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entitled 'Welfare Reform: HHS Should Exercise Oversight to Help Ensure 
TANF Work Participation Is Measured Consistently across States' which 
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Report to the Chairman, Subcommittee on Human Resources, Committee on 
Ways and Means, House of Representatives: 

United States Government Accountability Office: 

GAO: 

August 2005: 

Welfare Reform: 

HHS Should Exercise Oversight to Help Ensure TANF Work Participation Is 
Measured Consistently across States: 

GAO-05-821: 

GAO Highlights: 

Highlights of GAO-05-821, a report to the Chairman, Subcommittee on 
Human Resources, Committee on Ways and Means, House of Representatives: 

Why GAO Did This Study: 

The debate over reauthorization of the Temporary Assistance for Needy 
Families (TANF) block grant has focused on work requirements and 
brought attention to the measure of TANF work participation. The 
measure is used to assess statesí performance and determine whether a 
state is subject to penalty for not meeting TANF work requirements. The 
2003 work participation rates ranged from 9 to 88 percent for the 50 
states based on data they submit to the U.S. Department of Health and 
Human Services (HHS). To help Congress understand these rates, GAO 
looked at (1) how selected states are defining the categories of work 
activities, (2) whether selected states have implemented internal 
controls over the work participation data, and (3) what guidance and 
oversight HHS has provided states. 

What GAO Found: 

Differences in how states define the 12 categories of work that count 
toward meeting TANF work participation requirements have resulted in 
some states counting activities that other states do not count and, 
therefore, in an inconsistent measurement of work participation across 
states. For example, 5 of the 10 states we reviewed considered caring 
for a disabled household or family member to count toward the federal 
work participation requirement, while 5 did not consider hours spent in 
this activity to be countable (see table below). We also found that 
some states made significant changes in their definitions of the 
categories of work. As a result, the work participation rates for these 
states cannot be compared from year to year. 

Some of the states in our review have implemented internal controls to 
help report work participation hours in accordance with HHS guidance, 
while other states lack such internal controls. Some states have not 
issued guidance on how to verify that reported hours were actually 
worked, nor do they monitor data reported by their staff to help ensure 
that hours are reported correctly. In contrast, a few states have 
systematic approaches for verifying that hours reported were worked. 

HHS has provided limited oversight and guidance to states on 
appropriately defining work activities and reporting hours of work 
participation. According to HHS officials, HHS has the authority to 
regulate statesí definitions of work activities. However, to promote 
state flexibility, HHS chose not to issue regulations for this purpose. 
Further, HHSís guidance lacks specific criteria for determining the 
appropriate hours to report. Given that HHS has not exercised oversight 
of statesí definitions and internal controls, states are making 
different decisions about what to measure. Therefore, there is no 
standard basis for interpreting statesí rates, and the rates cannot 
effectively be used to assess and compare statesí performance. 

Number of Reviewed States that Count Certain Activities toward Meeting 
the Federal Work Participation Rate and the Categories of Work in Which 
the States Counted the Activities

[See PDF for image]

Source: GAO review of 10 statesí TANF documents and interviews with the 
statesí TANF officials. 

Note: An additional state counts substance abuse treatment, domestic 
violence counseling, and other mental health counseling toward meeting 
the federal work participation rate in limited circumstances. 

[End of table] 

What GAO Recommends: 

GAO recommends that HHS enact regulations to provide oversight of 
statesí definitions and more guidance on counting hours of work 
activities and that HHS identify cost-effective internal control 
practices and disseminate information on these practices to states. In 
commenting on our draft report, HHS said it would consider making the 
recommended revisions in its regulations after TANF reauthorization and 
is exploring options for implementing the recommendation on internal 
controls. 

www.gao.gov/cgi-bin/getrpt?GAO-05-821. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact David Bellis at (415) 904-
2272 or bellisd@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Differences in How States Define Work Activities Result in Inconsistent 
Measurement of Work Participation across States and over Time: 

Some States Do Not Have Internal Controls Needed for Reporting Data in 
Accordance with HHS Guidance, while Other States Do: 

HHS's Oversight and Guidance on Appropriately Defining Work Activities 
and Reporting Hours of Work Participation Have Been Limited: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Elements of the Work Participation Requirement and How the 
Work Participation Rate Is Calculated: 

Appendix II: States That Count Certain Activities toward Meeting the 
Federal Work Participation Rate: 

Appendix III: States Identified as Lacking Certain Internal Controls: 

Appendix IV: Fiscal Year 2003 Work Participation Rates Calculated by 
HHS Based on Data Provided by States: 

Appendix V: Comments from the Department of Health and Human Services: 

Appendix VI: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: 12 Categories of Federal Work Activities and Limitations on 
Counting Time in Those Activities: 

Table 2: The Number of 10 Reviewed States That Count Certain Activities 
toward Meeting the Federal Work Participation Rate and the Categories 
of Work in Which the States Counted the Activities: 

Table 3: Number of Reviewed States Lacking Internal Controls to Help 
Ensure Hours of Participation Are Reported in Accordance with HHS 
Guidance: 

Table 4: Number of Hours Different Types of Recipients Must Participate 
in Allowed Work Activities to Count as Working in the TANF All-Family 
Work Participation Rate: 

Table 5: Base Percentage of TANF Families That Must Be Engaged in Work 
for the All-Family and the Two-Parent Family Rates: 

Table 6: States Covered by the Review That Count Certain Activities 
toward Meeting the Federal Work Participation Rate: 

Table 7: States Covered by the Review That Lacked Internal Controls to 
Help Ensure Hours of Participation Are Reported in Accordance with HHS 
Guidance: 

Table 8: Fiscal Year 2003 Work Participation Rates Calculated by HHS 
Based on Data Provided by States: 

Figure: 

Figure 1: Formula for Calculating the All-Family Work Participation 
Rate: 

Abbreviations: 

ACF: Administration for Children and Families: 

HHS: U.S. Department of Health and Human Services: 

MOE: maintenance-of-effort: 

NDNH: National Directory of New Hires: 

OMB: Office of Management and Budget: 

PRWORA: Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996: 

SSP: separate state program: 

TANF: Temporary Assistance for Needy Families: 

United States Government Accountability Office: 

Washington, DC 20548: 

August 19, 2005: 

The Honorable Wally Herger: 
Chairman: 
Subcommittee on Human Resources: Committee on Ways and Means: 
House of Representatives: 

Dear Mr. Chairman: 

In fiscal year 2004, states spent $26 billion from the federal 
Temporary Assistance for Needy Families (TANF) block grant and related 
state funds to assist low-income parents and their children. The 
federal welfare reform law--the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (PRWORA)--that created the TANF 
block grant included the expectation that welfare recipients would 
participate in work activities. The law outlined 12 categories of work 
activities, such as "unsubsidized employment" and "community service 
programs," in which recipients could participate to meet federal TANF 
requirements. Under the law, states have significant flexibility in 
designing their TANF programs, such as flexibility in defining specific 
activities to fall under the 12 categories of work activities outlined 
in the law. Along with providing this flexibility, PRWORA required 
states to collect and report a specified set of data to the Department 
of Health and Human Services (HHS), including data on hours recipients 
spent in work activities. PRWORA also created a performance measure 
called the TANF work participation rate for determining the extent to 
which a state's TANF families were engaged in work activities during 
the year. The 2003 work participation rates calculated for the 50 
states based on the data they submitted to HHS ranged from 9 to 88 
percent. HHS is responsible for reporting these rates to Congress and 
for using them to identify states that are not meeting the required 
level of work participation for their TANF recipients and, thus, may be 
subject to penalties. Given the importance of the work participation 
rates, they need to provide a consistent measure of work participation 
across states. Without a consistent measure, there will be no standard 
basis for interpreting each state's rate or for comparing the 
performance of states. 

A key issue in the debate over TANF reauthorization has been whether to 
change work requirements, such as by requiring additional hours of work 
and allowing more types of work activities to be counted. For example, 
a Senate bill proposed adding substance abuse treatment and caring for 
a disabled family member to the list of activities that can be counted 
as work participation. Another issue in reauthorization has been how to 
revise the caseload reduction credit, which uses levels of TANF 
caseload declines to reduce the work participation rates states must 
have in order to avoid penalty. Because of significant declines in TANF 
caseloads following TANF implementation, the caseload reduction credit 
enabled many states to have very low work participation rates and still 
meet their required levels of work participation. Revisions in the 
caseload reduction credit could raise the required level of work 
participation for many states and may result in more states being 
penalized for not having high enough work participation rates. In 
considering welfare reauthorization, Congress has focused much 
attention on states' current work participation rates. To help you 
understand these rates, we looked at (1) how selected states are 
defining the work activities that count toward meeting federal work 
participation requirements, (2) whether selected states have 
implemented internal controls to help ensure that the work 
participation data they report are in accordance with HHS guidance, and 
(3) what guidance and oversight HHS has provided states regarding 
appropriately defining work activities and reporting hours of work 
participation. 

Our review focused on HHS's Administration for Children and Families 
(ACF), which administers the TANF block grant, and 10 selected states-- 
California, Georgia, Kansas, Maryland, Nevada, New York, Ohio, 
Pennsylvania, Washington, and Wisconsin. In 2003, the 10 states made up 
46 percent of the national TANF caseload. We selected these states to 
represent a mix of TANF 2003 work participation rates, according to 
data reported by states to ACF.[Footnote 1] (These rates are shown in 
app. IV.) Specifically, we selected the 3 states with the lowest rates 
(9 percent to 11 percent), 3 states with some of the highest rates (62 
percent to 88 percent), and 4 states with rates in the middle range (22 
percent to 46 percent). We also selected states to represent a variety 
of other characteristics, such as geographic location, benefit 
policies, and use of waivers that exempt the state from certain TANF 
requirements. We used a semistructured interview protocol in conducting 
telephone interviews with the 10 selected states' TANF officials. 

To learn how selected states are defining the work activities that 
count toward meeting federal work participation requirements, we 
interviewed the 10 selected states' TANF officials about activities 
they count in work participation data. We also reviewed state 
documents, such as annual TANF reports and TANF manuals that show how 
states define the 12 federal categories of work activities and how they 
classify recipients. Although our work allowed us to identify 
inconsistencies in definitions and classifications across states, we 
did not have data to evaluate the impact of different definitions and 
classifications on the rates. 

To learn whether selected states have implemented internal controls to 
help ensure the work participation data they report are in accordance 
with HHS guidance, we interviewed the 10 selected states' TANF 
officials about their internal controls over collection and reporting 
of the data. We also reviewed the states' guidance on collection and 
reporting of the data.[Footnote 2] Through these telephone interviews 
and document reviews, we learned about policies and processes 
established by the states to help ensure data reported are in 
accordance with HHS guidance, but we could not learn whether these 
policies and processes are effectively carried out by staff at the 
local level. Also for the 10 states, we interviewed state auditors and 
reviewed single audit reports for fiscal years 2000-2003 and any other 
state audit reports that addressed work participation data. 

To learn what guidance and oversight HHS has provided states regarding 
appropriately defining work activities and reporting hours of work 
participation, we interviewed ACF officials about their oversight of 
states' definitions of work activities that count toward the work 
participation rates and states' data on hours of work participation. We 
also interviewed officials from the HHS Office of Inspector General. In 
addition, we reviewed ACF's regulations and other guidance for 
reporting work participation data. We conducted our work from November 
2004 to June 2005 in accordance with generally accepted government 
auditing standards. 

Results in Brief: 

Differences in how states define the 12 categories of work that count 
toward meeting federal work participation requirements have resulted in 
some states counting activities that other states do not count and, 
therefore, in an inconsistent measurement of work participation across 
states. For example, out of the 10 states we reviewed, 5 considered 
caring for a disabled family or household member to be part of the 
Community Service category of work activities, but 5 other states 
considered this activity as not countable. Also, 6 of the 10 selected 
states considered substance abuse treatment to be part of countable 
categories such as Job Search/Job Readiness, Work Experience, and 
Community Service, but 4 states did not consider it a countable 
activity. We also found that some states made significant changes year 
to year in which activities they count in the work participation rate. 
As a result, the rates for these states cannot be compared from year to 
year to assess how the states' performance changed. For example, after 
expiration of a waiver that had exempted it from restrictions on time 
spent in Job Search/Job Readiness, one state redefined many activities 
from Job Search/Job Readiness to other categories without time 
restrictions. After this change, the state's work participation rate 
calculated based on nonwaiver requirements increased more than 50 
percentage points. Another inconsistency among states--which adult 
recipients are counted in work rates--occurs because states have 
flexibility in how they classify recipients. Four of the 10 states have 
used their funding flexibility to serve two-parent families through 
separate state-funded programs not covered by TANF work requirements, 
and 1 state also served adults with significant barriers, such as 
medical problems, through a separate state program. Thus, in these 
states, all of these cases were removed from the work participation 
rate calculation, while these types of cases are included in other 
states' rate calculations. 

In reviewing the 10 states' internal controls for collecting and 
reporting hours TANF recipients spent in work activities (regardless of 
how the states defined the activities), we found that some states have 
implemented internal controls to help report work hours in accordance 
with HHS guidance, while other states are lacking such internal 
controls. For example, some states have not issued guidance for their 
staff on the support needed to verify that reported hours were worked. 
As a consequence, some states report hours that recipients are 
scheduled to work instead of hours actually worked, especially in the 
case of unsubsidized employment, for which, according to state 
officials, it is difficult to get documentation from employers and 
recipients to verify hours worked. Two states have guidance allowing 
hours that were missed to be reported as worked when case workers 
determine that the recipient had good cause for the absence. One 
state's guidance instructs that 30 hours of participation per week be 
reported for certain activities such as a parent's involvement in her 
child's Head Start program but does not require evidence that the 
parent was actually involved in 30 hours of the activity. In contrast, 
a few of the 10 states had systematic approaches for verifying that 
hours reported were worked. For example, according to officials in some 
states, their states review the documentation in each sampled file to 
ensure that hours reported are supported before submitting their data 
to HHS. 

HHS has provided limited oversight and guidance to states on 
appropriately defining work activities and reporting hours of work 
participation. According to HHS officials, HHS has authority under 
PRWORA to regulate states' definitions of work activities. However, HHS 
has chosen not to issue regulations for this purpose in order to 
promote the flexibility PRWORA provided states and in response to calls 
from states for as much flexibility as possible in designing their TANF 
programs, according to HHS officials. The current TANF regulations 
repeat the 12 categories of work activities that are included in PRWORA 
and do not further specify activities that can and cannot be included 
under the 12 categories. Given the current regulatory structure, HHS 
officials said they cannot direct states to change their definitions if 
HHS believes the definitions are inappropriate. HHS's guidance on the 
appropriate hours to report is also limited. HHS has specified in TANF 
regulations that the quarterly reports that contain work participation 
data be "complete and accurate." In other guidance, HHS has further 
specified that states must report "actual" hours that recipients engage 
in work activities rather than hours for which the recipient is 
scheduled or expected to work. However, the guidance does not specify 
what support is needed to verify actual hours of work participation. 
HHS performs checks on the data that can identify inconsistencies but 
cannot determine whether hours reported were actually worked. According 
to HHS officials, HHS's primary mechanism for identifying states that 
are not reporting data in accordance with HHS guidance is the state 
single audits that review internal controls and compliance with laws 
and regulations governing federal awards. Although HHS has identified 
data problems using state single audit reports, some of the internal 
control problems we identified in this review had not been found by 
single audits. To emphasize the importance of work participation data, 
HHS is adding to the single audit guidance for fiscal year 2005 more 
instructions on reviewing work participation data. 

To help improve the quality and comparability of the work participation 
data, we are recommending that HHS issue regulations to provide 
oversight of states' definitions and more guidance on counting hours of 
work activities and that HHS work with states to identify cost- 
effective internal control practices and disseminate information on 
these practices to states. 

In commenting on our draft report, HHS said it would consider making 
the recommended revisions in its regulations after TANF reauthorization 
and is exploring options for implementing the recommendation on 
internal controls. 

Background: 

Enactment of the TANF block grant significantly changed federal welfare 
policy and gave states more flexibility in designing their welfare 
programs. For example, states have flexibility in setting benefit 
levels, eligibility requirements,[Footnote 3] work requirements, and 
policies for sanctioning noncompliant recipients (that is, reducing or 
discontinuing their benefits). Due to this flexibility, TANF programs 
differ substantially from state to state. These different state 
policies can affect the extent to which a state's TANF recipients 
participate in work activities and the type of work activities they 
engage in. States also have flexibility in using TANF block grant funds 
and in using state funds--referred to as maintenance-of-effort (MOE) 
funds--that states were required to use toward TANF purposes in order 
to qualify for the block grant. For example, if states want to 
exclusively use MOE funds for a particular group of welfare recipients, 
such as those in two-parent families, they can use these funds through 
separate state programs (SSPs) for those recipients and remove them 
from the TANF requirements. 

Due to the importance of state flexibility under TANF, PRWORA limited 
HHS's authority to regulate state TANF programs. PRWORA also 
substantially reduced HHS staff available to implement TANF. However, 
PRWORA established penalties for states, such as for not meeting 
required levels of work participation, and HHS has authority to 
regulate in situations where penalties are involved. TANF has two work 
participation rates--one that applies to all adult-headed families and 
another that applies to two-parent families.[Footnote 4] A certain 
percentage of each state's adult-headed TANF cases receiving cash 
assistance must participate in work-related activities for a minimum 
number of hours each week or the state may face financial 
penalty.[Footnote 5] The categories of work activities that can be 
counted for the purpose of the performance measure are outlined in TANF 
law and regulations. If TANF recipients engage in other activities 
provided or permitted under the state's TANF program, then those 
activities do not count toward meeting the federal work participation 
requirements. Further, if TANF recipients engage in work activities for 
less than the minimum required number of hours, then those recipients 
do not count as being engaged in work for purposes of the performance 
measure. 

When a state does not meet its required level of work participation, 
HHS will send the state a penalty notice. The state then has the 
opportunity to avoid a penalty by providing reasonable cause why it did 
not meet the work participation rate or by submitting a corrective 
compliance plan that will correct the violation and ensure continued 
compliance with work participation requirements. Since implementation 
of TANF, numerous states have received penalty notices from HHS for not 
meeting the required level of work participation. However, most of 
these states have avoided penalties by submitting corrective compliance 
plans. As of February 2005, 11 states[Footnote 6] and the District of 
Columbia had paid penalties for not meeting the two-parent work 
participation rate.[Footnote 7] Most of these penalties were for the 
first 4 years (fiscal years 1997-2000) of TANF implementation, and 5 
states and the District of Columbia have paid penalties for more than 1 
year. 

Each quarter, states are required to report to ACF monthly data on 
their TANF cases, including the number of hours each adult recipient 
spent in activities that count toward meeting federal work 
requirements. States have the option of reporting to ACF on all their 
TANF cases (the universe) or on a scientifically drawn sample of TANF 
cases. Using the data reported by states, ACF calculates an annual work 
participation rate for each state. A state's annual work participation 
rate is based on the state's average monthly rate for the year. See 
appendix I for information on elements of the work participation 
requirement and how the work participation rate is calculated by ACF. 

12 Categories of Countable Work Activities: 

The TANF legislation and regulations outline 12 categories of work 
activities that can count toward the federal work requirement. The TANF 
regulations name the categories and require each state to include its 
definition of each work activity in the annual report it must file each 
year with HHS. Hours spent in some activities (referred to as 
supplemental activities) generally cannot count toward the federal work 
requirement unless hours are also spent in other countable activities 
(referred to as core activities). Some activities have restrictions on 
the amount of time that can be spent in them. The 12 categories and 
their time restrictions are shown in table 1. 

Table 1: 12 Categories of Federal Work Activities and Limitations on 
Counting Time in Those Activities: 

Activity: Core activities: 

Activity: 1. Unsubsidized employment; Limitations on counting time (for 
all families): None. 

Activity: 2. Subsidized private sector employment; Limitations on 
counting time (for all families): None. 

Activity: 3. Subsidized public sector employment; Limitations on 
counting time (for all families): None. 

Activity: 4. Work experience; 
Limitations on counting time (for all families): None. 

Activity: 5. On-the-job training; Limitations on counting time (for all 
families): None. 

Activity: 6. Job search and job readiness assistance; Limitations on 
counting time (for all families): 6-week time limit per client per 
year, no more than 4 weeks consecutively. 

Activity: 7. Community service programs; Limitations on counting time 
(for all families): None. 

Activity: 8. Caring for child of community service participant; 
Limitations on counting time (for all families): None. 

Activity: 9. Vocational education training; Limitations on counting 
time (for all families): 12-month total time limit per client. 

Activity: Supplemental activities: 

Activity: 10. Job skills training directly related to employment; 
Limitations on counting time (for all families): Counts only after 
accumulating 20 hours in a core activity. 

Activity: 11. Education directly related to work; Limitations on 
counting time (for all families): Counts only after accumulating 20 
hours in a core activity (except if under 20 years old). 

Activity: 12. Satisfactory attendance at high school or equivalent; 
Limitations on counting time (for all families): Counts only after 
accumulating 20 hours in a core activity (except if under 20 years 
old). 

Source: GAO analysis of section 407 of PRWORA and HHS regulations. 

Note: This table does not show all the provisions that apply to the 12 
categories. 

[End of table]

Single Audits: 

The Single Audit Act, as amended,[Footnote 8] established the concept 
of having one audit of an entity as a whole instead of multiple audits 
of individual grants received by the entity.[Footnote 9] The act 
requires state and local governments and nonprofit organizations that 
expend $500,000 or more in federal funds during the year to undergo an 
organizationwide audit.[Footnote 10] These audits focus on the entity's 
internal controls and compliance with laws and regulations governing 
federal awards and should be viewed as a tool that raises relevant or 
pertinent questions rather than a document that answers all questions. 

Office of Management and Budget (OMB) Circular A-133, Audits of States, 
Local Governments, and Non-Profit Organizations, provides the federal 
guidance for single audits. It contains a Compliance Supplement that 
summarizes key information about federal programs and identifies audit 
objectives and suggested procedures for auditors' use in determining 
compliance with the requirements. The Compliance Supplement contains 
information on TANF, along with over a hundred other federal programs. 
The information on TANF includes some key line items, including those 
for reporting hours of work activity, from the TANF data report that 
states must submit to ACF. 

Internal Controls: 

Internal controls comprise the plans, methods, and procedures an 
organization uses to meet its missions, goals, and objectives. Internal 
controls are a series of actions and activities that occur throughout 
an organization's operations and on an ongoing basis. They provide 
reasonable assurance that an organization achieves its objectives of 
(1) effective and efficient operations, (2) reliable financial 
reporting, and (3) compliance with laws and regulations. An 
organization's internal controls over collecting and reporting data 
could include numerous processes and procedures, such as guidance that 
defines the specific data to be collected and any documentation needed 
to support that data and monitoring to ensure that the reported data 
are complete and accurate. 

Differences in How States Define Work Activities Result in Inconsistent 
Measurement of Work Participation across States and over Time: 

We found that differences in how states define the 12 categories of 
federal work activities result in some states counting hours recipients 
spend in activities that other states do not consider allowable 
activities for meeting federal work participation requirements. Also, 
some states have made changes in their definitions of some categories 
of federal work activities, making what is measured by those states' 
work participation rates inconsistent from year to year. Further, some 
differences across states in their classification of adult recipients 
can result in certain types of recipients being excluded from some 
states' work participation rates but included in other states' rates. 

Activities Are Defined Inconsistently across States: 

Although PRWORA outlines 12 categories of work activities that can 
count toward meeting federal work participation requirements, states 
are able to define the specific activities that fall under each of the 
categories. We found that differences in how states define the 12 
categories of work result in some states counting hours spent in 
certain activities toward meeting the work participation rate, while 
other states do not count hours spent in those activities. 

Although PRWORA outlined 12 categories of work activities that count 
toward meeting work participation rates, PRWORA does not prevent states 
from allowing their recipients to participate in other noncountable 
activities, such as activities that help the recipients overcome 
problems that prevent them from working. In our review of state TANF 
documents, we identified several activities that were commonly 
mentioned but that were treated differently by different states, such 
as substance abuse treatment. One state may include the activity under 
1 of the 12 categories of work, while other states may consider that 
activity a state activity that does not count toward meeting the 
federal work requirement. 

Table 2 shows how many of the 10 reviewed states counted certain 
activities that were commonly mentioned in state TANF documents toward 
meeting federal work participation requirements. (See app. II for 
states included in the table). States were counting these activities 
toward meeting the work participation rate by defining one of the 12 
categories of work as including the activities. 

Table 2: The Number of 10 Reviewed States That Count Certain Activities 
toward Meeting the Federal Work Participation Rate and the Categories 
of Work in Which the States Counted the Activities: 

Activity: Caring for a disabled household or family member; Number of 
10 reviewed states that count the activity as federal work 
participation: 5; Federal categories of work in which the reviewed 
states counted the activity: Community Service. 

Activity: Substance abuse treatment; Number of 10 reviewed states that 
count the activity as federal work participation: 6; Federal categories 
of work in which the reviewed states counted the activity: Job 
Search/Readiness, Work Experience, Community Service. 

Activity: Domestic violence counseling; Number of 10 reviewed states 
that count the activity as federal work participation: 3; Federal 
categories of work in which the reviewed states counted the activity: 
Job Search/Readiness, Work Experience, Community Service. 

Activity: Other mental health counseling; Number of 10 reviewed states 
that count the activity as federal work participation: 5; Federal 
categories of work in which the reviewed states counted the activity: 
Job Search/Readiness, Work Experience, Community Service. 

Activity: English as a second language; Number of 10 reviewed states 
that count the activity as federal work participation: 7; Federal 
categories of work in which the reviewed states counted the activity: 
Job Skills Training, Secondary School or Education Directly Related to 
Employment, Community Service, Vocational Education. 

Source: GAO review of 10 states' TANF documents and interviews with the 
states' TANF officials. 

Note: An additional state counts substance abuse treatment, domestic 
violence counseling, and other mental health counseling toward meeting 
the federal work participation rate in limited circumstances. 

[End of table]

Some states have a very broad definition for at least one federal 
category of work that allows the states to include many diverse 
activities under the category. For example, one state that defines 
Community Service as "an activity approved by your case manager which 
benefits you, your family, your community or your tribe" considered all 
five of the activities shown in table 2 to fall under the Community 
Service category. 

A few states had activities listed in the definition of a federal work 
activity that we did not see in other states' definitions, such as: 

* bed rest, short-term hospitalizations, and personal care activities a 
participant is engaged in as part of recovery from a medical problem 
(Job Search/Job Readiness);

* physical rehabilitation, which could include massage, regulated 
exercise, or supervised activity with the intent of promoting recovery 
or rehabilitation (Job Search/Job Readiness);

* activities to promote a healthier life style that will eventually 
assist the recipient in obtaining employment, such as personal 
journaling, motivational reading, exercise at home, smoking cessation, 
and weight loss promotion (Job Search/Job Readiness);

* participating in your child's Head Start or Early Head Start programs 
by participating in home visits, parent meeting presentations, and 
classroom volunteering (Community Service); and: 

* helping a friend or relative with household tasks and errands 
(Community Service). 

Increasing the number of activities that it counts toward the federal 
work participation rate should help a state increase its work 
participation rate and avoid incurring penalties. Out of our 10 
reviewed states, 2 states counted all five of the activities shown in 
table 2 above, while 1 state did not count any. Such variation in the 
number of activities that states count toward the federal work 
participation rate suggests that the states are subject to different 
standards for work participation. Because of the differences in states' 
internal controls over their work participation data (discussed in the 
next section of this report), the data cannot be relied upon for making 
comparisons across states. Therefore, we did not analyze states' work 
participation rates in relation to the number of activities they 
counted toward work participation. 

Changes in State Definitions Result in Inconsistent Measurement from 
Year to Year: 

Three of the 10 states we reviewed had made changes in their 
definitions of work activities within the past 2 years that may have 
affected their work participation rates and that could result in work 
participation rates that are not comparable over time. Kansas had a 
dramatic change in its work participation rate after changing some of 
its definitions. This state had a waiver exempting it from the 6-week 
limit for counting hours recipients spent in Job Search/Job Readiness 
activities. For states with waivers, the effective work participation 
rate is calculated based on the conditions of the waiver. However, ACF 
also calculates a without-waiver rate for states with waivers. After 
the state lost its waiver, it redefined some of its categories of work 
by placing activities previously in the Job Search/Job Readiness 
category (the category that had been covered by the waiver) into other 
categories that do not have time restrictions, such as Community 
Service. For this state, the 2003 with-waiver rate was significantly 
higher than the without-waiver rate. If the without-waiver rate had 
been the effective rate, the state would have been subject to penalty 
for not meeting the required work participation rate. One month after 
the waiver expired and the definitions were changed, the state's rate 
without the waiver rose over 50 percentage points to reach the level of 
the 2003 with-waiver rate. 

Another state, Nevada, also moved some activities from Job Search/Job 
Readiness to Work Experience to avoid the 6-week time limit on counting 
hours spent in Job Search/Job Readiness. According to a state official, 
the change was made because, as a result of the 6-week time limit, 
field workers would sometimes make decisions that were not in the best 
interest of the recipients and move recipients out of activities too 
quickly. The state official believes that the change is likely to help 
raise the state's work participation rate. 

Georgia added an additional activity (caring for a disabled relative 
who does not live with the recipient) to its Community Service category 
and broadened the definition of job skills training to allow for 
general training for a job, rather than just training for a specific 
job. According to a state official, these changes have helped the state 
increase its work participation rate. 

Other Differences in Classifications of Adult Recipients Result in 
Inconsistencies across States: 

Some differences among states in their classification of recipients 
affect whether or not recipients are included in the work participation 
rate calculation. We found the following different approaches that 
remove recipients from the work participation rate calculation. 

* Creating separate state programs for two-parent families.[Footnote 
11] By serving two-parent families through separate state programs, 
states remove those families from the calculation of work participation 
rates.[Footnote 12] Four of the 10 states in our review (California, 
Georgia, Maryland, and Nevada) had created separate state programs for 
two-parent families. Officials from Georgia, Maryland, and Nevada said 
that they created the programs because they wanted to avoid having to 
meet the higher two-parent family work requirement.[Footnote 13] 
Officials from the states we reviewed with separate state programs for 
two-parent families said that although the states do not have to meet a 
federal work participation requirement for their two-parent families, 
they still require the adult recipients in the two-parent families to 
comply with the states' work requirements. 

* Moving recipients with significant barriers into a separate state 
program. Nevada placed recipients who are less likely to meet the 
federal work participation requirements in a separate state program, 
thus removing them from the work participation rate calculation. These 
include recipients (1) with pending applications for Supplemental 
Security Income, (2) with medical difficulties confirmed by a 
physician, (3) in the third trimester of pregnancy, and (4) caring for 
a disabled family member. According to a state official, these 
recipients are still required to participate in work activities to the 
extent that they are able. 

* Reclassifying cases as child-only. California removes adults from 
TANF cases when they are sanctioned, thus changing the cases from adult-
headed cases to child-only cases.[Footnote 14] Because child-only cases 
are not included in state work participation calculations, the 
reclassification allows the state to avoid counting noncomplying adults 
in the calculation, which in turn is likely to result in a higher work 
participation rate. According to a state official, the state's practice 
of reclassifying cases this way preceded the implementation of TANF and 
therefore was not intended to influence the state's TANF work 
participation rate. 

Some States Do Not Have Internal Controls Needed for Reporting Data in 
Accordance with HHS Guidance, while Other States Do: 

Some of the states we reviewed did not have internal controls to help 
ensure that reported hours of participation in work activities are in 
accordance with HHS guidance. Other states have implemented systematic 
practices to help ensure that reported hours are in accordance with HHS 
guidance. Officials in some states cited challenges to obtaining 
support for hours of participation in unsubsidized employment. 

Some States Lack Internal Controls to Help Ensure Actual Hours of 
Participation Are Reported: 

Some of the states we reviewed did not have internal controls to help 
ensure that reported hours of participation in work activities are in 
accordance with HHS guidance. The HHS guidance (as discussed more fully 
later in this report) requires that states report hours recipients 
actually participated in work activities rather than hours that the 
recipients were scheduled to participate. Internal control weaknesses 
among the states we reviewed include the following: 

* Guidance and/or standard processes allow reporting of scheduled 
hours. In some states, we found that the hours recorded to show how 
recipients plan to comply with state work requirements (scheduled 
hours) were reported to ACF as hours actually worked. Reporting hours 
scheduled instead of hours worked does not take into account unexpected 
events or noncompliance on the part of the recipient that would result 
in scheduled hours being different than the hours actually worked. 
Allowing scheduled hours to be reported was most common for 
unsubsidized employment, but in a few states, we found guidance 
allowing scheduled hours for other work activities, such as vocational 
education. In one state, guidance instructs that a set number of hours 
be recorded for certain activities, such as 30 hours per week for 
parents involved in their children's Head Start program. However, the 
guidance does not indicate that the number of hours recorded should be 
verified to ensure that they were actual hours of participation. 

* Lack of guidance on the type of documentation needed to support 
reported hours of work activities. Without guidance, there is no 
assurance that the local staff collecting the data know what type of 
documentation is adequate to support hours reported or whether any 
documentation is required. The type of support needed would depend on 
the activity but could include pay stubs and time and attendance 
reports. Without guidance, staff at different locations are more likely 
to use different standards for what support is needed. 

* Guidance allows for reporting hours missed for good cause. Some 
states have guidance specifying that when recipients are absent from a 
scheduled activity and the case worker determines that there is a good 
cause for the absence, the missed hours can be reported as worked. This 
results in hours that were not worked being reported to ACF as worked. 

* Insufficient monitoring to verify that hours were reported correctly. 
Some states do not have a monitoring process in place to perform timely 
reviews to verify that hours were reported correctly.[Footnote 15] 
Without sufficient monitoring, states cannot be assured that local 
staff are reporting hours that are supportable and complete. 

Table 3 shows the number of states with the internal control weaknesses 
described above for the states in our review. (See app. III for states 
included in the table). 

Table 3: Number of Reviewed States Lacking Internal Controls to Help 
Ensure Hours of Participation Are Reported in Accordance with HHS 
Guidance: 

Internal control weakness: Guidance and/or standard processes allow 
reporting of scheduled hours; Number of states (out of 9 reviewed) with 
the internal control weakness: 3. 

Internal control weakness: Lack of guidance on the type of 
documentation needed to support reported hours of work activities; 
Number of states (out of 9 reviewed) with the internal control 
weakness: 4. 

Internal control weakness: Guidance allows for reporting hours missed 
for good cause; Number of states (out of 9 reviewed) with the internal 
control weakness: 2. 

Internal control weakness: Insufficient monitoring to verify that hours 
were reported correctly; Number of states (out of 9 reviewed) with the 
internal control weakness: 3. 

Source: GAO review of 9 states' TANF documents and interviews with 
their TANF officials. 

Notes: (1) The table only covers 9 states because we were unable to 
assess the internal controls of one of the 10 states we reviewed. (2) 
For states where the internal control activities were determined at the 
local level, we identified the state as having an internal control 
weakness if the state did not ensure that the local areas were 
implementing such internal controls. 

[End of table]

Six of the states in our review have at least one of the internal 
control weaknesses shown in table 3, and 3 of these states have at 
least two internal control weaknesses. Two states that did not have any 
of the internal control weaknesses have issued appropriate guidance and 
begun monitoring as part of corrective action plans developed in 
response to state audit findings on data problems. The states we 
reviewed may have internal control weaknesses over the collection and 
reporting of work participation data that our review was not designed 
to assess. For example, a state may have issued appropriate guidance 
and established a monitoring process; however, the state's staff may 
not follow the guidance or conduct monitoring according to the required 
process. 

Some States Have Systematic Approaches for Verifying Reported Data: 

While some of the states we reviewed lacked internal controls, other 
states have implemented systematic practices to help ensure that 
reported data are in accordance with HHS guidance. 

* Documentation requirements. Some states we reviewed had guidance 
outlining the specific documentation needed to verify actual hours for 
each work activity and specified when the documentation must be 
obtained and the hours recorded in the state's database. 

* Monthly audits. Officials in some states we reviewed told us they 
conduct monthly audits of all cases sampled for reporting to ACF to 
verify that hours reported were actually worked. If there is not 
adequate support showing that hours reported were actually worked, the 
data are not reported to ACF, according to state officials. 

Unsubsidized Employment Has Been Especially Difficult to Track: 

State officials cited challenges to obtaining support for hours of 
participation in unsubsidized employment. For some states, the standard 
process for obtaining hours of unsubsidized employment occurs every 6 
months when local staff reverify a recipient's income and benefit 
eligibility. Income is typically verified with a recent pay stub, which 
is then used to project the hours the recipient will be working for the 
next 6 months. Some officials told us that trying to obtain 
documentation for actual hours of unsubsidized employment from 
recipients or employers monthly would be onerous for case workers and 
recipients. Officials said they feared that contacting employers 
frequently to verify a recipient's employment could jeopardize the 
recipient's job. In states requiring monthly documentation, such as pay 
stubs, for hours of work reported to HHS, state officials told us they 
were likely underreporting hours because of the difficulty local staff 
face in obtaining the required documentation. 

A new effort on the part of ACF may provide states with additional 
options for obtaining information on hours recipients spend in 
unsubsidized employment. ACF recently began an initiative using the 
National Directory of New Hires (NDNH)[Footnote 16] to help states 
identify whether or not recipients are eligible for TANF benefits. If a 
state chooses to participate, HHS will conduct data matches comparing 
NDNH employee data against the state's list of TANF recipients. If the 
data matches identify recipients who are working and are still eligible 
for TANF, the data may provide states with a starting point for 
obtaining more complete work participation data, according to an ACF 
official. Because the NDNH does not contain hours worked, states would 
need to contact employers or recipients to obtain information on the 
actual hours the recipient worked, according to an ACF official. 

HHS's Oversight and Guidance on Appropriately Defining Work Activities 
and Reporting Hours of Work Participation Have Been Limited: 

HHS has provided minimal oversight of how states define work 
activities. Further, HHS has limited guidance for states on reporting 
the appropriate hours of work activities. HHS does not have a 
sufficient mechanism to identify data not in accordance with ACF 
guidance. 

HHS Has Provided Minimal Oversight of States' Definitions of Work 
Activities: 

Under PRWORA, HHS has authority to regulate states' definitions of work 
activities. However, HHS has chosen not to issue regulations for this 
purpose in order to promote the flexibility PRWORA provided states and 
in response to calls from states for as much flexibility as possible in 
designing their TANF programs, according to HHS officials. The current 
TANF regulations only repeat the 12 categories of work activities that 
are included in PRWORA and do not further specify activities that can 
and cannot be included under the 12 categories. Further, the current 
TANF regulations do not state that HHS will review states' definitions 
of work activities to determine if the definitions are appropriate. 
Accordingly, HHS officials said they are unable to direct states to 
change their definitions of work activities when they believe the 
states' definitions are inappropriate, as has occurred in the past. 

HHS Has Provided Limited Guidance to States on the Appropriate Hours to 
Report: 

Although HHS has provided states with general guidance on reporting 
actual hours of work participation, the guidance lacks specific 
criteria for determining the appropriate hours to report. The 
requirement for reporting actual hours of work participation is not 
specified in federal regulations but is instead described in other 
documents. The guidance on the type of hours are the following: 

HHS regulations[Footnote 17]

* Quarterly reports containing work participation data must be 
"complete and accurate." 

HHS responses to comments to proposed regulations[Footnote 18]

* Hours for which the recipient was paid may be reported as hours 
worked, such as paid holidays. 

HHS Web site[Footnote 19]

* States must report actual hours of participation for each work 
activity. 

* Reporting required (or scheduled) hours of participation is 
inconsistent with the "complete and accurate" standard and is not 
acceptable. 

Detailed reporting instructions for TANF data report (reporting 
instructions)[Footnote 20]

* States are to report actual hours of participation. 

* It is not acceptable to report scheduled hours of participation. 

* States should validate actual participation in each work activity. 

While HHS guidance calls for states to report actual hours, ACF 
officials acknowledged it may be difficult or impossible to obtain 
information on actual hours for some activities. For example, the ACF 
officials cited problems states have in obtaining hours of actual 
participation for recipients enrolled in vocational education courses, 
community colleges, and universities for which attendance is not taken. 

HHS Does Not Have a Sufficient Mechanism to Identify Data Not in 
Accordance with ACF Guidance: 

ACF uses two mechanisms to identify problems with work participation 
data submitted by states--computer edit checks and reviews of single 
audit findings. However, neither mechanism provides ACF with reasonable 
assurance that data reported are in accordance with ACF guidance. 

Computer edit checks. ACF performs edit checks of the data submitted 
quarterly by states. The edit checks identify outliers, such as if a 
recipient is reported to have participated in 80 hours of work 
activities for 1 week. The edit checks also identify inconsistencies 
between data elements, such as if a recipient is reported as having 
earnings but is also reported as having zero hours of work. ACF 
notifies states of any problems identified by the edit checks so that 
states can correct and resubmit the data. The edit checks can help 
improve the data; however, they do not address the issue of verifying 
whether hours reported are actual hours of participation. 

State single audits. According to ACF officials, HHS's primary vehicle 
for identifying problems with the states' data is states' single audit 
reports. Findings from the state single audits go through a review 
process at HHS to determine whether penalties are warranted. HHS has 
used findings from the single audit to take action against a state for 
reporting poor quality work participation data.[Footnote 21] However, 
ACF officials acknowledged that the work participation data reported by 
states may have problems that the single audits may not reveal. Our 
interviews with auditors in the 10 states we reviewed indicate that the 
level of attention given to work participation data varies greatly 
among the states. 

* State auditors from 5 states (California, Georgia, Maryland, Nevada, 
and Ohio) told us that their most recent single audits covering the 
TANF program[Footnote 22] did not review the data states report to HHS 
on hours of participation in work activities.[Footnote 23]

* Out of the 5 states in which state auditors reported that the most 
recent single audits did test hours of work participation: 

* Three states (Kansas, Washington, and Wisconsin) reported that the 
audits did not look for support of actual hours but instead compared 
hours shown in the state's welfare database with the hours reported to 
HHS for a sample of cases. State auditors for the 3 states did not 
report any findings on work participation data from these reviews. 

* Two states (New York and Pennsylvania) looked for supporting 
documentation to verify that hours reported to ACF were hours of actual 
participation for a sample of cases. In New York, the audit had no 
finding regarding work participation hours.[Footnote 24] The audit for 
Pennsylvania found that some reported hours had no supporting 
documentation to verify that they were actually worked. According to 
state officials, Pennsylvania has implemented corrective actions in 
response to the single audit findings. 

Our review of the 10 states' internal controls identified weaknesses 
both in states where state auditors told us that the most recent single 
audit did not test the data reported to HHS on hours of participation 
in work activities and in states that did. ACF officials acknowledged 
that because of the broad nature of the single audits, the quality and 
focus of the audits vary from state to state. The single audit, 
covering hundreds of federal programs, is designed as a tool that 
raises relevant questions about states' internal controls and 
compliance with laws and regulations governing federal awards but is 
not intended to answer all questions. State auditors responsible for 
conducting the single audits are provided with federal guidance issued 
by OMB--known as the Compliance Supplement. Currently the Compliance 
Supplement contains reference to work participation data only as a key 
line item for auditors to look at in the TANF data report. According to 
ACF officials, the fiscal year 2005 Compliance Supplement for the 
single audit will contain more guidance to help auditors identify 
whether work participation data are reported in accordance with HHS 
guidance. The addition to the Compliance Supplement will suggest that 
state auditors test a sample of cases to determine the completeness and 
accuracy of the data, including the proper documentation, used in 
calculating the work participation rate. 

Conclusions: 

By listing 12 categories of permissible work activities, Congress 
placed limits on the type of activities that states could count toward 
meeting federal work participation requirements. HHS regulations only 
restate the 12 categories of work activities and do not further specify 
the types of activities that can and cannot count toward meeting the 
federal work requirements, nor do they provide for HHS's oversight of 
states' definitions of the 12 categories. HHS has taken the position 
that with the current limited regulations, it will not place 
restrictions on the activities states can count toward meeting TANF 
work requirements. As a result, states have been able to include any 
activity in their definitions of the 12 categories of work. Several 
states have broadly defined 1 or more of the categories to include 
activities, such as substance abuse treatment, that other states 
provide but do not consider countable toward meeting the federal work 
participation requirement. Another discrepancy among states occurs with 
the internal controls over the data they report to HHS. For example, 
some states only report hours that have been verified as having been 
actually worked, while others report hours without verification. 
Because of the differences among states in the activities that they 
count in calculating the work participation rate and in the internal 
controls over the data used in the calculation, states are being 
measured by different standards, and the work participation rates 
cannot be used to compare the performance of states. Further, a high 
work participation rate does not necessarily indicate more engagement 
of TANF recipients in work activities than a lower rate. 

The current caseload reduction credit has greatly reduced the required 
level of work participation for most states. However, if TANF 
reauthorization results in lowering the caseload reduction credit and 
raising the work participation requirements, more states could be 
penalized, and states with strict definitions and effective internal 
controls may be the most susceptible to penalties. If the TANF work 
participation rate is to be an effective and equitable measure for 
assessing states' performance and penalizing states, HHS needs to give 
more oversight to states' definitions of federal work activities and 
internal controls over the data to help make the measure more 
consistent across states. We acknowledge that efforts to obtain more 
valid, accurate, and consistent information for this performance 
measure may have unintended consequences. For example, it may motivate 
states to use separate state programs or make other choices about the 
design of their TANF programs. However, a measure that is used to 
assess penalties needs to be clear and consistent for all those 
potentially subject to penalty; otherwise, the measure can result in 
misleading information and inequitable penalty assessments. 

Recommendations for Executive Action: 

HHS should issue regulations to: 

* specify the types of activities that can and cannot be included under 
the 12 categories of work activities,

* have HHS oversee states' definitions of activities under the 12 
categories, and: 

* set forth criteria for counting actual hours of activity and whether 
there are circumstances under which scheduled hours may be counted. 

We also recommend that HHS develop and implement a plan for working 
with states to improve internal controls over work participation data. 
This plan could make use of existing resources and include steps such 
as: 

* working through its regional offices to identify cost-effective 
internal controls being used by states,

* using regional offices and existing sponsored conferences to share 
information with states on these internal controls and to emphasize the 
importance of internal controls, and: 

* obtaining information from states about their experiences using the 
National Directory of New Hires to determine if it has potential for 
helping states collect more complete work participation data and if 
there are any useful practices to be shared with other states. 

Agency Comments and Our Evaluation: 

HHS provided written comments on a draft of this report; these comments 
appear in appendix V. HHS said that the report provides it with new and 
useful information. HHS said it would consider making the recommended 
revisions in its regulations after TANF reauthorization and is 
exploring options for implementing the recommendation on internal 
controls. HHS also provided technical comments that we incorporated as 
appropriate. 

Concerning our recommendation that HHS issue regulations to provide 
oversight of states' definition and more guidance on counting hours of 
work activities, HHS said that it will consider this recommendation 
when it develops the proposed rule after Congress enacts legislation to 
reauthorize the TANF program. We agree that addressing this 
recommendation during rule making after TANF reauthorization is 
appropriate, if TANF is reauthorized in the near future. However, TANF 
reauthorization has been delayed for 3 years and if it is delayed for 
much longer, HHS should take action to revise TANF regulations without 
waiting for reauthorization. Concerning our recommendation that HHS 
develop and implement a plan for working with states to improve 
internal controls over the work participation data, HHS said it 
recognized that more can be done to ensure increased consistency in the 
accuracy of the work participation data. HHS also stated that ACF is 
exploring options to increase oversight and provide technical 
assistance to states using its currently limited resources. Further, 
HHS noted that federal staff for TANF had been reduced by 75 percent 
several years ago. We added a statement about this staff reduction to 
the background section of the report. 

HHS expressed concern that the draft report did not sufficiently 
recognize the flexibility that Congress intended for the TANF program, 
and it stated that Congress did not intend that there be a consistent 
measure of work participation across states or that HHS make state-by- 
state comparisons for penalty purposes. We believe that the report does 
recognize the flexibility Congress provided to states. Also, we believe 
that the fact that Congress gave states the flexibility to design their 
TANF programs does not indicate that Congress did not want a meaningful 
measure to determine if states are meeting TANF requirements. While 
states have flexibility in determining what policies they will use to 
achieve TANF goals and requirements, the measure used to assess their 
performance should be defined the same way from state to state; 
otherwise, the rates produced by the measure cannot provide meaningful 
and understandable information for national policy makers and for 
assessing financial penalties. Further, although the use of waivers and 
separate state programs contributes to differences in which families 
are included in the work participation rate, HHS has made efforts, 
through its annual reporting, to ensure transparency about the rules 
governing these mechanisms and which states are using them. The lack of 
oversight of states' definitions of categories of work activities 
results in inconsistencies in performance measurement, as discussed in 
this report, that are not transparent. 

HHS noted some imprecision in the draft report's description of the 
work participation rate calculation. In response, we made revisions to 
the report. HHS also took issue with our discussion of how a state's 
work participation rate changed after its waiver expired. We continue 
to believe that this example of how a state's rate changed over 50 
percentage points 1 month after the waiver expired is a useful 
illustration of how changes in definitions can affect work 
participation rates. 

As agreed with your office, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
after its issue date. At that time, we will send copies of this report 
to the Secretary of the Department of Health and Human Services, 
relevant congressional committees, and others who are interested. 
Copies will be made available to others upon request, and this report 
will also be available on GAO's Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please 
contact me on (415) 904-2272. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. Additional GAO contacts and acknowledgments are 
listed in appendix VI. 

Sincerely,

Signed by: 

David Bellis, Director: 
Education, Workforce, and Income Security: 

[End of section]

Appendix I: Elements of the Work Participation Requirement and How the 
Work Participation Rate Is Calculated: 

The Temporary Assistance for Needy Families (TANF) work participation 
requirement is composed of (1) a requirement for a minimum number of 
hours recipients must participate in order to be counted as engaged in 
work activities and (2) a requirement for the percentage of TANF 
families with an adult (or minor head of household) a state must have 
engaged in work activities. The Department of Health and Human 
Services' Administration for Children and Families (ACF) uses a formula 
specified in the Personal Responsibility and Work Opportunity 
Reconciliation Act for calculating whether states are meeting the work 
participation requirement. 

The Minimum Number of Hours TANF Recipients Must Participate: 

The minimum number of hours TANF recipients must participate, on 
average, per week to be counted as engaged in work is shown in table 4. 

Table 4: Number of Hours Different Types of Recipients Must Participate 
in Allowed Work Activities to Count as Working in the TANF All-Family 
Work Participation Rate: 

Type of recipient: Single parent with a child under 6 years old; 
Required number of hours on average per week (or activity): 20. 

Type of recipient: Other adult recipients; Required number of hours on 
average per week (or activity): 30. 

Type of recipient: Single parent under 20 years old; Required number of 
hours on average per week (or activity): Satisfactory school attendance 
or equivalent. 

Source: GAO analysis of TANF regulations. 

Note: Adults in two-parent families have different requirements for the 
number of hours of activity. 

[End of table]

Base Percentage of a State's TANF Families Who Must Be Engaged in Work 
Activities: 

Different base percentages were established for all families and for 
two-parent families. The required percentages rose over time until they 
reached their current levels shown in table 5. 

Table 5: Base Percentage of TANF Families That Must Be Engaged in Work 
for the All-Family and the Two-Parent Family Rates: 

Type of participation rate: All-family (single and two-parent 
combined); Current required rate: 50%. 

Type of participation rate: Two-parent families; Current required rate: 
90%. 

Source: GAO analysis of TANF regulations. 

Note: This base percentage is adjusted for each state using the 
caseload reduction credit. 

[End of table]

Caseload Reduction Credit That Reduces the Base Percentage: 

For each percentage point that a state's welfare caseload declined from 
its 1995 level, the caseload reduction credit reduces the base 
percentage of TANF families who must be engaged in work in the state. 
For example, if a state's welfare caseload declined 40 percent since 
1995, then the all-family work participation rate that it must meet is 
10 percent and the two-parent family work participation rate that it 
must meet is 50 percent. Because of significant declines in welfare 
caseloads that have occurred in most states since 1995, 33 of the 50 
states were required to meet an all-family rate of 10 percent or less 
in fiscal year 2003. 

Calculation of Each State's Work Participation Rate: 

Each quarter, states are required to report to ACF monthly data on 
their TANF cases, including the number of hours each adult recipient 
spent in countable work activities. States have the option of reporting 
to ACF on all their TANF cases (the universe) or on a scientifically 
drawn sample of TANF cases.[Footnote 25] Using the data reported by 
states, ACF calculates an annual work participation rate for each 
state. A state's annual work participation rate is based on the state's 
average monthly rate for the year. The formula for the all-family rate 
is shown in figure 1. 

Figure 1: Formula for Calculating the All-Family Work Participation 
Rate: 

[See PDF for image]

Note: For the purposes of this formula, the term "adult" refers to TANF 
recipients age 20 or over or recipients under age 20 who are head of a 
household receiving TANF. 

[End of figure]

Child-only TANF cases are not included in the calculation. States have 
the option of disregarding from the calculation of the all-family work 
participation rate families with a single custodial parent and a child 
under age one. Other families disregarded in the calculation of the all 
family rate include: 

≤ families that are part of an ongoing research evaluation approved 
under Section 1115 of the Social Security Act;

≤ families that are disregarded based on an inconsistency under an 
approved welfare reform waiver that exempts the family; and: 

≤ families participating in a tribal family assistance plan or a Tribal 
work program (unless the state chooses to include the families in the 
calculation). 

The two-parent family rate is calculated the same way as the all-family 
rate, except that the calculation only includes two-parent families. 
Two-parent families with a disabled parent are not used in calculating 
the two-parent rate. 

[End of section]

Appendix II: States That Count Certain Activities toward Meeting the 
Federal Work Participation Rate: 

Table 6: States Covered by the Review That Count Certain Activities 
toward Meeting the Federal Work Participation Rate: 

Activity: Caring for a disabled household or family member; Reviewed 
states that count the activity as federal work participation: Georgia, 
Maryland, New York, Washington, Wisconsin. 

Activity: Substance abuse treatment; Reviewed states that count the 
activity as federal work participation: Kansas, Maryland, Nevada, New 
York, Washington, Wisconsin. 

Activity: Domestic violence counseling; Reviewed states that count the 
activity as federal work participation: Nevada, Washington, Wisconsin. 

Activity: Other mental health counseling; Reviewed states that count 
the activity as federal work participation: Kansas, Nevada, New York, 
Washington, Wisconsin. 

Activity: English as a second language; Reviewed states that count the 
activity as federal work participation: Kansas, Nevada, New York, Ohio, 
Pennsylvania, Washington, Wisconsin. 

Source: GAO review of 10 states' TANF documents and interviews with the 
states' TANF officials. 

Note: In the limited circumstance that counseling is related to 
employment and is given to a recipient along with employment services 
by the same service provider, Ohio counts hours spent in substance 
abuse treatment, domestic violence counseling, and other mental health 
counseling toward meeting the federal work participation rate, 
according to an Ohio official. 

[End of table]

[End of section]

Appendix III: States Identified as Lacking Certain Internal Controls: 

Table 7: States Covered by the Review That Lacked Internal Controls to 
Help Ensure Hours of Participation Are Reported in Accordance with HHS 
Guidance: 

Internal control weakness: Guidance and/or standard processes allow 
reporting of scheduled hours; States (out of 9 reviewed) with the 
internal control weakness: Georgia, Kansas, Ohio. 

Internal control weakness: Lack of guidance on the type of 
documentation needed to support reported hours of work activities; 
States (out of 9 reviewed) with the internal control weakness: 
California, Kansas, New York, Wisconsin. 

Internal control weakness: Guidance allows for reporting hours missed 
for good cause; States (out of 9 reviewed) with the internal control 
weakness: Wisconsin, New York. 

Internal control weakness: Insufficient monitoring to verify that hours 
were reported correctly; States (out of 9 reviewed) with the internal 
control weakness: Kansas, New York, Wisconsin. 

Source: GAO review of 9 states' TANF documents and interviews with 
their TANF officials. 

Notes: (1) Washington is not included in this table because we were 
unable to assess its internal controls. (2) For states where the 
internal control activities were determined at the local level, we 
identified the state as having an internal control weakness if the 
state did not ensure that the local areas were implementing such 
internal controls. (3) We considered state monitoring of local offices 
to be insufficient if it occurred less than yearly and did not verify 
that hours in work activities were reported correctly. 

[End of table]

[End of section]

Appendix IV: Fiscal Year 2003 Work Participation Rates Calculated by 
HHS Based on Data Provided by States: 

As discussed in this report, our review covering 10 states found that 
there were differences among states in the activities counted in the 
rates and, in some cases, weaknesses in internal controls over the data 
used to calculate the rates. Therefore, these rates may not reliably 
reflect work participation rates and should not be used to make 
comparisons between states. 

Table 8: Fiscal Year 2003 Work Participation Rates Calculated by HHS 
Based on Data Provided by States: 

State: Alabama; 
All-families rate: 37; 
Two-parent families rate[A]: N/A. 

State: Alaska; 
All-families rate: 41; 
Two-parent families rate[A]: 45. 

State: Arizona; 
All-families rate: 13; 
Two-parent families rate[A]: 55. 

State: Arkansas; 
All-families rate: 22; 
Two-parent families rate[A]: 32. 

State: California; 
All-families rate: 24; 
Two-parent families rate[A]: N/A. 

State: Colorado; 
All-families rate: 33; 
Two-parent families rate[A]: 40. 

State: Connecticut; 
All-families rate: 31; 
Two-parent families rate[A]: N/A. 

State: Delaware; 
All-families rate: 18; 
Two-parent families rate[A]: N/A. 

State: Florida; 
All-families rate: 33; 
Two-parent families rate[A]: N/A. 

State: Georgia; 
All-families rate: 11; 
Two-parent families rate[A]: N/A. 

State: Hawaii; 
All-families rate: 66; 
Two-parent families rate[A]: N/A. 

State: Idaho; 
All-families rate: 44; 
Two-parent families rate[A]: 42. 

State: Illinois; 
All-families rate: 58; 
Two-parent families rate[A]: N/A. 

State: Indiana; 
All-families rate: 40; 
Two-parent families rate[A]: N/A. 

State: Iowa; 
All-families rate: 45; 
Two-parent families rate[A]: 39. 

State: Kansas; 
All-families rate: 88; 
Two-parent families rate[A]: 87. 

State: Kentucky; 
All-families rate: 33; 
Two-parent families rate[A]: 46. 

State: Louisiana; 
All-families rate: 35; 
Two-parent families rate[A]: 39. 

State: Maine; 
All-families rate: 28; 
Two-parent families rate[A]: 29. 

State: Maryland; 
All-families rate: 9; 
Two-parent families rate[A]: N/A. 

State: Massachusetts; 
All-families rate: 61; 
Two-parent families rate[A]: 74. 

State: Michigan; 
All-families rate: 25; 
Two-parent families rate[A]: 36. 

State: Minnesota; 
All-families rate: 25; 
Two-parent families rate[A]: N/A. 

State: Mississippi; 
All-families rate: 17; 
Two-parent families rate[A]: N/A. 

State: Missouri; 
All-families rate: 28; 
Two-parent families rate[A]: N/A. 

State: Montana; 
All-families rate: 86; 
Two-parent families rate[A]: 96. 

State: Nebraska; 
All-families rate: 33; 
Two-parent families rate[A]: N/A. 

State: Nevada; 
All-families rate: 22; 
Two-parent families rate[A]: N/A. 

State: New Hampshire; 
All-families rate: 28; 
Two-parent families rate[A]: N/A. 

State: New Jersey; 
All-families rate: 35; 
Two-parent families rate[A]: N/A. 

State: New Mexico; 
All-families rate: 42; 
Two-parent families rate[A]: 52. 

State: New York; 
All-families rate: 37; 
Two-parent families rate[A]: 52. 

State: North Carolina; 
All-families rate: 25; 
Two-parent families rate[A]: 49. 

State: North Dakota; 
All-families rate: 27; 
Two-parent families rate[A]: N/A. 

State: Ohio; 
All-families rate: 62; 
Two-parent families rate[A]: 68. 

State: Oklahoma; 
All-families rate: 29; 
Two-parent families rate[A]: 51. 

State: Oregon; 
All-families rate: 60; 
Two-parent families rate[A]: 53. 

State: Pennsylvania; 
All-families rate: 10; 
Two-parent families rate[A]: 9. 

State: Rhode Island; 
All-families rate: 24; 
Two-parent families rate[A]: 95. 

State: South Carolina; 
All-families rate: 54; 
Two-parent families rate[A]: 51. 

State: South Dakota; 
All-families rate: 46; 
Two-parent families rate[A]: N/A. 

State: Tennessee; 
All-families rate: 43; 
Two-parent families rate[A]: N/A. 

State: Texas; 
All-families rate: 28; 
Two-parent families rate[A]: N/A. 

State: Utah; 
All-families rate: 28; 
Two-parent families rate[A]: N/A. 

State: Vermont; 
All-families rate: 24; 
Two-parent families rate[A]: 38. 

State: Virginia; 
All-families rate: 45; 
Two-parent families rate[A]: N/A. 

State: Washington; 
All-families rate: 46; 
Two-parent families rate[A]: 44. 

State: West Virginia; 
All-families rate: 14; 
Two-parent families rate[A]: 25. 

State: Wisconsin; 
All-families rate: 67; 
Two-parent families rate[A]: 40. 

State: Wyoming; 
All-families rate: 83; 
Two-parent families rate[A]: 92. 

Source: Rates calculated by HHS based on data provided by states. 

[A] Some states do not have two-parent families in their TANF programs. 
Thus, the two-parent families rate is not applicable for some states, 
as indicated by N/A. 

[End of table]

[End of section]

Appendix V: Comments from the Department of Health and Human Services: 

DEPARTMENT OF HEALTH & HUMAN SERVICES:

Office of Inspector General:

Washington, D.C. 20201:

AUG 2 2005:

Mr. David D. Bellis:
Director, Education, Workforce, and Income: Security Issues:
U.S. Government Accountability Office: Washington, DC 20548:

Dear Mr. Bellis:

Enclosed are the Department's comments on the U.S. Government 
Accountability Office's (GAO's) draft report entitled, "WELFARE REFORM: 
HHS Should Exercise Oversight to Help Ensure TANF Work Participation Is 
Measured Consistently across States" (GAO-05-821). These comments 
represent the tentative position of the Department and are subject to 
reevaluation when the final version of this report is received.

The Department provided several technical comments directly to your 
staff.

The Department appreciates the opportunity to comment on this draft 
report before its publication. 

Sincerely,

Signed by: 

Daniel R. Levinson: 
Inspector General:

Enclosure:

The Office of Inspector General (OIG) is transmitting the Department's 
response to this draft report in our capacity as the Department's 
designated focal point and coordinator for U.S. Government 
Accountability Office reports. OIG has not conducted an independent 
assessment of these comments and therefore expresses no opinion on 
them. 

COMMENTS OF THE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES ON THE 
U.S. GOVERNMENT ACCOUNTABILITY OFFICE'S DRAFT REPORT ENTITLED, "WELFARE 
REFORM: HHS SHOULD EXERCISE OVERSIGHT TO HELP ENSURE TANF WORK 
PARTICIPATION IS MEASURED CONSISTENTLY ACROSS STATES" (GAO-05-821):

General Comments:

The U.S. Department of Health and Human Services (HHS) appreciates the 
opportunity to comment on the U.S. Government Accountability Office's 
(GAO) draft report concerning how States define and report on work 
participation activities used in the calculation of the work 
participation rates and the scope of HHS's oversight role. Based on the 
survey of 10 States and discussions with HHS staff, the report provides 
information on the variation in States' definitions of work activities 
and the extent of internal controls over the quality and accuracy of 
the work participation data reported to HHS, Administration for 
Children and Families (ACF). The report provides ACF with new and 
useful information.

The report identifies inconsistencies in the way States surveyed define 
individual activities under the 12 statutory categories of work 
activities, as well as the variability in the scope of States' internal 
controls to ensure complete and accurate work participation data. GAO 
concludes that the work participation rates are neither comparable 
between States nor over time within a State. GAO is critical of HHS for 
failing to regulate the definition of work activities or to provide 
adequate direction and oversight in this area.

We do not believe that GAO sufficiently recognizes the statutory 
context of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA). Congress, in enacting PRWORA, 
explicitly specified that the purpose of the statute was to increase 
the flexibility of States to implement a Temporary Assistance for Needy 
Families (TANF) program focused on work and self-sufficiency. While the 
statute provided ACF the authority to regulate the definition of work 
activities, we explored this approach during our proposed and final 
rule-making process, but concluded that such an approach would be 
inconsistent with both the flexibility the statute provided States in 
other areas of the work participation requirements and the overall 
design of the program to foster creativity and innovation in the 
delivery of services at the local level.

Congress clearly did not intend that there be a consistent measure of 
work participation across States or that we make State-by-State 
comparisons for penalty purposes. Congress permitted 19 States to 
continue their Section 1115 (of the Social Security Act) Welfare Reform 
waivers. With respect to the work participation rates, each of the 19 
States had different waiver provisions which allowed them to count 
different activities toward meeting the work requirement. Some States 
were permitted to ignore limits on job search and vocational education 
and/or the 20-hour requirement for core activities. Other States were 
able to set a lower individual standard for required hours of 
participation in work activities (e.g., PRWORA requires 30 hours per 
week for a single parent with a child six years of age or older, of 
which 20 hours per week must come from the core activities) to be 
counted as engaged in work and/or to exclude families from the work 
participation calculation that, absent the waiver, would not be 
excluded. In addition to the waivers, Congress gave States substantial 
latitude in designing programs and policies, which affect the 
population being served by the TANF and Separate State Program- 
Maintenance of Effort programs in each State. This included the 
flexibility not to offer or include all 12 of the work activities that 
can be counted in the work participation rate. In addition, other State 
policies can have differential effects on participation rates. For 
example, States with high benefits and generous earning disregards are 
more likely to have high rates of unsubsidized employment, thereby 
reducing the number of work activity slots that might have to be 
created to serve other TANF families. These built-in differences make 
it extremely difficult to make State-by-State comparisons. Congress 
intended that each State's work participation rate be compared to the 
standard Congress established given the State's flexibility to run its 
own program.

GAO Recommendation:

HHS should revise its regulations to:

* specify the types of activities that can and cannot be included under 
the 12 categories of work activities,

* have HHS oversee States' definitions of activities under the 12 
categories, and:

* set forth criteria on counting actual hours of activities and whether 
there are circumstances under which scheduled hours may be counted.

HHS Comments:

Because Congress is currently considering significant changes to the 
work participation requirements as part of TANF reauthorization, we do 
not think it is appropriate to begin a rule-making process at this 
time. In fact, adopting GAO's recommendations prior to reauthorization 
could create unnecessary disruptions in State programs. If ACF were to 
specify some activities narrowly, some States might drop certain 
program activities, only to have those activities allowed again under 
one of the various reauthorization proposals that give States 
considerable flexibility in defining work activities. At the very 
least, the report should mention that reauthorization is a 
consideration in the timing of revising regulations. However, we will 
consider GAO recommendations when we develop the proposed rule after 
Congress enacts legislation to reauthorize the TANF program.

GAO Recommendation:

We also recommend that HHS develop and implement a plan for working 
with States to improve internal controls over the work participation 
data. This plan could make use of existing resources and include steps 
such as:

* working through its regional offices to identify cost-effective 
internal controls being used by States;

* using regional offices and existing sponsored conferences to share 
information with States on these internal controls and to emphasize the 
importance of internal controls; and:

* obtaining information from States about their experiences using the 
National Directory of New Hires to determine if it has potential for 
helping States collect more complete work participation data and if 
there are any useful practices to he shared with other States.

HHS Comments:

We appreciate the information GAO collected on the internal controls 
from the surveyed States. We also recognize that more can be done to 
ensure increased consistency in the accuracy of these data. ACF has 
relied primarily on results from the Single State Audit for providing 
oversight in this area. As GAO notes in the report, ACF has expanded 
the work participation rate review specifications for completeness and 
accuracy in the Fiscal Year (FY) 2005 Compliance Supplement. GAO 
suggests that recommended increased oversight and technical assistance 
to States by the Department can be done within existing resources. ACF 
is currently exploring options in this area. It should be noted by GAO 
that PRWORA limited HHS's authority and oversight of TANF; hence, 
Federal staffing for the program was reduced by 75 percent several 
years ago.

Other Comments:

Page 1, first paragraph, sixth sentence (and Appendix I), GAO describes 
the work participation rate as "the percentage of a State's adult TANF 
recipients who were engaged in work activities during the year." This 
is not correct. The work participation rate is based on a ratio of 
families, not adults. The annual all families work participation rate 
is an average of the 12 monthly all families work participation rates. 
The monthly all families work participation rate is a ratio of the 
number of families with an adult (or minor child head-of-household) who 
are engaged in work divided by the number of families with an adult (or 
minor child head-of-household) who are required to participate. This 
ratio excludes child-only families and families that are disregarded. 
The families that are disregarded from the all families work 
participation rate include:

(1) families with a single custodial parent and a child under age one; 
(2) families that are required to participate, but are not 
participating and are subject to a sanction for the reporting month, 
but have not been sanctioned for more than three months within the 
preceding 12-month period; (3) families that are part of an ongoing 
research evaluation approved under Section 1115 of the Social Security 
Act; (4) families that are disregarded based on an inconsistency under 
an approved welfare reform waiver that exempts the family; and (5) 
families that are disregarded based on participation in a Tribal work 
program. Many of these disregarded groups are not mentioned in the 
discussion of the calculation and are left out of Figure 1, Appendix 1. 
The annual and monthly definitions of the two-parent work participation 
rates are similar. These rates include only two-parent families; 
however, a two-parent family with a disabled parent is, by statute, not 
used in calculating the two-parent rate.

Page 4, first paragraph, sixth sentence, GAO makes a comparison of a 
State's work participation rate with a waiver and after the waiver 
expired. This is an unfair comparison. Had the waiver not been in 
place, some work activities coded under the waiver category would be 
permitted under other categories (without changing definitions). Also, 
States would have made different decisions about placing recipients in 
various work activities. We cannot accurately measure what the work 
participation rate would have been absent the waiver when the waiver is 
in place.

Appendix 1, it may be useful to add that child-only cases are not 
included in the participation rates and that these cases make up about 
40 percent of the caseload. 

[End of section]

Appendix VI: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

David Bellis (415) 904-2272: 

Staff Acknowledgments: 

The following staff members made major contributions to the report: 
Gale Harris (Assistant Director), Kathy Peyman (Analyst-in-Charge), 
Carolyn Blocker, Amanda Miller, Cady S. Panetta, Tovah Rom, Dan 
Schwimer, and Shana Wallace. 

[End of section]

Related GAO Products: 

Welfare Reform: Rural TANF Programs Have Developed Many Strategies to 
Address Rural Challenges. GAO-04-921. Washington, D.C.: Sept. 10, 2004. 

Supports For Low-Income Families: States Serve a Broad Range of 
Families through a Complex and Changing System. GAO-04-256. Washington, 
D.C.: Jan. 26, 2004. 

Welfare Reform: With TANF Flexibility, States Vary in How They 
Implement Work Requirements and Time Limits. GAO-02-770. Washington, 
D.C.: July 5, 2002. 

Welfare Reform: Federal Oversight of State and Local Contracting Can Be 
Strengthened. GAO-02-661. Washington, D.C.: June 11, 2002. 

Welfare Reform: States Are Using TANF Flexibility to Adapt Work 
Requirements and Time Limits to Meet State and Local Needs. GAO-02- 
501T. Washington, D.C.: Mar. 7, 2002. 

Welfare Reform: More Coordinated Federal Effort Could Help States and 
Localities Move TANF Recipients with Impairments toward Employment. GAO-
02-37. Washington, D.C.: Oct. 31, 2001. 

Welfare Reform: Progress in Meeting Work-Focused TANF Goals. GAO-01- 
522T. Washington, D.C.: Mar. 15, 2001. 

Welfare Reform: Moving Hard-to-Employ Recipients Into the Workforce. 
GAO-01-368. Washington, D.C.: Mar. 15, 2001. 

Welfare Reform: Data Available to Assess TANF's Progress. GAO-01-298. 
Washington, D.C.: Feb. 28, 2001. 

Single Audit: Update of the Implementation of the Single Audit Act 
Amendments of 1996. GAO/AIMD-00-293. Washington, D.C.: Sept. 29, 2000. 

Welfare Reform: Work-Site-Based Activities Can Play an Important Role 
in TANF Programs. GAO/HEHS-00-122. Washington, D.C.: July 28, 2000. 

Standards for Internal Control in the Federal Government. GAO/AIMD-00- 
21.3.1. Washington, D.C.: Nov. 1999. 

Performance Plans: Selected Approaches for Verification and Validation 
of Agency Performance Information. GAO/GGD-99-139. Washington, D.C.: 
July 30, 1999. 

Block Grants: Issues in Designing Accountability Provisions. GAO/AIMD-
95-226. Washington, D.C.: Sept. 1, 1995. 

Welfare to Work: JOBS Participation Rate Data Unreliable for Assessing 
States' Performance. GAO/HRD-93-73. Washington, D.C.: May 5, 1993. 

FOOTNOTES

[1] The fiscal year 2003 work participation rates were the most recent 
available rates at the time of our review. 

[2] To help determine the elements of internal control to address in 
our review, we used GAO, Standards for Internal Control in the Federal 
Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 

[3] Eligibility requirements can include an amount of income that 
recipients can earn and still remain eligible for TANF benefits. 
Referred to as earned income disregards, these provisions affect 
whether recipients who get a paying job can remain eligible for TANF 
while they are working. 

[4] The current House and Senate TANF reauthorization bills propose to 
eliminate the two-parent rate. 

[5] For the purposes of this report, the term "adult" refers to TANF 
recipients age 20 or over or TANF recipients under age 20 who are head 
of a household receiving TANF. 

[6] The states that have paid a penalty for not meeting the two-parent 
work participation rate are Arkansas, Delaware, Iowa, Mississippi, 
Nebraska, New Jersey, New Mexico, North Carolina, Oklahoma, Virginia, 
and West Virginia. 

[7] As of February 2005, Guam and the Virgin Islands, but no states, 
had paid penalties for not meeting the all-family work participation 
rate. 

[8] Chapter 75 of Title 31, United States Code. 

[9] For more information on the Single Audit Act, see GAO, Single 
Audit: Update on the Implementation of the Single Audit Act Amendments 
of 1996, GAO/AIMD-00-293 (Washington, D.C.: Sept. 29, 2000). 

[10] The dollar threshold, currently set at $500,000, for determining 
which entities are subject to a single audit is adjusted periodically 
by the Director of the Office of Management and Budget. 

[11] For more information on separate state programs for two-parent 
families, see GAO, Welfare Reform: With TANF Flexibility, States Vary 
in How They Implement Work Requirements and Time Limits, GAO-02-770 
(Washington, D.C.: July 5, 2002). 

[12] States with separate state programs for two-parent families do not 
have two-parent families in their TANF program and, therefore, do not 
have a two-parent family work participation rate. Also, two-parent 
families in a separate state program are not included in the state's 
all-family work participation rate. 

[13] Officials from California said that they created a separate state 
program for two-parent families in order "to study the unique 
characteristics and needs of this large and diverse population."

[14] In California, when the adult is sanctioned, the family's monthly 
benefit is reduced by the amount of the adult's share. In other states, 
the case would be classified as partially sanctioned and would be 
removed from the work participation rate calculation for 3 months. 
However, after those 3 months, the case would again be counted in the 
work participation rate calculation. 

[15] We considered the reviews to be timely if they were conducted at 
least once a year. 

[16] The purpose of the NDNH, maintained by HHS's Office of Child 
Support Enforcement, is to provide a national directory of employment 
and unemployment insurance information to enable state child support 
enforcement agencies to be more effective in locating noncustodial 
parents who are responsible for paying child support. State directories 
of new hires, state employment security agencies, and federal agencies 
provide information to the NDNH. 

[17] 45 C.F.R. 265.7(a). 

[18] 64 Fed. Reg. 17779 (April 12, 1999). 

[19] U.S. Department of Health and Human Services, TANF Program Policy 
Questions and Answers, HHS Web site: 
http://www.acf.hhs.gov/programs/ofa/polquest/index.htm. 

[20] U.S. Department of Health and Human Services, TANF Data Report-
Section One, Disaggregated Data Collection for Families Receiving 
Assistance under the TANF Program. 

[21] HHS threatened to penalize Pennsylvania for reporting poor quality 
work participation data, and in response, Pennsylvania developed a 
corrective compliance plan to address its data problems. 

[22] Because all states' single audits do not review TANF annually, we 
asked state auditors about the most recent single audit that did cover 
the TANF program. In some states, this audit was not the most recent 
single audit. 

[23] In Maryland, the single audit did not test the work participation 
data, but other audits did. The auditors identified internal control 
weaknesses over the work participation data that, according to state 
officials, have since been corrected. 

[24] While the most recent single audit for New York did not have 
findings related to work participation data, past single audits found 
that reported hours lacked documentation to verify that hours reported 
were actually worked. The state took corrective action as a result of 
these findings. 

[25] About one-half the states report using the universe, and about one-
half report using a sample. 

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