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. 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. 1). TANF’s Accountability Framework Has Limitations

		States Have Generally Met Work Participation Rates by Using Credits Allowed by Law

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. 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. 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. 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. 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. 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. 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. Several Factors Limit Incentives for Innovation and Evaluation in the TANF Program

In a November 2014 report, we concluded that while selected state and  local programs are making use of some promising approaches for moving  TANF recipients into employment and increasing their earnings,  incentives are lacking for large numbers of state and local TANF agencies  to adopt and test such approaches under the structure of the TANF  program. TANF allows  states to spend funds on a wide range of programs and services that  are not necessarily related to welfare-to-work activities as long as  these services support one of TANF’s four statutory purposes. Our  December 2012 report found that states spent significant amounts of  TANF funds on services such as child welfare or child care, and we  noted that state use of federal TANF funds for these and other  services can create tensions and trade-offs in state funding  decisions.additional resources needed for implementing more costly promising  approaches for TANF cash assistance clients may compete with other  allowable uses of TANF funds. In addition, our November 2014 report  included factors discussed above, such as the caseload reduction  credit, that have allowed states to reduce the percentage of families  they needed to engage in work to meet their work participation rate  requirements. We found that states may have less incentive to use  promising approaches to engage hard-to-employ individuals in work  activities as they can meet their work participation rate requirements  without them. impact evaluations of their TANF programs, although these evaluations  can provide useful information on program effectiveness. GAO-15-31. Consequently, to encourage broader adoption and evaluation of  promising approaches, we recommended that HHS, in consultation with  Congress, identify potential changes that would address the lack of  incentives for states and localities to adopt promising approaches and  then develop and submit a legislative proposal outlining those changes. We maintain that HHS should develop more concrete  proposals to address the lack of incentives within the TANF program  itself, and noted that the agency need not wait for Congress to take up  reauthorization to do so.
Why GAO Did This Study

The TANF block grant provides $16.5 billion annually in federal funding to states for cash assistance as well as a variety of other benefits and services to meet the needs of low-income families. TANF requires states to maintain a specified level of their own past welfare spending to receive all of their TANF funds. In fiscal year 2013, states spent a total of $31.6 billion in federal TANF and related state funds on cash assistance and other services for low-income families. GAO was asked to provide information from its recent reports to inform a hearing on next steps for welfare reform.
This statement addresses (1) states' use of TANF funds, (2) TANF's accountability framework, and (3) innovation and evaluation in the TANF program, drawing primarily from GAO reports issued from 2010 to 2014. For these reports, GAO reviewed and analyzed state TANF data reported to HHS from fiscal year 1997 through 2013; reviewed relevant federal laws, regulations, and guidance; interviewed HHS and state TANF administrators; and conducted visits in selected states.

What GAO Found

While the Temporary Assistance for Needy Families (TANF) block grant serves as the nation's major cash assistance program for low-income families with children, states increasingly use it as a flexible funding stream for supporting a broad range of allowable services. For example, in December 2012 GAO found that nationwide, in fiscal year 1997, states spent about 23 percent of TANF funds on services other than cash assistance, such as child welfare or child care. In contrast, states spent more than 66 percent of TANF funds for these purposes in fiscal year 2013, according to the most recent available data from the Department of Health and Human Services (HHS).
TANF's accountability framework has limitations in both the approach used for measuring work participation and the information that is available on trends in services other than cash assistance. One program performance measure, the work participation rate, measures the extent to which states engage work-eligible TANF cash assistance recipients in work activities as defined by federal law. In May 2010, GAO found that states often relied on several options allowed in law, including credits for caseload reductions, to reduce the percentage of families they needed to engage in work to meet their work participation rate requirements. Thus, GAO concluded that the rate's usefulness as an indicator of TANF performance is limited. There are also no reporting requirements mandating performance information specifically on families receiving services other than cash assistance. To fully assess how funds are being used, GAO suggested Congress should consider ways to improve performance information when TANF is being reauthorized. In response to GAO's 2012 recommendation that HHS develop a detailed plan to revise reporting categories for TANF expenditures to provide a more complete picture on the use of TANF funds, HHS has taken steps such as revising its reporting form and accounting methodology for expenditure data. HHS has also cited a statutory provision as preventing it from reporting an improper payment estimate for the TANF program, but says it will seek statutory modifications to allow for such an estimate when the program is reauthorized.
Incentives are often lacking for state and local TANF agencies to adopt and test promising approaches for moving cash assistance recipients from welfare to work, according to a November 2014 GAO report. State use of federal TANF funds for services that are not necessarily related to welfare-to-work activities may compete with funding for developing promising approaches for TANF cash assistance clients. Also, the federal work participation rate requirements may discourage states from pursuing approaches that incorporate longer-term education and training or treatment services, or from engaging hard-to-employ individuals in work activities as states can meet their work participation rate requirements by using the law's other options. In addition, little incentive exists for states to evaluate their TANF programs, and states are not required to do so, although these evaluations can provide useful information on program effectiveness. GAO recommended that HHS, in consultation with Congress, identify potential changes to address the lack of incentives to adopt and test promising approaches and submit a legislative proposal outlining those changes. HHS agreed with the recommendation but has not yet suggested program changes.

What GAO Recommends

In its prior work, GAO recommended that HHS take steps to improve TANF expenditure reporting and identify potential changes to address the lack of incentives in the TANF program. HHS has taken some action. GAO has also suggested Congress consider ways to improve performance information when TANF is reauthorized. Consequently, GAO is not making any new recommendations at this time.