TANF-ACF-PA-1999-01 (Guidance on Application of TANF Final Rules)
State Agencies Administering Approved Temporary Assistance for Needy Families (TANF) Plans and Other Interested Parties
Guidance on Application of TANF Final Rules
On April 12, 1999, we published final rules governing State TANF programs (64 FR 17720). You may obtain an electronic copy of the rule, a subject index, and a 14-page summary at /programs/ofa.
This guidance addresses some of the first questions raised in the initial discussions of the final rule. In light of the new Federal role under TANF, we do not anticipate providing Federal answers to all questions that States raise. However, we thought that providing early information on these particular issues would be very helpful in moving States forward on their program planning.
For your information, we are also preparing a notice for the Federal Register of "Technical and Correcting Amendments." We intend to include a variety of purely technical corrections in that package, in addition to the issues addressed here regarding Y2K, noncustodial parents, and the application of the definition of assistance.
In addition, we are preparing final data collection and reporting forms for OMB approval, pursuant to the Paperwork Reduction Act. We will transmit the new forms under separate cover.
Inquiries about TANF should be addressed to the appropriate Regional Administrator for the Administration for Children and Families (ACF).
Alvin C. Collins
Office of Family Assistance
Definition of Assistance
As we have made clear in the preamble to the final rule and in our initial briefings, the definition of assistance is very important because it determines whether recipients of program benefits and services are subject to key TANF requirements, including work requirements, time limits, data collection and reporting, and child support assignment. Under ACF-TANF-PA-97-1, we provided a definition of assistance for States to apply in the interim period before final rules took effect. During the period between April 1, 1999, and October 1, 1999, when the final rules take effect, States may continue to operate under the definition in PA-97-1, adopt the definition in the final rule, or use any other definition consistent with a reasonable interpretation of the statutory language.
The rule at §260.31(c)(1) provides that the definition of assistance does not apply to subpart A of part 263 (with respect to MOE expenditures). Also, §263.2(d) provides that expenditures for benefits and services listed as allowable activities in §263.2(a) count as MOE even if they do not meet the definition of assistance. The purpose of both these provisions was to clarify that MOE funds could be spent on benefits that were not assistance.
However, because §263.2(d) references only paragraph (a), readers have had questions whether §263.2(b)(i)(I) limits MOE expenditures to families that are eligible for "assistance" (as defined in §260.31) under the State's TANF plan. As we tried to explain in the preamble, this latter paragraph does not limit MOE expenditures in this way. MOE funds must be expended on families that both are needy (based on the applicable financial criteria in the TANF plan) and include a child living with a parent or other adult caretaker relative (or a pregnant woman). "Eligible for assistance" in this paragraph does not mean eligible for assistance as defined in §260.31. We intend to address this issue further in our amendment package.
Effective Date of Final Rule
The final rules at §260.40(a) state that we will judge expenditures of funds received prior to the effective date of the final rule (i.e., October 1, 1999) based on a reasonable interpretation of the statute, not the final rules. The preamble does not explain this specific language. To clarify, we will judge expenditures of any TANF funds awarded in fiscal years 1997, 1998, or 1999 and obligated prior to October 1, 1999, based on a reasonable interpretation of the statute. Federal funds awarded in fiscal years 1997, 1998, or 1999 and obligated prior to October 1, 1999, have an indefinite liquidation period under the existing rules and grant terms and conditions. We will judge expenditures of any 1997, 1998, or 1999 TANF funds that are reserved for obligation and expenditure after October 1, 1999, based on compliance with provisions in the final rule.
Thus, we will not consider any transfers of reserved funds to the Child Care and Development Fund or the Social Services Block Grant that take place prior to October 1, 1999, to be a misuse of funds. Further, if a State obligates reserved funds for benefits or services that meet a reasonable definition of assistance, but not the definition of assistance in the final rule, prior to October 1, 1999, such obligations will not represent a misuse of funds.
Y2K and Reasonable Cause
The final rule at §262.5(b)(1) provides that we will grant reasonable cause to a State that: (1) clearly demonstrates that it failed to submit complete and timely data for one or both of the first two quarters of fiscal year 2000 due to Y2K compliance activities; and (2) submits the data by June 30, 2000. Attendees at the initial briefings that we sponsored noted that the June 30, 2000, submittal date would not give a State additional time to submit the second quarter's data. Under the discretionary authority of the Secretary to grant reasonable cause, and consistent with our stated intent to give States additional time if Y2K activities prevented them from submitting the data for the first two quarters in a timely manner, we have decided to grant reasonable cause if a State has clearly demonstrated that its failure to meet the reporting deadlines for the first two quarters was due to Y2K compliance activities and it submits complete and accurate data for the first two quarters by September 30, 2000.
Inclusion of the Definition of Expenditure
We inadvertently left some language out of the preamble to the final rules explaining the new definition of "expenditures" in §260.30. We intended to replace the first paragraph at the beginning of the third column on p. 17752 of the Federal Register publication (i.e., immediately following the heading "(c) Significant Fiscal Terms") with the following:
In the final rule, we have added a definition for the term expenditure and added a new §260.33 to explain the circumstances under which refundable Earned Income Tax Credits and other refundable tax credits would count as expenditures. We felt it was necessary to include a basic definition of expenditure and add this additional regulatory text because, under the statute, Federal TANF funds and State MOE funds must both be used for "expenditures."
We have received many questions from States and other interested parties about whether the costs of State EITC programs and other tax provisions could count as expenditures. The new definition and regulatory text are designed to address these questions.
This subpart also incorporates a number of definitions that have substantial policy significance, which we included for clarification purposes.
For example, it incorporates terms that distinguish among several types of expenditures. These distinctions are critical because the applicability of the TANF requirements varies depending on the source of funds for the expenditures. In particular, it distinguishes between expenditures from the Federal TANF grant and from the State funds expended to meet MOE requirements (either within the TANF program or in separate State programs).
Following is a brief summary of the key fiscal terms:
Expenditure. This term refers to the spending or disbursement of funds. It does not include costs avoided or revenue losses.
Omission of this language had no substantive effect on the policy in the final rule. However, the language is helpful in explaining why we added a definition of expenditure, and we had included a reference to this omitted language in the preamble discussion at §260.33.
Benefits for Noncustodial Parents
At §260.30, we define a noncustodial parent as "a parent of a minor child receiving assistance who: (1) lives in the State; and (2) does not live in the same household as the child." The primary purpose of creating this definition was to clarify the circumstances under which noncustodial parents or their benefits would be subject to the TANF reporting requirements. In fact, the term "noncustodial parent" appears in the regulatory text only in part 265 of the final rules (i.e., at §§265.2(b)(1), 265.3(b)(3), and 265.3(f)).
However, the definition has caused considerable confusion. We want to clarify that the definition of "noncustodial parent" in the final rule does not limit the circumstances under which States may assist noncustodial parents. States may provide assistance and other forms of benefits and services to noncustodial parents when they are members of a TANF-eligible family, even if no other family members are receiving assistance. In addition, States may use Federal funds to provide services and benefits that do not constitute "assistance" to needy families and individuals, including noncustodial parents, where consistent with the purposes of the Act.
The definition also raised questions about reporting on non-custodial parents. We want to clarify that if one member of the family is receiving assistance, even the noncustodial parent, the family is receiving assistance, and the State must report both disaggregated and aggregated information on the entire family. If the noncustodial parent is only participating in work activities that do not constitute assistance (as defined in §260.31) and the other members of the family are not receiving assistance, the State must report only the aggregate information on the noncustodial parent’s participation in work activities. Further, if the noncustodial parent has been designated as a member of a family receiving assistance, the State must include the noncustodial parent in the disaggregated and aggregated reporting on the family.
We are working on technical changes to the definition of noncustodial parent and the reporting provisions in the regulation designed to eliminate any confusion.
Appeal of Adverse Actions
We consider denials of "reasonable cause" claims, rejections of corrective compliance plans, and determinations that a State plan is incomplete to be adverse actions. Thus, States may appeal such actions to the Departmental Appeals Board. Although §262.7 mentions only penalty reduction actions, the appeal procedures in this section apply to other types of adverse actions. We did not intend to imply that a reduction in the SFAG was the only possible type of adverse action that a State might appeal.
In addition, under section 410 of the Act, States may appeal adverse State plan decisions and adverse reasonable cause, corrective compliance, and penalty actions taken prior to the effective date of the final rules.