Table of Contents
Availability of Funds
Federal TANF Funds
State Maintenance-of-Effort (MOE) Funds
Spurred on by the passage of the landmark welfare reform legislation -- the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 -- States have made tremendous progress toward the critical goal of moving families from welfare to work. More families are entering employment, earnings are up, and caseloads are down. The Temporary Assistance for Needy Families (TANF) program has given States new opportunities to develop and implement creative and innovative strategies and approaches to remove families from a cycle of dependency on public assistance and into work. For example, many are turning welfare offices into comprehensive service centers focused on work or changing policies so that work pays. However, in spite of some dramatic results, there are still individuals not working or in entry-level jobs, with incomes that are too low or too erratic to raise their families above poverty. Under TANF, States have the flexibility and resources to develop programs that reach all families, promote success at work, and convert welfare offices into job centers. The task of welfare reform is far from finished. We encourage States to take the critical next steps to ensure that all families get the essential supports they need to get a job, succeed at work, and move out of poverty. Some important areas for States and communities to address include:
The TANF program provides extraordinary flexibility for funding a wide variety of employment and training activities, supportive services, and benefits that will enable clients to get a job, keep a job, and improve their economic circumstances. TANF funds are much more flexible than funds under the prior entitlement programs. So States should start with the assumption that they may use these funds in innovative ways to achieve the critical goals laid out in the TANF statute.As a general rule, States (or local governments and other agencies where decision-making has devolved from the State agency) must use the available funds for eligible, needy families with a child and for one of the four purposes of the TANF program:
States must use objective criteria for determining eligibility and benefits. However, they may decide the income and resource standards that they will use to determine eligibility, and they may set different financial eligibility criteria for different benefits or services. (For example, they could limit eligibility for cash assistance to families living below poverty, but provide supportive services like child care and transportation to working families with incomes up to 185% of poverty.) Further, since individuals do not have an entitlement to TANF benefits, States may elect to target benefits to families with incomes below their established eligibility guidelines.
States fund their TANF programs with a combination of Federal and State funds. While both are very flexible, the two sources of funds entail somewhat different rules and restrictions.
Federal TANF Funds. If States use Federal funds provided through their TANF block grants to provide "assistance," recipients are subject to work and participation requirements, a five-year time limit on Federal assistance, data reporting, and certain prohibitions. But these restrictions do not generally apply to other services and benefits that are not "assistance." Also, States have broad discretion to provide a wide range of benefits and services and to set different eligibility standards for the different types of benefits.
State "maintenance-of-effort" (MOE) funds. States must spend 80% of their historic level of spending (FY 1994) -- or 75% if they meet work participation requirements -- on "qualified State expenditures" to meet the basic MOE requirement. All MOE funds must be spent on TANF eligible families.
This guide suggests some of the many flexible ways States may expend their Federal TANF and State MOE funds to further the purposes of the TANF program. These examples are by no means exhaustive. They merely serve to illustrate a few of the possibilities that State and local agencies, State legislators, communities, community-based organizations, and advocates may consider when designing an array of benefits, services, and supports that will accomplish one of the four purposes of the TANF program. We hope that the principles and illustrations in this guidance will promote the design of creative and innovative programs that effectively address the needs of low-income families.
This guide is organized into seven sections:
General Guidance and References identifies additional sources of information about the appropriate use of Federal and State funds. It also includes a chart summarizing the specific program requirements that would apply under different State program designs.
We hope that this guide will facilitate the development and sharing of creative ideas, and we invite States to send us information about successful strategies and innovative approaches. We will post them on our Internet page (www.acf.dhhs.gov) so that everyone can benefit from this information. Also, we encourage contact with Regional Office or Central Office staff who are available to answer any fiscal or policy questions about strategies being considered.
The purpose of this guide is to show how States may use Federal TANF and State MOE funds to support working families and to address the needs of clients with barriers to self-sufficiency. The flexibility available under TANF presents new opportunities for funding a greater variety of activities, services, and benefits and for fostering new collaborative partnerships. Because the funding of TANF is complex, State agencies, advocates, community groups, and State legislators may be unsure about the array of options available. Therefore, we developed this guide as a ready reference tool that would promote creative thinking about potential services, supports, and activities that States might adopt to further the purposes of the TANF program.This guide presents examples of the many flexible ways States may use TANF and MOE funds to further the purposes of the TANF program. It does not contain new rules or policies. Although it summarizes the general limitations and prohibitions on the use of funds, we do not intend for it to serve as a definitive policy manual. States and locales should review the recently issued final rules and consult with Regional Office or Central Office staff if they have fiscal or policy questions about strategies they are considering.
The guide does not attempt to identify all possible appropriate uses of TANF and MOE funds, but simply provides a list of representative examples. Omission of a particular activity or service from the list does not necessarily mean that associated expenditures are not allowable. Also, inclusion of a particular example does not mean that such expenditures are categorically allowable, under all funding streams or for all types of recipients.
Over the past several years, States have made great progress toward the critical goal of moving families from welfare to work, spurred on by the passage of the landmark Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). This legislation created the TANF program. The TANF program has expanded the opportunities States have to develop and implement creative and innovative strategies and approaches to remove families from the cycle of dependency on public assistance and into work. Across the country, we are seeing welfare offices transformed into comprehensive service centers focused on work. Case managers are being energized by their success in helping families find jobs and enter the economic mainstream. States have dramatically improved policies to help ensure that work pays. For example, they are allowing families to keep a larger share of their earnings, supplementing the Federal Earned Income Tax Credit with refundable State credits, allowing ownership of more reliable automobiles, helping families accumulate assets through Individual Development Accounts, and investing new resources in child care services.
The results are dramatic:
Even with these dramatic results, there are still individuals without work or in entry-level jobs. While these jobs typically pay more than welfare, they may leave families with incomes that are too low or too erratic to escape poverty. Some studies are showing that, within a year of finding jobs, 30-40% of families are back on assistance or still combining welfare with work.It is clear that poverty is significantly correlated with bad results for families: poor nutrition and health, unsafe housing, dangerous neighborhoods, and inadequate cognitive development of children. Recent findings from the New Hope demonstration program in Milwaukee demonstrate that investments in working families -- particularly child care and health care -- can yield very impressive results in helping families succeed in jobs and improve the well-being of children.Under TANF, States have the flexibility and resources to contribute to these kinds of investments.
To succeed over the long run, collaboration among a range of community organizations and of governmental agencies must occur to address how best to serve clients with needs such as developmental disabilities, learning problems, substance abuse, mental health problems, rural isolation, and domestic violence.
States decide the services or benefits that are to be provided using their Federal and State funds. A State must use all of its Federal TANF and State MOE funds to meet one of the four purposes articulated in the Federal TANF statute or, in the case of the Federal TANF funds, to continue providing services and benefits that it was authorized to provide under its former title IV-A or IV-F State plans (which covered Aid to Families with Dependent Children (AFDC), Emergency Assistance (EA), Job Opportunities and Basic Skills Training (JOBS), and Supportive Services). In brief, the four purposes are to:
A State may use its TANF or MOE funds for services and benefits that directly lead to (or can be expected to lead to) the accomplishment of one of these four purposes. For example, it could fund special initiatives to improve the motivation, performance, and self-esteem of youth (e.g., activities like those included in the HHS Girl Power! Campaign or sponsored by the Boys and Girls Clubs) because such initiatives would be expected to reduce school- dropout and teen pregnancy rates.NOTE:
States have two primary funding sources for their TANF programs:
Both sources of funding provide significant resources for States to invest in the services that families need to move from welfare to work, stay in the workforce, and move out of poverty. States have received tremendous financial benefits from the flexibility available under TANF and the strong economy. Many States have unobligated TANF funds available, giving them an unprecedented opportunity to invest in families with significant barriers to employment, provide additional supports for low-income working families, or design pregnancy prevention and family formation programs.
In deciding how to best use their TANF and MOE funds, it is critical that State agencies, including agencies such as child support, transportation, housing, and child care, develop strong collaborative relationships with businesses, local agencies, and community organizations in developing strategies and delivering services. While States have been enormously successful in placing millions of clients into work, efforts must extend to reach all needy families, including those that face multiple barriers to success and who face time limits for receiving public assistance.
Considerations in Deciding Whether A Use of
States should start with the assumption that they may use their funds in innovative ways to achieve the critical goals laid out in the TANF statute. The following steps outline a simple step-by-step process to follow in determining how to best use the available funds.
The first step in the process of deciding how best to use TANF and MOE funds is to identify needs within the State and prioritize them. This step includes identifying needs, weighing alternative options and strategies that address these needs (e.g., for consistency with TANF purposes and requirements), selecting the most appropriate services and benefits, and designing programs or activities that reflect those decisions.
If the proposed program or activity achieves a TANF purpose, the second step involves determining the nature of the benefit. A State may choose to spend funds on activities that are considered "assistance" under the Federal regulations.
The next step is to define individual eligibility criteria (which would generally be in the form of income and/or resource standards) for receipt of benefits. The first and second purposes of TANF concern only "needy families" or "needy parents," respectively, as defined by State criteria. Thus, a State must establish financial eligibility criteria for benefits under either of these purposes. For the third and fourth purposes, a State may use Federal funds to provide services to both needy and non-needy families that are consistent with those purposes.
The State must then decide how to fund the desired program benefits and services. This decision will determine what specific requirements apply and whether a particular use of funds is appropriate. All State expenditures claimed under the MOE requirements must be made with respect to "eligible families." These families need not actually be TANF recipients in order to receive services or benefits funded with MOE dollars; they need only be financially eligible for the service or benefit (and have a minor child living with an adult relative in the home). The definition of "eligible families" is very similar to that of "needy families"; eligible families are families that meet the income and resource standards in the State plan. In addition, they must be either: (1) eligible for TANF; or (2) eligible for TANF, but for the five-year time limit on federally funded assistance or the restrictions on benefits to immigrants found in title IV of the 1996 welfare law (Public Law 104-193). In addition, the State may count as MOE only the qualified expenditures that exceed its program spending in 1995. This limitation is referred to as the "new spending test."
A State may expend Federal funds, but not State MOE funds, for activities that were previously authorized under its IV-A or IV-F plans, but which are not otherwise allowable under TANF (including juvenile justice and/or State foster care maintenance payments).
The final step in determining how best to use the available TANF funds is to determine what requirements, limitations, and restrictions apply to the selected activities or services. The last two sections of this guide outline the statutory requirements, restrictions and cost principles that apply. For example, they address the requirements associated with "assistance"for certain clients, the administrative cost caps, the medical services prohibition, and general appropriations principles. Specific questions on these limitations can be directed to the ACF Regional Offices for clarification.
Federal TANF Funds
The TANF program gives States broad flexibility to make program and funding decisions that they believe will best support the goals of the program and their individual circumstances. They may use Federal funds for a wide array of services and benefits that were previously allowable only through specific, categorical programs. States should view their Federal TANF grant as a source of funds that they may use creatively to support work and the efforts of low-income working families, promote marriage, and reduce and prevent out-of-wedlock childbearing. In support of these goals, they may use their funds to fill gaps in the service delivery system, integrate program services, and supplement or enhance the services available through other programs. Key features of the TANF program include:
Under the prior public assistance program, all families in similar circumstances of need were entitled to a standard package of basic benefits and services. Under TANF, States have the ability to offer services to some, but not all, families and to tailor services and benefits so that they better address the needs of individual clients. They also have the ability to make adjustments in the services they offer, depending upon funding availability and other factors. However, under their TANF State plans, States must set forth the objective criteria for the determination of eligibility and the delivery of benefits and for the fair and equitable treatment of clients.
States may set different financial eligibility criteria for different types of benefits in order to increase the number of families they help to become self-sufficient. For example, States may set higher income standards to establish eligibility for transitional benefits (i.e., for those no longer receiving cash assistance) in order to provide these families child care, transportation, and other job retention and advancement services. For instance, States may limit eligibility for TANF cash assistance to families with income below poverty, while making transitional child care and transportation services available to families with incomes up to 185% of the poverty line. By adopting these different standards, States may provide work supports to a broader range of low-income, working families.Under this principle, a State can set different financial eligibility criteria based on any number of categorical distinctions. For example, as we indicated above, States may apply different standards for "assistance" than for other types of benefits or services. Also, where appropriate, a State may deem specific groups financially eligible for particular services if there is a categorical, factual basis (for example, homelessness) for determining financial need.
A State that had a welfare reform waiver(s) approved before enactment of PRWORA may continue to operate its program under some or all of those waivers rather than the TANF rules. For States that elect this option, the provisions or requirements of TANF that are inconsistent with the waiver are not effective until the applicable waivers expire.
Under TANF, the Federal government may not regulate State conduct or enforce any provision except to the extent expressly provided by law. Consistent with the principle of State flexibility in program design, the final TANF rules regulate only where Congress specifically directed the Department of Health and Human Services to do so or where the Department is charged with enforcing penalties.
State, local, and Tribal TANF agencies, or private organizations providing services under contract with the TANF agency, may use Federal TANF funds in one of three fundamental ways:
Under this provision, allowable expenditures for particular activities, benefits, or services consist of those that are "in any manner reasonably calculated to accomplish" any one of the four purposes of the TANF program. Activities, benefits, or services that are reasonably calculated to accomplish a TANF purpose are those that directly lead to (or can be expected to lead to) achievement of a TANF purpose. This language includes all activities that are obviously related to a purpose. It also includes activities whose relationship to a purpose may not be obvious, but for which there is evidence that it achieves a purpose. For example, there is a clear statistical relationship between staying in school and lower teen pregnancy rates. Thus, we would conclude that special initiatives to keep teens in school are reasonably related to the third purpose of TANF - to reduce out-of-wedlock pregnancies. States may use Federal TANF and State MOE funds in accordance with this principle for a variety of eligible activities.The four purposes are:
Spending under this purpose is not limited to benefits that are within the regulatory definition of "assistance." A State may provide other services in support of this purpose. For example, funding of home repairs or food banks to provide groceries to needy families would be consistent with the purpose, even if the benefits provided do not fall within the definition of "assistance."
Under this purpose, a State could help any needy parent, including a noncustodial parent or a working parent, by providing employment, job preparation, or training services. Examples of potential services include job or career advancement activities, marriage counseling, refundable earned income tax credits, child care services, and employment services designed to increase the noncustodial parent's ability to pay child support. Activities that promote any one of the three objectives - job preparation, work, and marriage -- would be consistent with this purpose. Like a needy family, a needy parent must meet the income and/or resource standards established by the State in its TANF plan.The following example illustrates how some of the funding principles would apply in meeting this TANF purpose. A State agency determines that there are insufficient child care services available for the pre-school age children of working needy parents. A Head Start facility can meet this need. The TANF agency could contract with the Head Start grantee to provide child care services for a number of TANF families who are not enrolled in Head Start or to provide expanded hours of child care services for TANF families whose children are enrolled in the Head Start program.
The State agency may pay for these services with Federal TANF or State MOE funds. (However, the Head Start grantee must account for the TANF and MOE funding separately from its Head Start funding and must also be able to identify the needy or eligible families served with the TANF or MOE funds.)
Neither this purpose nor the following purpose (related to family formation) is limited to needy families or individuals. Thus, a State may use Federal TANF funds, but not MOE funds, to serve non-needy families or individuals for either of these two purposes. However, the State must establish objective criteria for the delivery of services to the non-needy.
Potential activities that would be reasonably calculated to accomplish this purpose include abstinence programs, visiting nurse services, and programs and services for youth such as counseling, teen pregnancy prevention campaigns, and after-school programs that provide supervision when school is not is session. A State may also fund a media campaign for the general population on abstinence or preventing out-of-wedlock childbearing.
A significant share of TANF families consists of unmarried mothers with low skills who live with their children apart from low-skilled, underemployed fathers. Many of these fathers are involved in the lives of their children and provide some financial support, but would like to do much more. Historically, however, the fathers have found limited employment opportunities, and welfare rules have worked to discourage family formation and fuller involvement of these fathers in the lives of their children.
This fourth TANF purpose offers the opportunity to address these issues. Some activities that are reasonably calculated to accomplish this purpose might include parenting skills training, premarital and marriage counseling, and mediation services; activities to promote parental access and visitation; job placement and training services for noncustodial parents; initiatives to promote responsible fatherhood and increase the capacity of fathers to provide emotional and financial support for their children; and crisis or intervention services.
This statutory provision allows States to use Federal TANF funds for specific activities that had been previously authorized based on an approved title IV-A or IV-F plan and using the same eligibility criteria contained in the approved plan. While the purposes of the TANF program are very broad, some activities that are not now permissible had been included in a State's approved AFDC plan, JOBS plan, or Supportive Services plan as of September 30, 1995 (or, at State option, as of August 21, 1996). Examples of such activities are juvenile justice and certain State child welfare and foster care activities that were included in many States' approved plans. A State may continue to provide these services or benefits that were previously authorized, notwithstanding the prohibitions in PRWORA (under section 408 of the Social Security Act). For example, if a State's approved AFDC plan as of September 30, 1995, allowed it to assist children in the juvenile justice system, then it may continue to use TANF funds for such activities even though the child is not living with a parent or other adult caretaker relative.
In providing previously authorized services, a State must choose one of these two dates (i.e., either 9/30/95 or 8/21/96). It should consider two things in deciding which date to choose. First, if it previously covered juvenile justice services under its Emergency Assistance program and wants to continue to do so under TANF, it must elect the September 30, 1995, date. Since the Department notified States that juvenile justice services would no longer be approved in a State plan on September 30, 1995, juvenile justice activities would not be allowable if a State elected the August 1996 date. Second, if a State significantly amended its State plan after September 30, 1995, to expand coverage of child welfare or State foster care services or to provide other expanded benefits, it must choose the latter date if it wants to continue those benefits under TANF and they are not otherwise allowable.
A State may transfer a total of up to 30% of its TANF funds for a fiscal year to the Child Care Development Fund (CCDF) and the Social Services Block Grant program (SSBG). However, it may transfer no more than 10% (4.25% beginning in fiscal year 2001) of the grant amount for a fiscal year to the SSBG. If a State transferred 10% of its annual TANF grant to SSBG, then it could transfer up to 20% of the annual grant to CCDF. Once a State transfers funds to either program, it must use the funds in accordance with the rules of the receiving program.
Child care is critically important to accomplishing the goals of TANF. Since most States are unable to fulfill the demand and need for child care with their CCDF funds, they should look to TANF as another vehicle for expanding the availability of child care. They could either transfer the Federal TANF funds to CCDF or spend TANF and/or MOE funds directly on child care. Also, by transferring funds or expending TANF funds on child care services, States could make additional funds available to expand child care quality activities under CCDF. These quality activities could include funding professional development activities, increasing payment rates to allow for better compensation of child care workers, and establishing or enhancing incentives for providers who attain accreditation.
State Maintenance-of-Effort (MOE) Funds
The law requires that for each fiscal year, a State must spend State funds in an amount equal to at least 80% of the amount it spent in FY 1994. But, if the State meets the minimum work participation rate requirements for all families and two-parent families, then it need expend only 75% of the amount it spent in FY 1994. Under the TANF MOE provisions, a State may expend these State MOE funds on a wide variety of services, benefits, and supports that help families become self-sufficient.
A State must use all of its MOE funds to help "eligible families." Eligible families must meet two criteria: (1) include a child living with his or her custodial parent or other adult caretaker relative (or a pregnant woman); and (2) be financially eligible according to the appropriate income/resource standards established by the State in its TANF plan. "Eligible families" includes those eligible for TANF assistance, as well as those who would be eligible, but for the time limit on the receipt of federally funded assistance or PRWORA's restrictions on benefits to immigrants. Thus, "eligible families" may include certain non-citizens.
Qualified activities to help eligible families include:
Thus, a State must expend all of its MOE funds to help eligible families in a manner that is reasonably calculated to accomplish one or more of the four purposes of the TANF program. State spending on families that are not eligible for TANF does not count toward the State's MOE requirement.
As the following figure indicates, States may spend their MOE funds in three different ways:
Given these possibilities, States have the opportunity to tailor their programs and services in ways that are appropriate for them and best suited to address the needs of eligible families in their State.
Appropriate Uses of Funds
The TANF program provides tremendous flexibility for funding a wide variety of activities, supportive services, and benefits to accomplish the purposes of the program. The following lists identify some possible uses of Federal TANF or State MOE funds.
Support for Work Activities
Education and Training
Mental Health/Substance Abuse
Developmental and Learning Disabilities
Enhancing or Supplementing the Family Income or Assets
Family Formation and Pregnancy Prevention
The word "assistance" and the phrase "families receiving assistance" are important because most of the prohibitions, restrictions, and requirements in the Act apply only when clients are receiving "assistance." For example, all families receiving TANF "assistance" (whether funded with Federal TANF or State MOE funds) must meet work participation and child support cooperation requirements. Few of the TANF program rules pertain to needy families served outside of the State's TANF program, in a separate State or local program. Also, few program rules pertain to families receiving benefits or services that do not constitute "assistance."
"Assistance" includes benefits directed at basic needs (e.g., food, clothing, shelter, utilities, household goods, personal care items, and general incidental expenses) even when conditioned on participation in a work experience or community service activity. It also includes child care, transportation, and supports for families that are not employed. ("Assistance" is defined in §260.31 of the TANF final rule.)
When planning for the provision of new or expanded services, supports, and activities, States should be aware of certain statutory requirements, restrictions, and cost principles that apply to the use of Federal TANF funds. The general prohibitions and restrictions include restrictions on providing "assistance" to certain teen parents, convicted felons, and individuals convicted of fraud; a prohibition on expending Federal TANF funds on medical services (except pre-pregnancy family planning); and a 15% cap on administrative expenditures. The chart attached to this paper summarizes the major restrictions and requirements that apply to Federal and State expenditures.
States may reserve Federal TANF funds that they receive for any fiscal year for the purpose of "providing assistance" under the TANF program, without fiscal year limitation. A State may only expend reserved money: (1) within the TANF program; and (2) to provide benefits that meet the definition of "assistance" or on related administrative costs. This limitation precludes a State from transferring reserved funds to either the CCDF or SSBG.
General Guidance and References
For additional information on appropriate use of funds, consult the following documents:
__________________________________1This column also applies to programs and activities where State MOEW funds are commingled with Federal TANF funds.
2Under this scenario, Federal and State funds are not commingled. Thus, some, butr not all, of the Federal TANF rules apply. 3These programs count towards State MOE. They are not subject to TANF requirements, but are subject to the MOE restricitons at section 409(a)(7); e.g., they must be spent on "eligible families." 4Per definition of "eligible families."
5These requirements apply only when families are receiving benefits that meet the definition of "assistance."