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Q & A: Use of Funds

TANF Program Policy Questions and Answers

Published: May 2, 2013
Temporary Assistance for Needy Families (TANF)
TANF Guidance
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
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.
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.
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.
Last Reviewed: June 9, 2020