TANF and Child Care Expenditure Accountability

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Child care assistance is critical for families to become self-sufficient and is also needed to support low-wage working families to avoid welfare receipt.

The Temporary Assistance for Needy Families (TANF) Block Grant is an annual federal allocation to states that can be used to help families avoid welfare. States are also required to spend at least 80% of the funds they spent in 1994 on families prior to the creation of TANF under welfare reform. These state funds are referred to as maintenance of effort or MOE.

TANF funds can be used in a flexible manner designed by states to:

• Provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives
• End the dependence of needy parents on government benefits by promoting job preparation, work, and marriage
• Prevent and reduce the incidence of out-of-wedlock pregnancies
• Encourage the formation and maintenance of two-parent families

TANF expenditures fall into two categories: “Assistance” and “Non-assistance.”

Assistance generally refers to monthly cash benefits or supportive services that help families receiving monthly cash aid.

Non-assistance generally refers to supportive services provided to families not receiving monthly cash aid (e.g., child care, PreKindergarten, education and training, as well as services for low-income children and families, fatherhood programs, and short-term benefits such as emergency housing payments).

To support parents in obtaining and retaining employment, states can transfer up to 30% of their TANF funds to the Child Care and Development Block Grant (CCDBG).

When transferred to CCDBG, funds are spent in compliance with state regulations and requirements.

States can also spend directly on child care, which allows funds to be spent on any child care regardless of health, safety and quality of care. The law requires states to report only the total amount spent on child care, but no other information. States are not required to report the number of children and families served, the amount of assistance, or if the care meets minimum health and safety requirements or conducts background checks for providers.

In contrast, when TANF funds are transferred to CCDBG, requirements under CCDBG law must be followed. This includes reporting the number of children receiving assistance, the type of care that they receive, the average amount of monthly assistance provided, and other demographic information. This data helps provide accountability for the expenditure of public dollars.

A recent report from the U.S. Government Accountability Office (GAO) showed that spending on non-assistance as a share of all TANF spending significantly increased between 2015 and 2022 while spending on assistance declined. In Fiscal Year 2022, 25.2% of TANF funds were spent on assistance, 44.2% were spent on non-assistance, 13.6% on both assistance and non-assistance combined, and the remainer spent on administrative costs and transfers to other block grants.

States are allowed to keep unobligated funds indefinitely. GAO reported that TANF unobligated balances increased from $4 billion in FY2015 to $9 billion in FY2022. Unobligated funds do not lapse. They grow over time and can be drawn down for use related to any of the law’s four goals. While these funds can be spent by states, they cannot be transferred to CCDBG or Title XX.

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