This testimony discusses the progress of welfare reform. GAO found that states are transforming the nation's welfare system into a work-based, temporary assistance program for needy families, with a focus on moving people into employment rather than signing them up for cash assistance. States' implementation of Temporary Assistance for Needy Families (TANF), undertaken in a time of strong economic growth, has been accompanied by a 50 percent decline in the number of families receiving cash welfare. GAO's review of state-sponsored studies available in 1999 and several more recent studies show that most of the adults in families remaining off the welfare rolls were employed at some time after leaving welfare. All six of the states GAO visited have modified their "work first" programs to better serve recipients who face difficulties in entering the workforce. States have found that some of the recipients with such difficulties do, in fact, find jobs. Although states have made significant progress in meeting work-focused goals attention should be paid to the following issues: (1) emphasizing and enhancing work-based strategies, including engaging hard-to-employ recipients in work and helping families stay off welfare and increase their earnings, and (2) fostering and facilitating improved management and service delivery approaches by states.