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TANF-ACF-PI-1997-11 (Funding Guidance to Territories for TANF and Other Programs Subject to the Funding Ceiling in Section 1108 of the Social Security Act, as Amended by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA))

Published: November 21, 1997
Audience:
Temporary Assistance for Needy Families (TANF)
Topics:
TANF Guidance
Types:
Program Instructions (PI)
Tags:
Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193)

To:

Territorial Agencies administering the Temporary Assistance for Needy Families (TANF) program and other interested parties

Subject:

Funding guidance to Territories for TANF and other programs subject to the funding ceiling in section 1108 of the Social Security Act, as amended by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) and the Balanced Budget Act of 1997 (Public Law 105-33).

Background:

Guam, the Virgin Islands, American Samoa, and Puerto Rico have been subject to a funding ceiling under section 1108 for certain programs.  PRWORA revised the funding ceilings and established new requirements under section 1108 for the Territories. P.L. 105-33 more recently amended section 1108.

Inquiries:

Questions should be forwarded to the ACF Regional Offices in Regions II and IX.

/s/

Elizabeth M. James
Director 
Office of Program Support

/s/

Lavinia Limón
Director 
Office of Family Assistance

/s/

James Harrell
Deputy Commissioner
Administration on Children, Youth and Families

Funding Guidance to Territories for TANF and Amended Section 1108 of the Social Security Act

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) replaced the Aid to Families with Dependent Children (including Emergency Assistance) and the Job Opportunities and Basic Skills Training (JOBS) programs with the Temporary Assistance for Needy Families (TANF) Program.  PRWORA repealed the Title IV-A childcare programs (AFDC/JOBS Child Care, Transitional Child Care, and At-Risk Child Care).  For the Territories, PRWORA also amended section 1108 of the Social Security Act.

P.L. 105-33 further amended section 1108 and made other changes to the PRWORA, which affect funding for the Territories.  This program instruction explains the changes made by PRWORA and P.L. 105-33.

I.  Revised Funding Ceilings Under Section 1108 of the Social Security Act

PRWORA revised the funding ceilings that had been in effect for Guam, Puerto Rico, the Virgin Islands and American Samoa.  The revised funding ceilings under section 1108, effective October 1, 1996, are as follows:

  • Guam: $4,686,000
  • Virgin Islands: $ 3,554,000
  • Puerto Rico: $107,255,000
  • American Samoa: $ 1,000,000

The programs subject to the funding ceiling are:

(1)  the adult assistance programs under Titles I, X, XIV, and XVI of the Social Security Act;

(2)  the TANF program under Title IV-A of the Social Security Act;

(3)  the Foster Care, Adoption Assistance and Independent Living programs under Title IV-E of the Social Security Act; and,

(4) nthe Matching Grant under section 1108(b) of the Social Security Act.

Please note the following:

a) Funding provided to Territories for the programs in items (1) through (3) above are funded through the specific program appropriation. There is a separate appropriation for the Matching Grant under section 1108(b).

The Federal financial participation (FFP) limits under the statute and regulations for the programs in items (1) through (3) apply, i.e.,

the FFP rate for the adult assistance programs is 75 percent (as stated in section 1118 of the Social Security Act);

the TANF program is 100 percent funded by the Federal government; and,

for Foster Care and Adoption Assistance, the Federal Medical Assistance Percentage (FMAP) applies for assistance payments; 50 percent is the Federal matching rate for administrative costs; and 75 percent is the Federal matching rate for training expenditures (as stated in Title IV-E of the Social Security Act). (The FMAP rate is 50 percent for the Territories for FYs 1997 and 1998.)

Funding for the Independent Living Program (ILP) through the Title IV-E appropriation is not available to the Territories.  This is because the formula for ILP is based on foster care maintenance payments made to States in FY 1984.  Because the Territories did not operate a Foster Care program in FY 1984, ILP funding from the Title IV-E appropriation is not available.  (As will be discussed later, funding under the Matching Grant (at the Federal matching rate of 75 percent) may be used for the ILP program, as well as for the Foster Care and Adoption Assistance programs under Title IV-E.)

b) American Samoa is not eligible for the adult assistance programs.

c) For FY 1997 only, funding for the Aid to Families with Dependent Children (AFDC), Emergency Assistance, and JOBS programs are also subject to the ceiling, effective October 1, 1996.

d) Section 103(c) of PRWORA repealed sections 402(g) and (i) of Title IV-A, which provided AFDC/JOBS child care, Transitional Child Care, and At-Risk Child Care.  The effective date for the elimination of these programs was October 1, 1996, as provided in section 116(a)(4) of PRWORA.  While PRWORA created new childcare funding under section 418 of Title IV-A, it did not provide this new funding to the Territories.  Section 418(d) of Title IV-A provides this new funding only to the States and the District of Columbia.  As with the States, Territories may use TANF funds for child care services and they may transfer up to 30 percent of their Family Assistance Grant (FAG) funds provided under section 403(a)(1) and Matching Grant funds to the Discretionary Fund (also referred to as the Child Care and Development Block Grant Program) in accordance with the provisions of section 404(d).

e) PRWORA eliminated the additional funding for family planning under the former section 1108(b), effective October 1, 1996.  (However, under TANF, section 408(a)(6)(B) provides that Federal TANF funds may be used for prepregnancy family planning services.)

II.  How Funding Under the Ceiling Works

Territories can receive funding for each program listed above, i.e., the adult assistance, the TANF, and the Foster Care and Adoption Assistance programs and the Matching Grant, subject to the following:

a.  The total in grant amounts for each program for the fiscal year cannot exceed the ceiling amount for each Territory;

b.  The TANF Family Assistance Grants (FAG), awarded for a fiscal year cannot exceed the Territory's FAG annual allocation, as provided to the Territories in February 1997.

The FAG annual allocation is the basic block grant amount provided to all States and Territories. The FAG annual allocations are:

Guam $ 3,465,478 
Virgin Islands $ 2,846,564
American Samoa $ -0-
Puerto Rico $71,562,501

c.  There is no restriction, other than the section 1108 ceiling, on the amount of Federal funds a Territory may receive for the adult assistance programs, the Foster Care and Adoption Assistance programs, and the Matching Grant for a fiscal year.

d. Thus, in determining the amount available for each program, the Territories must subtract grant amounts received for each prior quarter from the ceiling.  Final adjustments will be made after the financial reports have been submitted for the fiscal year to determine the actual amount to which a Territory is entitled for each program.

ACF has historically reconciled Territories' grants for all programs subject to section 1108 with Territorial reports on actual expenditures.  ACF will continue to do so for all programs subject to the amended section 1108.

e.  ACF is developing a Territorial Financial Report.  This quarterly report will be used by Territories to request quarterly grant estimates for each of the programs under section 1108.  (This report will be discussed later in this document.)

III.  Foster Care, Adoption Assistance and Independent Living Programs under Title IV-E

Territories are required to submit a Title IV-E plan for the Foster Care and Adoption Assistance Programs.  The Independent Living Program is optional.  However, a Title IV-E plan is required if a Territory wishes to operate an Independent Living program.  Territories should refer to ACYF-PI-88-07, ACYF-PI-90-11, ACYF-CB-PI-97-01, ACYF-CB-PI-97-04, ACYF-CB-PI-97-05 and ACYF-IM-CB-97-01 for guidance on submission of Title IV-E plans.  Funding is available for Title IV-E activities only if a Title IV-E plan for the Title IV-E programs has been approved by the ACF.

Territories should note that funding for the Foster Care and Adoption Assistance programs is available through the Title IV-E appropriation.  Funding is not available for the Independent Living program from the Title IV-E appropriation, as discussed above.  Funding is available for the Foster Care, Adoption Assistance and Independent Living program from the Matching Grant.  If the Title IV-E appropriation is used, the Title IV-E requirements and applicable matching rates apply; if Matching Grant funds are used, the additional requirements described in Item IV apply.  However, as stated previously, funds provided under both sources are subject to the ceiling applicable for each Territory.  ACF will be providing further assistance to Territories on the operation of Title IV-E programs.

IV.  Matching Grant at Section 1108(b)

Matching Grant Expenditures

PRWORA created a new funding stream (and appropriation) under section 1108(b).  These funds, which are subject to the section 1108 ceiling, may be used for the TANF program and the Foster Care, Adoption Assistance, and Independent Living programs only (not the adult assistance programs); the Federal matching rate is 75 percent.

Expenditures made for TANF and the IV-E programs with Matching Grant funds, i.e., Matching Grant expenditures, are subject to the same requirements that are applicable to TANF activities funded with Federal funds and IV-E activities funded under the IV-E appropriation.  Thus, e.g., if TANF assistance is provided to a family with Matching Grant funds, the 5-year limit on assistance applies.

Territories should note that use of the Matching Grant is optional.  Unlike the Family Assistance Grant, there is no fixed amount available for the Matching Grant.  In general, the Matching Grant is the difference between the Territory's ceiling and the amounts granted for TANF, the adult assistance programs, and the Foster Care and Adoption Assistance programs for the fiscal year.

For example:

  • For FY 1998 Guam requests and receives TANF funds equal to its FAG, i.e., $3,465,478.  It also requests $1,220,522 for the adult assistance programs.  The sum of these amounts is $4,686,000, i.e., its section 1108 ceiling.  Because Guam has received funds for these two programs that equal its ceiling, additional funds for the Matching Grant are not available.

Use of Matching Grant

The amount of Matching Grant funds each Territory is eligible to receive is an amount that is equal to 75 percent of the amount, if any, by which the Territory's expenditures for the current fiscal year under TANF and the IV-E programs (Foster Care, Adoption Assistance, and Independent Living programs), but not the adult assistance programs, exceed the sum of historical fixed amounts.  The historical fixed amounts are equivalent to the sum of the Territories' FAG received and the Territories' share of expenditures for FY 1995 for the AFDC, Emergency Assistance, and JOBS programs (the Matching Grant maintenance of effort (MOE) requirement).  These historical amounts are shown below.

Territory

FAG Amount

Matching Grant

Total

Puerto Rico

$71,562,501

$28,182,864

$99,745,365

 

Guam

$ 3,465,478

$ 974,517

$ 4,439,995

 

Virgin Islands

$ 2,846,564

$ 820,380

$ 3,666,944

 

American Samoa

0

0

0

 

Expenditures used to receive Matching Grant funds are expenditures that exceed the sum of the historical fixed amounts.  Thus, if a Territory reports an expenditure as a Matching Grant expenditure, that same expenditure cannot be used to meet the historical fixed amounts, i.e., the FAG Amount and the Matching Grant MOE.

Matching Grant FAG Amount

Expenditures made to meet the FAG Amount may include:

(1) Federal TANF funds (i.e., the FAG grants);

(2) Territorial funds used for the TANF program that are not used to meet the Matching Grant MOE requirement;

(3) The Federal share of expenditures for the Foster Care, Adoption Assistance and Independent Living programs;

(4) The State share of expenditures for the Foster Care, Adoption Assistance, and Independent Living programs; and,

(5) Territorial funds used for IV-E expenditures that are made with the Territories' own funds and which are not available for match by the IV-E or Matching Grant appropriation.

(6) Those funds that have been transferred from the FAG to the Discretionary Fund (the Child Care and Development Block Grant) and the Social Services Block Grant (SSBG) under Title XX of the Social Security Act.

Matching Grant FAG Amount Expenditures that are made with Federal FAG and IV-E funds must meet the requirements that apply to the use of Federal TANF funds and Federal IV-E funds.

Territorial funds used for TANF expenditures to meet this requirement must meet the requirements applicable to Matching Grant "MOE Expenditures," as discussed below.

Territorial funds used for IV-E expenditures that are made with the Territories' own funds and which are not available for match by the IV-E or Matching Grant appropriation are subject to the requirements that apply to the use of Federal IV-E funds.

Matching Grant Maintenance-of-Effort (MOE) Expenditures

Matching Grant MOE expenditures are TANF and IV-E expenditures made with the Territory's funds that must equal the State share of expenditures for AFDC, EA, and JOBS, excluding childcare, for FY 1995.  They do not include Federal funds for TANF or IV-E.

The statute provides little guidance on what expenditures a Territory may count as Matching Grant MOE Expenditures.  However, as the provision is for additional title IV-A (TANF) and IV-E expenditures, ACF will apply the same requirements as for the TANF MOE to TANF expenditures under the Matching Grant MOE, i.e., the requirements at section amended 409(a)(7) will apply to the Matching Grant MOE expenditures for TANF.  Because Matching Grant MOE expenditures for TANF must be expenditures made under part A, they must be expenditures made under the TANF program, not "separate State programs."  Therefore, the provisions at section 409(a)(7)(B)(i)(II) which pertain to "separate State programs" do not apply.  In addition, the provision at amended section 409(a)(7)(B)(ii) regarding the reduction to the MOE requirement if participation rates are not met does not apply.  Finally, expenditures made under the TANF program, but not "separate State programs, to provide assistance to eligible families which may be counted as TANF MOE expenditures may also be counted as Matching Grant MOE expenditures.

Thus, Matching Grant MOE expenditures may include:

(1) The same expenditures that count toward the TANF MOE requirement so long as they are expenditures made under the TANF program, not "separate State programs."

(2) Territorial expenditures made in accordance with IV-E program requirements.  This includes the Territorial share of expenditures which are matched with Federal funds and expenditures made by the Territories with their own funds that meet the requirements of the IV-E program.

(3) Expenditures made with the Territories' own funds which meet the Federal TANF program requirements but which are not funded with Federal TANF funds.

In summary, Territories should note that Territorial expenditures made under section 1108(b) can be applied only as one of the following: (1) a Matching Grant expenditure; (2) a FAG Amount expenditure; or (3) a Matching Grant MOE expenditure.

Example

In this example, Puerto Rico will request the following:

$71,562,501 for TANF, i.e., all of its FAG annual allocation;

$10,000,000 for the adult assistance programs; and,

$20,000,000 for Foster Care and Adoption Assistance.

These total $101,562,501.

In order for Puerto Rico to receive Matching Grant funds for either or both "excess" TANF and IV-E expenditures, Puerto Rico must have "FAG Amount expenditures" and "Matching Grant MOE expenditures" which in total exceed $99,745,365.  See example below.

 $ 71,562,501 (FAG Amount received = FAG annual allocation)

 + $ 28,182,864 (the Matching Grant MOE requirement)

 $ 99,745,365

Puerto Rico's expenditures above $99,745,365 total $15,254,635 (for TANF and IV-E, but not the adult programs because Matching Grant funds are not available for adult assistance program expenditures.)  In this example, Puerto Rico could be eligible for $11,440,976 (0.75 x $15,254,635) in Matching Grant funds.

However, if Puerto Rico receives the claimed $101,562,501 for the adult assistance programs, TANF, and IV-E, all the $11,440,976 would not be available for the Matching Grant.  This is because Puerto Rico's ceiling is $107,255,000.  Therefore, only $5,692,499 would be available as a Matching Grant, i.e., $107,255,000 minus $101,562,501.

Matching Grant Disallowance

If a Territory that receives Matching Grant funds for a fiscal year does not expend up to its FAG amount or its Matching Grant MOE amount, all Matching Grant expenditures will be disallowed.  This includes funds which have been transferred to the Discretionary Fund and/or SSBG.  A disallowance decision may be appealed to the Departmental Appeals Board according to the regulations at 45 CFR Part 16.  The debt collection regulations at 45 CFR Part 30 applies to these disallowances.

Matching Grant Territorial Waiver

For Guam and the Virgin Islands, the $200,000 waiver for Territorial match provided to insular areas pursuant to U.S.C. 1469(d) can be applied to the Matching Grant for expenditures that these areas are required to match at 25 percent.

Matching Grant - Title IV-E

As previously stated, Matching Grant funds may be used for IV-E expenditures, i.e., Foster Care, Adoption Assistance and ILP expenditures.  If a Territory chooses to use Matching Grant funds for IV-E expenditures, instead of IV-E appropriated funds, they may do so.  It is to the Territory's advantage to use Matching Grant funds instead of IV-E appropriated funds because the Matching Grant rate of 75 percent provides more Federal funds to the Territory than the Federal funding that would be available under the IV-E appropriation.  However, Territories must be aware that if they fail to meet the dual restrictions of the "FAG Amount" requirement and the Matching Grant MOE requirement, all Matching Grant funds must be disallowed.

V.  Transfer to the Discretionary Fund and/or SSBG

Territories may transfer funds from their FAG and their Matching Grant amounts according to the provisions in section 404(d).  Territories may transfer up to 30 percent of each fiscal year's FAG amount or Matching Grant amount to the Discretionary Fund and SSBG.  No more than 10 percent of the FAG or Matching Grant amounts can be transferred to SSBG. Funds transferred to SSBG are subject to the requirements of the SSBG program and the other requirements in section 404(d).  Funds transferred to the Discretionary Fund are subject to the requirements applicable to the Discretionary Fund.

Transfer of FAG Funds

Territories should note that the percentage of funds that can be transferred from a fiscal year's grant is based on the FAG grants received, not the FAG annual allocation, which may be higher than the FAG amount received for a fiscal year.

As noted previously, FAG funds transferred to the Discretionary Fund and SSBG can be counted as expenditures that must be made to expend up to the FAG Amount.

Transfer of Matching Grant Funds

As noted previously, if a Territory does not meet the FAG Amount or the Matching Grant MOE requirement, all Matching Grant funds will be disallowed.  This includes Matching Grant funds that have been transferred.

The example above regarding Puerto Rico shows that Puerto Rico would have $5,692,499 available for the Matching Grant based on TANF and IV-E expenditures made above historical amounts, after taking into consideration the overall section 1108 ceiling of $107,255,000.

If, however, Puerto Rico, had decided to transfer 30 percent of available Matching Grant funds to SSBG and the Discretionary Fund, 10 percent and 20 percent respectively, i.e., a total of $1,707,749.  Thus, only $3,984,750 would be available for TANF and IV-E expenditures from the Matching Grant.

Territories should note that the restriction on the transfer of funds to SSBG, i.e., funds could only be transferred to SSBG if funds were transferred to the Discretionary Fund, was eliminated by P.L. 105-33.

VI.  Elimination of Maintenance of Effort Requirement Pursuant to Amended Section 1108(e)

Public Law 105-33 eliminated the MOE requirement established in PRWORA under section 1108(e).  It had provided that a Territory's section 1108 ceiling for the immediately succeeding fiscal year would be reduced if the Territories' expenditures for the prior fiscal year for all programs under section 1108(a) were less than the amount expended by the Territories for all programs under section 1108(a) as in effect for FY 1995.  The repeal is effective for FY 1997.

VII.  Grant Requirements for Territories Under Section 1108

We are proposing to issue one grant award each quarter covering all programs under section 1108.  The grant award will include an amount for each of the following, if requested:

(1)  the FAG (part A of Title IV);

(2)  the adult programs (Titles I, X, XIV, and XVI);

(3)  the Matching Grant for IV-A and/or IV-E (section 1108(b)); and,

(4)  the programs under Title IV-E.

We are also proposing to require one financial report quarterly for reporting estimates and expenditures for the programs above.

The financial report will also be used by the Territories to report:

(1)  the TANF MOE; and,

(2)  the Matching Grant MOE and the FAG Amount expenditures for purposes of the Matching Grant.

This Territorial Financial Report is under development.  Territories will use this report for the TANF program, not the ACF-196 that will apply to States.

Closing out Section 1108 Grants

As stated previously, final payments for eligible programs for each fiscal year will be based on final reports of expenditures submitted by the Territories.   ACF will pay all allowable expenditures for each program made in the fiscal year but only up to the ceiling applicable to each Territory.  This applies to the Matching Grant as well as other programs under section 1108.

As Territories are aware, FAG funds are available for future fiscal years.  (This ability to reserve funds does not apply to Matching Grant funds or funding for other programs subject to the section 1108 ceiling.)  The reservation of FAG funds may delay the closeout of funding under section 1108 for each fiscal year and possibly result in changes to other grant amounts already paid.  If the Territory has received a Matching Grant for the fiscal year, then if the final FAG grants for a fiscal year are changed, the "FAG Amount" must also be adjusted.

VIII.  Application of Additional Funding Sources to the Territories

Public Law 105-33 amended section 1108(a) to provide that funds awarded to the Territories for the "Bonus to Reward Decrease in Illegitimacy" at section 403(a)(2), the "Bonus to Reward High Performance States" at section 403(a)(4), and for funds provided under section 413(f) (State-Initiated Evaluations) are not subject to the section 1108 ceiling.  Thus, any payments made from these funding sources increase the total amount of funds to the Territories.

Public Law 105-33 also created the new Welfare-to-Work program through the inclusion of a new section 403(a)(5) in Title IV-A.  Territories are eligible to participate in this program, which is being administered on the Federal level by the Department of Labor.  Welfare-to-Work grants are not subject to the section 1108 ceiling.

Territories may participate in the Federal loan program under section 406 of Title IV-A.  There is no specific exclusion to their participation in the loan program, and as section 419 defines "States" to include the Territories, ACF has determined that the Territories may participate. (Loan amounts are not subject to the section 1108 ceiling).

Territories are excluded from participation in Supplemental Grant Funds for Population Increases at 403 (a)(3) and the Contingency Fund at 403(b).  They are excluded because "State" in these subsections is defined to be each of the 50 States of the United States and the District of Columbia.

IX.  Special Guidance for FY 1997 Transition to TANF and Amended Section 1108 of the Social Security Act

Grants for the fourth quarter of FY 1997 have been issued to the Territories.  Territories should note that final adjustments to FY 1997 grant awards will be made after we have received the expenditure report for the fourth quarter.

For example:

  • For FY 1997, Puerto Rico has requested TANF, AFDC, EA, JOBS, and adult program funds up to its ceiling of $107,255,000.  ACF has issued grant awards for these programs equaling $107,255,000.
  • Puerto Rico's approvable Title IV-E plan is approved in FY 1998.  Thus, Puerto Rico may claim Federal reimbursement for its Foster Care and Adoption Assistance programs for allowable FY 1997 expenditures under the IV-E appropriation.  However, in order for a IV-E grant to be issued for allowable IV-E expenditures, the total in grant awards issued for FY 1997 must be reduced.  A reduction will most usually occur because the Federal reimbursement on actual expenditures claimed is less that the amount requested (and thus granted.)  Therefore, if, for example, Puerto Rico's fourth quarter claim for the adult assistance program expenditures is $1 million less than its Fourth Quarter Grant for the adult assistance programs, ACF will reduce the adult assistance grant amount for the fiscal year by $1 million.  If Puerto Rico submits a claim of $1 million for IV-E expenditures, then ACF will award to Puerto Rico $1 million in FY 1997 funds for the Foster Care and Adoption Assistance programs.

MOE Requirements for FY 1997

States and Territories were informed in a letter from the Office of Family Assistance to State Commissioners dated January 7, 1997 that the TANF MOE requirement would be prorated based on the date the State or Territory began operation of the TANF program.  Since the Territories (except for American Samoa) began TANF on July 1, the FY 1997 TANF MOE requirements will be adjusted as follows: the annual TANF MOE amount x 92 days/365 days. The TANF MOE requirements for the Territories for FY 1997 are as follows:

Guam

$223,835 (at 75%)

$238,747 (at 80%)

Virgin Islands

$148,383 (at 75%)

$158,275 (at 80%)

Puerto Rico

$5,339,895 (at 75%)

$5,695,888 (at 80%)

The Matching Grant MOE requirement for FY 1997 is also prorated.  For Puerto Rico, the only Territory that has expressed an interest in the Matching Grant for FY 1997, the Matching Grant MOE requirement is $7,103,626.