Since PRWORA’s passage, cash assistance caseloads have declined, freeing up TANF funds for states to use for other allowable purposes. In May 2013, we reported that when states implemented TANF during fiscal year 1997, an average of 3.9 million families a month were receiving cash assistance. This number declined by over half within the first 5 years of TANF. Since that time, the average number of families receiving cash assistance each month has remained well below the initial number of 3.9 million families. An average of about 1.5 million families received cash assistance each month in 2014, according to the most recent available data from HHS. GAO-13-33. former welfare recipients increased their income through employment, and employment rates among single parents increased. At the same time, some families worked more and had higher incomes, others had incomes that left them still eligible for cash assistance. However, many of these eligible families were not participating in the program. According to our estimates in a February 2010 report, about 87 percent of the caseload decline through 2005 can be explained by the decline in eligible families participating in the program, in part because of changes to state welfare These changes included mandatory work requirements; programs.changes to application procedures; lower benefits; policies such as lifetime limits on assistance; diversion strategies such as providing one- time, non-recurring benefits instead of monthly cash assistance to families facing temporary hardships; and sanctions for non-compliance, according to a review of the research. Our December 2012 report found that while the TANF block grant still serves as the nation’s major cash assistance program for low-income families with children, states have also increasingly used it as a flexible funding stream for supporting a broad range of allowable services. the TANF block grant, states have generally maintained access to their full TANF allocation each year. As the number of families receiving cash assistance declined, states shifted their TANF priorities to other forms of aid, or non-cash services, which can include any other services meeting TANF purposes. We found that states spent significant amounts of TANF funds on services such as child welfare or child care. We reported that nationwide, in fiscal year 1997, states spent about 23 percent of TANF funds on non-cash services. In contrast, states spent more than 66 percent of TANF funds for these purposes in fiscal year 2013, according to the most recent available data from HHS. GAO-13-33. spent federal TANF funds on existing or new programs according to state legislative priorities and, as a result, funds are often allocated to and administered through multiple state and local agencies (see fig. 1). This is in contrast to TANF’s predecessor program, AFDC, which was typically administered through state welfare agencies. Our work showed that the multiple state and local agencies that receive TANF funds may serve low- income families beyond the TANF cash assistance caseload. Because job preparation and employment are key goals of TANF, one of the federal measures of state TANF programs’ performance is the proportion of TANF cash assistance recipients engaged in allowable work activities. Generally, states are held accountable for ensuring that at least 50 percent of all families receiving TANF cash assistance and considered work-eligible participate in one or more of 12 specified work activities for an average of 30 hours per week. Our work has shown that over the years, states have engaged about one third of families receiving TANF cash assistance in federally-defined work activities nationwide.For example, according to HHS data, in fiscal year 2011—the most recent year for which data are available—states engaged 29.5 percent of work- eligible cash assistance families nationwide in work activities. GAO-10-525. 1. decreases in the number of families receiving TANF cash assistance, 2. state spending on TANF-related services beyond what is required,3. state policies that allow working families to continue receiving TANF 4. state policies that provide nonworking families cash assistance outside of the TANF program. Beyond families’ participation in the 12 work activities, the factor that states have commonly relied on to help them meet their required work participation rates is the caseload reduction credit. Specifically, decreases in the numbers of families receiving TANF cash assistance over a specified time period are accounted for in each state’s caseload reduction credit, which then essentially lowers the states’ required work participation rate from 50 percent. For example, if a state’s caseload decreases by 20 percent during the relevant time period, the state receives a caseload reduction credit equal to 20 percentage points, which results in the state work participation rate requirement being adjusted from 50 to 30 percent. While state caseload declines have generally been smaller after a 2006 law changed the base year for the comparison from fiscal year 1995 to fiscal year 2005, many states are still able to use caseload declines to help them lower their required work participation rates. In fiscal year 2011, the most recent year for which data are available, 49 of 50 states received a caseload reduction credit, including 22 that reduced their state’s work participation rate requirement to 0 percent, according to HHS data. In addition, states’ spending of their own funds on TANF-related services has also been a factor in some states’ credits. As stated previously, states are required to spend a certain amount of their funds every year— their maintenance of effort (MOE) funds—in order to receive all of their federal TANF block grants. However, if states spend in excess of the required amount (“excess MOE”), they are allowed to functionally increase their caseload reduction credits. We reported in May 2012 that MOE, including expenditures by third parties, is playing an expanded role in TANF programs due, in part, to some states’ reliance on excess MOE to help meet their work participation rates. We also noted that if states’ MOE claims do not actually reflect maintaining or increasing service levels, low-income families and children may not be getting the assistance they need and federal funds may not be used in the most efficient manner. In addition to the caseload reduction credits and excess MOE discussed above, we also reported in May 2010 that some states have made changes to their TANF programs that may affect which families are counted in their work participation rates, such as providing assistance to non-working families outside of the TANF program, as providing TANF assistance to such families would lower states’ work participation rates. Given these various factors, we noted that the work participation rate does not allow for clear comparisons across state TANF programs or comparisons of individual state programs over time. Thus, we concluded that because of the various factors that affect the calculation of states’ work participation rates, the rate’s usefulness as a national performance measure for TANF is limited. As stated above, we reported in December 2012 that the TANF block grant has evolved into a flexible funding stream that states use to support a broad range of allowable services. In that report, we also reported that the accountability framework in place in federal law and regulations had not kept pace with this evolution. While funding for non-cash services represents the majority of TANF spending, there were no reporting requirements mandating performance information specifically on families receiving non-cash services or their outcomes. There was also little information related to TANF’s role in filling needs in other areas such as child welfare, even though this has become a more prominent spending area for TANF funds in many states. We reported that while states prepared state plans and expenditure reports that individually provided some information on non-cash services, when considered together, these did not provide a complete picture on state goals and strategies for uses of TANF funds. Thus, in our December 2012 report, we recommended that HHS develop a detailed plan with specific timelines to assist it in monitoring its progress on revising its financial reporting categories for expenditures of federal TANF and state maintenance of effort funds. In response to our recommendation, HHS has taken some steps to improve expenditure reports from states. Specifically, HHS revised its reporting form and accounting methodology to collect more detailed and accurate expenditure data for the TANF program. The agency told us it also plans to provide technical assistance to states to help make the transition to this new reporting form and methodology easier. Despite these efforts by HHS, without more information that encompasses the breadth of states’ uses of TANF funds, Congress will not be able to fully assess how funds are being used, including who is receiving services or what is being achieved. We suggested that Congress should consider ways to improve reporting and performance information in our December 2012 report. Changes to the program could be considered as part of a full reauthorization of TANF in the future. In March 2015, we reported that HHS did not report an improper payment estimate for the TANF program in fiscal year 2014, even though the program is considered susceptible to the risk of improper payments. In general, federal executive branch agencies are required to report improper payment estimates that include payments that should not have been made or were made in the incorrect amount. We concluded that the lack of an improper payment estimate for TANF and other risk- susceptible programs constrains the federal government’s ability to determine the full extent to which improper payments occur and reasonably assure that appropriate actions are taken to reduce them. HHS cited a statutory provision as prohibiting it from requiring states to estimate improper payments for TANF and stated that when legislation is considered to reauthorize TANF, the agency plans to encourage Congress to consider statutory modifications that would allow for a reliable error rate measurement.