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Q & A: Use of Funds

TANF Program Policy Questions and Answers

Published: May 2, 2013
Audience:
Temporary Assistance for Needy Families (TANF)
Topics:
TANF Guidance
Types:
Q&A
Tags:
TANF Program Policy Questions and Answers, Use of Funds

Q11: May a State use TANF funds to help needy families overcome the "digital divide" by providing access to computers and the Internet?

A11: States have wide flexibility under TANF to fund innovative strategies designed to achieve one or more program purposes. Familiarity with computers and the Internet enhances employability for many jobs, and the Internet itself is a critical source of information about employment opportunities.

Thus, it is clear that a State could claim that such expenditures would be consistent with the second purpose of the TANF program: "to end the dependence of needy parents on government benefits by promoting job preparation, work and marriage." A State may use Federal TANF funds or State "maintenance of effort" (MOE) expenditures to purchase computers, provide training and cover the cost of Internet access for eligible, needy families.

States also decide the income and resource standards used to determine TANF eligibility and may set different criteria for different benefits or services. The criteria for helping families purchase computers and/or access the Internet could be broader than the criteria used for cash assistance. For example, a State could make computers and Internet access available to all families with incomes below 150 percent of the poverty line.

We need to point out one restriction on the use of TANF funds for computers or Internet access. Under the statute and final TANF rules, prior year funds can only be used for "assistance" -- those benefits designed to meet the ongoing, basic needs of a family, such as food, clothing, shelter, utilities, etc. The purchase of computer hardware, software or Internet access does not appear to meet the definition of TANF assistance. Therefore, only current year TANF funds can be used for such expenditures. By spending prior year dollars on assistance, however, a State could free up current year funds for use on computers and Internet access. To benefit from current prices and discounts for bulk purchases, a State could contract for computers and Internet access and actually liquidate the current year obligation over the next two years.

We would treat expenditures on computers and Internet access for families as program expenditures, outside (i.e., not counted toward) the 15 percent administrative cap.

Q12: What is the status of the Handbook of Public Assistance? Are any portions of Parts III, IV, and V of the Handbook of Public Assistance Administration still binding upon the States?

A12: The original Handbook consisted of seven parts (designated I through VII), four supplements (designated A through D), and an undesignated supplement for "Medical Assistance for the Aged." Many of these, including Part III, have been superseded by later legislation, formally revoked, or codified into regulation. With regard to the welfare program, the Handbook provisions at Parts IV and V, which were applicable to the old Aid to Families with Dependent Children (AFDC) program, were never fully revoked or codified. However, the repeal of that program and enactment of the Temporary Assistance for Needy Children (TANF) program has rendered the Handbook obsolete -- except in one situation.States that elect to continue programs under the former AFDC plan in accordance with grandfathering clause at section 404(a)(2) of the Social Security Act (e.g., the Emergency Assistance Program) must adhere to the applicable Handbook provisions governing presumptive eligibility (Part IV - 5520), interpretation of the authorization of award (Part IV - 5212), and the prior or simultaneous authorization of assistance (Part IV - 5214). We base our rationale on the acknowledgment that section 404(a)(2), which permits States to "grandfather in" the plan provisions, also "grandfathers in" the associated substantive policies related to such provisions from the AFDC program.

The rest of the Handbook provisions became obsolete at the time a State implemented its TANF program. For example, a State that implemented TANF effective July 1, 1997, was subject to the Handbook provisions up until that date. It is at that point, for each State, that the AFDC program was actually repealed and the TANF program enacted.

We have issued a Policy Announcement, TANF-ACF-PA-00-1, which implements this policy. (See /programs/ofa/pa2001.htm .) However, we inadvertently omitted applicability of Part IV-5212. We intend to issue a corrected Policy Announcement shortly.

Q13: Are costs associated with staff training considered administrative costs?

A13: We have not spoken to this issue in the regulation, preamble, or other policy guidance. However, we have indicated that costs such as equipment, travel, and office space costs, when directly associated with providing program services, would be treated as program costs (whether provided under contract or otherwise). In the same vein, a State may treat costs for training of case managers or for other training directly associated with providing program services as program costs under its cost allocation plan. For example, training of case managers and other staff about how to provide appropriate services to victims of domestic violence under the Family Violence Option (i.e., screening and identification, safeguarding, referrals to appropriate services, and options to waive program requirements), would be a program cost. Likewise, training staff about providing appropriate services to people with disabilities would be a program cost. On the other hand, training of staff to perform administrative functions -- such as eligibility determinations, procurement, and payroll -- would be considered administrative costs.

The same definitions of administrative costs and program costs apply to both Federal TANF and State MOE funds.

[REVISED] Q14: May States use TANF and/or MOE funds for SCHIP outreach and Food Stamp Program (FSP) informational activities? If yes, are such costs considered administrative costs?

A14: States may use TANF and MOE funds for SCHIP outreach activities that will improve access of needy families to SCHIP benefits. In May 2002, Congress clarified that States may use TANF and MOE funds, Food Stamp funds, or a combination of both funding streams for Food Stamp Program (FSP) informational activities directed to families, as long as the same costs are not charged more than once. Food Stamp informational activities include activities that inform low-income families about the availability, eligibility requirements, application procedures, and the benefits of the Food Stamp Program. Activities associated directly or indirectly with individual FSP certification are not considered informational.

Any such expenditures by a State would not count against its administrative cost caps. The final rule at §263.0(b)(1)(i) cites the example of providing program information as an example of an activity that is excluded from the definition of administrative costs. Similarly, we would exclude the cost of providing information to needy families about related services or programs for which they might be eligible.

In deciding whether to use TANF or MOE funds for SCHIP outreach and/or Food Stamp informational activities, States need to keep in mind basic program and cost principles. States may only use Federal TANF or State MOE funds for allowable TANF or MOE expenditures. This generally means that a Federal TANF or State MOE funded benefit or service must be reasonably calculated to accomplish a TANF purpose. For example, we believe that Food Stamp informational activities and SCHIP outreach services are reasonably calculated to accomplish the first of the four TANF purposes: to provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives. Because expenditures on activities that accomplish this TANF purpose are restricted to the "needy," Federal TANF funds may only be used for the portion of the outreach/information expenditures that are attributed to low-income families meeting the State's income and resource (if applicable) standards established for this activity. This determination must be based on a sound methodology that enables the State to arrive at a reasonable estimate of the TANF-eligibles benefiting from the service vs. the non-eligible population. The document known as the ASMB C-10, which is entitled The Cost Principles and Procedures For Establishing Cost Allocation Plans and Indirect Cost Rates For Agreements with the Federal Government, provides guidance on the allocation of costs eligible for reimbursement under more than one program.

According to 45 CFR 263.2(b), MOE funds may only be used to help eligible family members -- namely, a financially eligible ("needy") family that consists, at a minimum, of a child living with a relative or a pregnant woman. Hence, as explained above, to claim any MOE expenditures for outreach activities, a State must have a sound methodology that enables it to identify and claim only the portion of total qualified expenditures for benefits that have been provided to or on behalf of eligible families.

[REVISED] Q15: Under the grandfathering provision at section 404(a)(2) of the Act, may a State use TANF funds for Food Stamp and Medicaid administrative costs?

A15: No. Under the final rules at §263.11(b), States must spend their TANF funds in accordance with the requirements of OMB Circular A-87 and part 92. The Department's Office of Grants Acquisitions and Management issued OGAM AT 98-2, which provided that A-87 requires that TANF and other government programs must allocate costs to all "benefiting" programs. In addition, the preamble to the TANF final rule, at 62 FR 17811, provides that "States must properly allocate costs. They must attribute administrative, program, and systems costs to benefiting programs and appropriate cost categories, in accordance with approved cost principles in part 92." Thus, States are bound by the "benefiting" program rule and may not charge Medicaid or Food Stamp administrative costs to TANF.

The statutory provision at section 404(a)(2) does not create an exception (or affect the applicability of OGAM AT 98-2). As we stated in the preamble to the TANF final rule, at 62 FR 17841, "[a]ctivities authorized under this subsection must have been in an approved plan under part A or part F to be an allowable expenditure of Federal TANF funds." Because cost allocation plans were separate and distinct from the AFDC and JOBS plans, the administrative costs authorized under the prior cost allocation plans do not come under the purview of section 404(a)(2).

Q16: Do the time limits requirements for filing claims (at 45 CFR 95 Subpart A) and other Part 95 requirements apply to the TANF program?

A16: Part 95 does not apply to the TANF program. Section 1132 of the Social Security Act and the conforming regulations in Part 95 speak to Federal financial participation (i.e., matching). Since TANF is not funded this way, these regulations do not apply.

Q17: Which funding restrictions apply to benefits and services provided pursuant to goals three and four of TANF?

A17: The first, threshold question is whether expenditures on the benefits or services would be reasonably calculated to accomplish the third or fourth goal of TANF. Two other important questions are: (1) how the benefits or services are funded; and (2) whether they meet the definition of "assistance." Most of the funding restrictions at section 4086 apply only to the use of Federal funds7 and only to expenditures on "assistance." If the statutory provision restricts only the use "of the grant," it does not restrict the use of MOE funds (except in the case where the MOE funds are commingled with Federal TANF funds). If the statutory provision only restricts the circumstances under which a State may provide "assistance" and the activities States are funding to support goals three or four fall outside the definition of "assistance" (at §260.31), States may use either Federal TANF or State MOE funds for those activities.

For example, a State could use TANF or MOE funds to provide pregnancy prevention counseling to a teen parent8, even if he or she does not live in an adult-supervised setting. Also, a State could use MOE funds to provide "assistance" to a teen parent who does not live in an adult-supervised setting. Section 408(a)(5) precludes the use of Federal funds only on "assistance" to teen parents who are not living in an adult-supervised setting. Likewise, section 408(a)(4) prohibits the use of Federal funds only on "assistance" to teen parents who are not attending appropriate educational activities.

Section 408(a)(6) is the only restriction on the use of the "grant" in section 408 that applies to benefits and services that are not "assistance." This provision precludes the use of Federal TANF funds for any medical services other than prepregnancy family planning services.

The section 408 restrictions on the use of the "grant" do not apply to State MOE expenditures (except where the MOE funds are commingled with TANF funds). However, States may not expend State MOE funds for any activity unless the expenditures are made on behalf of needy families. Although TANF purposes three and four are not restricted to the needy, MOE is. As we indicated in the TANF funding guide, States may only claim MOE expenditures with respect to eligible families, i.e., families in which a child lives with a parent or caretaker relative (or is a pregnant individual) and that are needy per the financial eligibility criteria (i.e., according to the appropriate income and resource (when applicable) standards) established by the State in its TANF plan. Also, MOE expenditures must meet all the conditions in section 409(a)(7) of the Act and subpart A of part 263 of the TANF rules in order to count as "qualified expenditures" for MOE purposes.
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6For example, this section of the statue prohibits States from using "the grant" to provide assistance to: families with no minor child; teen parents not attending school or living in adult-supervised settings; families with adults who have received assistance for five years; individuals found to have fraudulently represented their residence; and fugitive felons and parole violators. It also prohibits Stats from using "the grant" for medical services except prepregnancy family planning. The requirement for families to assign rights to child support applies "as a condition of providing assistance under the State['s TANF program]"; thus, it affects any family receiving "assistance" under the TANF program, regardless of whether Federal TANF or State MOE funds are used.
7As a reminder, restrictions on the use of Federal funds also apply to State MOE funds in any circumstances where a State is commingling its Federal TANF and State MOE funds.
8This activity falls outside the definition of "assistance."

 

Q18: May States spend Federal TANF funds on health insurance coverage, e.g., for employee health premiums?

A18: Payments for health insurance coverage would constitute expenditures on medical services. Thus, section 404(a)(6) of the Act, which prohibits use of Federal TANF funds for medical services, would preclude use of Federal TANF funds for the costs of health insurance coverage. However, where consistent with the goals of TANF (e.g., to help sustain employment of low-income working parents), States may use their MOE funds for this type of activity.

Q19: May States use TANF funds for costs associated with providing legal representation to members of needy families who are pursuing SSI benefits?

A19: Yes, States may use TANF funds in connection with legal representation for members of needy families who are pursuing SSI benefits. Receipt of SSI benefits can further purpose one of TANF by helping needy families care for children in their own home. Further, although OMB Circular A-87, which applies to Federal expenditures under the TANF program, prohibits the use of Federal funds for "prosecution of claims against the Federal government", under the Circular’s definition of "claims," this prohibition would not restrict the provision of legal support in connection with an SSI application (from pre-filing through the administrative appeals process).

Q20: May States use TANF and MOE funds to help resolve personal or family legal problems?

A20: Yes, States may use their funds in this way as long as such expenditures are consistent with the purposes of the program (e.g., where legal problems are a threat to family stability or undermine the employment of needy parents).

Q21: May States use TANF and MOE funds to help needy families resolve bad debt and credit problems?

A21: Yes, States may use TANF and/or MOE funds for these purposes. Even under prior law, States helped needy families avoid eviction by providing them with funds to cover their rent arrearages. Likewise, clearing up other kinds of debt (e.g., credit, car payments, etc.) would be consistent with the goals of TANF.

Q22: May a State use TANF or MOE funds to provide benefits that could serve as an adjunct to those available through its UI program (e.g., to provide coverage for short-term paid parental leave or to provide benefits for families with insufficient earnings to meet UI thresholds)?

A22: Yes, we mentioned that supplemental unemployment insurance for unemployed workers in needy families is an allowable use of funds in the TANF funding guide (Helping Families Achieve Self-sufficiency). For example, a State might use TANF or MOE funds (or both) to provide UI-type benefits to families with insufficient earnings to meet UI thresholds or to provide paid parental leave to families who would otherwise qualify for TANF cash assistance. In general, under TANF, States have broad discretion in establishing their methodologies for determining need, including the ability to decide who is in the family unit, what kinds of income count, what income to disregard, what data sources to use, the period of time over which need is measured, and the threshold levels for determining "need." Thus, we would not prescribe how a State determines eligibility for these types of benefits. For example, if a State proposed to define needy families based on current unemployment and prior low wages, using UI wage data in its determination, we would not reject that proposal. However, in setting its eligibility criteria and procedures, we caution States to make sure that their expenditures are consistent with the statutory purposes of the program; i.e., that their expenditures under the first two purposes of TANF and all MOE expenditures are on behalf of needy families and parents.

Q23: Suppose a State provides funds to a developer for a reserve account that will be used to reduce future rents so that they would be affordable for TANF families (e.g., providing an average rent subsidy of $300/month). The payment to the developer is a one-time payment, although the developer will draw down the funds over a minimum of 10 years. Would the payment to the developer be an allowable expenditure and the subsidies excluded from the definition of assistance?

A23: States may set up reserve accounts for this purpose using State funds, but the funds placed in a reserve account would not count as an MOE expenditure until the developer draws them down. Also they would count as MOE expenditures at drawdown only to the extent that they represent expenditures on behalf of needy families.States may also use Federal TANF funds for rent subsidies for needy families, but they may not draw down Federal TANF funds to place them in a reserve account. They may draw down the Federal funds only when the family's rent payments are subsidized.Relatedly, the fact that the State makes a one-time payment to the developer does not affect the treatment of the benefits under the definition of assistance. If needy families receive rent subsidies on an ongoing basis, these benefits would constitute assistance.

Q24: States that elect to use segregated Federal TANF funds for "previously authorized" activities under section 404(a)(2) of the Act must select the State's approved AFDC, JOBS, or Supportive Services plans in effect as of either 8/21/96 or 9/30/95 for this purpose. Could a State that elects the 8/21/96 date expend Federal funds on juvenile justice activities, if its most recent approved AFDC-EA plan is dated prior to 9/30/95 and includes juvenile justice services?

A24: No, ACF-AT-95-9 -- dated September 12, 1995 -- instructed States that, effective January 1, 1996, Federal Financial Participation would not be available for juvenile justice costs and indicated that we would disallow any claims for such costs. This Action Transmittal also advised States that provided juvenile justice benefits or services to submit amendments to their Regional Office by December 31, 1995, deleting references to such assistance. The amendments had to have an effective date of not later than January 1, 1996. Some States might not have complied with these instructions. Or, a State could have submitted an amendment, but not have received an approval prior to the repeal of the programs. Regardless, costs on juvenile justice activities were not allowable beginning January 1, 1996. Thus, under no State plan in effect as of 8/21/96 were such activities "authorized."

Q25: Does a State have flexibility in establishing the period of time it will look at in determining if a family is needy? 9

A25: Yes, a State has the flexibility to decide the timeframes it will look at in determining whether a family is financially eligible for a particular benefit or service. The State may define any period reasonable for the benefit or service, consistent with the State's criteria for fair and equitable treatment. For example, it may look at income received in the prior month, in the current month, or even in the prior year (e.g., for eligibility for a refundable tax credit) in determining financial need. Likewise, a State may determine that a family is eligible for an extended period of transitional benefits based on its eligibility for cash assistance in a recent prior period.However, in establishing its procedures for determining eligibility, a State should make sure that all of its eligibility determinations are reasonably prompt and consistent with the State's criteria for fair and equitable treatment.

Q26: Is there any specific expectation about how often a State must redetermine that a family is needy?9

A26: States may establish their own criteria regarding redeterminations of a family's financial eligibility to continue to receive benefits. They may also establish their own criteria regarding the scope and frequency of reporting requirements.

We remind States that all Federal and MOE expenditures are subject to audit and must be substantiated for the auditors. Therefore, while entirely the State's decision, it might be prudent for a State to conduct redeterminations no less often than annually. Regardless, for audit purposes, it is important that States have clear policies, procedures, and systems in place for ensuring that their expenditures are appropriate, that they meet TANF requirements, and that they support the goals of TANF.10
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9Families must be needy in order to receive benefits or services pursuant to goals one or two and to receive benefits or services funded with MOE funds.
10See related discussion in answer to Q9 in the Definition of Assistance section.

 

Q27: A State is considering an initiative to use TANF funds to provide loans to former TANF families to assist with first-time home purchases. If the family remains in the home for five years or more, the State would convert the loan into a grant. Would this be an allowable use of Federal TANF funds?

A27: Yes, a State may use TANF (or MOE) funds for this purpose. If the State uses TANF funds to provide loans, it would treat the loan repayments as program income, and the regulations at 45 CFR 92.25 (Program Income) would apply. In the preamble to the final TANF rules at §263.11, we indicate that States may add program income to their TANF grant and use it in the TANF program in accordance with the TANF purposes and for allowable TANF activities. We authorized this practice in accordance with the authority given us under 45 CFR 92.25(g). For audit or other review purposes, States must keep financial records regarding any program income earned and the purposes for which it is used. States do not have to report program income on the ACF-196 (TANF Financial Report).Benefits provided in the form of a loan would not count as "assistance." Neither would the financial benefit received by the family at the time the loan converted into a grant. The converted benefit would not be considered assistance because it would fall under the exclusion for nonrecurrent, short-term benefits.States may also support housing purchases in other ways. For example, the State could use TANF funds to help the family pay the downpayment on a home for first-time home purchases and/or settlement costs.11 The State could attach conditions to the amount paid to the family -- e.g., provide that the family remain in the home for at least 5 years. If the family does not satisfy the conditions established for participation in the home purchase program, then the State could treat the money provided as an overpayment subject to recovery.

Q28: Could a State use Federal TANF funds to help a non-profit agency purchase a multi-family building that would provide affordable housing to a number of needy families? Would it matter how the transaction was structured (i.e., as a grant, a deferred payment loan, or a guaranteed, forgivable loan)?

A28: The proposed expenditures for grants or loans to a developer would not be allowable because of the prohibition against using Federal funds for construction, rehabilitation, and purchases of buildings. This prohibition applies to grantees and subrecipients. Subrecipients include county subgrantees, nonprofit agencies, and contractors. However, a State could enter into a multi-year contract with the agency to provide Federal TANF funds for rental subsidies (paid at a fair market value) on behalf on TANF-eligible families, contingent on the agency purchasing the building with other funds.12
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11A one-time payment to a family to assist in the purchase of a home (e.g., to assist with the costs of settlement and/or a downpayment) would not be considered assistance either; it would be excluded as a nonrecurrent, short-term benefit.
12Such rental subsidies would constitute assistance for families that benefit from them.


Q29: Assume a State program provides a deferred payment loan to a developer to assist with the construction or rehabilitation of multifamily housing for TANF families with substantial barriers to work—and that the housing assistance is "bundled" with services, such as on-site child care. What portion of the loan payment would be an allowable use of funds, and would any of the benefits be considered assistance?

A29: Payments to a developer for construction costs would not be a permissible use of Federal TANF funds. Payments to a developer for rent subsidies on behalf of needy families or transitional supportive services for families living in the subsidized apartments would be permissible uses of Federal TANF funds. Drawdown of such Federal funds is governed by the Cash Management Improvement Act.The nature of the benefits provided (rather than the nature of the contractual arrangement with the developer) determines whether the benefits constitute assistance. In this case, the value of the rental subsidies supported by the TANF funds would be assistance because they represent ongoing support of the families’ basic needs. The transitional services provided to the family would constitute assistance in some circumstances, but not others (e.g., depending upon the type of service involved and whether the family is employed or not). The number of payments made by the State to the subrecipient is irrelevant.

Q30: Are there any circumstances under which a State may use Federal TANF funds to provide "assistance" to non-needy families?

A30: No. In the preamble to the final regulation, we stated: "A family may not receive 'assistance' under the State's TANF program unless the family is needy. We interpret the term 'needy' for TANF and MOE purposes to mean financial deprivation, i.e., lacking adequate income and resources" (FR Vol. 64, No. 69, April 12, 1999, p. 17825). States may provide the needy with any form of "assistance" (as defined in 45 CFR 260.31) that is consistent with any of the four purposes of the Act or is in accordance with the State's grandfathering authority.