload projections using data from previous years. Remaining funds are then available for non-cash services. Although the TANF block grant has evolved into a flexible funding stream that states use to support a broad range of allowable services while also serving as the nation’s major cash assistance program for low-income families with children, the accountability framework currently in place in federal law and regulations has not kept pace with this evolution. As a result, there is incomplete information available for assessing TANF performance. Under federal law and regulations, states are required to submit several reports to HHS related to TANF. These generally include: quarterly reports on demographic and economic circumstances and work activities of families receiving cash assistance; state TANF plans outlining how each state intends to run its TANF program, generally filed every two years; quarterly financial reports providing data on federal TANF and state quarterly state MOE reports providing data on families receiving cash benefits under separate state programs, which are funded entirely with state MOE funds and are not subject to certain federal requirements; and annual single audit reports resulting from required audits of nonfederal entities that expend federal funds. Taken together, this set of reports and the information provided serves as the accountability framework in place to help HHS and Congress ensure that states use TANF funds in keeping with the block grant’s purposes and identify any program improvements that may be warranted. Yet, these numerous requirements provide limited information on state strategies for using their TANF funds for non-cash services. Our past work has shown that a sound accountability framework includes (1) defining desired outcomes, (2) measuring performance to gauge progress, and (3) using performance information as a basis for decision- making. This requires complete, accurate, and reliable data. However, this type of performance information is not available for a majority of TANF funds nationwide. There are no reporting requirements mandating performance information specifically on families receiving non-cash services or their outcomes, or 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.reporting gaps limit the information available for oversight of TANF block grant funds by HHS and Congress. State TANF plans serve as a potential source of useful program information. However, they 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. Federal law includes general language on what should be included in the state TANF plan. For example, the law states that plans are to outline how a state will “conduct a program…that provides assistance to needy families with (or expecting) children and provides parents with job preparation, work, and support services to enable them to leave the program and become self-sufficient.” Federal law does not require states to include descriptions in their state plans of how they intend to use TANF funds beyond the cash assistance population for non-cash services, and states have used their discretion in For example, a state determining how much detail to put in their plans. plan prepared by one of the selected states outlined its cash assistance program and provided descriptions of a variety of non-cash services it intends to provide. In contrast, the state plan of another selected state described its intentions to provide supportive services, particularly to families who have exhausted cash assistance benefits, but did not describe what those services would be. HHS officials also noted that they do not have the authority to require states to include basic information about their cash assistance programs, including state TANF eligibility criteria, benefits levels, and other program features. The financial reports on federal TANF and state MOE expenditures also provide some information on the types of non-cash services provided by states, but recent HHS studies and officials in most selected states we spoke to have noted some weaknesses in the information collected from states. Specifically, an HHS study from 2009 reviewed most states’ expenditures and noted incomplete and inconsistent information related to HHS’s current TANF expenditure reporting form for states. HHS identified similar issues in its reports to Congress required under the Claims Resolution Act of 2010, which examined more detailed information from states on TANF expenditures reported on the form. For example, the reports show that spending for child welfare services is often reported in the “other” category for non-cash services as well as the “authorized solely under prior law” categories for cash assistance and non-cash services. In addition, the reports noted inconsistencies between states with the activities counted under the form’s reporting categories. Officials in 7 of the 10 selected states said that the form does not fully capture the purposes of their TANF spending. For example, one state official described how their state’s use of TANF funds for child welfare services is not identifiable in the form’s reporting categories. Also, current expenditure reporting does not provide data in a way that allows distinctions between expenditures made on behalf of cash assistance recipients to help them find employment and leave welfare, and expenditures provided to other individuals and families not directly related to welfare-to-work purposes. While state plans and expenditure reports individually provide some information on non-cash services, even when considered together, they do not provide a complete picture on state goals and strategies for uses of TANF funds. This is because the state plan is not required to be written in a way that connects to HHS’s financial reporting categories. This makes it difficult to determine how and whether spending areas fit into each state’s stated goals and strategies. One state official we interviewed said that with the current reporting requirements, it was hard for them to know how much TANF funding each of their state programs were using and what benefit the state was getting from each program. As a result, the state developed an additional internal report that presents the costs of performing activities by program, which provides it with better information for assessing the return on investment for each program. Officials from another state also said that it might be helpful to have the state plan more closely tied to the TANF expenditure reporting form, but they would want very specific instructions for how this should be done. HHS officials noted the department’s recent efforts to improve TANF expenditure reporting and acknowledged that reporting could be improved in certain other areas as well. HHS officials said they are revising the TANF expenditure reporting form to the extent permitted by law to include additional reporting categories, such as those related to child welfare services. They said they are also revising reporting instructions for states to improve consistency across states. Officials noted the importance of considering the implications for states of any changes or additions to current reporting requirements. For example, some state officials we interviewed described how new or revised reporting requirements can require costly and time-consuming changes to automated and other systems and practices in states and localities, and need to be carefully considered in terms of burden and appropriate timing for states. HHS officials were unable to provide a detailed plan with specific timeframes for the reporting revisions, but said that they are working on them, that they will seek input from relevant parties, and that when the revisions are finalized, they will be shared with Congress to assist in potential TANF reauthorization. In commenting on a draft of this report, HHS stated that it intends to publish draft revisions and instructions for comment in early 2013, with a goal of implementing the revisions for fiscal year 2014. The work participation rate for states, established in law and focused on families receiving cash assistance, serves as a key performance measure for state TANF programs. This focus remains, even though the cash assistance component of TANF no longer reflects how most TANF funds are spent. Our 2010 report shows that the emphasis on the work participation rate as a measure of program performance has helped change the culture of state welfare programs so that they focus on moving families off cash assistance and into employment.held accountable for ensuring that a specified percentage of all families receiving TANF cash assistance, and considered work-eligible, participate States are in one or more of the federally-defined allowable activities for the required number of hours each week. We noted in our 2010 report that while the rate specified in law is 50 percent, states have used various policy options, such as credits for caseload reductions and spending above required MOE amounts, to reduce their required rates below 50 percent, as permitted by law. TANF also provides states some flexibility regarding which families to include or exclude in calculating their rates. Our 2010 report noted that over the years, states have typically engaged about one- third of work-eligible families in allowable work activities nationwide and generally met their reduced rates. State participation rates have remained essentially the same since TANF’s implementation, despite legislative changes in 2005 that were generally expected to strengthen the work requirements, as we also reported in 2010 and again in 2011. We also noted in 2012 that the TANF work participation rate requirements, as enacted, in combination with the allowable credits and flexibility provided to states, may not serve as an incentive for states to engage more families in work. Our previous work and our work in selected states also shows that the work participation rate measure may not capture aid and services that states believe are important and that it may also serve as a disincentive to work with families with complex needs. All 10 selected states were using federal TANF funds to offer a range of non-cash services that could, for example, help remove barriers to work and/or keep families off the cash assistance caseload. A few of these states provided emergency aid to help meet low-income families’ immediate needs, including housing, child care, and transportation. These efforts are not captured in the key performance measure, the work participation rate. Also, some officials in several selected states also said that 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. In our interviews with state officials in the 10 selected states, we found that eight said their states had developed or are developing performance measures of their own that include at least some TANF non-cash services. Officials from seven of these eight states said that their states had tracked information that included the number of people served by some state programs that used federal TANF funds for non-cash services. In addition, of these eight states, officials in Washington and the District of Columbia said they are going through a “re-design process” for their cash assistance program. For example, they are more closely aligning services across multiple state agencies to provide comprehensive services to meet the individual needs of families receiving cash assistance and to help them attain self-sufficiency. Washington officials said they are developing alternative measures of family well- being to measure the effectiveness of TANF as a whole for these families under the re-designed TANF program. Examples of measures Washington officials are considering for families receiving cash assistance include examining whether parents are attaining higher levels of education, training, and financial literacy; whether children have increased access to early childhood and preschool programs; and whether families have increased access to health care, stable housing, and supports for family conflict and domestic violence. Several features of TANF pose challenges to designing performance measures, as indicated by our previous work. In our 2006 report on improving performance accountability in grant programs, we noted that some grant features in particular affect the difficulties of designing accountability mechanisms. These features include the extent to which a grant: operates as a funding stream rather than a distinct program, and supports a limited or diverse array of objectives. We also said in our 2012 guidance on designing evaluations that a block grant, with loosely defined objectives that simply adds to a stream of funds supporting on-going state programs, presents a significant challenge to efforts to portray the results of the federal program. Moreover, we noted in 1995 that accountability for block grants can be difficult since accountability provisions need to strike a balance between the potentially conflicting objectives of increasing state flexibility while attaining certain national objectives—a balance that inevitably involves philosophical questions about the proper roles and relationships among the levels of government in our federal system. The four stated TANF purposes in the law that generally define allowable use of funds for states are broad, so the ways in which states use TANF funds can often be complex and varied across states. Also, as discussed previously, as allowed under TANF, states have used TANF funds to expand existing state programs that may be funded with other federal sources, such as Workforce Investment Act funds for employment and training services; CCDF funds for child care; and SSBG and Title IV-B and E funds of the Social Security Act for child welfare services. While accountability for the TANF block grant can be challenging, general principles of performance measurement can help guide the development of improved performance information. As we cited earlier, our previous work noted that an essential first step in any system of performance information and measurement is to establish goals to be achieved through the relevant program or funding stream. This work also identified characteristics of successful performance measurement systems. These include ensuring that performance measures are tied to program goals, demonstrate the degree to which the desired results were achieved, and take into account stakeholder concerns. In addition, real world considerations, such as the cost and effort involved in gathering and analyzing data, must be taken into account while striving to collect sufficiently complete, accurate, and consistent data to be useful for decision makers. Moreover, other key decisions in establishing performance measures relate to whether to link penalties or rewards to any such measures. Although in many situations HHS can revise its reporting form to make adjustments to the reporting categories, generally HHS has limited authority to impose new TANF reporting requirements on states unless directed by Congress, so many changes to the types of performance information that states are required to report would require congressional action. Over the years, TANF has clearly 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 other eligible families. States still spend some portion of TANF funds on welfare-to-work programs for the cash assistance population, but their new and varied uses of TANF funds for non-cash services over time beyond this population raise questions about how state efforts are contributing to TANF purposes. Yet, without an accountability framework 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 acknowledge HHS’s steps toward improving TANF expenditure reporting and its concerns about reporting revisions for states. Any efforts to require more information or make changes to existing reporting and performance measures must consider this potential reporting burden for states. At the same time, gaps in TANF reporting and performance information make it difficult for policymakers to fully assess the workings of TANF. If Congress determines that TANF, as currently structured, continues to address its vision for the program, improved reporting and performance information will be important to enhance Congress’ decision making and oversight of TANF in the future. To provide better information for making decisions regarding the TANF block grant and better ensure accountability for TANF funds, Congress should consider ways to improve reporting and performance information so that it encompasses the full breadth of states’ uses of TANF funds. As HHS takes steps to revise expenditure reporting for TANF to better understand how states use TANF funds, it should develop a detailed plan with specific timelines to assist in monitoring its progress for revising its financial reporting categories for expenditures of federal TANF and state MOE funds. We provided a draft of our report to HHS for review and comment. HHS indicated in its general comments (see appendix IV) that it agrees that current reporting on TANF expenditures provides limited information on the range of ways in which states use federal TANF and state MOE funds. HHS noted that it intends to publish draft revisions to its reporting categories for TANF expenditures and instructions for states for comment in early 2013, with a goal of implementing the revisions in fiscal year 2014. We have added this information to the report. We commend HHS’s efforts to improve TANF expenditure reporting, and maintain that a detailed plan with timelines for revising the reporting categories will facilitate monitoring of its progress and help ensure that the revisions are implemented in a timely fashion. We also agree with HHS that as it works to improve financial reporting, it will be helpful to develop more refined categories of spending than the current categories in existing federal reporting, and to look at overall usage of funds, including transfers and MOE spending. In addition, HHS said that it lacks the authority to require states to provide certain types of information in their state plans, such as plans for using TANF funds or meeting MOE requirements as well as strategic goals or performance targets or measures. HHS noted that absent a statutory change, it cannot add additional categories of required information to the state plan, and any decision to establish such new requirements is one for Congress to consider. HHS also noted that the report underscores that a large share of TANF spending now goes to categories of spending other than cash assistance, and that improved information can assist in considering both appropriate allowable expenditure categories and the potential for performance measurements for these other categories of TANF and MOE spending. In addition to these general comments, HHS also provided us with technical comments that we incorporated, as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies 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 V. Appendix I: HHS Categories of Expenditures for Cash Assistance and Non-Cash Services on the Form ACF-196 expenditures on non-recurrent short-term benefits or subsidized employment. It also includes TANF Contingency funds provided to states when certain triggers indicate increased needs. HHS’s TANF expenditure reporting form, the Form ACF-196, includes 13 categories for states to report spending for non-cash services. We combined HHS TANF expenditure reporting categories under the following “spending areas” for the purposes of our report. This appendix provides selected TANF-related information—such as TANF caseload and spending data—as well as data on numbers of families and children in poverty for each of the 10 states we reviewed in this report: Arkansas, California, Colorado, the District of Columbia, Florida, Illinois, Louisiana, New York, Utah, and Washington. States were judgmentally selected to capture a variety of state characteristics including the proportion of federal and state funds states spent on TANF non-cash services; the proportion spent for specific non- cash services including child welfare, emergency aid, and other services, job preparation and work activities, and work supports such as child care; the total amount of federal and state expenditures for non-cash services; and organizational, geographic, and other considerations. These 10 states accounted for nearly half of all federal and state spending for TANF non-cash services in fiscal year 2010. Examples of programs and services provided Education, training, and job search services for TANF caseload families as well as incentive bonuses for families no longer receiving cash assistance to continue finding employment. Career Pathways initiative to increase access to education credentials to help TANF caseload and other low-income families attain higher paying jobs through partnerships with local colleges and businesses. Subsidized child care services primarily for TANF caseload families through the state’s child care system. Administration costs for the Departments of Workforce Services and Human Services. Examples of programs and services provided Education and training for TANF caseload families only. Wage subsidies for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Administration costs for both the counties and the state, in addition to some related costs for contractors. Domestic violence services for TANF caseload families only. Temporary transitional services such as child protection, family preservation, and case management to meet a specific crisis situation. Examples of programs and services provided Child welfare services for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Homeless Prevention and Rapid Re-housing Program, in partnership with the Colorado Housing and Finance Authority, for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Administrative costs for both the counties and the state. Child care tax credits for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Examples of programs and services provided Child care vouchers for TANF caseload families as well as other eligible low-income families not on the TANF caseload, delivered through the Office of the State Superintendent for Education. Child welfare services for TANF caseload families only, with case management services provided through the Department of Child and Family Services. Emergency aid such as shelter, food, and clothing for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Home visits to TANF caseload families to identify barriers to employment and link these families to needed services. Teen pregnancy prevention program through the Department of Health, which provides sex education to young women. Examples of programs and services provided Child welfare services including protective investigations, abuse hotlines, case management, and other family safety activities for TANF caseload families as well as other eligible low-income families not on the TANF caseload. School readiness child care program for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Education, training and work subsidies for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Examples of programs and services provided Child welfare screening, assessments, and investigations for TANF caseload families. Home visits and parent training for child welfare cases. Employment and training programs provided to TANF caseload families through contractors administered by the state. Child care certificate and voucher program for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Examples of programs and services provided Pre-kindergarten program to reduce out-of-wedlock pregnancies and encourage two-parent families by increasing literacy and responsible behavior for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Administration costs associated with multiple programs. Work-related activities, education, and skills training for TANF caseload families. Examples of programs and services provided Child protective and preventive services and maintenance of a child welfare hotline for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Administration costs including TANF eligibility determination. Work programs for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Examples of programs and services provided Employment, education, and job training services for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Subsidized employment for TANF caseload families. Administration and systems costs for the state. Healthy marriage promotion programs through education and training. After-school youth development programs to help prevent out-of-wedlock pregnancy. Examples of programs and services provided Vocational education and GED support generally through community colleges as well as job preparation and job search assistance for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Subsidized employment for TANF caseload families only. Child care assistance for TANF caseload families as well as other eligible low-income families not on the TANF caseload. Administration and systems costs for the state. Washington officials noted discrepancies between their fiscal year-end 2010 TANF expenditure data with the data HHS published for that year. Officials said further that discrepancies are likely due to differences in reporting time frames between the state and HHS. In addition to the contact named above, Robert Campbell, Gale Harris, Kristy Kennedy, Nhi Nguyen, Michael Pahr, and Michelle Loutoo Wilson made significant contributions to all aspects of this report. Also contributing to this report were James Bennett, Elizabeth Curda, Rachel Frisk, Alexander Galuten, Kathleen van Gelder, Thomas James, Edward Leslie, Jennifer McDonald, Ellen Phelps Ranen, Almeta Spencer, and Walter Vance. 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. 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 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. GAO-06-414. Washington, D.C.: March 3, 2006. Welfare Reform: States Provide TANF-Funded Work Support 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. Designing Evaluations: 2012 Revision. GAO-12-208G. Washington, D.C.: January 2012. Grants Management: Enhancing Performance Accountability Provisions Could Lead to Better Results. GAO-06-1046. Washington, D.C.: September 29, 2006. Block Grants: Issues in Designing Accountability Provisions. GAO/AIMD-95-226. Washington, D.C.: September 1, 1995.

Summary: The TANF block grant, created as part of the 1996 welfare reforms, gives states flexibility to make key decisions about how to allocate funds to provide services to low-income families. The number of families receiving cash assistance declined by over half within the first 5 years of TANF, and states shifted their TANF priorities to other forms of aid, or non-cash services. In fiscal year 2011, states spent about 64 percent of nearly $31 billion in federal and state funds for such services, with federal funds accounting for nearly $9 billion. GAO examined (1) how states have used TANF funds for non-cash services and (2) what information is available to assess TANF performance for non-cash services and what challenges are involved in doing so. GAO reviewed past reports and relevant federal laws and regulations; analyzed state TANF expenditure information; and interviewed HHS officials, TANF experts, and officials in 10 selected states through site visits and phone conferences. These 10 states accounted for nearly half of all TANF spending for non-cash services in fiscal year 2010. Nationwide, states have used Temporary Assistance for Needy Families (TANF) block grant funds not only to provide cash assistance, but also to provide noncash services, such as job preparation and work supports for low-income families and aid for at-risk children. Among our 10 selected states, job preparation and work activities included help with the job search process, skills training, and subsidized employment. California generally provides such services to families receiving cash assistance while the other nine states extend some of them to other low-income families. Florida and Utah provide such services in coordination with the Workforce Investment Act one-stop center system. Work supports among these states mainly include child care subsidies for low-income working families. Services for at-risk children include child welfare activities, such as child abuse hotlines, investigative and legal services, child protection, and preventive services. TANF has allowed states to make funding decisions based on state priorities, particularly as cash assistance caseload declines freed up funds for non-cash services. However, according to officials in three states GAO reviewed, state decisions to fund a broad array of services can create tensions and tradeoffs between meeting cash assistance and other service needs. TANF's accountability framework provides incomplete information on how states' non-cash services are contributing to TANF purposes. Plans that states submit to the Department of Health and Human Services (HHS) outlining how they intend to run their TANF programs provide limited information on goals and strategies for non-cash services. In addition, past HHS reports and selected states identified some weaknesses in TANF expenditure reporting. For example, officials in one selected state noted that the use of TANF funds for child welfare services is not clearly identifiable in HHS's reporting categories for TANF expenditures. HHS is working to revise reporting categories, with a goal of implementing them for fiscal year 2014. No reporting requirements currently mandate performance information specifically on families receiving non-cash services or TANF's role in filling needs in prominent spending areas for TANF funds, like child welfare. These reporting gaps limit the information available for oversight of TANF block grant funds by HHS and Congress. Generally, HHS has limited authority to impose new TANF reporting requirements on states unless directed by Congress. While GAO's previous work on grant design highlights several features of grants, such as broad and varied purposes, that pose challenges to the development of performance information and measures, it also lays out accountability principles that can help address these issues for TANF. Congress may wish to consider ways to improve reporting and performance information so that it encompasses the full breadth of states' uses of TANF funds. GAO recommends that HHS develop a detailed plan with timelines to revise reporting categories for TANF expenditures. In its response, HHS provided some timeframes that we added to the report, although we maintain a more detailed plan will help HHS monitor its progress in completing this effort.