TANF-ACF-PI-2004-03 (Use of TANF Funds to Recover Aid to Families with Dependent Children (AFDC) Overpayments)
State agencies administering the Temporary Assistance for Needy Families (TANF) program and other interested parties.
Use of TANF Funds to Recover Aid to Families with Dependent Children (AFDC) Overpayments.
42 U.S.C. 604(a)(2); 31 U.S.C. 1301(a); and TANF-ACF-PI-2000-2. This Program Instruction clarifies that Federal TANF funds may be used for the costs of pursuing, recovering, accounting for and reimbursing the Federal share of AFDC overpayments that occurred before October 1, 1996.
Under the former AFDC program, States were required to take appropriate action to collect all overpayments, either through repayments or recoupment (grant reduction). Collections were retained by the State, reported quarterly and the grant award was adjusted to recover the Federal share (FMAP) of the assistance payment.
With the enactment of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), ACF issued a series of three “program instructions” that required States to continue to pursue AFDC overpayments made prior to October 1, 1996 and refund the Federal share. TANF-ACF-PI-2000-2 dated September 1, 2000 rescinded the prior program instructions and required States to remit the Federal share of recovered AFDC overpayments made prior to October 1, 1996 to ACF via check. The policy to pursue and return the Federal share of AFDC overpayments made prior to October 1, 1996 is still in place. Recoveries of overpayments paid to recipients on or after October 1, 1996 were to be retained by the State and used for TANF program costs. While not explicitly stated in TANF-ACF-PI-2000, the reason for the difference in treatment between the two timeframes is that appropriations law requires public funds to be used only in the program and for the purposes for which they were appropriated, except as otherwise provided by law.
Beginning in fiscal year 2000, the HHS Office of the Inspector General (OIG) began audits of 24 State programs and three California counties to determine whether States had properly collected and refunded AFDC overpayment recoveries to the Federal government, in accordance with the program instruction. For those States which had not complied, the OIG recommended that the States refund the Federal share to ACF.
The follow-up discussion with States about the policy and appropriations law principles has raised the question as to whether TANF funds can be used for the costs to recover AFDC overpayments, if AFDC collections cannot be retained and used in the TANF program.
Federal TANF funds may be used for the costs of pursuing, recovering, accounting for and reimbursing the Federal share of AFDC overpayments. Section 404(a)(2) of the Social Security Act (the so-called “grandfather” provision) provides that States may use their TANF grant “in any manner that the State was authorized to use amounts received under part A or F of this subchapter, as such parts were in effect on September 30, 1995, or (at the option of the State) August 21, 1996.” [42 U.S.C. 604(a)(2)] Since AFDC funds could be used for the administrative costs of collecting AFDC overpayments, section 404(a)(2) likewise permits TANF funds to be used for that purpose.
While TANF funds may be used for this limited purpose, the statute does not similarly authorize AFDC funds to be used for TANF purposes. Thus, as required by TANF-ACF-PI-2000-2, the Federal share of recovered AFDC overpayments made prior to October 1, 1996 must be remitted to ACF via check. States may not retain the Federal share of these AFDC collections to use in the TANF program.
Inquiries and comments should be directed to the appropriate Administration for Children and Families (ACF) Regional Administrator.
Curtis L. Coy
Deputy Assistant Secretary
Office of Family Assistance