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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

Use of Funds


Q1: May States help the non-needy with services that are consistent with TANF purpose one or two as long as those services fall outside the definition of assistance?

A1: No. The first two statutory purposes (related to caring for children in their own homes and ending dependence) are expressly for the needy. Therefore, the statute envisions that States would serve only the needy when they are conducting activities or providing benefits that are reasonably calculated to accomplish TANF purpose one or two. This means that States would have to develop and apply criteria of financial need in these cases. However, States may use Federal TANF funds to help both the needy and the non-needy with benefits or services that are reasonably calculated to accomplish TANF purpose three or four (which relate to reducing out-of-wedlock pregnancies and the formation and maintenance of two-parent families). In serving the non-needy, States may use only segregated Federal TANF funds.1
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1States may spend MOE funds only on needy "eligible families."

Q2: If a State provides case management services to help potential TANF recipients apply for SSI eligibility, would that activity be considered an administrative cost?

A2: Case management, information and referral, and counseling activities constitute program expenditures, rather than administrative costs.

Q3: Is foster care for a child in the home of a non-relative allowable under TANF?

A3: There are limited circumstances under which a child may be placed in foster care with a non-relative and be eligible for TANF.2

A State may use Federal TANF funds (but not State MOE funds) to pay for foster care activities that were included in a State's approved AFDC, JOBS, or Supportive Services plans as of September 30, 1995, or August 21, 1996. A State may continue to provide services and assistance to a child placed with a non-relative to the same extent that was permitted under the State’s Emergency Assistance plan as of the date selected by the State.

Secondly, States may use Federal TANF or State MOE funds to provide "assistance" that addresses a child's needs during a period of temporary absence.

For Federal TANF funds, the period of temporary absence must be consistent with the definition of "temporary absence" developed by the State pursuant to section 408(a)(10) of the Social Security Act.

Section 408(a)(10) does not directly address allowable living arrangements for MOE purposes.3 However, under a State temporary absence policy, it would be reasonable for a State to determine that a child who is temporarily absent is living with a parent or adult caretaker relative. However, in order to meet the "eligible families" requirement and to be consistent with the goals of TANF, there must be a clear expectation that the child will return home within the foreseeable future to live with a parent or relative.

A State might also provide temporary foster care benefits or services for a child placed with an unrelated foster parent that do not constitute "assistance." However, the State must ensure that its expenditures are reasonably calculated to accomplish a TANF purpose. For goal one (refer to §260.20), the primary objective must be keeping children in their home with parents or other relatives or working towards their return to live with parents or relatives.

States may use Federal TANF or State MOE funds to provide ongoing assistance and other benefits and services in "kinship care" situations where a child is placed with an adult relative.
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2States may not use Federal TANF or State MOE funds to take the place of any foster care maintenance payments provided under the Federal Foster Care Program. Section 402 of the Act requires "eligible States" (i.e., States that receive Federal TANF funds) to certify that they will operate a Foster Care and Adoption Assistance Program under Title IV-E of the Act. Also, the preamble to the final rule says: "With regard to foster care or other out-of-home maintenance payments, we would note that such costs are not allowable TANF costs under section 404(a)(1) of the Act since they are not reasonably calculated to further a TANF purpose. . . . [M]aintenance payments for foster care, substitute care, and out-of-home placements (except perhaps temporary emergency placements during an investigation of abuse) are not eligible TANF expenditures unless allowable under section 404(a)(2).

3However, if a State commingles its State MOE and Federal TANF funds, the restrictions on use of Federal funds at section 408 would apply to the MOE funds as well.
 

Q4: Under section 404(a)(2) of the Act, States may use Federal TANF funds only for the specific activities that had been previously authorized based on an approved title IV-A or IV-F plan in effect as of either 9/30/95 or 8/21/96 per the State option. States must use the same eligibility criteria and the same duration for the assistance and services contained in the approved plan. However, is the State bound by the same payment rates in effect for the activity(ies) as of either 9/30/95 or 8/21/96? For example, is a State bound by the foster care payment rates in effect as of the date selected by the State (either 9/30/95 or 8/21/96)?

A4: No, States are not bound by the rates specified in the State plan or otherwise in effect as of the date selected by the State. A State could make reasonable cost-of-living adjustments even if it did not specifically provide for such adjustments in its plan or policies as of the prior date. We think that expenditures that reflect reasonable and necessary cost-of-living adjustments for the previously authorized activities would be consistent with section 404(a)(2) of the Act.

Q5: Does a child living with a legal guardian constitute an eligible family for the purpose of assistance and MOE?

A5: A child must be living with a parent or adult relative in order to receive: (1) "assistance"; or (2) any MOE-funded benefits or services. In determining whether a child is living with a parent or relative, States may apply the relationship provisions that existed under prior law, but they are not bound by these rules. In any event, States should generally assume that the requirement for a parental or adult relationship includes relationships based on blood, marriage, or adoption.In addition, if State law provides that legal guardians or other individuals stand in loco parentis, then a State could provide that a child living with such a legal guardian or other individual would constitute an eligible family both for the purpose of "assistance" and MOE. Second, if a State's approved AFDC, EA, or JOBS plan as of 9/30/95 (or at State option, as of 8/21/96), enabled a State to provide specified services to a child living with a legal guardian, then a State may use Federal TANF funds to continue the service(s).

Q6: May a State use Federal TANF or State MOE funds for adoption assistance?

A6: A State could use Federal TANF or State MOE funds to provide adoption benefits and services4 to needy parents of an adopted child who is not eligible for title IV-E adoption assistance.5 The adoption establishes a parental relationship even if no blood relationship exists.

Also, under TANF purpose one, States could use Federal TANF funds to provide adoption services (that do not constitute "assistance") to a needy family in which an unrelated adult is in the process of adopting a child. In this circumstance, the State could not provide income support (i.e., assistance) to the family prior to adoption because the family would not include a child living with a parent or adult relative. Also, the State would have to use segregated Federal TANF funds to pay for the services because the family would not be an "eligible family" for MOE purposes.
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4Benefits provided in this circumstance would trigger applicable TANF rules if they meet the definition of "assistance," e.g., address basic needs, and are provided under the TANF program.

5States may not use Federal or State MOE funds to take the place of any adoption assistance payments provided under the Federal Adoption Assistance Program; section 402 of the Act requires " eligible States" (i.e., States that receive Federal TANF funds) to certify that the State will operate a Foster Care and Adoption Assistance Program under Title IV-E of the Act. However, there may be circumstances under which adoption assistance (in the form of family services, benefits payments, or both) would be outside the normal purview of the IV-E program and reasonably calculated to accomplish TANF purpose one. Expenditures on adoption assistance in such circumstances could constitute an allowable use of Federal or State MOE funds.
 

Q7: Is ACF going to work with the auditors to convey the same message about funding flexibility as the TANF agencies are receiving?

A7: Yes. As the opportunity presents itself, e.g., at conference presentations, meetings and discussions, we will convey the message contained in our guidance to the audit audience. We will also reference the guidance document (i.e., "Helping Families Achieve Self-Sufficiency, A Guide on Funding Services for Children and Families through the TANF Program") and briefly explain it in the Compliance Supplements that we prepare to assist auditors during their annual audits of State programs.

Q8: Suppose a State has done the maximum transfer to the Child Care and Development Fund, or CCDF (or for some reason cannot or will not transfer), but wants to spend additional Federal TANF funds on child care. Further suppose that the CCDF program involves a mix of child care for the employed, for people in education/training, and for protective services cases. If the State now puts additional TANF money into its CCDF program, does CCDF become a TANF-funded program, in which case the non-employed receiving CCDF funds are getting child care from a TANF-funded program (and are subject to time limits and other TANF requirements)?

A8: Basically, the principles applicable to the structuring of a State's TANF program pertain to this funding arrangement.

If a State commingles its Federal TANF and CCDF grants to fund child care activities, then both the TANF and CCDF rules would apply. For example, providers would need to meet health and safety standards under the CCDF program, and ongoing child care provided to families that are not employed would be considered TANF assistance.

The State child care program could segregate the (non-transferred) TANF funds that it receives and use them to help fund a particular activity, or services for a particular subset of its service population. In such cases, the applicable TANF rules would apply only to the benefits or activities supported by the TANF funds. Activities funded in part by CCDF would remain subject to CCDF requirements as well.

Finally, the State child care agency could receive TANF funds under a contract, grant, or similar arrangement to provide TANF benefits or services on behalf of the TANF agency. If the State keeps the TANF funds segregated from its CCDF funds, TANF requirements would apply, but the CCDF programmatic rules would not apply (i.e., the requirements of the CCDBG statute and rules apply to activities funded with CCDF funds).

Before deciding whether or how to use TANF funds to expand the services provided by CCDF programs, States should review the respective rules of the CCDF and TANF programs. Such a review would present a great opportunity for looking at ways to develop a more streamlined and coordinated system of quality child care services within the State.

States with specific questions about the implications of particular funding or administrative decisions should talk to their RO representatives for advice.

Q9: What happens if the CCDF agency cannot use all the TANF funds transferred to it?

A9: CCDF agencies may return any unobligated transferred TANF funds they receive as long as they do so prior to the end of the CCDF's maximum two-year obligation period. Any such returned funds would become TANF carry-over funds for the original fiscal year. For example, assume that the CCDF lead agency receives a transfer of FY 99 TANF funds in FY 99. If this agency fails to obligate all of these transferred funds within CCDF's maximum two-year obligation period (i.e., by end of FY 2000), it may still return the money to TANF as long as it does so no later than September 30, 2000. Funds returned in this timeframe would then be treated within the TANF program as FY '99 carry-over TANF funds and could be spent only on "assistance" or administrative costs related to providing "assistance." If the CCDF agency does not return or obligate the funds by September 30, 2000, they revert to the Federal treasury.

Q10: What factors should a State consider in determining how to use Federal TANF and State MOE funds to support summer jobs for youth?

A10: Our publication, "Helping Families Achieve Self-sufficiency, A Guide on Funding Services for Children and Families through the TANF Program," provides a systematic approach for a State to use in determining how it might use Federal TANF and State Maintenance of Effort (MOE) funds. The following discussion is a brief explanation of the steps that a State should take when evaluating a proposal to initiate a program, such as summer jobs for youth. Please refer to the aforementioned document for a fuller explanation. This document is available online, in PDF and HTML formats (see /programs/ofa/funds2.pdf or /programs/ofa/funds2.htm ).

Assuming that a State is considering the use of Federal TANF or MOE funds for a summer jobs program, its first step would be to identify how this program meets a purpose of the TANF statute. For example, a program that covers a youth's wages in a subsidized public or private sector job could be associated with purpose one of the TANF statute - - providing assistance so that children in needy families may live at home -- or with purpose two (for teens with children) - - reducing dependency among needy parents through work and job preparation.

Given that the summer jobs program achieves a TANF purpose, the State would then determine whether or not the benefits (i.e., the wage subsidies in this case) constitute "assistance" as defined under the Federal regulations at 45 CFR 260.31. Items falling under "assistance" are subject to a number of requirements, including work, time limits, child support assignment, and data reporting. However, wage subsidies do not constitute assistance under our regulatory definition. Thus, the State faces fewer administrative and programmatic requirements in providing these benefits.

The third step for the State would be to establish eligibility criteria, including a definition of "needy" (generally in the form of income and/or resource standards) for the receipt of summer jobs program benefits. This step derives from the language in purpose one and two of the statute.

A fourth step is for the State to decide how to fund the summer jobs for low-income youth program. There are two potential sources under the TANF funding provisions: Federal TANF and State MOE funds. The use of State MOE funds for the program requires that any expenditure be made on behalf of "eligible families." The term "eligible families" means that the family must include a child living with a custodial parent or other adult caretaker relative (or a pregnant woman) and be financially needy as discussed in step three. Federal TANF funds can likewise be used to provide summer jobs for youth in "eligible/needy families." (Note: Federal TANF funds may also be used to help a "needy" youth that is not a member of an "eligible/needy family" - a "needy" non-custodial teen parent. Services provided to such persons can only be in the form of benefits that do not constitute "assistance".)

The fifth and final step would be for the State to consider the requirements, limitations, and restrictions that apply to the selected activities or services. For Federal TANF funds, it is important to consider certain cost principles derived from appropriations law and OMB circulars (see pages 26 through 29 of our guidance). Some of the Federal grant rules that should be considered in the formulation of a summer jobs for low-income youth program include:

  • A State may not use Federal TANF funds to satisfy a cost-sharing or matching requirement of another Federal program unless specifically authorized by Federal law. During consideration of a summer jobs program, a State would ask itself if such a program is funded by another Federal program for which there is a cost-sharing or matching requirement. If the answer is yes, the State could not use Federal TANF funds to meet this cost-sharing or matching requirement. To date, the only exception to the cost-sharing rule relates to the use of Federal TANF funds for the Job Access and Reverse Commute program administered by the Department of Transportation; this exception is statutorily based.
  • In general, funds used to meet Federal cost-sharing requirements in other programs are not allowable as State MOE. Here too, a State would ask if such a program is funded by another Federal program and subject to a cost-sharing or matching requirement under that program. If the answer is yes, the State may not use the same State funds to meet the cost-sharing requirements for both the other program and TANF (i.e., the State MOE).
  • However, a State may spend Federal TANF and/or MOE funds to supplement the services provided by other programs. If a State wishes to supplement a summer jobs for low-income youth program covered under a State WIA youth plan, it may use Federal TANF or State MOE funds to contract with the applicable workforce agency for additional services or summer jobs on behalf of needy, eligible families.

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.

Q31: May States use Federal TANF and State MOE funds to provide language services to families with limited English proficiency (i.e., LEP families) that apply for or receive TANF benefits?

A31: Yes, State TANF agencies may use their Federal TANF and MOE funds to provide language services and other services needed by LEP families applying for or receiving TANF benefits. If applicable, State expenditures in this area must follow the cost allocation guidelines governing expenditures involving two or more Federal programs. Such costs are also subject to the 15-percent administrative cost limitations percent on both Federal TANF and MOE expenditures. Thus, in situations where LEP-related services are needed for TANF, Food Stamp, and Medicaid benefits, States must appropriately allocate the costs of those services among these three programs. Regarding the 15-percent administrative cost limitations, States need to evaluate the services provided against the Federal rule at 45 CFR 263.0, which defines "administrative costs" for the purposes of these limitations. Under the TANF rule, the term "administrative costs" means costs necessary for the proper administration of the TANF program or separate State programs. It includes the costs of general administration and coordination of programs including contract costs and all indirect (or overhead) costs. Examples of the types of activities that would be classified as "administrative costs" include the salaries and benefits of staff performing administrative and coordination functions, activities related to eligibility determinations, the preparation of budgets, program plans and schedules, monitoring of programs and projects, etc. Excluded from "administrative costs" are the direct costs of providing program services such as providing program information, the development of employability plans, work activities, post-employment services, work supports, and case management.

In short, TANF and MOE expenditures that are not "administrative costs" are not subject to the 15-percent cost limitations. For example, the cost of an interpreter who provides program information or performs an employability assessment is not subject to the limitations; however, the cost of an interpreter to elicit family information for an eligibility determination is an administrative cost covered by the limitations.

A comprehensive explanation of "administrative costs," together with a complete list of the items that are included and excluded from the definition, are available in the Federal regulations at 45 CFR 263.0 and in the preamble discussion to the final TANF regulations (at 64 FR 17808 - 17814).

Q32: May a State automatically continue the emergency assistance (EA) and/or services it has provided pursuant to the grandfathering provision in section 404(a)(2) of the Social Security Act (Act) once the initial 12 month period has expired?

A32: No. Under section 404(a)(2) of the Act, States may use segregated Federal TANF funds only for the specific activities that had been previously authorized based on the State's approved title IV-A or IV-F plan in effect as of either 9/30/95 or 8/21/96 (per the State option). States must use the same eligibility criteria and the same duration for the assistance and services contained in the State's approved plan. A State's approved plan had to comply with the applicable former AFDC statute and regulation. “Emergency assistance to needy families with children” was set forth in section 406 (e) of the Act. The implementing regulation was 45 CFR 233.120. The AFDC statute and regulation allowed States to use Federal funds for EA and services that the State authorized during one period of 30 consecutive days in any 12 consecutive months, provided ALL EA eligibility criteria had been met. In pertinent part, 45 CFR 233.120 states that EA may only be provided: To or on behalf of a needy child under the age of 21 and any other member of the household in which he is living if:

(i) Such child is (or, with 6 months prior to the month in which such assistance is requested, has been) living with any of the relatives specified in section 406(a)(1) of the Act in a place of residence maintained by one or more such relatives as his or their own home. (per section 406(a)(1) of the Act, the child must be living with his father, mother, grandfather, grandmother, brother, sister, stepfather, stepmother, stepbrother, stepsister, uncle, aunt, first cousin, nephew, or niece, in a place of residence maintained by one or more of such relatives as his or their own home.)

(ii) Such child is without resources immediately accessible to meet his needs; and

(iii) The emergency assistance is necessary to avoid destitution of such child or to provide living arrangements for him in a home.

At the end of the 12-month period, a new application must be taken, and eligibility must be determined in order for EA to be authorized during the 30-day period which begins a new 12-month period.

Q33: Final DRA 2005 Rules: Can a county offer family planning services, funded by TANF, to a childless couple under TANF purpose 4? TANF purpose 4 is as follows: To promote the formation and maintenance of two-parent families. The reason for such a service is to prevent an unwanted pregnancy from creating stress in the marriage.

A33: Yes. However as explained below, the State must use Federal TANF funds only. Also, it is worth noting that there is a statutory prohibition on using Federal TANF funds to provide medical services, with the exception of pre-pregnancy family planning services. If the State or county uses State or local funds to pay for family planning services, then the State may count this non-assistance expenditure toward its maintenance-of-effort (MOE) requirement until September 30, 2008. In the interim final TANF rule, we discussed the pro-family MOE claiming provision added by the Deficit Reduction Act (DRA) of 2005. Under the interim final TANF rule, States may count allowable expenditures for MOE purposes, on “pro-family” non-assistance activity provided to anyone (not just eligible family members), so long as the activity is reasonably calculated to prevent and reduce the incidence of out-of-wedlock pregnancies (TANF purpose 3) or to encourage the formation and maintenance of two parent families (TANF purpose 4).

The final TANF rule narrowed the scope of this pro-family claiming provision to “certain” pro-family activities within TANF purpose 3 or TANF purpose 4. Effective October 1, 2008 (FY 2009), States may only claim for MOE purposes, allowable expenditures for the pro-family healthy marriage and responsible fatherhood activities enumerated in part IV-A of the Social Security Act, sections 403(a)(2)(A)(iii) and 403(a)(2)(C)(ii) that are consistent with TANF purpose 3 or TANF purpose 4. Family planning services are not among the enumerated healthy marriage and responsible fatherhood activities.

Beyond the limited pro-family claiming provision described above, State may only claim for MOE purposes, allowable expenditures for or on behalf of eligible families. An eligible family is a financially needy family that consists of, at a minimum, a child living with a caretaker relative, or consists of a pregnant woman. This married childless couple does not meet the definition of “eligible family.”

Q34: Can State or Tribal Federal TANF funds be used to purchase tools and building materials in order to support a training program that will prepare needy TANF recipients for jobs in the “construction trades” such as carpenter, electrician, plumber, etc.?

A34: Federal TANF funds may be expended on items that are necessary to enable the needy TANF individual to engage in training for positions in the construction field. Items or services such as clothing, books, tuition, and onsite instruction that are used exclusively for training purposes can be covered with Federal TANF funds. We remind you, however, that 2 C.F.R. Part 225 Appendix B contains several applicable restrictions on the use of Federal funds with respect to equipment and construction costs.

Q35: The U.S. Department of Transportation's New Freedom Program (49 USC 5317), and the Formula Grants for Special Needs of Elderly Individuals (49 USC 5310) both have a cost sharing requirement. In pertinent part, both programs specify that the State's share of costs may be met "from amounts appropriated or otherwise made available to a department or agency of the Government (other than the Department of Transportation) that are eligible to be expended for transportation." Is it allowable to use Federal TANF funds to help meet the cost-sharing requirement of either program?

A35: Yes, an allocable portion of Federal TANF funds may be used to help meet the program's cost sharing requirement, as long as the State uses the funds to help pay for allowable costs for or on behalf of TANF clientele. The regulation at 45 CFR 92.41(a)(1) states that "Except as provided by Federal statute, a cost-sharing or matching requirement may not be met by costs borne by another Federal grant."

(States are prohibited from using MOE funds to help meet either program's cost-sharing requirement, per section 409(a)(7)(B)(iv)(IV) of the Social Security Act and the TANF regulations at 45 CFR 263.6(c)).

Q36: When is it allowable for TANF jurisdictions to use TANF funds for food service expenses?

A36: 2 CFR Part 225 (OMB Circular A-87) establishes principles and standards for determining costs for Federal awards carried out through grants, cost reimbursement contracts, and other agreements with State and local governments and federally recognized Indian tribal governments (governmental units). Appendix B identifies select items of costs. The analysis applies to States, Territories, and Tribes.

For the purpose of this response, food service expenses include food and other related costs (e.g., gratuity, catering staff, delivery charges, renting tables, etc.).

2 CFR Part 225 requires that costs be necessary and reasonable for proper and efficient performance and administration of Federal awards. In general, in accordance with 2 CFR Part 225, App. A, section C, a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. 2 CFR Part 225, App. A, section C outlines further criteria for consideration in determining if a cost is reasonable and necessary.

Reasonable and necessary costs pertaining to TANF-related meetings and conferences, including food service expenses, are allowable. 2 CFR Part 225, App. B, section 27 clarifies that the “the primary purpose of [the conference or meeting must be] the dissemination of technical information” (emphasis added). Further, note that all TANF expenditures, including food service expenditures, must be clearly linked to one or more of the four statutory purposes of TANF. Therefore, costs pertaining to meetings and conference, including food service expenses, are allowable if the primary purpose of the event is the dissemination of technical information related to TANF. ACF considers a topic related to TANF if imparting this information is reasonably calculated to further a purpose of TANF. Examples of topics related to TANF include housing, child welfare, and other issues impacting vulnerable families. The meeting or conference could be a meeting intended to provide technical information to program participants, staff, community partners, or others, so long as it is furthering a TANF purpose.

Examples of allowable uses of TANF funds for food service expenses during a meeting or conference include:

  • catered meals during an all-day employment-related training for TANF clients,
  • orientation for new TANF clients, and
  • catered meals during an annual “TANF Outreach Meeting” for administrators and staff from other TANF programs and other local social service providers.

2 CFR Part 225, App. B, section 14 provides that “costs of entertainment, including amusement, diversion, and social activities and any costs directly associated with such costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities) are unallowable.” Examples of unallowable uses of TANF funds for food service expenses related to entertainment include:

  • catered parties (e.g., holiday parties for TANF staff and/or clients),
  • lunch provided during a “Family Day” at the fair for TANF clients,
  • catered lunches at “Grand Opening” events in the community,
  • youth awards dinners, and
  • Mother’s Day lunch for TANF clients at a local restaurant.

Please note that the costs of alcoholic beverages are unallowable in all circumstances.

A few TANF jurisdictions have inquired about the allowability of “holiday baskets” which contain turkeys, pumpkin pies, and other items traditionally included in “holiday” meals. “Holiday baskets” are allowable if clearly linked to TANF purpose one and thus only provided to families meeting income and family composition criteria; however, providing “holiday baskets” to the community in general does not meet a purpose of TANF and is thus unallowable.

A few Tribal representatives have also inquired about the use of TANF funds for food service expenses at cultural activities. Tribal TANF programs have the flexibility to establish their own allowable work activities, including, if desired, culturally relevant work activities. For example, many Tribes include traditional subsistence activities such as fishing, hunting, or beadwork as work activities. Food service expenses related to participation in a work activity is linked to TANF purpose one and two; therefore these expenditures are allowable provided that TANF funds are only used to pay for food service expenses for families participating in work activities (i.e., TANF families eligible for TANF assistance according to the financial criteria established by the Tribe). TANF funds cannot be used to provide food to the Tribal community in general at cultural events.

Q37: Are employee morale expenditures, including cash incentives to employees, an allowable use of TANF funds?

A37: First and foremost, the purpose of TANF is to help needy families, along with the other goals specified in Section 401(a) of the Social Security Act, and in looking at any potential expenditure, it is important for the State, Tribe or Territory to be satisfied that the expenditure is reasonably calculated to further the program goals.

However, 2 C.F.R. Part 225, Appendix B, Section 13 provides:

13. Employee morale, health, and welfare costs.

a. The costs of employee information publications, health or first-aid clinics and/or infirmaries, recreational activities, employee counseling services, and any other expenses incurred in accordance with the governmental unit's established practice or custom for the improvement of working conditions, employer-employee relations, employee morale, and employee performance are allowable.

b. Such costs will be equitably apportioned to all activities of the governmental unit. Income generated from any of these activities will be offset against expenses.

This means that TANF expenses incurred in the context of employee morale are allowable if they are consistent with the State, Tribe, or Territory’s established personnel practice and policies governing the administration of TANF and other government programs. For example, if the Tribe has or wants to implement an employee morale/cash incentive based on actual employee performance then TANF funds may be used to pay the incentives for TANF employees up to the percentage of effort they work on the TANF program. Please note that cash incentives that are not in place prior to the performance of the work, not based on actual and documented employee performance, and not available to all Tribal employees (e.g., only available to TANF employees) are not allowable.

Employee morale costs need to be evaluated against the Federal “administrative cost” definition at 45 CFR 263.0(b) for States, DC, and the Territories and 45 CFR 286.5 for the Tribes. It is also important to note that for an employee whose salary and benefits qualify as an “administrative cost”, any employee morale costs attributable to that employee are also subject to the TANF jurisdiction’s administrative cost limit. However, if an employee is providing program services, then the associated salary and benefits (including any employee morale costs) are excluded from the administrative cost limit.

Items prohibited by 2 C.F.R. Part 225 are still unallowable in the context of employee morale; for example, costs of alcoholic beverages and entertainment are unallowable. It is important to distinguish between allowable recreational activities and unallowable entertainment; therefore, at the jurisdiction’s request, we can review any morale-building activities that resemble entertainment on a case-by-case basis.

2 C.F.R. Part 225, Appendix A, Section C requires that all costs be “necessary and reasonable for proper and efficient performance and administration of Federal awards.” The regulatory definition of “reasonable” is:

A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when governmental units or components are predominately federally-funded. In determining reasonableness of a given cost, consideration shall be given to:

a. Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the governmental unit or the performance of the Federal award.

b. The restraints or requirements imposed by such factors as: sound business practices; arm's-length bargaining; Federal, State and other laws and regulations; and, terms and conditions of the Federal award.

c. Market prices for comparable goods or services.

d. Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the governmental unit, its employees, the public at large, and the Federal Government.

e. Significant deviations from the established practices of the governmental unit which may unjustifiably increase the Federal award's cost.

In summary, expenses incurred in the context of improving employee morale, including cash incentives to employees, are allowable if they are consistent with all applicable rules and regulations, including the criteria outlined above.

Q38: Under what conditions may a State provide assistance to a family whose child has been absent for longer than a 180-day period?

A38: When a child is absent from the home, a State may only use Federal TANF funds or comingled State and Federal funds to provide assistance beyond a 180 day absence period if pursuant to good cause exceptions specified in its State plan. When using separate or segregated State funds to provide assistance beyond a 180 day period, the State may adopt the same approach as applies to Federal or commingled funds, or may implement another reasonable approach.

For assistance funded with Federal or commingled Federal and State funds, Section 408(a)(10) of the Social Security Act provides:

(A) In general.—A State to which a grant is made under section 403 shall not use any part of the grant to provide assistance for a minor child who has been, or is expected by a parent (or other caretaker relative) of the child to be, absent from the home for a period of 45 consecutive days or, at the option of the State, such period of not less than 30 and not more than 180 consecutive days as the State may provide for in the State plan submitted pursuant to section 402.

(B) State authority to establish good cause exceptions.—The State may establish such good cause exceptions to subparagraph (A) as the State considers appropriate if such exceptions are provided for in the State plan submitted pursuant to section 402.
Accordingly, if the State elects to provide assistance during a period of temporary absence, the time period must be a minimum of 30 days and a maximum of 180 days, subject to any good exceptions. Moreover, the parent or caretaker must expect that the child will return home during the specified period, again subject to any good cause exceptions.

If a child has been absent from the family for longer than 180 days, subject to reasonable cause exceptions, then the State may no longer provide Federal TANF assistance to the family on behalf of the absent child. This means that if there is another minor child in the home, the State must reduce the assistance grant to account for the removal of the absent child. If there is no other minor child in the family, then after a 180-day maximum temporary absence period, the family is not eligible for Federal TANF assistance, subject to reasonable cause exceptions; if and when the absent minor child is returned to the home of the family, the family will once again be eligible for Federal TANF assistance, provided it still meets all other eligibility criteria.

By its terms, Section 408(a)(10) does not apply to a State’s use of segregated or separate State funding counting toward TANF MOE requirements. However, MOE expenditures may only be made on behalf of eligible families, which are defined as needy families in which a child is residing with a parent or caretaker relative (45 C.F.R.263.2(b)). A State may develop its own reasonable temporary absence policy for purposes of MOE expenditures. The Preamble to the TANF Final Rule states that “It would be reasonable for States to use the time frames given under section 408(a)(10) to define ‘temporary’ and to develop a corresponding MOE policy” (FR Vol. 64, No. 69, April 12, 1999, p. 17823). However, in order to meet the "eligible families" requirement for MOE and to be consistent with the goals of TANF, there cannot be an expectation that the child will be absent beyond the reasonable period of temporary absence determined by the State for MOE purposes. As with assistance funded with Federal and commingled funds, the child must return to the home by the end of the temporary period established by the State. Otherwise, the child can no longer be considered to be residing with the parent or other caretaker relative. If there is no other minor child in the home, then the family is not an “eligible family,” and may not receive State MOE-funded assistance.

A State should identify in its State plan its temporary absence policy as it pertains to assistance funded with Federal TANF and commingled funds, as well as MOE-funded assistance.

Q39: Can Tribal TANF funds be used to purchase or lease a trailer or modular unit for use by TANF staff?

A39: Background: The Office of Family Assistance (OFA) received an inquiry from a Tribe requesting to use Tribal TANF funds for the purchase or lease of a trailer or modular unit. According to the Tribe, TANF staff need additional office space. The TANF staff understand that they can't build a facility, but would like to know what can be done to stay within the guidelines for allowable uses of TANF funds.

Applicable regulations:

Under 45 CFR 286.45(e), “Tribal TANF funds may not be used for the construction or purchase of facilities or buildings.”

According to the HHS Grants Policy Statement, Exhibit 4. Selected Items of Cost, “A trailer or modular unit is considered real property when the unit and its installation are designed or planned to be installed permanently at a given location so as to seem fixed to the land as a permanent structure or appurtenance thereto. Units classified as real property may not be charged to an HHS grant-supported project unless authorizing legislation permits construction or acquisition of real property and the specific purchase is approved by the OPDIV.”

Under 2 CFR 225, App. B. 37, rental costs of buildings and equipment are allowable to the extent that the rates are reasonable, subject to certain limitations.

Response:

TANF funds cannot be used to purchase a trailer or modular building. The regulations at 45 CFR 286.45(e) specifically prohibit the purchase of “facilities or buildings” with Tribal TANF funds; trailers and modular buildings, which are designed to serve as dwellings or places of business, fit this classification. Further, ACF has consistently classified trailers and modular units as permanent structures and has not approved related costs for other ACF programs. As articulated in the HHS Grants Policy Statement, trailers or modular units that are classified as permanent structures are considered real property and may not be charged. Therefore, the restriction at 45 CFR 286.45(e) applies. However, this prohibition does not extend to the leasing of a trailer. The Tribal TANF regulations do not address rental scenarios, and 2 CFR 225, App. B. 37 allows for rental costs to be charged, subject to certain limitations.

If leasing is being considered, the following criteria will apply:

Subject to the limitations described below, rental costs are allowable to the extent that the rates are reasonable in light of such factors as: rental costs of comparable property, if any; market conditions in the area; alternatives available; and the type, life expectancy, condition, and value of the property leased. Rental arrangements should be reviewed periodically to determine if circumstances have changed and other options are available.

Rental costs under "sale and lease back'' arrangements are allowable only up to the amount that would be allowed had the governmental unit continued to own the property. This amount would include expenses such as depreciation or use allowance, maintenance, taxes, and insurance.

Rental costs under "less-than-arm's-length'' leases are allowable only up to the amount that would be allowed had title to the property been vested in the governmental unit. For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement is able to control or substantially influence the actions of the other. Such leases include, but are not limited to those between divisions of a governmental unit; governmental units under common control through common officers, directors, or members; and a governmental unit and a director, trustee, officer, or key employee of the governmental unit or his immediate family, either directly or through corporations, trusts, or similar arrangements in which they hold a controlling interest. For example, a governmental unit may establish a separate corporation for the sole purpose of owning property and leasing it back to the governmental unit.

Rental costs under leases which are required to be treated as capital leases under Generally Accepted Accounting Principles (GAAP) are allowable only up to the amount (as explained in subsection b) that would be allowed had the governmental unit purchased the property on the date the lease agreement was executed. The provisions of Financial Accounting Standards Board Statement 13, Accounting for Leases, shall be used to determine whether a lease is a capital lease. Interest costs related to capital leases are allowable to the extent they meet the criteria at 2 CFR 225, App. B. 23. Unallowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had the governmental unit purchased the facility.

When evaluating a request to lease a modular unit with TANF funds, the Tribe must also consider the extent to which the funds expended by the TANF program would represent the proportional cost of the unit’s use by TANF staff and clients.

Q40: Can federal TANF & MOE funds be used to match (1) the emergency solutions grants program as authorized under subtitle B of title IV of the McKinney-Vento Homeless Assistance Act, as amended; (2) the continuum of care program as authorized under subtitle C of title IV of such Act; (3) the rural housing stability assistance program as authorized under subtitle D of title IV of such Act; (4) the supportive housing program as formerly authorized under subtitle C of title IV of such Act (regulations at 24 CFR part 583); and (5) the shelter plus care program as formerly authorized under subtitle F of title IV of such Act (regulations at 24 CFR part 582)?

A40: It is permissible for federal TANF funds to be used as a match for the above-listed programs, but it is not permissible for state funds to be used as a match to count toward a jurisdiction’s MOE requirement.

In general, federal funds from one program may not be used as matching funds for another federal program unless federal law expressly authorizes that the funds be allowable as a match. However, according to recent appropriations acts, a grantee under HUD’s McKinney-Vento Act programs may use other federal funds as a match unless there is a specific statutory prohibition. The provision allowing for the use of funds from other federal agencies as a match for these McKinney-Vento Act programs first appeared in the FY 2009 HUD appropriations legislation and has been incorporated in each annual HUD appropriation since then (see, for example, Consolidated and Further Continuing Appropriations Act, 2012, Pub. L. No. 112–55, 125 Stat. 552, 685 (2011)).

There is no language in title IV-A of the Social Security Act which governs the TANF program that prevents Federal TANF funds from being used as matching funds for the above mentioned HUD homelessness programs. These matching funds must be used consistent with the TANF requirements as well as the requirements for the homelessness programs they are being used in. Please note that the use of federal TANF funds as a match for these HUD homeless programs is permissible so long as the HUD appropriation language, which allows for this matching arrangement, is in force.  

Non-federal funds used to meet the matching requirement for the HUD homelessness programs cannot count as MOE in the TANF Program. The TANF statute and regulations, section 409(a)(7)(B)(iv)(IV) of the Social Security Act and 45 CFR 263.6(c), expressly prohibit counting expenditures  made as a condition of receiving federal funds in another program toward a jurisdiction’s maintenance of effort requirement.

Q41: If a state intercepts a portion of a family’s refundable EITC in order to recoup a debt owed to the state by the family, may the state consider the full amount of the refund (including the intercepted portion) as a federal TANF or MOE expenditure?

A41:  No.  In this case, where the state is using the intercept to recoup a debt owed to the state, only the portion of the refundable EITC that is actually received by the family may be considered a federal TANF or MOE expenditure.   This follows from the policy explained in TANF-ACF-PI-2001-01 which can be found at the following link: http://www.acf.hhs.gov/programs/ofa/resource/policy/pi-ofa/2001/pi200...

Please note the language in the PI explaining that a state may not treat foregone revenue as an allowable use of TANF or MOE funds, and that only the portion of the tax credit that the state actually refunds to the taxpayer may be claimed.  These principles are also outlined in the federal regulations at 45 CFR 260.30 and 260.33 and the definition of what constitutes an “Expenditure.”  Since these intercepted funds are being used to repay a debt owed to the state, they do not constitute an expenditure of federal TANF or MOE funds.

However, in circumstances where the tax intercept recovered a past due child support debt (i.e., from an individual whose EITC payment was eligible for reimbursement via federal TANF or MOE funds) and the intercepted amount (or a portion thereof) was transmitted to a custodial parent and not retained by the state, then the transmitted amount of the EITC could be paid out of federal TANF funds or claimed as an MOE expenditure.  However, if the intercepted amount was retained by the state, then federal TANF funds or MOE could not cover this amount.  (Amended on: 6/4/2013)

Q42: May a TANF jurisdiction offer non-recurrent, short-term benefits to an individual or family that has received a non-TANF/MOE-funded benefit or service in excess of four months to address a specific crisis or episode of need?

A42: Yes.  The four months of TANF benefits would be considered a non-recurrent, short-term benefit, even though they are provided to a recipient who has received the same or similar non-TANF/MOE benefits in order to address the same crisis or episode of need.  The reading of the TANF statute and regulations is that the four month limitation on non-recurrent, short-term benefits applies to TANF/MOE-funded support and does not encompass services covered by other federal funding streams such as FEMA or HUD.  (Posted on: 5/2/2013)

Q43: May a state offer additional TANF/MOE-funded non-recurrent, short-term benefits to recipients after they have exhausted four months of TANF/MOE-funded non-recurrent, short-term benefits, if those benefits are similar in nature and designed to address the same crisis or episode of need?

A43: No.  The continuation of similar benefits designed to address a specific crisis or episode of need provided beyond the initial four months of non-recurrent short-term benefit receipt, even if provided through a new program, is not consistent with the regulatory definition of non-recurrent, short-term benefits at 45 CFR 260.31(b)(1).  This is consistent with our regulations and past practice.

Please note, any TANF or MOE funded benefit that is designed to meet a particular need on an ongoing basis (i.e., more than four consecutive months) would have to be classified as assistance if it qualifies as such under the applicable regulatory requirements.  (Posted on: 5/2/2013)