3. Basic Grants Management Principles

Penalties and Disallowances

Tribal TANF grantees face financial penalties if Federal funds are used in violation of the Act. The single audit conducted under the Single Audit Act, supplemented by other related audits, reviews, and data sources, will help identify violations.

Any use of TANF funds in violation of the provisions of the Act, the provisions of 45 CFR Part 92, OMB Circulars A-87 and A-133, or any Federal statutes and regulations applicable to the TANF program, will be considered to be a misuse of funds.

Misuse of the Tribal TANF grant will be considered to have been intentional under the following conditions: (1) there is supporting documentation, such as Federal guidance or policy instructions, indicating that TANF funds could not be used for that purpose; or (2) after notification that the government has determined such use to be improper, the Tribe continues to use the funds in the same or similarly improper manner.

Five TANF penalties can be imposed on tribal grantees. They are as follows:

• A penalty of the amount by which a Tribe's grant was used in violation of part IV-A of the Act, including providing assistance beyond the Tribe's negotiated time limit, as determined by findings from a single audit;
• In addition to the amount misused, a penalty of five percent of the TANF grant as a result of audit findings which show that the Tribe intended to violate a provision of the Act;
• A penalty in the amount of the outstanding loan plus interest owed on the outstanding amount for failure to repay a Federal loan;
• A penalty for failure to satisfy the minimum work participation rates; and
• A penalty of no more than two percent plus the amount a Tribe failed to expend of its own funds to replace the reduction in its grant due to the assessment of a penalty.

To ensure tribal accountability, the regulations have narrowly defined the limited circumstances under which Tribes may demonstrate reasonable cause or receive penalty reductions.

Within 60 days of receiving notice that it is facing a penalty, a Tribe may respond by stating that it has reasonable cause for failing to meet a requirement and/or by providing a corrective compliance plan. A penalty will not be assessed against a Tribal TANF grantee if it can be determined that there was reasonable cause for its failure. The general factors a Tribe may use to claim reasonable cause are:

• Natural disasters, extreme weather conditions, and other calamities (e.g., hurricanes, earthquakes, fire, and economic disasters) whose disruptive impact was so significant that the Tribe failed to meet a requirement;
• Formally issued Federal guidance which provided incorrect information resulting in the Tribe's failure;
• Isolated, non-recurring problems of minimal impact that are not indicative of a systemic problem; or
• Significant increases in the unemployment rate in the Tribal TANF service area and changes in the TANF caseload size during the fiscal year being reported.

The statute provides that prior to imposing a penalty against a Tribe, the Tribe must be given an opportunity to enter into a corrective compliance plan. The regulation requires the corrective compliance plan to identify the causes of the problems, the corrective action steps, outcomes, and time frames which the Tribe believes will fully and adequately correct the violation. Each plan will be reviewed on a case-by-case basis, and acceptance of the plan will be guided by the extent to which the Tribe's plan will lead to correction of the situation leading to the penalty.

Tribal Child Care grantees are subject to disallowances, penalties, and sanctions based on the results of the annual A-133 audit, or a finding that the grantee failed to comply with regulation or law. These disallowances may be based on questioned costs, e.g., incurring costs deemed to be unallowable, or other failure to comply with Federal requirements.

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