Within these goals, states are responsible for  designing, implementing, and administering their welfare programs to  comply with federal requirements, as defined by federal law and HHS. Each state’s TANF block grant amount is generally based on the amount  of the state’s spending under AFDC. In addition, during the most recent  recession, the federal government created a $5 billion Emergency  Contingency Fund for state TANF programs through the American  Recovery and Reinvestment Act of 2009 (Recovery Act), available in  federal fiscal years 2009 and 2010. PRWORA coupled the block grant with an MOE provision, which requires  states to maintain a portion of their own historic financial commitment to  their welfare programs as a condition of receiving their full federal TANF  allotments. In addition to  its own spending, under HHS regulations, a state is permitted to count  toward its TANF MOE requirement certain in-kind or cash expenditures  by third parties—such as nongovernmental organizations (including  nonprofit organizations or other private parties)—as long as the  expenditures meet other TANF MOE requirements, including those  related to eligible families and allowable activities. We have not updated  this analysis, and information on how many states use excess MOE to  reduce their required work participation rate is not readily available,  according to HHS officials. On  the other hand, some stakeholders have noted that allowing states to  count nongovernmental third-party expenditures as MOE spending helps  states meet TANF requirements and facilitates public and private  partnerships. While Most States Do Not Regularly Count Nongovernmental Third-Party Expenditures as TANF MOE Spending, Some States Make Greater Use of It than Other States

		One-Third of States Counted Nongovernmental Third- Party Expenditures as TANF MOE Spending in Fiscal Year 2015

In fiscal year 2015, around one-third of states (16 of 51) reported counting  nongovernmental third-party expenditures as TANF MOE spending. After  peaking at 24 states in 2010—the last year Recovery Act Emergency  Contingency Funds were available—the number of states counting such  expenditures as TANF MOE spending fell. However, since that time the  number of states that have counted nongovernmental third-party  expenditures toward TANF MOE requirements has remained higher than  pre-Recovery Act levels (see fig. 1). 2). States Most Often Reported Food Assistance as the Nongovernmental Third-Party Provided Service Counted as TANF MOE Spending

According to our survey, most states that reported having counted  nongovernmental third-party expenditures toward their state’s TANF MOE  requirement in federal fiscal year 2015 also reported counting expenses  related to food assistance service as TANF MOE spending. Similarly, officials  in Arizona reported that through an agreement with the Association of  Arizona Food Banks, the state counts toward its TANF MOE requirement  the value of the food assistance services the food bank provides to  families considered eligible for TANF services as defined by the state and  the administrative expenses associated with providing this service. Agency Comments and Our Evaluation

We provided a draft of this report to HHS. HHS provided written  comments, reproduced in appendix II, in which the agency agreed with  our findings. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of Health and  Human Services, and other interested parties.
Why GAO Did This Study

Each year, TANF block grants, which are overseen by the U.S. Department of Health and Human Services (HHS), provide $16.5 billion in federal funds to states to assist low-income families. States are also required to spend a significant amount of their own funds under TANF, but they can include certain expenditures made by nongovernmental third parties toward their MOE requirement. Some stakeholders support this option because it helps states meet MOE requirements, but others question whether this approach is consistent with program goals. GAO was asked to update the information presented in its 2012 report on this topic ( GAO-12-929R ).
This report updates information on, among other things, (1) the extent to which states count nongovernmental third-party expenditures for services as TANF MOE spending, and (2) the types of nongovernmental third-party services provided that states counted as TANF MOE spending.
To obtain this information, GAO surveyed state TANF directors in all 50 states and the District of Columbia and reached a 100-percent response rate. GAO also reviewed relevant federal laws and regulations, reviewed HHS expenditure data, and interviewed HHS officials. Lastly, GAO interviewed TANF officials in three states selected to reflect geographic diversity and variety among other factors.

What GAO Found

Nearly one-third of states (16 of 51) reported counting nongovernmental third-party expenditures toward their states' required spending level under the Temporary Assistance for Needy Family (TANF) block grant in fiscal year 2015, according to GAO's survey of all state TANF directors. TANF requires states to maintain a significant portion of their own historic financial commitment, called maintenance of effort (MOE), to welfare-related programs. In addition to its own spending, a state may count toward its MOE requirement certain in-kind or cash expenditures by nongovernmental third parties—such as food banks—as long as these services are allowable under TANF, are provided to needy families, and the state meets other requirements. The number of states counting such expenditures as MOE spending increased substantially between fiscal years 2009 and 2010, perhaps in part due to requirements necessary to obtain additional funding under the American Recovery and Reinvestment Act of 2009 (Recovery Act). After fiscal year 2010, the number of states counting nongovernmental third-party expenditures toward their TANF MOE requirements fell, but remained higher than pre-Recovery Act levels for other reasons. States that reported such expenditures as TANF MOE spending cited reasons such as developing public-private partnerships and meeting state MOE requirements.
Of the 16 states that reported counting nongovernmental third-party expenditures as TANF MOE spending in fiscal year 2015, most said the types of services they counted involved food assistance and programs serving youth, according to GAO's survey. For example, one state reported working with a food bank to count the value of the food the bank provided to families deemed needy under state TANF rules.

What GAO Recommends

GAO is not making recommendations in this report. HHS agreed with the findings, and provided written comments on the report.