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TANF-ACF-PI-1997-08 (Contingency Fund Eligibility Requirements and Application Procedures)

Published: October 27, 1997
Audience:
Temporary Assistance for Needy Families (TANF)
Topics:
Contingency Fund, TANF Guidance
Types:
Program Instructions (PI)

To:

State Agencies Administering the Temporary Assistance for Needy Families Program, Under Title IV of the Social Security Act, As Amended, and Other Interested Parties

Subject:

Contingency Fund Eligibility Requirements and Application Procedures

Legal and Related References:

Title IV-A, Section 403(b) of the Social Security Act, as amended

Purpose:

This Program Instruction provides guidance to States on the requirements for receiving Contingency Funds and instructions for applying for these funds.  It also includes guidance and instructions to States for applying for funds which represent an add on to the State Family Assistance Grant (SFAG) for FY 1997 only, as provided in Public Law 104-327.

Inquiries:

Comments and questions should be directed to: Joseph Lonergan, Federal Contingency Fund Manager, Administration for Children and Families, Office of Program Support, Office of Management Services, Division of Formula, Entitlement and Block Grant, 370 L'Enfant Promenade, SW, Washington, DC 20447, (202) 401-6603, Email: jlonergan@acf.dhhs.gov.

/s/

Norman L Thompson
Director
Office of Program Support

/s/

Lavinia Limon
Director
Office of Family Assistance

Attachments:

Attachment A - Section 116 of PRWORA Public Law 104-327
Attachment B - Explanation
Attachment C - Contigency Fund States for April 1997
Attachment D - Explanation
Attachment E - Optional Request Letter
Attachment F - Contingency Fund 100% MOE Level
Attachment G - TANF Implementation Dates

Note:

Due to their length and complexity, the attachments are not included. For a copy of the attachments, contact the Office of Family Assistance.

I.  Background/Summary

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996.  (PRWORA), Public Law 104-193, enacted August 22, 1996, replaces the open ended entitlement program Aid to Families with Dependent Children (AFDC), including Emergency Assistance (EA), under Title IV-A of the Social Security Act; and the Job Opportunities and Basic Skills (JOBS) program under Title IV-F with the Temporary Assistance for Needy Families (TANF) Program.

The former childcare programs established under Title IV-A; i.e., AFDC/JOBS, Transitional, and At-Risk Child Care programs were replaced with a new capped funding stream under Title VI of PRWORA.

TANF is a capped block grant program; the amount of funds States may receive generally is fixed.  However, PRWORA contains provisions that, under certain circumstances, increase the amount a State can receive. In addition to the State Family Assistance Grant (SFAG) issued under TANF, funds are available from the Bonus to Reward Decreased Illegitimacy, the Supplemental Grant for Population Increases, the Bonus to Reward High Performance States, the Federal Loans for State Welfare Programs, and the Contingency Fund for State Welfare Programs (i.e., the Contingency Fund).

A total of $2 billion is available for the Contingency Fund for Fiscal Years (FY) 1997 through FY 2001 for States faced with economic conditions that threaten their ability to operate the TANF program.  These funds are available to the 50 States and the District of Columbia.  A State is not eligible to receive Contingency Funds until it has implemented TANF.  After implementation of TANF, States, at their request, may receive funds from the Contingency Fund if they meet the eligibility requirements contained in Section 403(b) of the Social Security Act.  Contingency Funds are available to match State expenditures that exceed a state's Maintenance of effort (MOE) level only in the fiscal year in which the funds are awarded.  Unlike TANF funds under Section 403(a), Contingency Funds are not available until expended.

Section 403(b) was amended by Public Law 104-327 and Public Law 105- Public Law 104-327 permits the add on of funds to the SFAG for certain States for FY 1997 based on those States' ability to meet certain Contingency Fund requirements.  (See amendments to Section 116(1)(b)(ii)(II) in Attachment A.)  Public Law 105-33 makes technical changes to the Contingency Fund MOE, the Federal Medical Assistance Percentage (FMAP) rate and the penalty provisions. These changes have been incorporated in this Program Instruction (PI).

II.  Eligibility

States may receive Contingency Funds if:

  1. the State's average-unemployment rate for the most recent 3-month period is at least 6.5 percent and at least equal to 110 percent of the State's rate for the corresponding 3-month period in either of the two preceding calendar years; and/or
  1. the State's monthly average of individuals participating in the Food Stamp program (as of the last day of the month) for the most recent 3-period exceeds by at least 10 percent its monthly average of individuals in the corresponding 3-month period in the Food Stamp caseload for FY 1994 or FY 1995, whichever is less, had the immigrant provisions of Title IV and the food stamp provisions under Title VIII of PRWORA been in effect in those years.

The first qualifying criterion is called the Unemployment Trigger; the second qualifying criterion is called the Food Stamp Trigger.  A State must first qualify monthly as a 034needy State034 by satisfying either the Unemployment Trigger or the Food Stamp Trigger.

The Unemployment Trigger Data is obtained from Weekly Trigger Notices (WTNs) released by the U.S. Department of Labor (DOL) for this purpose.  The WTNs are also available on the INTERNET.

Attachment B is a copy of WTN No. 97-2, with an effective date of January 26, 1997, and an explanation.

A State meets the unemployment trigger for each month in which any WTN that is effective for any day in that month indicates both requirements in (1) above are met.

In the attached WTN, New Mexico met the trigger for January because its unemployment rate was 7.0 percent (as noted in the column entitled 113 mo SA TUR11) and this rate represented an increase of 16 percent for the corresponding period for 1995.  The increase of 16 percent is indicated in the column "2nd Year" which states "116."

Even though other States had unemployment rates that exceeded 6.5 percent (e.g., Alaska, California, and the District of Columbia), these States, increases for the corresponding period for the prior two calendar years did not exceed 110 percent.  Thus, New Mexico was the only State to have met the 034Unemployment Trigger034 for January.

Questions relating to the WTN for the Unemployment Trigger should be addressed to the Bureau of Labor Statistics, DOL, on (202) 606-6418.

The Food Stamp Trigger-data is provided to ACF monthly by the U.S. Department of Agriculture (USDA).  (PRWORA requires that USDA determine if a State has met the Food Stamp Trigger for a month.)

Attachment C is a Food Stamp Trigger Notice (FSTN) for the month of April (034Contingency Fund States for April 1997034), and an accompanying explanation.

Questions relating to the FSTN should be addressed to the Office of Analysis and Evaluation, Food and Consumer Service, USDA, on (703) 305-2019.

Attachment D1 is a list of those States that have met the Food Stamp Trigger in FY 1997 as of the issuance date of this PI. Attachment D2 is a listing of States, which have met the Unemployment Trigger in FY 1997.

As defined in Section 403(b)(5), an 034eligible month034 is a month in the 2-month period that begins with any month for which the State is determined to be a “needy State;” i.e., meets either the Unemployment or Food Stamp Trigger.  A State that elects to receive Contingency Funds for an eligible month can continue to receive payments for one month after it no longer meets the eligibility criteria.  Therefore, a determination of a “needy State” for a month will make that State eligible to receive Contingency Funds for two consecutive months, at the State's option.

III.  Application Process

Option 1-Monthly Request 

Each State that has met either the Unemployment Trigger or the Food Stamp Trigger for any month will be notified via certified mail.  The State will have 15 calendar days after receipt of the notification to submit a request for Contingency Funds. Information on States meeting either trigger will also be available on the ACF Home Page.

The State's request must be in the form of a letter signed by the Governor or his/her designee. The letter should reference our notification, the month or months for which payment is requested, and the trigger satisfied.  The State must certify that matching funds are available, that it will satisfy the required MOE, and that it will expend these funds in accordance with the requirements of the TANF Program and Section 4.03(b).

For convenience, we are providing an optional request letter that may be used to request Contingency Fund payments.  (See Attachment E.)  The State's request may be faxed to us at (202) 205-4270; the original request must be mailed to us at the address below.

Option 2-Advance Request 

Instead of requesting Contingency Funds upon each notification, a State may make one advance request for payment in each fiscal year.  Upon receipt of this advance request, we will make payments to the State for each month for which it qualifies for a payment in the fiscal year.  As with individual requests, the State's advance request must include the applicable criteria listed above under Option 1.  Attachment E can be used for both options.

The request should be sent to:

Joseph Lonergan
Federal Contingency Fund Manager
Division of Formula, Entitlement & Block Grants (DFEBG)
Office of Management Services
Office of Program Support
Administration for Children and Families
370 L'Enfant Promenade, SW, Room 702
Washington, DC 20447

ACF will issue eligibility notifications to States that have already met the triggers in FY 1997 via certified mail on the issuance date of this program instruction.

For further information/questions please contact Oscar Tanner at (202) 401-5704 or tanner@acf.dhhs.gov.

IV.  Award Process

For each month of the fiscal year that a State meets the eligibility based on either the Unemployment Trigger or the Food Stamp Trigger, a State may receive up to 1/12th of 20 percent of its SFAG annual allocation.  Contingency Fund grant awards will be made, via the SFAG Notice of Grant Award (NGA), in the order in which the requests for payments are received by ACF.  The Contingency Fund award is a separate line item on the NGA.

For each eligible month, a State can generally receive a 2-month grant award (Contingency Fund payment) in the amount of 1/6 of 20 percent of the SFAG.  For example, if a State qualifies for Contingency Funds for the month of October and requests Contingency Funds, we will issue a 2-month' grant award, i.e., for October and November (1/12 for each month).  However, a State has the option to request payment for only one month.

The exception is when a State qualifies for Contingency Funds for the month of September.  One grant award will be issued for September using the current fiscal year's funds; and a separate grant award will be issued for October using the next fiscal year's funds.  Each award will be 1/12 of 20 percent of the SFAG for the respective fiscal year.

Since Contingency Funds must be expended in the year in which they are received and we are unable to notify States of their eligibility for the month of September until 60 to 90 days after the end of the fiscal year because of the lag in the availability of trigger data, States should note that electing to receive Contingency Funds for the month of September would, in effect, be substituting or reimbursing State expenditures.  States should also note that those same expenditures cannot be used to meet the Annual Reconciliation MOE requirement, which is discussed later in this PI.

If a State applies for and receives Contingency Funds and subsequently determines it does not wish to participate in this part of the TANF program, it must notify ACF by letter signed by the Governor or his/her designee.  The letter notifying ACF of the State's decision must be received not later than November 14 for Contingency Funds received in the prior fiscal year.  For Contingency Funds received after the end of the fiscal year, notification must be received by ACF not later than 45 days after receipt (via certified mail) of Contingency Funds.  ACF will then recoup the Contingency Funds awarded to the State.

V.  Allowable Use of Funds

Contingency Funds are subject to the same rules and limitations that govern the use of other-Federal TANF funds, except that Contingency Funds cannot be:

  1. transferred to the Social Service Block Grant or the Child Care and Development Block Grant' (also known as the Discretionary Fund);[1] or
  2. carried over for use in a subsequent fiscal year; i.e., funds provided for a fiscal year must be expended in the fiscal year received.[2]

VI.  Maintenance-of-Effort (MOE) Level

States must meet the Annual Reconciliation MOE requirement, which is separate from the TANF MOE requirement.  The Annual Reconciliation MOE level is 100 percent of historic State expenditures for FY 1994.  Historic State expenditures include the State share of AFDC benefit payments, administration, Family Assistance Maintenance Information Systems (FAMIS), EA, and JOBS expenditures.  Child care expenditures, i.e., AFDC/JOBS, Transitional and At-Risk child care expenditures are excluded from the Annual Reconciliation MOE requirement.  Attachment F provides the Annual Reconciliation MOE levels for each State.  In determining the State's Annual Reconciliation MOE level, we used the same data sources, except for child care, used for determining the TANF MOE which were provided to States in TANFACF-PI-96-2, dated December 6, 1996.

TANF MOE expenditures may be used to meet the Annual Reconciliation MOE requirement unless they are child care expenditures or expenditures made under “separate State programs.”  Unlike the TANF MOE, the Annual Reconciliation MOE will not be prorated in FY 1997.  That is, if a State elects to receive Contingency Funds for even just 1-month in FY 1997, it is still required to meet the full Annual Reconciliation MOE level for FY 1997.  However, for FY 1997 only, States may count as the Annual Reconciliation MOE expenditures amounts expended by the State in FY 1997 to fulfill a State's matching requirement for AFDC, EA and JOBS programs.

States should note that we will reduce the Annual Reconciliation MOE level if a Tribe within the State receives a Tribal Family Assistance Grant under Section 412.  This reduction is provided for in Section 409(a)(7)(B)(iii).  We will reduce the Contingency Fund MOE level by the same percentage as a State's SFAG annual allocation is reduced for Tribal Family Assistance Grants in the State for the fiscal year.

VII.  Annual Reconciliation

Section 403(b)(6) requires an annual reconciliation be completed in order to determine if a State may retain the Contingency Funds received for a fiscal year or if it must remit all or a portion of those funds to ACF.  Section 403(b)(6) provides that Federal.  Contingency Funds are to be used to match, at the applicable FMAP rate, State funds for expenditures above a specified MOE level.  Therefore, Contingency Funds are available only to match expenditures that exceed a State's MOE level.

Annual reconciliation involves computing the amount, if any, by which countable State expenditures (State and Contingency Fund expenditures) in a fiscal year exceed the State's MOE level.  If the countable expenditures exceed 100 percent of that level, then the State is entitled to keep all or a portion of the Contingency Funds paid to it.

If the State has met its Contingency Fund MOE requirement, the amount of Contingency Funds it may retain is the lesser of two amounts.  The first amount is the amount of Contingency Funds paid to it for the fiscal year.  The second amount is its expenditures above its MOE level, multiplied by: (1) the State's FMAP applicable for the fiscal year for which funds were awarded; and (2) 1/12 times the number of months during the fiscal year that the State received contingency funds.

For example, a State's expenditures for the fiscal year 1997 are $103 million.  This amount includes $2.5 million in Contingency Funds that have been paid to the State for 6 months.  The State's MOE level is $95 million.  The State's FMAP for FY 1997 is 50 per * cent.  In determining how much a State may retain of its Contingency Funds, we must first subtract from the expenditures made by the State, the Contingency MOE level of expenditures; i.e., $103 minus $95 million.  This difference of $8 million must then be multiplied by the State's FY 1997 FMAP rate of 50 percent.  That amount is $4 million. Next, we must multiply the $4 million by 1/12 times 6 months.  The result is $2 million.

This is the amount of Contingency Funds the State may retain.  Because the State had been paid $2.5 million for the fiscal year, it must remit to ACF $500,000.

If a State fails to meet the Annual Reconciliation MOE level, it must remit all of the Contingency Funds received for that fiscal year.  Section 403(b)(6), as amended by Public Law 105-33, does not require a State to remit Contingency Funds until one year after it has failed to meet either the Food Stamp Trigger or the Unemployment Trigger for 3 consecutive months.  For example, if the State received Contingency Funds in FY 1997 but must remit some or all of the funds received, and fails to meet either trigger for the months of October, November, and December 1997, the State has until December 31, 1998, to remit the funds.

By the time the Annual Reconciliation is conducted, it is possible that a State will have expended the Contingency Funds received for the fiscal year.  This is evident in the example above where the State had to remit $500,000 of the $2.5 million received even though it had made expenditures above the MOE level.  Therefore, we will not consider expenditure of Contingency Funds, which later must be remitted under the Annual Reconciliation as an improper use.  Contingency Funds are to be expended in the fiscal year in which they are awarded.  Therefore, States may not use these funds for expenditures made in either the subsequent fiscal year or a prior fiscal year.

Section 409(a)(10) provides a penalty for failure to remit funds.  The penalty is a reduction of the State's next fiscal year SFAG by the amount of funds not remitted.  Section 409(a)(10), as amended by Public Law 105-33, eliminated the Secretary's ability to waive this penalty for reasonable cause or corrective compliance.  The State may appeal our decision to reduce the State's SFAG.

VIII.  Submittal of Annual Reconciliation

We have developed a quarterly TANF Financial Report, Form ACF-196, which States will use to report TANF and Contingency Fund expenditures.  Instructions accompanying the report will explain to States how to report TANF and Contingency Fund expenditures.  The Fourth Quarter's submission of the ACF-196, due 45 days after the end of the fiscal year, i.e., November 14, will be used to complete the annual reconciliation.  When Contingency Funds are received after the end of a fiscal year, the State must submit a revised 4th quarter ACF-196 not later than 45 days after receipt (via certified mail) of Contingency Funds.

IX.  Additional Funds to Add On to States' SFAGs for FY 1997 (Public Law 104-327)

Public Law 104-327 made technical changes to Section 403(b) of the Social Security Act and Section 116 of PRWORA.  It included a special provision amending Section 116 which permits ACF to increase a State's SFAG for FY 1997 only.  Section 116, as amended by Public Law 104-327, defines this add on to the SFAG grant as:

" ... the amount, if any, that the State would have been eligible to be paid under the Contingency Fund for State Welfare programs established under section 403(b) of the Social Security Act ...., during the period beginning October 1, 1996 and ending on the date the Secretary of Health and Human Services first receives from the State a plan described in section 402(a) of the Social Security Act ...."

“Plan” as used in section 402(a) means a State plan for implementing the TANF program.

Thus, funds may be added on to a State's SFAG for FY 1997, if prior to its implementation of the TANF program, the State would otherwise “be eligible for” Contingency Funds under Section 403(b).  “Eligibility under Section 403(b)” means that the amount of funding available; i.e., 1/12 of 20 percent per month, and all other requirements under Section 403(b) apply.  Thus, the add on to a State's SFAG for FY 1997 is available only if the State qualifies as a “needy State” by satisfying either the Unemployment Trigger or the Food Stamp Trigger and requests the funds in writing.

Funding for the SFAG add on is provided through the SFAG appropriation in Section 403(a)(1), not the Contingency Fund appropriation in Section 403(b) of PRWORA.  The add on to the SFAG is not available to States that began operation of the TANF program in October 1996, or before.

For States implementing TANF after October 1996, and choosing to participate in the add on to the SFAG and/or the Contingency Fund in FY 1997, we believe that the legislation contemplated a single process.  Thus, the requirements and procedures applicable to States participating in the Contingency Fund and the SFAG add on will, except where noted, be the same as outlined above.

States receiving these add on funds may continue to receive payments for the month after they no longer meet the eligibility trigger criteria.  However, if the second month is the month in which TANF is implemented, funding associated with the second month will not be considered an add on to the SFAG but funding under the Contingency Fund.

States may use the optional request letter (Attachment E) to apply for participation in either the Contingency Fund or the SFAG add on.  For FY 1997, States need not indicate whether the request is for the Contingency Fund or the SFAG add on.  If a State requests funds for months prior to the month of TANF implementation, we will pay the State from the SFAG appropriation.  If a State requests funds for the month on or after TANF implementation, we will pay the State from the Contingency Fund appropriation.

Attachment F shows each State's TANF implementation date, to facilitate the determination from which appropriation a State will receive funds.

Some States may choose to participate in the add on to the SFAG, but not the Contingency Fund.  This is permissible for those months prior to TANF implementation; however, the State must still meet its MOE requirement, and the determination of the actual amount of the add on to be retained will be made following completion of the Annual Reconciliation process described in section 403(b).

After the Annual Reconciliation process, the amount related to the months under TANF implementation will be payable from the Contingency Fund.  For example, if after the Annual Reconciliation for FY 1997, the amount a State may retain is determined to be $1,000,000.  The State implemented TANF in June and requested funding for the months of April through September.  The amount of the SFAG add-on will be $1,000,0.00 divided by 6 months and multiplied by 2 months, i.e., $333,333.  The remainder, $666,667, will be paid under the Contingency Fund.



[1] Section 404(d) provides the authority to transfer funds awarded under section 403(a); Contingency Funds are awarded under section 403(b).

[2] Section 403(b)(4) requires States receiving Contingency Funds to perform an annual reconciliation, which has the effect of placing a time limit on availability of funds.