Regulations for TANF program

APPENDIX B -- Proposed TANF Data Report - Section Two (Disaggregated Data Collection for Families No Longer Receiving Assistance under the TANF Program)

APPENDIX C -- Proposed TANF Data Report - Section Three (Aggregated Data Collection for Families Applying for, Receiving, and No Longer Receiving Assistance under the TANF Program)

APPENDIX D -- Proposed TANF Financial Report and Fourth Quarter Addendum

APPENDIX E -- Proposed TANF MOE Data Report - Section One (Disaggregated Data Collection for Families Receiving Assistance under the Separate State Programs)

APPENDIX F -- Proposed TANF MOE Data Report - Section Two (Disaggregated Data Collection for Families No Longer Receiving Assistance under the Separate State Programs)

APPENDIX G -- Proposed TANF MOE Data Report - Section Three (Aggregated Data Collection for Families Receiving Assistance under the Separate State Programs)

APPENDIX H -- Sampling Specifications

APPENDIX I -- Statutory Reference Table for Appendix A

APPENDIX J -- Statutory Reference Table for Appendix B

APPENDIX K -- Statutory Reference Table for Appendix C

PART 270 -- GENERAL TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) PROVISIONS

§270.10 What does this part cover?

This part includes regulatory provisions that generally apply to the Temporary Assistance for Needy Families (TANF) program.

§270.20 What is the purpose of the TANF program?

The TANF program has the following four purposes:

(a) Provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives;

(b) End the dependence of needy parents on government benefits by promoting job preparation, work, and marriage;

(c) Prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies;

(d) Encourage the formation and maintenance of two-parent families.

§270.30 What definitions apply under the TANF regulations?

The following definitions apply under parts 270 through 275 of this chapter:

ACF means the Administration for Children and Families.

Act means Social Security Act, unless otherwise specified.

Adjusted State Family Assistance Grant, or adjusted SFAG, means the SFAG amount, minus any reductions for Tribal Family Assistance Grants paid to Tribal grantees on behalf of Indian families residing in the State.

Adult means an individual who is not a "minor child," as defined elsewhere in this section.

AFDC means Aid to Families with Dependent Children.

Aid to Families with Dependent Children means the welfare program in effect under title IV-A of prior law.

Assistance means every form of support provided to families under TANF (including child care, work subsidies, and allowances to meet living expenses), except: services that have no direct monetary value to an individual family and that do not involve implicit or explicit income support, such as counseling, case management, peer support, and employment services that do not involve subsidies or other forms of income support; and one-time, short-term assistance (i.e., assistance paid within a 30-day period, no more than once in any twelve-month period, to meet needs that do not extend beyond a 90-day period, such as automobile repair to retain employment and avoid welfare receipt and appliance repair to maintain living arrangements). This definition does not apply to the use of the term assistance at part 273, subpart A, of this chapter.

CCDF means the Child Care and Development Fund, or those child care programs and services funded either under section 418(a) of the Act or the Child Care and Development Block Grant Act of 1990, 42 U.S.C. 9801 note.

Commingled State TANF expenditures means expenditure of State funds that are made within the TANF program and commingled with Federal funds.

Contingency Fund means Federal funds available at section 403(b) of the Act, and contingency funds means the Federal monies made available to States under that section. It does not include any State funds expended as a requirement of that section.

Contingency Fund MOE means the MOE expenditures that a State must make in order to: meet the MOE requirements at sections 403(b)(4) and 409(a)(10) of the Act and subpart B of part 274 of this chapter; and retain contingency funds made available to the State. The only expenditures that qualify for Contingency Fund MOE are State TANF expenditures and, in certain cases, child care expenditures made under the Child Care and Development Fund (CCDF).

EA means Emergency Assistance.

Eligible State means a State that, during the 2-year period immediately preceding the fiscal year, has submitted a TANF plan that we have determined is complete.

Emergency Assistance means the program option available to States under sections 403(a)(5) and 406(e) of prior law to provide short-term assistance to needy families with children.

Family Violence Option (or FVO) means the provision at section 402(a)(7) of the Act under which States may elect to implement comprehensive strategies for identifying and serving victims of domestic violence.

FAMIS means the automated statewide management information system under sections 402(a)(30), 402(e), and 403 of prior law.

Federal expenditures means expenditures by a State of Federal TANF funds.

Federal funds and Federal TANF funds have the same meaning as TANF funds, as defined in this section.

Fiscal year means the 12-month period beginning on October 1 of the preceding calendar year and ending on September 30.

FY means fiscal year.

Good cause domestic violence waiver means a waiver of one or more program requirements granted by a State to a victim of domestic violence under the Family Violence Option that is:

Granted appropriately, based on need, as determined by an individualized assessment;
Temporary, for a period not to exceed six months; and
Accompanied by an appropriate services plan designed to provide safety and lead to work.

IEVS means the Income and Eligibility Verification System operated pursuant to the provisions in section 1137 of the Act.

Inconsistent means that complying with a TANF requirement would necessitate that a State change a policy reflected in an approved waiver.

Indian, Indian Tribe and Tribal Organization have the meaning given such terms by section 4 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b), except that the term "Indian tribe" means, with respect to the State of Alaska, only the Metlakatla Indian Community of the Annette Islands Reserve and the following Alaska Native regional nonprofit corporations:

Arctic Slope Native Association;
Kawerak, Inc.;
Maniilaq Association;
Association of Village Council Presidents;
Tanana Chiefs Council;
Cook Inlet Tribal Council;
Bristol Bay Native Association;
Aleutian and Pribilof Island Association;
Chugachmuit;
Tlingit Haida Central Council;
Kodiak Area Native Association; and
Copper River Native Association.

Job Opportunities and Basic Skills Training Program means the program under title IV-F of prior law to provide education, training and employment services to welfare recipients.

JOBS means the Job Opportunities and Basic Skills Training Program.

Minor child means an individual who:

Has not attained 18 years of age; or
Has not attained 19 years of age and is a full-time student in a secondary school (or in the equivalent level of vocational or technical training).

MOE means maintenance-of-effort.

Needy State is a term that pertains to the provisions on the Contingency Fund and the penalty for failure to meet participation rates. It means, for a month, a State where:

(1)(i) The average rate of total unemployment (seasonally adjusted) for the most recent 3-month period for which data are published for all States equals or exceeds 6.5 percent; and

(ii) The average rate of total unemployment (seasonally adjusted) for such 3-month period equals or exceeds 110 percent of the average rate for either (or both) of the corresponding 3-month periods in the two preceding calendar years; or

(2) The Secretary of Agriculture has determined that the average number of individuals participating in the Food Stamp program in the State has grown at least ten percent in the most recent three-month period for which data are available.

Prior law means the provisions of title IV-A and IV-F of the Act in effect as of August 21, 1996. They include provisions related to Aid to Families with Dependent Children (or AFDC), Emergency Assistance (or EA), Job Opportunities and Basic Skills Training (or JOBS), and FAMIS.

PRWORA means the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, or Pub. L. 104-193, 42 U.S.C. 1305 note.

Qualified Aliens has the meaning prescribed under section 431 of PRWORA, as amended by the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, or Pub. L. 104-208, 8 U.S.C. 1101 note.

Qualified State Expenditures means the total amount of State funds expended during the fiscal year that count for TANF MOE purposes. It includes expenditures, under any State program, for any of the following with respect to eligible families:

Cash assistance;
Child care assistance;
Educational activities designed to increase self-sufficiency, job training, and work, excluding any expenditure for public education in the State except expenditures involving the provision of services or assistance of an eligible family that is not generally available to persons who are not members of an eligible family;
Any other use of funds allowable under subpart A of part 273 of this chapter; and
Administrative costs in connection with the matters described in paragraphs (1), (2), (3) and (4) of this definition, but only to the extent that such costs do not exceed 15 percent of the total amount of qualified State expenditures for the fiscal year.

Secretary means Secretary of the Department of Health and Human Services or any other Department official duly authorized to act on the Secretary's behalf.

Segregated State TANF expenditures means the expenditure of State funds within the TANF program that are not commingled with Federal funds.

Separate State program means a program operated outside of TANF in which the expenditures of State funds may count for TANF MOE purposes.

SFAG means State Family Assistance Grant, as defined in this section.

SFAG payable means the SFAG amount, reduced, as appropriate, for any Tribal Family Assistance Grants made on behalf of Indian families residing in the State and any penalties imposed on a State under this chapter.

Single audit means an audit or supplementary review conducted under the authority of the Single Audit Act at 31 U.S.C. chapter 75.

State means the 50 States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, and American Samoa, unless otherwise specified.

State Family Assistance Grant means the amount of the basic block grant allocated to each eligible State under the formula at section 403(a)(1) of the Act.

State MOE expenditures means the expenditure of State funds that may count for purposes of the TANF MOE requirements at section 409(a)(7) of the Act and the Contingency Fund MOE requirements at sections 403(b)(4) and 409(a)(10) of the Act.

State TANF expenditures means the expenditure of State funds within the TANF program.

TANF means The Temporary Assistance for Needy Families Program.

TANF funds means all funds provided to the State under section 403 of the Act, including the SFAG, any bonuses, supplemental grants, or contingency funds.

TANF MOE means the expenditure of State funds that must be made in order to meet the MOE requirement at section 409(a)(7) of the Act.

TANF program means a State program of family assistance operated by an "eligible State" under its State TANF plan. Territories means Puerto Rico, the Virgin Islands, Guam, and American Samoa.

Title IV-A refers to the title and part of the Act that now includes TANF, but previously included AFDC and EA. For the purpose of the TANF program regulations, this term does not include child care programs authorized and funded under section 418 of the Act, or their predecessors, unless we specify otherwise.

Tribal Family Assistance Grant means a grant paid to a Tribe that has an approved Tribal family assistance plan under section 412(a)(1) of the Act.

Tribal grantee means a Tribe that receives Federal funds to operate a Tribal TANF program under section 412(a) of the Act.

Tribal TANF program means a TANF program developed by an eligible Tribe, Tribal organization, or consortium and approved by us under section 412 of the Act.

Tribe means Indian Tribe or Tribal organization, as defined elsewhere in this section. The definition may include Tribal consortia (i.e., groups of federally recognized Tribes or Alaska Native entities that have banded together in a formal arrangement to develop and administer a Tribal TANF program).

Victim of domestic violence means an individual who is battered or subject to extreme cruelty under the definition at section 408(a)(7)(B)(iii) of the Act.

Waiver refers to a specific action taken by the Secretary under the authority of section 1115 of the Act to allow a State to operate a program that does not follow specific requirements of prior law. For the purpose of parts 270 through 275 of this chapter and section 415 of the Act, it consists of provisions necessary to achieve the State's policy objective. It includes the approved revised AFDC requirements, articulated in the State's waiver list. It also includes those provisions of prior law that:

Did not need to be waived as part of the waiver package; and
Were integral and necessary to achieve the State's policy objective for the approved waiver.

We (and any other first person plural pronouns) means the Secretary of Health and Human Services or any of the following individuals or organizations acting in an official capacity on the Secretary's behalf: the Assistant Secretary for Children and Families, the Regional Administrators for Children and Families, the Department of Health and Human Services, and the Administration for Children and Families.

Welfare-to-Work means the new program for funding work activities at section 403(a)(5) of the Act.

WTW means Welfare-to-Work.

§270.40 When are these provisions in effect?

(a) The TANF statutory requirements go into effect no sooner than a State's implementation of its TANF program. Each State must implement its TANF program no later than July 1, 1997.

(b) In determining whether a State is subject to a penalty under parts 271 through 275 of this chapter, we will not apply the regulatory provisions in parts 270 through 275 of this chapter retroactively. We will judge State behavior and actions that occur prior to [effective date of final rules] only against a reasonable interpretation of the statutory provision in title IV-A of the Act.

PART 271 -- ENSURING THAT RECIPIENTS WORK

§271.1 What does this part cover?

This part includes the regulatory provisions relating to the mandatory work requirements of TANF.

§271.2 What definitions apply to this part?

The general TANF definitions at §270.30 of this chapter apply to this part.

Subpart A -- Individual Responsibility

§271.10 What work requirements must an individual meet?

(a) A parent or caretaker receiving assistance must engage in work activities when the State has determined that the individual is ready to engage in work or when (s)he has received assistance for a total of 24 months, whichever is earlier. The State must define what it means to engage in work for this requirement, which can include participation in work activities in accordance with section 407 of the Act.

(b) If a parent or caretaker has received assistance for two months, (s)he must participate in community service employment, unless the State has exempted the individual from work requirements or (s)he is already engaged in work activities as described at §271.30. The State will determine the minimum hours per week and the tasks the individual must perform as part of the community service employment. This requirement takes effect no later than August 22, 1997, unless the governor of the State opts out of this provision by notifying HHS.

§271.11 Which recipients must have an assessment under TANF?

(a) The State must make an initial assessment of the skills, prior work experience, and employability of each recipient who is at least age 18 or who has not completed high school (or equivalent) and is not attending secondary school.

(b) The State may make any required assessments within 90 days (180 days, at State option) of the date it implements the TANF program for anyone receiving assistance as of that date. For anyone else who must have an assessment, the State may assess an individual within 30 days (90 days, at State option) of the date (s)he becomes eligible for assistance.

§271.12 What is an individual responsibility plan?

An individual responsibility plan is a plan developed at State option, in consultation with the individual, on the basis of the assessment made under §271.11. The plan:

(a) Should set an employment goal for the individual and a plan for moving immediately into private sector employment;

(b) Should describe the obligations of the individual. These could include going to school, maintaining certain grades, keeping school-age children in school, immunizing children, going to parenting or money management classes, or doing other things that will help the individual become and remain employed in the private sector;

(c) Should be designed to move the individual into whatever private sector employment (s)he is capable of handling as quickly as possible, and to increase over time the responsibility and the amount of work the individual handles;

(d) Should describe the services the State will provide the individual; and

(e) May require the individual to undergo appropriate substance abuse treatment.

§271.13 May an individual be penalized for not following an individual responsibility plan?

Yes. If an individual fails without good cause to comply with an individual responsibility plan that (s)he has signed, the State may reduce the amount of assistance otherwise payable to the family, by whatever amount it considers appropriate. This penalty is in addition to any other penalties under the State's TANF program.

§271.14 What is the penalty if an individual refuses to engage in work?

If an individual refuses to engage in work required under section 407 of the Act, the State must reduce or terminate the amount of assistance payable to the family, subject to any good cause or other exceptions the State may establish. A grant reduction must be at least prorated, based on the portion of the month in which the individual refuses to work, but could be greater.

§271.15 Can a family be penalized if a parent refuses to work because (s)he cannot find child care?

(a) If the individual is a single custodial parent caring for a child under age six, the State may not reduce or terminate assistance for the parent's refusal to engage in required work if (s)he demonstrates an inability to obtain needed child care for one or more of the following reasons:

(1) Appropriate child care within a reasonable distance from the home or work site is unavailable;

(2) Informal child care by a relative or under other arrangements is unavailable or unsuitable; or

(3) Appropriate and affordable formal child care arrangements are unavailable.

(b)(1) The State will determine when the individual has demonstrated that (s)he cannot find child care, in accordance with criteria established by the State.

(2) These criteria must:

(i) Address the procedures that the State uses to determine if the parent has a demonstrated inability to obtain needed child care;

(ii) Include definitions of the terms "appropriate child care," reasonable distance," "unsuitability of informal care," and "affordable child care arrangements"; and

(iii) Be submitted to us.

§271.16 Does the imposition of a penalty affect an individual's work requirement?

A penalty imposed by a State against the family of an individual by reason of the failure of the individual to comply with a requirement under TANF shall not be construed to be a reduction in any wage paid to the individual, and shall not result in a reduction in the number of hours of work required.

Subpart B -- State Accountability

§271.20 How will we hold a State accountable for achieving the work objectives of TANF?

(a) Each State must meet two separate work participation rates, one based on how well it succeeds in helping adults in two-parent families find work activities described at §271.30 (the two-parent rate), the other based on how well it succeeds in finding those activities for adults in all families it serves (the overall rate).

(b) Each State must submit data to allow us to measure its success in requiring adults to participate in work activities, as specified at §275.3 of this chapter.

(c) If the data show that a State met both participation rates in a fiscal year, then the percentage of historic State expenditures that it must expend under TANF, pursuant to §273.1 of this chapter, decreases from 80 to 75 percent for that fiscal year. This is also known as the State's "maintenance of effort" requirement.

(d) If the data show that a State did not meet either minimum work participation rate for a fiscal year, a State could be subject to a financial penalty.

(e) Before we impose a penalty, a State will have the opportunity to claim reasonable cause or enter into a corrective compliance plan, pursuant to §§ 272.5 and 272.6 of this chapter.

§271.21 What overall work rate must a State meet?

Each State must achieve the following minimum overall participation rate:

If the fiscal year is: then the minimum participation rate is:

1997 25

1998 30

1999 35

2000 40

2001 45

2002 and thereafter 50

§271.22 How will we determine a State's overall work rate?

(a) The overall participation rate for a fiscal year is the average of the State's overall participation rates for each month in the fiscal year.

(b)(1) We determine a State's overall participation rate for a month as follows:

(i) The number of families receiving TANF assistance that include an adult or a minor head-of-household who is engaged in work for the month (the numerator); divided by

(ii) The number of families receiving TANF assistance during the month that include an adult or a minor head-of-household minus the number of families that are subject to a penalty for refusing to work in that month (the denominator). However, if a family has been sanctioned for more than three of the last 12 months, we will not deduct it from the denominator.

(2) States may define families receiving TANF assistance...that include an adult or a minor child head-of household, but may not exclude families from the definition solely for the purpose of avoiding penalties under §271.50.

(i) States shall report to us annually on the number of families excluded because of the State's definition and the circumstances underlying each exclusion.

(ii) Where we find that a State has excluded families for the purpose of avoiding a penalty for work participation, we shall include those families in the calculation in paragraph (b)(1) of this section in determining whether a State is subject to the penalty described in §271.50.

(c) A State has the option of not requiring a single custodial parent caring for a child under age one to engage in work. If the State adopts this option, it may disregard such a family in the participation rate calculation for a maximum of 12 months.

(d) If a family receives assistance for only part of a month, the State may count it as a month of participation if an adult in the family is engaged in work for the minimum average number of hours in each full week that the family receives assistance in that month.

§271.23 What two-parent work rate must a State meet?

A State receiving a TANF grant for a fiscal year must achieve the following minimum two-parent participation rate:

If the fiscal year is: then the minimum participation rate is:

1997 75

1998 75

1999 and thereafter 90

§271.24 How will we determine a State's two-parent work rate?

(a) The two-parent participation rate for a fiscal year is the average of the State's two-parent participation rates for each month in the fiscal year.

(b)(1) We determine a State's two-parent participation rate for a month as follows:

(i) The number of two-parent families receiving TANF assistance that include an adult (or minor child head-of-household) and other parent who meet the requirements set forth in §271.32 for the month (the numerator); divided by

(ii) The number of two-parent families receiving TANF assistance during the month minus the number of two-parent families that are subject to a penalty for refusing to work in that month (the denominator). However, if a family has been sanctioned for more than three of the last 12 months, we will not deduct it from the denominator.

(i) States shall report to us annually on the number of families excluded because of the State's definition and the circumstances underlying each exclusion.

(ii) Where we find that a State has excluded families for the purpose of avoiding a penalty for work participation, we shall include those families in the calculation in paragraph (b)(1) of this section in determining whether a State is subject to the penalty described in §271.50.

(c) If a family receives assistance for only part of a month, the State may count it as a month of participation if an adult in the family (both adults, if they are both required to work) is engaged in work for the minimum average number of hours in each full week that the family receives assistance in that month.

(d) If a family includes a disabled parent, the family is not considered a two-parent family for the participation rate. Such a family is not included in either the numerator or denominator of the two-parent rate.

§271.25 Does a State include Tribal families in calculating these rates?

A State has the option of including families that are receiving assistance under an approved tribal family assistance plan or under a tribal work program in calculating the State's participation rates under §§ 271.22 and 271.24.

Subpart C -- Work Activities and How to Count Them

§271.30 What are "work activities"?

Work activities include:

(a) Unsubsidized employment;

(b) Subsidized private sector employment;

(d) Work experience;

(e) On-the-job training (OJT);

(f) Job search and job readiness assistance;

(g) Community service programs;

(h) Vocational educational training;

(i) Job skills training directly related to employment;

(j) Education directly related to employment, in the case of a recipient who has not received a high school diploma or a certificate of high school equivalency;

(k) Satisfactory attendance at secondary school or in a course of study leading to a certificate of general equivalence, if a recipient has not completed secondary school or received such a certificate; and

(l) Providing child care services to an individual who is participating in a community service program.

§271.31 How many hours must an individual participate to count in the numerator of the overall rate?

(a) An individual counts as engaged in work for a month for the overall rate if (s)he participates in work activities during the month for at least the minimum average number of hours per week listed in the following table.

If the fiscal year is: then the minimum average hours per week is:

1997 20

1998 20

1999 25

2000 or thereafter 30

(b)(1) In addition, for the individual to count as engaged in work, at least 20 per week of the above hours must come from participation in certain of the activities listed in §271.30. The following nine activities count for the first 20 hours of participation: unsubsidized employment; subsidized private sector employment; subsidized public sector employment; work experience; on-the-job training; job search and job readiness assistance; community service programs; vocational educational training; and providing child care services to an individual who is participating in a community service program.

(2) Above 20 hours per week, the following three activities may also count for participation: job skills training directly related to employment; education directly related to employment; and satisfactory attendance at secondary school or in a course of study leading to a certificate of general equivalence.

When does the activity count?

Activity
Overall rate

2-Parent rate

20 hours hours above 20 30/50 hours (without/with Fed child care) hours above 30/50

(a) unsubsidized employment __ __ __ __

(b) subsidized private sector employment __ __ __ __

(c) subsidized public sector employment __ __ __ __

(d) work experience __ __ __ __

(e) OJT __ __ __ __

(f) job search & job readiness __ __ __ __

(g) community service programs __ __ __ __

(h) vocational educational training __ __ __ __

(i) job skills training no __ no __

(j) education directly related to employment no¹ __ no¹ __

(k) high school or GED no¹ __ no¹ __

(l) providing child care services to a community service participant __ __ __ __

¹Teen parents may count due to participation in these activities. Refer to §271.33.

§271.32 How many hours must an individual participate to count in the numerator of the two-parent rate?

(a) If an individual and the other parent in the family are participating in work activities for an average of at least 35 hours per week during the month, then (s)he counts as engaged in work for a two-parent family for the month, subject to paragraph (c) of this section.

(b)(1) In addition, at least 30 of the 35 hours per week must come from participation in certain of the activities listed in §271.30 for the individual to count as engaged in work. The following nine activities count for the first 30 hours of participation: unsubsidized employment; subsidized private sector employment; subsidized public sector employment; work experience; on-the-job training; job search and job readiness assistance; community service programs; vocational educational training; and providing child care services to an individual who is participating in a community service program.

(2) Above 30 hours per week, the following three activities may also count for participation: job skills training directly related to employment; education directly related to employment; and satisfactory attendance at secondary school or in a course of study leading to a certificate of general equivalence.

(c)(1) If the family receives federally-funded child care assistance and an adult in the family is not disabled or caring for a severely disabled child, then the individual and the other parent must be participating in work activities for an average of at least 55 hours per week for the individual to count as engaged in work for a two-parent family for the month.

(2) At least 50 of the 55 hours per week must come from participation in the activities listed in paragraph (b)(1) of this section.

(3) Above 50 hours per week, the three activities listed in paragraph (b)(2) of this section may also count for participation.

(d) The chart in §271.31 lists when each activity counts in the two-parent rate.

§271.33 What are the special requirements concerning educational activities in determining monthly participation rates?

(a) Vocational educational training may only count for a total of 12 months for any individual.

(b) A married or single head-of-household under 20 years old counts as engaged in work in a month if (s)he:

(1) Maintains satisfactory attendance at a secondary school or the equivalent during the month; or

(2) Participates in education directly related to employment for an average of at least 20 hours per week during the month.

(c) In counting individuals for each participation rate, not more than 30 percent of individuals engaged in work may be included because they are participating:

(1) In vocational educational training; or

(2) In fiscal year 2000 or thereafter, as a teen parent in educational activities described in paragraph (b) of this section.

§271.34 Are there any limitations in counting job search and job readiness assistance toward the participation rates?

Yes. There are four limitations concerning job search and job readiness.

(a) Except as provided in paragraph (b) of this section, an individual's participation in job search or job readiness assistance counts for only six weeks in any fiscal year.

(b) If the State's total unemployment rate for a fiscal year is at least 50 percent greater than the United States' total unemployment rate for that fiscal year or if the State meets the definition of a needy State, specified at §270.30 of this chapter, then an individual's participation in job search or job readiness assistance counts for up to 12 weeks in that fiscal year.

(c) An individual's participation in job search and job readiness assistance counts for no more than four consecutive weeks in a fiscal year.

(d) Not more than once for any individual in a fiscal year, a State may count three or four days of job search and job readiness assistance during a week as a full week of participation.

§271.35 Are there any special work provisions for single custodial parents?

Yes. A single custodial parent or caretaker relative with a child under age six will count as engaged in work if (s)he participates for at least an average of 20 hours per week.

§271.36 Do welfare reform waivers affect what activities count as engaged in work?

A welfare reform waiver could affect what activities count as engaged in work, if it meets the requirements at §271.60.

Subpart D -- Caseload Reduction Factor for Minimum Participation Rates

§271.40 Is there a way for a State to reduce the work participation rates?

(a) If the average monthly number of cases receiving assistance, including assistance under a separate State program, in a State in the preceding fiscal year was lower than the average monthly number of cases that received assistance in FY 1995, the minimum participation rate the State must meet for the fiscal year will decrease by the number of percentage points the caseload fell in comparison to the FY 1995 caseload. The number of percentage points by which the caseload falls is referred to as the caseload reduction factor.

(b) The calculation in paragraph (a) of this section must disregard any caseload reductions due either to requirements of Federal law or to changes that a State has made in its eligibility criteria in comparison to its criteria in effect in FY 1995.

(c) To establish the caseload base for fiscal year 1995, we will use the number of AFDC cases reported on ACF-3697, Statistical Report on Recipients Under Public Assistance. For subsequent years, we will use AFDC data from this same report, supplemented by caseload information from the TANF Data Report and the TANF MOE Data Report for appropriate States beginning with the fourth quarter of fiscal year 1997. To qualify for a caseload reduction, a State must have reported monthly caseload information, including cases in separate State programs, for the preceding year for cases receiving assistance as defined at §271.43.

§271.41 How will we determine the caseload reduction factor?

(a) We will determine the appropriate caseload reduction that applies to each State based on reliable, validated information and estimates reported to us by the State. We will determine whether the information and estimates provided are acceptable, based on the criteria listed in paragraph (d) of this section. We will also conduct periodic, on-site reviews and inspect administrative records on applications and terminations to validate the accuracy of the State estimates.

(b) In order to receive a reduction in the overall participation rate, a State must submit the Caseload Reduction Report to us containing the following information:

(1) A complete listing of and implementation dates for all eligibility changes, as defined at §271.42, made by the State since the beginning of FY 1995, all changes in Federal requirements and implementation dates for each change since FY 1995, and a listing of the reasons (such as found employment) for case closures;

(2) A numerical estimate of the impact on the caseload of each eligibility change or case closure reason;

(3) A description of the methodology and the supporting data that it used to calculate its caseload reduction estimates; and

(4) A certification from the Governor that it has taken into account all reductions resulting from changes in Federal and State eligibility.

(c) A State requesting a caseload reduction shall provide separate estimates and information for the overall and two-parent family rates.

(1) The State must base its estimate for the overall case rate on decreases in its overall caseload compared to the AFDC caseload in FY 1995.

(2) The State must base its estimate for two-parent cases on decreases in its two-parent caseload compared to the AFDC Unemployed Parent caseload in FY 1995.

(d)(1) For each State, we will assess the adequacy of information and estimates using the following criteria: methodology, estimates and impact compared to other States; quality of data; and completeness and adequacy of the documentation.

(2) If we request additional information, the State must provide the information within two weeks of the date of our request.

(3) The State must provide sufficient data to document the information submitted under paragraph (b) of this section.

(e) We will not consider a caseload reduction factor for approval unless the State reports case-record data on individuals and families served by any separate State program, as required under §275.3(d) of this chapter.

(f) A State may only apply the caseload reduction factor that we have determined to its participation rate. If a State disagrees with our caseload reduction factor, then the determination may be considered an adverse action; therefore, a State has the right to appeal such a decision, as specified at §272.7 of this chapter.

§271.42 Which reductions count in determining the caseload reduction factor?

(a)(1) Each State's estimate must factor out any caseload decreases due to Federal requirements or State changes in eligibility rules since FY 1995 that directly affect a family's eligibility for assistance (e.g., more stringent income and resource limitations, time limits).

(2) A State need not factor out calculable effects of enforcement mechanisms or procedural requirements that are used to enforce existing eligibility criteria (e.g., fingerprinting or other verification techniques) to the extent that such mechanisms or requirements identify or deter families ineligible under existing rules.

(b) States must include cases receiving assistance in separate State programs as part of its caseload. However, we will consider excluding cases in the separate State program under the following circumstances, if adequately documented:

(1) The cases overlap with or duplicate cases in the TANF caseload;

(2) They are cases made ineligible for Federal benefits by Pub. L. 104-193 that are receiving only State-funded cash assistance, nutrition assistance, or other benefits; or

(3) They are cases that are receiving only State earned income tax credits, child care, transportation subsidies or benefits for working families that are not directed at their basic needs.

§271.43 What is the definition of a "case receiving assistance" in calculating the caseload reduction factor?

(a) The caseload reduction factor is based on decreases in caseload (other than those excluded pursuant to §271.42) in both a State's TANF program and in any separate State programs that are used to meet the maintenance-of-effort requirement.

(b)(1) For fiscal year 1995, we will use AFDC caseload data.

(2) For all other fiscal years, we will determine the caseload based on all cases in a State receiving assistance (according to the definition of assistance at §270.30).

§271.44 When must a State report the required data on the caseload reduction factor?

(a) A State must report the necessary documentation on the caseload reduction factor for the preceding fiscal year by November 15.

(b) We will notify the State of whether we approve or reject the proposed reduction factor by the following February 15.

Subpart E -- State Work Penalties

§271.50 What happens if a State fails to meet the participation rates?

(a) If we determine that a State did not achieve one of the required minimum work participation rates, we must reduce the SFAG payable to the State.

(b)(1) If there was no penalty for the preceding fiscal year, the penalty for the current fiscal year is five percent of the adjusted SFAG.

(2) For each consecutive year that the State is subject to a penalty under this part, we will increase the amount of the penalty by two percentage points over the previous year's penalty. However, the penalty can never exceed 21 percent of the State's adjusted SFAG.

(c) We impose a penalty by reducing the SFAG payable for the fiscal year that immediately follows our final determination that a State is subject to a penalty and our final determination of the penalty amount.

(d) In accordance with the procedures specified at §272.4 of this chapter, a State may dispute our determination that it is subject to a penalty.

§271.51 Under what circumstances will we reduce the amount of the penalty below the maximum?

(a) In order to qualify for a penalty reduction under paragraphs (b)(3) and (c) of this section, the State must demonstrate that it has not diverted cases to a separate State program for the purpose of avoiding the work participation requirements.

(b) We will reduce the amount of the penalty based on the degree of the State's noncompliance.

(1) If the State fails only the two-parent participation rate specified at §271.23, its maximum penalty will be a percentage of the penalty specified at §271.50. This percentage will equal the percentage of the State's two-parent cases

(2) If the State fails the overall participation rate specified at §271.21, or both rates, its maximum penalty will be the penalty specified at §271.50.

(3)(i) In order to receive a reduction of the penalty amounts determined under paragraphs (b)(1) or (b)(2) of this section, the State must achieve participation rates equal to a threshold level defined as 90 percent of the applicable minimum participation rate, at §271.23 or §271.21. If a State met this threshold, we would base its reduction on the severity of the failure.

(ii) For this purpose, we will calculate the severity of the State's failure as the ratio of:

(A) The difference between the participation rate achieved by the State and the 90 percent "threshold" level; and

(B) The difference between the minimum applicable participation rate and the threshold level.

(c)(1) We may reduce the penalty if the State failed to achieve a participation rate because:

(i) It meets the definition of a needy State, specified at §270.30 of this chapter, or

(ii) Noncompliance is due to extraordinary circumstances such as a natural disaster or regional recession.

(2) In determining noncompliance under paragraph (c)(1)(ii) of this section, we will consider objective evidence of extraordinary circumstances if the State chooses to submit it.

§271.52 Is there a way to waive the State's penalty for failing to achieve either of the participation rates?

(a) We will not impose a penalty under this part if we determine that the State has reasonable cause for its failure.

(b) In addition to the general reasonable cause criteria specified at §272.5 of this chapter, a State may also submit a request for a reasonable cause exemption from the requirement to meet the minimum participation rate in two specific case situations, if it demonstrates that it has not diverted cases to a separate State program for the purpose of avoiding the work participation rates.

(1) We will determine that a State has reasonable cause if it demonstrates that failure to meet the work participation rates is attributable to its provision of good cause domestic violence waivers as follows:

(i) To demonstrate reasonable cause, a State must provide evidence that it achieved the applicable work rates, except with respect to any individuals receiving good cause waivers of work requirements (i.e., when cases with good cause waivers are removed from the calculations in §§ 271.22(b) and 271.24(b)); and

(ii) A State must grant good cause domestic violence waivers appropriately, in accordance with the criteria specified at §270.30 of this chapter. If a State fails to meet the criteria for "good cause domestic violence waivers" specified at §270.30 of this chapter, the Secretary will not grant reasonable cause under this paragraph (b).

(2) We will determine that a State has reasonable cause if it demonstrates that its failure to meet the work participation rates is attributable to its provision of assistance to refugees in federally-approved alternative projects under section 412(e)(7) of the Immigration and Nationality Act (8 U.S.C. 1522(e)(7)).

(c) In accordance with the procedures specified at §272.4 of this chapter, a State may dispute our determination that it is subject to a penalty.

§271.53 Can a State correct the problem before incurring a penalty?

(a) Yes. A State may enter into a corrective compliance plan to remedy a problem that caused its failure to meet a participation rate, as specified at §272.6 of this chapter.

(b) To qualify for a penalty reduction under §272.6(i)(1) of this chapter, based on significant progress in discontinuing a violation, a State must reduce the difference between the participation rate it achieved in the year for which it is subject to a penalty and the rate applicable during the penalty year by 50 percent.

§271.54 Is a State subject to any other penalty relating to its work program?

(a) If we determine that, during a fiscal year, a State has violated section 407(e) of the Act, relating to imposing penalties against individuals, we must reduce the SFAG payable to the State.

(b) The penalty amount for a fiscal year will equal between one and five percent of the adjusted SFAG.

§271.55 Under what circumstances will we reduce the amount of the penalty for not properly imposing penalties on individuals?

(a) We will reduce the amount of the penalty based on the degree of the State's noncompliance.

(b) In determining the size of any reduction, we will consider objective evidence of:

(1) Whether the State has established a control mechanism to ensure that the grants of individuals are reduced for refusing to engage in required work; and

(2) The percentage of cases for which the grants have not been appropriately reduced.

(c) Neither the reasonable cause provisions at §272.5 of this chapter nor the corrective compliance plan provisions at §272.6 of this chapter applies to this penalty.

Subpart F -- Waivers

§271.60 How do existing welfare waivers affect the participation rate?

(a) If a State is implementing policies in accordance with an approved waiver that meets the provisions of section 415(a)(1)(A) of the Act and the definition of a waiver at §270.30 of this chapter, the provisions of section 407 of the Act do not apply, to the extent that they are inconsistent with the waiver.

(b)(1) In the case of waivers addressing activities in which an individual may participate in order to be "engaged in work" and count toward the minimum participation rates (as specified at §271.30):

(i) We will include provisions of prior law as part of such waivers; and

(ii) We will recognize such waivers as inconsistent.

(2) In the case of waivers addressing minimum average hours of work per week necessary to be "engaged in work" for a month (as specified at §§ 271.31 and 271.32):

(i) We will recognize the waiver as inconsistent if it specifies an individual's mandated hours of participation in accordance with his/her particular circumstances, either as specified by criteria described in the waiver or under an individualized plan or similar agreement for achieving self-sufficiency; and

(ii) We will not recognize as inconsistent any waiver designed to increase the mandatory work hours for a class of recipients under the former JOBS program.

(c) Except as applicable to research cases in paragraph (d) of this section, we will not recognize any prior law exemptions as part of the waiver with respect to the denominator of the participation rates, found at §§ 271.21 and 271.23.

(d) If a State is continuing research group policies in order to complete an impact evaluation of a waiver demonstration, the demonstration's control group may be subject to prior law and its experimental treatment group may be also subject to prior law, except as modified by the waiver.

(e) The additional requirements at §272.8 of this chapter apply to the use of continuing waiver alternative work requirements in the calculation of the work participation penalty.

Subpart G -- Non-displacement

§271.70 What safeguards are there to ensure that participants in work activities do not displace other workers?

(a) An adult taking part in a work activity outlined in §271.30 may not fill a vacant employment position if:

(1) Another individual is on layoff from the same or any substantially equivalent job; or

(2) The employer has terminated the employment of any regular employee or caused an involuntary reduction in its work force in order to fill the vacancy with an adult taking part in a work activity.

(b) A State must establish and maintain a grievance procedure to resolve complaints of alleged violations of the displacement rule in this section.

(c) This section does not preempt or supersede State or local laws providing greater protection for employees from displacement.

PART 272 -- ACCOUNTABILITY PROVISIONS -- GENERAL

§272.0 What definitions apply to this part?

The general TANF definitions at §270.30 of this chapter apply to this part.

§272.1 What penalties will apply to States?

(a) We will assess fiscal penalties against States under circumstances defined in parts 271 through 275 of this chapter. The penalties are:

(1) A penalty of the amount by which a State misused its TANF funds;

(2) A penalty of five percent of the adjusted SFAG for intentional misuse of such funds;

(3) A penalty of four percent of the adjusted SFAG for failure to submit an accurate, complete and timely required report;

(4) A penalty of up to 21 percent of the adjusted SFAG for failure to satisfy the minimum participation rates;

(5) A penalty of no more than two percent of the adjusted SFAG for failure to participate in IEVS;

(6) A penalty of no more than five percent of the adjusted SFAG for failure to enforce penalties on recipients who are not cooperating with the State Child Support Enforcement (IV-D) Agency;

(7) A penalty equal to the outstanding loan amount, plus interest, for failure to repay a Federal loan;

(8) A penalty equal to the amount by which a State fails to meet its TANF MOE requirement;

(9) A penalty of five percent of the adjusted SFAG for failure to comply with the five-year limit on Federal assistance;

(10) A penalty equal to the amount of contingency funds unremitted by a State for a fiscal year;

(11) A penalty of no more than five percent of the adjusted SFAG for the failure to maintain assistance to an adult single custodial parent who cannot obtain child care for a child under age six;

(12) A penalty of no more than two percent of the adjusted SFAG plus the amount a State has failed to expend of its own funds to replace the reduction to its SFAG due to the assessment of penalties in this section in the year of the reduction;

(13) A penalty equal to the amount of the State's Welfare-to-Work formula grant for failure to meet its TANF MOE requirement during a year in which the formula grant is received; and

(14) A penalty equal to not less than one percent and not more than five percent of the adjusted SFAG for failure to reduce assistance for recipients refusing without good cause to work.

(b) In the event of multiple penalties for a fiscal year, we will add all applicable penalty percentages together. We will then assess the penalty amount against the adjusted SFAG that would have been payable to the State if no penalties were assessed. As a final step, we will subtract other (fixed) penalty amounts from the adjusted SFAG.

(c)(1) We will take the penalties specified in paragraphs (a)(1), (a)(2) and (a)(6) of this section by reducing the SFAG payable for the quarter that immediately follows our final decision.

(2) We will take the penalties specified in paragraphs (a)(3), (a)(4), (a)(5), (a)(7), (a)(8), (a)(9), (a)(10), (a)(11), (a)(12), (a)(13), and (a)(14) of this section by reducing the SFAG payable for the fiscal year that immediately follows our final decision.

(d) When imposing the penalties in paragraph (a) of this section, the total reduction in an affected State's grant must not exceed 25 percent. If this 25 percent limit prevents the recovery of the full penalty amount imposed on a State during a fiscal year, we will apply the remaining amount of the penalty to the SFAG payable for the immediately succeeding fiscal year.

(e)(1) In the same fiscal year, a State must expend additional State funds to replace any reduction in the SFAG resulting from penalties.

(2) The State must document compliance with this provision on its TANF Financial Report (or Territorial Financial Report).

§272.2 When do the TANF penalty provisions apply?

(a) A State will be subject to the penalties specified in §§ 272.1(a)(1), (2), (7), (8), (9), (10), (11), (12), (13), and (14) for conduct occurring on and after the first day the State operates the TANF program.

(b) A State will be subject to the penalties specified in §§ 272.1(a)(3), (4), (5), and (6) for conduct occurring on and after July 1, 1997, or the date that is six months after the first day the State operates the TANF program, whichever is later.

(c) For the period of time prior to [effective date of final rules], we will assess State conduct as specified in §270.40(b) of this chapter.

§272.3 How will we determine if a State is subject to a penalty?

(a) We will use the single audit, as implemented through OMB Circular A-133, to determine if a State is subject to a penalty for misusing Federal TANF funds (§273.10 of this chapter), intentionally misusing Federal TANF funds (§273.12 of this chapter), failing to participate in IEVS (§274.10 of this chapter), failing to comply with paternity establishment and child support requirements (§274.31 of this chapter), failing to maintain assistance to an adult single custodial parent who cannot obtain child care for child under six (§274.20 of this chapter), and failing to reduce assistance to a recipient who refuses without good cause to work (§271.14 of this chapter).

(b) We will use data reports required under part 275 of this chapter to determine if a State failed to meet participation rates (§271.21 of this chapter) or failed to comply with the five-year limit on Federal assistance (§274.1 of this chapter).

(1) Data in these reports are subject to our verification in accordance with §275.7 of this chapter.

(2) States may not revise the sampling frames or program designations for cases in the quarterly TANF and TANF MOE Data Reports retroactively (i.e., after submission).

(c) We will use the TANF Financial Report (or, as applicable, the Territorial Financial Report) to determine if a State should be penalized for failure to meet the TANF MOE requirement (§273.7 of this chapter), the Contingency Fund MOE requirement (§274.76 of this chapter), and to replace SFAG reductions with State-only funds (§274.50 of this chapter). Data in these reports are subject to our verification in accordance with §275.6 of this chapter.

(d) We will determine that a State is subject to the specific penalties for failure to perform, if we find information in the reports under paragraphs (b) and (c) of this section to be insufficient or if we determine that the State has not adequately documented actions verifying that it has met the participation rates.

(e) To determine if a State has met its TANF MOE requirement, we will use the additional information listed at §273.7 of this chapter.

(f) States should maintain records in accordance with §92.42 of this title.

§272.4 What happens if we determine that a State is subject to a penalty?

(a) If we determine that a State is subject to a penalty, we will notify the State in writing, specifying which penalty we will impose and the reasons for the penalty.

(b) Within 60 days of when it receives our notification, the State may submit to ACF, a written response that:

(1) Demonstrates that our determination is incorrect because our data or the method we used in determining the penalty was in error or was insufficient, or that the State acted, prior to the [effective date of final regulations], on a reasonable interpretation of the statute;

(2) Demonstrates that the State had reasonable cause for failing to meet the requirement(s); and/or

(3) Provides a corrective compliance plan, pursuant to §272.6.

(c) If we find that we determined the penalty erroneously, or that the State has adequately demonstrated that it had reasonable cause for failing to meet one or more requirements, we will not impose the penalty.

(d) Reasonable cause and a corrective compliance plan are not available for failing to repay a Federal loan; failing to meet the TANF MOE requirement; failing to maintain 100 percent TANF MOE after receiving Contingency Funds; failing to expend additional State funds to replace adjusted SFAG reductions due to the imposition of one or more penalties listed in §272.1; or failing to maintain 80, or 75, percent, as appropriate, TANF MOE during a year in which a Welfare-to-Work grant is received.

(e) We will notify the State in writing of our findings regarding its response.

(f) If we request additional information from a State, it must provide the information within two weeks of the date of our request.

§272.5 Under what general circumstances will we determine that a State has reasonable cause?

(a) We will not impose a penalty against a State if we determine that the State had reasonable cause for its failure. The general factors a State may use to claim reasonable cause are limited to the following:

(1) Natural disasters and other calamities (e.g., hurricanes, earthquakes, fire) whose disruptive impact was so significant as to cause the State's failure;

(2) Formally issued Federal guidance that provided incorrect information resulting in the State's failure; or

(3) Isolated, non-recurring problems of minimal impact that are not indicative of a systemic problem.

(b) A State may also use the additional factors for claiming reasonable cause for failure to satisfy the five-year limit at §274.3 of this chapter and to meet the minimum participation rates at §271.52 of this chapter.

(c) We will not forgive a State penalty under §§ 272.1(a)(4), (a)(9), (a)(11), or (a)(14) based on reasonable cause if we detect a significant pattern of diversion of families to a separate State program that achieves the effect of avoiding the work participation rates at §§ 271.22 or 271.24.

(d) We will not forgive a State penalty under §§ 272.1(a)(4), (a)(6), (a)(9), or (a)(14) based on reasonable cause if we detect a significant pattern of diversion of families to a separate State program that achieves the effect of diverting the Federal share of child support collections.

§272.6 What if a State does not demonstrate reasonable cause?

(a) A State may accept the penalty or enter into a corrective compliance plan that will correct or discontinue the violation within six months in order to avoid the penalty if:

(1) A State does not claim reasonable cause; or

(2) We find that the State does not have reasonable cause.

(b) A State that does not claim reasonable cause will have 60 days from receipt of our notice described in §272.4(a) to submit its corrective compliance plan.

(c) A State that unsuccessfully claimed reasonable cause will have 60 days from the date it received our second notice, described in §272.4(f), to submit its corrective compliance plan.

(d) The corrective compliance plan must include:

(1) A complete analysis of why the State did not meet the requirements;

(2) A detailed description of how the State will correct or discontinue, as appropriate, the violation in a timely manner;

(3) The milestones, including interim process and outcome goals, the State will achieve to assure it comes into compliance within the specified time period; and

(4) A certification by the Governor that the State is committed to correcting or discontinuing the violation, in accordance with the plan.

(e) During the 60-day period following our receipt of the State's corrective compliance plan, we may request additional information and consult with the State on modifications to the plan.

(f) If an acceptable corrective compliance plan is not submitted on time, we will assess the penalty immediately.

(g) A corrective compliance plan is deemed to be accepted if we take no action during the 60-day period following our receipt of the plan.

(h) We will not impose a penalty against a State with respect to any violation covered by a corrective compliance plan that we accept if the State completely corrects or discontinues, as appropriate, the violation within the period covered by the plan. This period must be no longer than six months from the date we accept a State's compliance plan.

(i)(1) Under limited circumstances, and subject to paragraph (i)(2) of this section, we may reduce the penalty if the State fails to completely correct or discontinue the violation pursuant to its corrective compliance plan and in a timely manner. To receive a reduced penalty, the State must demonstrate that it met one or both of the following conditions:

(i) Although it did not achieve full compliance, the State made substantial progress towards correcting or discontinuing the violation; or

(ii) The State's failure to comply fully was attributable to either a natural disaster or regional recession.

(2) We will not reduce a State's penalty:

(i) Under §§ 272.1(a)(4), (a)(9), (a)(11), or (a)(14) if we detect a significant pattern of diversion of families to a separate State program that achieves the effect of avoiding the work participation rates and the State fails to correct the diversion; or

(ii) Under §§ 272.1(a)(4), (a)(6), (a)(9), or (a)(11) if we detect a significant pattern of diversion of families to a separate State program that achieves the effect of diverting the Federal share of child support collections and the State fails to correct the diversion.

§272.7 How can a State appeal our decision to take a penalty?

(a) We will formally notify the chief executive officer of the State of an adverse action (i.e., the reduction in the SFAG) within five days after we determine that a State is subject to a penalty under parts 271 through 275 of this chapter.

(b) The State may file an appeal of the action, in whole or in part, to the HHS Departmental Appeals Board (the Board) within 60 days after the date it receives notice of the adverse action. The State must include the brief and all supporting documents with its appeal when it is filed. The State must send a copy of the appeal to the Office of the General Counsel, Children, Families and Aging Division, Room 411-D, 200 Independence Avenue, S.W., Washington, D.C. 20201.

(d) The appeal to the Board must follow the provisions of the rules under this section and those at §§ 16.2, 16.9, 16.10, and 16.13 through 16.22 of this title.

(e) The Board will consider an appeal filed by a State on the basis of the documentation and briefs submitted, along with any additional information the Board may require to support a final decision. In deciding whether to uphold an adverse action or any portion of such action, the Board will conduct a thorough review of the issues and make a final determination within 60 days after the appeal is filed.

(f)(1) The filing date shall be the date materials are received by the Board in a form acceptable to it.

(2) If the Board requires additional documentation to reach its decision, the 60 days shall be tolled for a reasonable period, specified by the Board, to allow production of the documentation.

(g)(1) A State may obtain judicial review of a final decision by the Board by filing an action within 90 days after the date of such decision. It should file this action with the district court of the United States in the judicial district where the State agency is located or in the United States District Court for the District of Columbia.

(2) The district court will review the final decision of the Board on the record established in the administrative proceeding, in accordance with the standards of review prescribed by 5 U.S.C. 706(2). The court will base its review on the documents and supporting data submitted to the Board.

§272.8 What is the relationship of continuing waivers on the penalty process for work participation and time limits?

(a) In order for the State's alternative waiver requirements to be considered in the calculation of the work participation rate and the time limit requirement, the Governor must certify in writing to the Secretary:

(1) The specific inconsistencies (i.e., alternative waiver requirements) that the State chooses to continue;

(2) The reasons for continuing the alternative waiver requirements, including how their continuation is consistent with the purposes of the waiver; and

(3) Consistent with the waiver and its purpose, the standards that the State will use to:

(i) Assign individuals to the alternative waiver work activities or to an alternative number of hours; and

(ii) Determine exemptions from or extensions to the time limit.

(b) If a State using the alternative waiver requirements fails to meet the work participation rate or the time limit requirement:

(1) The State is not eligible for a reasonable cause exception from the applicable penalty under §§ 272.2(a)(4) or (a)(9), nor for any reduction of the work penalty under §§ 271.51(b)(3) or (c) of this chapter;

(2) The State must consider modification of its alternative waiver requirements as part of its corrective compliance plan; and

(3) If the State continues waivers related to the failure to achieve compliance with the work requirements described in subparts B and C of part 271 of this chapter or the time limits described in §§ 274.1 and 274.2 of this chapter and still fails to correct the violation, it will not be eligible for a reduced penalty for related noncompliance under §272.6(i)(1).

(c) The Secretary will use the data submitted by the States pursuant to §275.3 of this chapter to calculate and make public the work participation rates and the percentage of families with an adult that received Federal TANF benefits for more than 60 months under both the TANF requirement and the State's alternative waiver requirement.

PART 273 -- STATE TANF EXPENDITURES

Subpart A -- What Rules Apply to a State's Maintenance of Effort?

§273.0 What definitions apply to this part?

(a) Except as noted in §273.2(d), the general TANF definitions at §270.30 of this chapter apply to this part.

(b) Administrative costs means costs necessary for the proper administration of the TANF program or separate State programs. It includes the costs for general administration and coordination of these programs, including indirect (or overhead) costs. Examples of administrative costs include:

(1) Salaries and benefits and all other indirect (or overhead) costs not associated with providing program services (such as diversion, assessment, development of employability plans, work activities and post-employment services, and supports) to individuals;

(2) Preparation of program plans, budgets, and schedules;

(3) Monitoring of programs and projects;

(4) Fraud and abuse units;

(5) Procurement activities;

(6) Public relations;

(7) Services related to accounting, litigation, audits, management of property, payroll, and personnel;

(8) Costs for goods and services required for administration of the program such as rental and purchase of equipment, utilities, office supplies, postage, and rental and maintenance of office space;

(9) Travel costs incurred for official business;

(10) Management information systems not related to the tracking and monitoring of TANF requirements (e.g., for a personnel and payroll system for State staff); and

(11) Preparing reports and other documents related to program requirements.

§273.1 How much State money must a State expend annually to meet the TANF MOE requirement?

(a)(1) The minimum TANF MOE for a fiscal year is 80 percent of a State's historic State expenditures.

(2) However, if a State meets the minimum work participation rate requirements in a fiscal year, as required under §§ 271.21 and 271.23 of this chapter, then for that fiscal year, the minimum TANF MOE is 75 percent of the State's historic State expenditures.

(b) The TANF MOE level also depends on whether a Tribe or consortium of Tribes residing in a State has received approval to operate its own TANF program. The State's TANF MOE level for a fiscal year will be reduced the same percentage as the SFAG was reduced as the result of any Tribal Family Assistance Grants awarded to Tribal grantees in the State for that year.

§273.2 What kinds of State expenditures count toward meeting a State's annual MOE expenditure requirement?

(a) Expenditures of State funds in TANF or separate State programs may count if they were made for the following types of services:

(1) Cash assistance, including assigned child support collected by the State, distributed to the family, and disregarded in determining eligibility for, and amount of the TANF assistance payment;

(2) Child care assistance (see §273.3);

(3) Education activities designed to increase self-sufficiency, job training, and work (see §273.4);

(4) Any other use of funds allowable under section 404(a)(1) of the Act and consistent with the goals at §270.20 of this chapter; and

(5) Administrative costs for activities listed in paragraphs (a)(1) through (a)(4) of this section, if these costs do not exceed 15 percent of the total amount of countable expenditures. Information technology and computerization needed for tracking or monitoring services are excluded from this determination. "Administrative costs" has the meaning specified at §273.0(b).

(b) The services listed under paragraph (a) of this section may be counted only if they have been provided to or on behalf of eligible families. An "eligible family," as defined by the State, must:

(1) Be comprised of citizens, qualified aliens (as defined in §270.30 of this chapter), non-immigrants under the Immigration and Nationality Act, aliens paroled into the U.S. for less than one year, or, in the case of aliens not lawfully present in the U.S., provided that the State enacted a law after August 22, 1996, that "affirmatively provides" for such services; and

(2) Include a child living with a custodial parent or other adult caretaker relative (or consist of a pregnant individual); and

(3) Be financially eligible according to the TANF income and resource standards established by the State under its TANF plan.

(c) Services listed under paragraph (a) of this section may also be provided to a family that meets the criteria under paragraphs (b)(1) and (2) of this section, but which became ineligible solely due to the time limitation given under §274.1 of this chapter.

(d) Assistance does not have the meaning given in §270.30 of this chapter, but for MOE purposes can be ongoing, short-term or one-time only and may include services.

(e) The expenditures for services in separate State programs listed under paragraph (a) of this section only count if they also meet the requirements of §273.5. Expenditures that fall within the prohibitions in §273.6 do not count.

§273.3 When do child care expenditures count?

(a) State funds expended to meet the requirements of the Matching Fund of the Child Care and Development Fund (i.e., match and MOE amounts) that also count as TANF MOE expenditures are limited to the State's child care MOE amount pursuant to section 418(a)(2)(C) of the Act.

(b) The child care expenditures must be made to or on behalf of eligible families, as defined in §273.2(b).

§273.4 When do educational expenditures count?

(a) Expenditures for educational activities or services count if:

(1) They are targeted to eligible families (as defined in §273.2(b)) to increase self-sufficiency, job training, and work; and

(2) They are not generally available to other residents of the State.

(b) Expenditures on behalf of eligible families for educational services or activities provided through the public education system do not count unless they meet the requirements under paragraph (a) of this section.

§273.5 When do expenditures in separate State programs count?

(a) If the expenditures in the separate State program(s) were previously authorized and were allowable under section 403 of prior law, then they may count in their entirety.

(b) If the expenditures under the separate State program(s) had not been previously authorized and allowable under section 403 of prior law, then only the amount expended in excess of money expended on such program(s) in FY 1995 may count.

§273.6 What kinds of expenditures do not count?

The following kinds of expenditures do not count:

(a) Expenditures of funds that originated with the Federal government;

(b) State funds that are used to match Federal funds (or expenditures of State funds that support claims for Federal matching funds), including State expenditures under the Medicaid program under title XIX of the Act;

(c) Expenditures that States make as a condition of receiving Federal funds under other programs except as provided under §273.3;

(d) Expenditures made in a prior fiscal year;

(e) Expenditures used to match Federal Welfare-to-Work funds provided under section 403(a)(5) of the Act; and

(f) Expenditures made in the TANF program to replace the reductions in the SFAG as a result of penalties pursuant to §274.50 of this chapter.

§273.7 How will we determine the level of State expenditures?

(a) Each State must report its expenditures quarterly to us as required under part 275 of this chapter.

(b) Each State must also submit an annual addendum to its TANF Financial Report (or, as applicable, its Territorial Financial Report) on separate State programs for the fourth quarter containing:

(1) A description of the specific State-funded program activities provided to eligible families;

(2) Each program's statement of purpose (how the program serves eligible families);

(3) The definitions of each work activity in which families in the program are participating;

(4) A statement whether the program/activity had been previously authorized and allowable as of August 21, 1996, under section 403 of prior law;

(5) The FY 1995 State expenditures for each program/activity not authorized and allowable as of August 21, 1996 (see §273.5(b));

(6) The total number of eligible families served by each program as of the end of the fiscal year;

(7) The eligibility criteria for the families served under each program/activity; and

(8) A certification that those families served met the State's criteria for "eligible families."

§273.8 What happens if a State fails to meet the TANF MOE requirement?

(a) If any State fails to meet its TANF MOE requirement for any fiscal year, then we will reduce dollar-for-dollar the amount of the SFAG payable to the State for the following fiscal year.

(b) If a State fails to meet its TANF MOE requirement for any fiscal year, and the State received a Welfare-to-Work formula grant provided under section 403(a)(5)(A) of the Act for the same fiscal year, we will reduce the amount of the SFAG payable to the State for the following fiscal year by the amount of the Welfare-to-Work formula grant paid to the State.

§273.9 May a State avoid a TANF MOE penalty because of reasonable cause or through corrective compliance?

The reasonable cause and corrective compliance provisions at §§ 272.4, 272.5, and 272.6 of this chapter do not apply.

Subpart B -- What Rules Apply to the Use of Federal Funds?

§273.10 What actions are to be taken against a State if it uses Federal TANF funds in violation of the Act?

(a) If a State misuses such funds, we will reduce the SFAG payable for the immediately succeeding fiscal year quarter by the amount misused.

(b) If we determine that the misuse was intentional, we will reduce the SFAG payable for the immediately succeeding fiscal year quarter in an amount equal to five percent of the adjusted SFAG.

(c) The reasonable cause and corrective compliance provisions of §§ 272.4 through 272.6 of this chapter apply to penalties under paragraphs (a) and (b) of this section.

§273.11 What uses of Federal TANF funds are improper?

(a) States may use Federal TANF funds for expenditures that:

(1) Are reasonably related to the purposes of TANF, as specified at §270.20 of this chapter; or

(2) The State was authorized to use IV-A or IV-F funds for under prior law, as in effect on September 30, 1995, or (at the option of the State) August 21, 1996.

(b) We will consider use of funds in violation of paragraph (a) of this section, the provisions of the Act, section 115 of PRWORA, the provisions of part 92 of this title, or OMB Circular A-87 to be misuse of funds.

§273.12 How will we determine if a State intentionally misused Federal TANF funds?

(a) The State must show, to our satisfaction, that it used the funds for purposes that a reasonable person would consider to be within the purposes of the TANF program (as specified at §270.20 of this chapter) and the provisions listed in §273.11.

(b) We will consider funds to be misused intentionally if there is supporting documentation, such as Federal guidance or policy instructions, indicating that Federal TANF funds could not be used for that purpose.

(c) We will also consider funds to be misused intentionally if, after notification that we have determined such use to be improper, the State continues to use the funds in the same or similarly improper manner.

§273.13 What types of activities are subject to the administrative cost limit on Federal TANF grants?

(a) Activities that fall within the definition of "administrative costs" at §273.0(b) are subject to this limit.

(b) Information technology and computerization for tracking and monitoring are not administrative costs for this purpose.

Subpart C -- What Rules Apply to Individual Development Accounts?

§273.20 What definitions apply to Individual Development Accounts (IDAs)?

The following definitions apply with respect to IDAs:

Date of acquisition means the date on which a binding contract to obtain, construct, or reconstruct the new principal residence is entered into.

Eligible educational institution means an institution described in section 481(a)(1) or section 1201(a) of the Higher Education Act of 1965 (20 U.S.C. 1088(a)(1) or 1141(a)), as such sections were in effect on August 21, 1996. Also, an area vocational education school (as defined in subparagraph (C) or (D) of section 521(4) of the Carl D. Perkins Vocational and Applied Technology Education Act (20 U.S.C. 2471(4)) that is in any State (as defined in section 521(33) of such Act), as such sections were in effect on August 22, 1996.

Individual Development Account (IDA) means an account established by or for an individual who is eligible for TANF assistance to allow the individual to accumulate funds for specific purposes.

Post-secondary educational expenses means a student's tuition and fees required for the enrollment or attendance at an eligible educational institution, and required course fees, books, supplies, and equipment required at an eligible educational institution.

Qualified acquisition costs means the cost of obtaining, constructing, or reconstructing a residence. The term includes any usual or reasonable settlement, financing, or other closing costs.

Qualified business means any business that does not contravene State law or public policy.

Qualified business capitalization expenses means business expenses pursuant to a qualified plan.

Qualified entity means a non-profit, tax-exempt organization, or a State or local government agency that works cooperatively with a non-profit, tax-exempt organization.

Qualified expenditures means expenses entailed in a qualified plan, including capital, plant equipment, working capital, and inventory expenses.

Qualified first-time home buyer means a taxpayer (and, if married, the taxpayer's spouse) who has not owned a principal residence during the three-year period ending on the date of acquisition of the new principal residence.

Qualified plan means a business plan that is approved by a financial institution, or by a nonprofit loan fund having demonstrated fiduciary integrity. It includes a description of services or goods to be sold, a marketing plan, and projected financial statements, and it may require the eligible recipient to obtain the assistance of an experienced entrepreneurial advisor.

Qualified principal residence means the place a qualified first-time home buyer will reside in in accordance with the meaning of section 1034 of the Internal Revenue Code of 1986 (26 U.S.C. 1034). The qualified acquisition cost of the residence cannot exceed the average purchase price of similar residences in the area.

§273.21 May a State use the TANF grant to fund IDAs?

States may use TANF grants to fund IDAs for individuals who are eligible for TANF assistance.

§273.22 Are there any restrictions on IDA funds?

(a) A recipient may deposit only earned income into an IDA.

(b) A recipient's contributions to an IDA may be matched only by a qualified entity.

(1) To cover post-secondary education expenses, if the amount is paid directly to an eligible educational institution;

(2) For the recipient to purchase a first home, if the amount is paid directly to the person to whom the amounts are due and it is a qualified acquisition cost for a qualified principal residence by a qualified first-time home buyer; or

(3) For business capitalization, if the amounts are paid directly to a business capitalization account in a federally-insured financial institution and used for a qualified business capitalization expense.

§273.23 How does a State prevent a recipient from using the IDA account for unqualified purposes?

To prevent recipients from using the IDA account improperly, States may do the following:

(a) Count withdrawals as earned income in the month of withdrawal (unless already counted as income);

(b) Count withdrawals as resources in determining eligibility; or

(c) Take such other steps as the State has established in its State plan or written State policies to deter inappropriate use.

PART 274 -- OTHER ACCOUNTABILITY PROVISIONS

Subpart A -- What Specific Rules Apply for Other Program Penalties?

§274.0 What definitions apply to this part?

The general TANF definitions at §270.30 of this chapter apply to this part.

§274.1 What restrictions apply to the length of time Federal TANF assistance may be provided?

(a)(1) Subject to the exceptions in this section, no State may use any of its Federal TANF funds to provide assistance (as defined in §270.30 of this chapter) to a family that includes an adult who has received assistance for a total of five years (60 cumulative months, whether or not consecutive).

(2) Assistance provided under section 403(a)(5) of the Act (WTW) is not subject to the time limit in paragraph (a)(1) of this section.

(3) States may define "a family that includes an adult," but may not exclude families from their definition solely for the purpose of avoiding penalties under §274.2.

(i) States shall report to us annually on the number of families excluded because of the State's definition and the circumstances underlying each exclusion.

(ii) Where we find that a State has excluded families for the purpose of avoiding a penalty for the five-year time limit, we shall include those families in the calculation under paragraph (c) of this section in determining whether a State has complied with time-limit extension rules and is subject to the penalty described in §274.2.

(b) States must not count towards the five-year limit:

(1) Any month of receipt of assistance by an individual when she was a minor who was not the head-of- household or married to the head-of-household;

(2) Any month in which an adult lived in Indian country (as defined in section 1151 of title 18, United States Code) or Native Alaskan Village and at least 50 percent of the adults were not employed; and

(3) Non-cash assistance provided under section 403(a)(5) of the Act (WTW).

(c) States have the option to extend assistance from Federal TANF funds beyond the five-year limit for up to 20 percent of their cases. This provision requires computation of an average monthly percentage for each fiscal year, with the numerator for each month equal to the number of families that includes an adult receiving assistance beyond the five-year limit and the denominator equal to the average monthly number of families that includes an adult receiving assistance during the fiscal year or the immediately preceding fiscal year, whichever the State elects. States are permitted to extend assistance to a family only on the basis of:

(1) Hardship, as defined by the State; or

(2) The fact that the family includes someone who has been battered, or subject to extreme cruelty based on the fact that the individual has been subjected to:

(i) Physical acts that resulted in, or threatened to result in, physical injury to the individual;

(ii) Sexual abuse;

(iii) Sexual activity involving a dependent child;

(iv) Being forced as the caretaker relative of a dependent child to engage in non-consensual sexual acts or activities;

(v) Threats of, or attempts at, physical or sexual abuse;

(vi) Mental abuse; or

(vii) Neglect or deprivation of medical care.

(d) If a State opts to extend assistance to part of its caseload as permitted under paragraph (c) of this section, it only determines whether or not the extension applies to a specific family once an adult in the family has received 60 cumulative months of assistance.

(e) If the five-year limit is inconsistent with a State's waiver granted under section 1115 of the Act, which was submitted before August 22, 1996, and was approved by July 1, 1997, the State need not comply with the inconsistent provisions of the five-year limit until the waiver expires.

(1) The five-year limit would be inconsistent with the State's waiver:

(i) If the State has an approved waiver that provides for terminating cash assistance to individuals or families because of the receipt of assistance for a period of time, specified by the approved waiver; and

(ii) The State would have to change its waiver policy in order to comply with the five-year limit.

(2)(i) Generally, under an approved waiver, a State will count, toward the five-year limit, all months for which the adult subject to a State waiver time limit receives assistance with Federal TANF funds, just as it would if it did not have an approved waiver.

(ii) The State need not count, toward the five-year limit, any months for which an adult receives assistance with Federal TANF funds while the adult is exempt from the State's time limit under the terms of the State's approved waiver.

(3) The State may continue to provide assistance with Federal TANF funds for more than 60 cumulative months, without a numerical limit, to families provided extensions to the time limit, under the provisions of the terms and conditions of its approved waiver, as long as the State's waiver authority has not expired.

(4) The five-year limit would also be inconsistent with a State's waiver to the extent that the State needs to maintain prior law policies for control group or experimental treatment cases in order to continue an experimental research design for the purpose of completing an impact evaluation of the waiver policies.

(5) The additional requirements at §272.8 of this chapter apply to the use of continuing waivers with alternative time-limit requirements in the calculation of the time limit penalty.

§274.2 What happens if a State does not comply with the five-year limit?

If we determine that a State has not complied with the requirements of §274.1, we will reduce the SFAG payable to the State for the immediately succeeding fiscal year by five percent of the adjusted SFAG unless the State demonstrates to our satisfaction that it had reasonable cause or we approve a corrective compliance plan.

§274.3 How can a State avoid a penalty for failure to comply with the five-year limit?

(a) We will not impose the penalty if the State demonstrates to our satisfaction that it had reasonable cause for failing to meet the five-year limit or it completes a corrective compliance plan pursuant to §§ 272.5 and 272.6 of this chapter.

(b)(1) In addition, we will determine a State has reasonable cause if it demonstrates that it exceeded the 20 percent limitation on exceptions to the time limit because of good cause waivers provided to victims of domestic violence.

(2)(i) To demonstrate reasonable cause under paragraph (b)(1) of this section, a State must provide evidence that, when individuals with active good cause waivers and their families are excluded from the calculation, the percentage of families receiving federally-funded assistance for more than 60 months did not exceed 20 percent of the total.

(ii) To qualify for exclusion, such families must have good cause domestic violence waivers that:

(A) Reflect the State's assessment that an individual in the family was, at the time the waiver was granted, temporarily unable to work because of domestic violence;

(B) Were in effect after the family had received a hardship exemption from the limit on receiving federally-funded assistance for 60 or more months; and

(C) Were granted appropriately, in accordance with the criteria specified at §270.30 of this chapter.

(iii) If a State fails to meet the criteria specified for "good cause domestic violence waivers" at §270.30 of this chapter or any of the other conditions in paragraph (b)(2)(ii) of this section, the Secretary will not grant reasonable cause under paragraph (b)(1) of this section.

§274.10 Must States do computer matching of data records under IEVS to verify recipient information?

(a) States must meet the requirements of IEVS pursuant to section 1137 of the Act and request the following information from the Internal Revenue Service (IRS), the State Wage Information Collections Agencies (SWICA), the Social Security Administration (SSA), and the Immigration and Naturalization Service (INS):

(1) IRS unearned income;

(2) SWICA employer quarterly reports of income and unemployment insurance benefit payments;

(3) IRS earned income maintained by SSA; and

(4) Immigration status information maintained by the INS. (States may request a waiver of this match under the authority of 42 U.S.C. 1320 through 1327, note.)

(b) The requirements at §§ 205.51 through 205.62 of this chapter also apply to the TANF IEVS requirement.

§274.11 How much is the penalty for not participating in IEVS?

If we determine that the State has not complied with the requirements of §274.10, we will reduce the SFAG payable for the immediately succeeding fiscal year by two percent of the adjusted SFAG unless the State demonstrates to our satisfaction that it had reasonable cause or we approve a corrective compliance plan pursuant to §§ 272.5 and 272.6 of this chapter.

§274.20 What happens if a State sanctions a single parent of a child under six who cannot get needed child care?

(a) If we determine that a State has not complied with the requirements of §271.15 of this chapter, we will reduce the SFAG payable to the State by no more than five percent for the immediately succeeding fiscal year unless the State demonstrates to our satisfaction that it had reasonable cause or we approve a corrective action plan pursuant to §§ 272.5 and 272.6 of this chapter.

(b) We will impose the maximum penalty if:

(1) The State does not have a statewide process in place that enables families to demonstrate that they have been unable to obtain child care; or

(2) There is a pattern of substantiated complaints from parents or organizations verifying that a State has reduced or terminated assistance in violation of this requirement.

(c) We will impose a reduced penalty if the State demonstrates that the violations were isolated or that they affected a minimal number of families.

§274.30 What procedures exist to ensure cooperation with the child support enforcement requirements?

(a) The State (the IV-A agency) must refer all appropriate individuals in the family of a child, for whom paternity has not been established or for whom a child support order needs to be established, modified or enforced, to the child support enforcement agency (the IV-D agency). Those individuals must cooperate in establishing paternity and in establishing, modifying, or enforcing a support order with respect to the child.

(b) If the IV-D agency determines that an individual is not cooperating, and the individual does not qualify for a good cause or other exception established by the State in accordance with section 454(29) of the Act, then the IV-D agency must notify the IV-A agency promptly.

(1) Deducting from the assistance that would otherwise be provided to the family of the individual an amount equal to not less than 25 percent of the amount of such assistance; or

(2) Denying the family any assistance under the program.

§274.31 What happens if a State does not comply with the IV-D sanction requirement?

(a)(1) If we find, for a fiscal year, that the State IV-A agency did not enforce the penalties against recipients required under §274.30(c), we will reduce the SFAG payable for the next fiscal year by one percent of the adjusted SFAG.

(2) Upon a finding for a second fiscal year, we will reduce the SFAG by two percent of the adjusted SFAG for the following year.

(3) A third or subsequent finding will result in the maximum penalty of five percent.

(b) We will not impose a penalty if the State demonstrates to our satisfaction that it had reasonable cause or we approve a corrective compliance plan pursuant to §§ 272.5 and 272.6 of this chapter.

§274.40 What happens if a State does not repay a Federal loan?

(a) If a State fails to repay the amount of principal and interest due at any point under a loan agreement:

(1) The entire outstanding loan balance, plus all accumulated interest, becomes due and payable immediately; and
(2) We will reduce the SFAG payable for the immediately succeeding fiscal year quarter by the outstanding loan amount plus interest.

(b) Neither the reasonable cause provisions at §272.5 of this chapter nor the corrective compliance plan provisions at §272.6 of this chapter apply when a State fails to repay a Federal loan.

§274.50 What happens if, in a fiscal year, a State does not expend, with its own funds, an amount equal to the reduction to the adjusted SFAG resulting from a penalty?

(a) We will assess a penalty of no more than two percent of the adjusted SFAG plus the amount equal to the difference between the amount the State was required to expend and the amount it actually expended in the fiscal year.

(1) We will take the full two percent of the adjusted SFAG plus the amount the State was required to expend if the State made no additional expenditures to compensate for reductions to its adjusted SFAG resulting from penalties.

(2) We will reduce the percentage portion of the penalty if the State has expended some of the amount required. In such case, we will calculate the applicable percent by multiplying the percentage of the required expenditures actually made in the fiscal year by two percent.

(b) The reasonable cause and corrective compliance plan provisions at §§ 272.4, 272.5, and 272.6 of this chapter do not apply to this penalty.

(c) State expenditures that are used to replace reductions to the SFAG as the result of TANF penalties must be used for expenditures made under the State TANF program, not under "separate State programs."

Subpart B -- What are the Funding Requirements for the Contingency Fund?

§274.70 What funding restrictions apply to the use of contingency funds?

(a) Contingency funds are available to a State only if expenditures by the State, excluding all Federal funds but the contingency funds, exceed the State's historic State expenditures.

(b) The maximum amount payable to a State in a fiscal year may not exceed an amount equal to 1/12 times 20 percent of that State's SFAG for that fiscal year, multiplied by the number of eligible months for which the State has requested contingency funds.

§274.71 How will we determine 100 percent of historic State expenditures, the MOE level, for the annual reconciliation?

(a)(1) The State historic State expenditures, the MOE level, include the State share of expenditures for AFDC benefit payments, administration, FAMIS, EA, and the JOBS programs for FY 1994.

(2) We will use the same data sources and date, i.e., April 28, 1995, that we used to determine the TANF MOE levels for FY 1994. We will exclude the State share of expenditures from the former IV-A child care programs (AFDC/JOBS, Transitional and At-Risk child care) in the calculation.

(b) We will reduce a State's MOE level for the Contingency Fund by the same percentage that we reduce the TANF MOE level for any fiscal year in which the State's SFAG annual allocation is reduced to provide funding to Tribal grantees operating a Tribal TANF program.

§274.72 For the annual reconciliation requirement, what restrictions apply in determining qualifying State expenditures?

Qualifying State expenditures are expenditures of State funds made in the State TANF program, excluding child care expenditures.

§274.73 What other requirements apply to qualifying State expenditures?

The regulations at §§ 273.2 (except for §§ 273.2(a)(2)), 273.4, and 273.6 of this chapter apply.

§274.74 When must a State remit contingency funds under the annual reconciliation?

(a) A State may retain its contingency funds only if it matches them with the expenditure of State funds above a specified MOE level. If the amount of contingency funds paid to a State for a fiscal year exceeds the amount equal to qualifying State expenditures (as defined at §274.72), plus contingency funds, minus the MOE level, multiplied by the Federal Medical Assistance Percentage (FMAP), then multiplied by 1/12 times the number of months the State received contingency funds, then such excess amount must be remitted.

(b) If a State does not meet its MOE requirement, all contingency funds paid to a State for a fiscal year must be remitted.

(c) If required to remit funds, the State must remit all (or a portion) of the funds paid to it for a fiscal year within one year after it has failed to meet either the Food Stamp trigger or the Unemployment trigger for three consecutive months.

§274.75 What action will we take if a State fails to remit funds as required?

(a) If a State fails to remit funds as required, we will reduce the SFAG payable for the next fiscal year by the amount of funds not remitted.

(b) A State may appeal this decision as provided in §272.7 of this chapter.

(c) The reasonable cause exceptions and corrective compliance regulations at §§ 272.5 and 272.6 of this chapter do not apply to this penalty.

§274.76 How will we determine if a State has met its Contingency Fund reconciliation MOE level requirement and made expenditures that exceed its MOE requirement?

(a) States receiving contingency funds for a fiscal year must complete the quarterly TANF Financial Report (or, as applicable, the Territorial Financial Report). As part of the fourth quarter's report, a State must complete its annual reconciliation.

(b) The TANF Financial Report and State reporting on expenditures are subject to our review.

§274.77 Are contingency funds subject to the same restrictions that apply to other Federal TANF funds?

As Federal TANF funds, contingency funds are subject to the restrictions and prohibitions in effect for Federal TANF funds. The provisions of §273.11 of this chapter apply.

Subpart C -- What Rules Pertain Specifically to the Spending Levels of the Territories?

§274.80 If a Territory receives Matching Grant funds, what funds must it expend?

(a) If a Territory receives Matching Grant funds under section 1108(b) of the Act, it must:

(1) Contribute 25 percent of expenditures funded under the Matching Grant for title IV-A or title IV-E expenditures;

(2) Expend up to 100 percent of the amount of historic expenditures for FY 1995 for the AFDC program (including administrative costs and FAMIS), the EA program, and the JOBS program; and

(3) Expend up to 100 percent of the amount of the Family Assistance Grant annual allocation using Federal TANF, title IV-E funds and/or Territory-only funds.

(b) Territories may not use the same Territorial expenditures to satisfy the requirements of paragraph (a) of this section.

§274.81 What expenditures qualify for Territories to meet the Matching Grant MOE requirement?

To meet the Matching Grant MOE requirements, Territories may count:

(a) Territorial expenditures made pursuant to §§ 273.2, 273.3, 273.4, and 273.6 of this chapter that are commingled with Federal TANF funds or made under a segregated TANF program; and

(b) Territorial expenditures made pursuant to the regulations at 45 CFR parts 1355 and 1356 for the Foster Care and Adoption Assistance programs and section 477 of the Act for the Independent Living program.

§274.82 What expenditures qualify for meeting the Matching Grant FAG amount requirement?

To meet the Matching Grant FAG amount requirement, Territories may count:

(a) Expenditures made with Federal TANF funds pursuant to §273.11 of this chapter;

(b) Expenditures made pursuant to §§ 273.2, 273.3, 273.4, and 273.6 of this chapter that are commingled with Federal TANF funds or made under a segregated TANF program;

(d) The Federal and Territorial shares of expenditures made pursuant to the regulations at 45 CFR parts 1355 and 1356 for the Foster Care and Adoption Assistance programs and section 477 of the Act for the Independent Living program.

§274.83 How will we know if a Territory failed to meet the Matching Grant funding requirements at §274.80?

We will require the Territories to report the expenditures required by §274.80(a)(2) and (a)(3) on the quarterly Territorial Financial Report.

§274.84 What will we do if a Territory fails to meet the Matching Grant funding requirements at §274.80?

If a Territory does not meet the requirements at either or both of §274.80(a)(2) and (a)(3), we will disallow all Matching Grant funds received for the fiscal year.

§274.85 What rights of appeal are available to the Territories?

The Territories may appeal our decisions to the Departmental Appeals Board in accordance with our regulations at part 16 of this title if we decide to take disallowances under 1108(b).

PART 275 -- DATA COLLECTION AND REPORTING REQUIREMENTS

§275.1 What does this part cover?

(a) This part explains how we will collect the information required by section 411(a) of the Act (data collection and reporting); the information required to implement section 407 of the Act (work participation requirements), as authorized by section 411(a)(1)(A)(xii); the information required to implement section 409 (penalties), section 403 (grants to States), section 405 (administrative provisions), section 411(b) (report to Congress), and section 413 (research and annual rankings); and the data necessary to carry out our financial management and oversight responsibilities.

(b) This part describes the information in the quarterly and annual reports that each State must file, as follows:

(1) The case record information (disaggregated and aggregated) on individuals and families in the quarterly TANF Data Report;

(2) The expenditure data in the quarterly TANF Financial Report (or, as applicable, the Territorial Financial Report);

(3) The annual information related to definitions and expenditures that must be filed with the fourth quarter Financial Report; and

(4) The annual information on State programs and performance for the report to Congress.

(c) If a State claims MOE expenditures under a separate State program, this part specifies the circumstances under which the State must collect and report case-record information on individuals and families served by the separate State program.

(d) This part describes when reports are due, how we will determine if reporting requirements have been met, and how we will apply the statutory penalty for failure to file a timely report. It also specifies electronic filing and sampling requirements.

§275.2 What definitions apply to this part?

(a) Except as provided in paragraph (b) of this section, the general TANF definitions at §270.30 of this chapter apply to this part.

(b) For data collection and reporting purposes only, TANF family means:

(1) All individuals receiving assistance as part of a family under the State's TANF or separate State program; and (2) The following additional persons living in the household, if not included under paragraph (b)(1) of this section:

(i) Parent(s) or caretaker relative(s) of any minor child receiving assistance;

(ii) Minor siblings of any child receiving assistance; and

(iii) Any person whose income or resources would be counted in determining the family's eligibility for or amount of assistance.

§275.3 What reports must the State file on a quarterly basis?

(a) Quarterly reports. Each State must collect on a monthly basis, and file on a quarterly basis, the data specified in the TANF Data Report and the TANF Financial Report (or, as applicable, the Territorial Financial Report). Under the circumstances described in paragraph (d)(1) of this section, the State must collect and file the data specified in the TANF-MOE Data Report.

(b) TANF Data Report. The TANF Data Report consists of three sections. Two sections contain disaggregated data elements and one section contains aggregated data elements.

(1) TANF Data Report: Disaggregated Data - Sections one and two. Each State must file disaggregated information on families receiving TANF assistance (section one) and families no longer receiving TANF assistance (section two). These two sections specify identifying and demographic data such as the individual's Social Security Number; and information such as the type and amount of assistance received, educational level, employment status, work participation activities, citizenship status, and earned and unearned income. These reports also specify items pertaining to child care and child support. The data requested cover adults (including non-custodial parents who are participating in work activities) and children.

(2) TANF Data Report: Aggregated Data - Section three. Each State must file aggregated information on families receiving, applying for, and no longer receiving TANF assistance. This section of the Report asks for aggregate figures in the following areas: the total number of applications and their disposition; the total number of recipient families, adult recipients, and child recipients; the total number of births, out-of-wedlock births, and minor child heads-of-households; the total number of non-custodial parents participating in work activities; and the total amount of TANF assistance provided.

(1) Each State must file quarterly expenditure data on the State's use of Federal TANF funds, State TANF expenditures, and State expenditures of MOE funds in separate State programs.

(2) In addition, each State must file annually with the fourth quarter TANF Financial Report (or, as applicable, the Territorial Financial Report) definitions and descriptive information on the TANF program and descriptive and expenditure-related information on the State's separate MOE program as specified in §275.9.

(3) If a State makes a substantive change in its definition of work activities, its description of transitional services provided to families no longer receiving assistance due to employment under the TANF program, or how it reduces the amount of assistance when an individual refuses to engage in work, as specified in §275.9, it must file a copy of the changed definition or description with the next quarterly report. The State must also indicate the effective date of the change.

(4) If a State is expending TANF funds received in prior fiscal years, it must file a separate quarterly TANF Financial Report (or, as applicable, Territorial Financial Report) for each fiscal year that provides information on the expenditures of that year's TANF funds.

(5) Territories must report their expenditure and other fiscal data on the Territorial Financial Report, as provided at §274.85 of this chapter, in lieu of the TANF Financial Report.

(d) TANF - MOE Data Report.

(1) If a State claims MOE expenditures under a separate State program, it must collect and file similar disaggregated and aggregated information on families receiving and families no longer receiving assistance under the separate State program if it wishes to:

(i) Receive a high performance bonus;

(ii) Qualify for work participation caseload reduction credit; or

(iii) Be considered for a reduction in the penalty for failing to meet the work participation requirements.

(2) The TANF-MOE Data Report consists of three sections. Two sections contain disaggregated data elements and one contains aggregated data elements. Except for data elements that do not apply to individuals and families under the MOE program, such as time limits, the data elements in the TANF-MOE Data Report are the same as those in the TANF Data Report as described in paragraph (b) of this section.

§275.4 When are quarterly reports due?

(a) Each State must file the TANF Data Report and the TANF Financial Report (or, as applicable, the Territorial Financial Report), including the addendum to the fourth quarter Financial Report, within 45 days following the end of the quarter.

(b) The State may collect and submit its TANF-MOE Data Report quarterly at the same time as it submits its TANF Data Report, or the State may submit this report at the time it seeks to be considered for a high performance bonus, a caseload reduction credit, or a reduction in the work participation rate penalty as long as the data submitted are for the full period for which these decisions will be made.

(1) If a State implemented the TANF program by January 1, 1997, the first reports cover the July-September 1997 quarter and are due November 14, 1997.

(2) If a State implemented its TANF program between January 1, 1997, and July 1, 1997, the first reports cover the period that begins six months after the date of implementation and are due 45 days following the end of the applicable quarter.

§275.5 May States use sampling?

(a) Each State may report the disaggregated data in the TANF Data Report and in the TANF-MOE Data Report on all recipient families or on a sample of families selected through the use of a scientifically acceptable sampling method that we have approved. States may not use a sample to generate the aggregated data.

(b) "Scientifically acceptable sampling method" means a probability sampling method in which every sampling unit in the population has a known, non-zero chance to be included in the sample and our sample size requirements are met.

§275.6 Must States file reports electronically?

Each State must file all quarterly reports (i.e., the TANF Data Report, the TANF Financial Report (or, as applicable, the Territorial Financial Report), and the TANF-MOE Data Report) electronically, based on format specifications that we will provide.

§275.7 How will we determine if the State is meeting the quarterly reporting requirements?

(a) Each State's quarterly reports (the TANF Data Report, the TANF Financial Report (or Territorial Financial Report), and the TANF-MOE Data Report) must be complete and accurate and filed by the due date.

(b) For a disaggregated data report, "a complete and accurate report" means that:

(1) The reported data accurately reflect information available to the State in its case records, financial records, and automated data systems;

(2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so);

(3) The data are reported for all elements (i.e., no data are missing);

(4)(i) The data are provided for all families; or

(ii) If the State opts to use sampling, the data are provided for all families selected in a sample that meets the minimum sample size requirements (except for families listed in error); and

(5) Where estimates are necessary (e.g., some types of assistance may require cost estimates), the State uses reasonable methods to develop these estimates.

(1) The reported data accurately reflect information available to the State in its case records, financial records, and automated data systems;

(2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so);

(3) The data are reported for all applicable elements; and

(4) Monthly totals are unduplicated counts for all families (e.g., the number of families and the number of out-of-wedlock births are unduplicated counts).

(d) For the TANF Financial Report (or, as applicable, the Territorial Financial Report), "a complete and accurate report" means that:

(1) The reported data accurately reflect information available to the State in its case records, financial records, and automated data systems;

(2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so);

(3) The data are reported for all applicable elements; and

(4) All expenditures have been made in accordance with §92.20(a) of this title.

(e) We will review the data filed in the quarterly reports to determine if they meet these standards. In addition, we will use audits and reviews to verify the accuracy of the data filed by the States.

(f) States must maintain records to adequately support any report in accordance with §92.42 of this title.

§275.8 Under what circumstances will a State be subject to a reporting penalty for failure to submit quarterly reports?

(a) We will impose a reporting penalty under §272.1(a)(3) of this chapter if:

(1) A State fails to file the TANF Data Report and the TANF Financial Report (or, as applicable, the Territorial Financial Report) on a timely basis;

(2) The disaggregated data in the TANF Data Report is not accurate or does not include all the data required by section 411(a) of the Act (other than section 411(a)(1)(A)(xii) of the Act) or those nine additional elements necessary to carry out the data collection system requirements;

(3) The aggregated data in the TANF Data Report does not include complete and accurate information on the data elements required by section 411(a) of the Act and the data elements necessary to carry out the data collection system requirements and verify and validate disaggregated data;

(4) The TANF Financial Report (or, as applicable, the Territorial Financial Report) does not contain complete and accurate information on total expenditures and expenditures on administrative costs and transitional services; or

(5) The addendum to the fourth quarter TANF Financial Report (or, as applicable, the Territorial Financial Report) does not contain the information required under §§ 271.22, 271.24, and 274.1 of this chapter on families excluded from the calculations in those sections because of the State's definition of families receiving assistance; the definition of work activities; and the description of transitional services provided by a State to families no longer receiving assistance due to employment.

(b) We will not apply the reporting penalty to the TANF-MOE Data Report, the annual program and performance report specified in §275.9, or other information on individuals and families required by section 411(b) of the Act.

(c) If we determine that a State meets one or more of the conditions set forth in paragraph (a) of this section, we will notify the State that we intend to reduce the SFAG payable for the immediately succeeding fiscal year.

(d) We will not impose the penalty at §272.1(a)(3) of this chapter if the State files the complete and accurate reports before the end of the fiscal quarter that immediately succeeds the fiscal quarter for which the reports were required.

(e) If the State does not file all reports as required by the end of the immediately succeeding fiscal quarter, the penalty provisions of §§ 272.4 through 272.6 of this chapter will apply.

(f) For each quarter for which the State fails to meet a reporting requirement, we will reduce the SFAG payable by an amount equal to four percent of the adjusted SFAG.

§275.9 What information must the State file annually?

(a) Each State must file annually, as an addendum to the fourth quarter TANF Financial Report (or, as applicable, the Territorial Financial Report), the following definitions and information with respect to the TANF program for that year:

(1) The number of families excluded from the calculations at §§ 271.22, 271.24, and 274.1 of this chapter because of the State's definition of families receiving assistance, together with the basis for such exclusions;

(2) The State's definition of each work activity;

(3) A description of the transitional services provided to families no longer receiving assistance due to employment; and

(4) A description of how a State will reduce the amount of assistance payable to a family when an individual refuses to engage in work without good cause.

(b) Each State must also file with the fourth quarter TANF Financial Report (or, as applicable, the Territorial Financial Report) the information on separate State MOE programs for that year specified at §273.7 of this chapter.

(c) Each State must file an annual program and performance report that provides information about the characteristics and achievements of each State program; the design and operation of the program; the services, benefits, assistance provided; the eligibility criteria; and the extent to which the State has met its goals and objectives for the program. Each State may also include a description of any unique features, accomplishments, innovations, or additional information appropriate for the Department's annual report to Congress.

§275.10 When are annual reports due?

(a) The annual report of State definitions and expenditures required by §275.9(a) and (b) is due at the same time as the fourth quarter TANF Financial Report (or, as applicable, the Territorial Financial Report).

(b) The annual program and performance report to meet the requirements of section 411(b) of the Act (report to Congress) is due 90 days after the end of the fiscal year. The first report, covering FY 1997, is due December 30, 1997.

If the fiscal year is:	then the minimum participation rate is:
1997	25
1998	30
1999	35
2000	40
2001	45
2002 and thereafter	50

If the fiscal year is:	then the minimum average hours per week is:
1997	20
1998	20
1999	25
2000 or thereafter	30

	*When does the activity count?*
Activity	Overall rate		2-Parent rate
	20 hours	hours above 20	30/50 hours (without/with Fed child care)	hours above 30/50
(a) unsubsidized employment	__	__	__	__
(b) subsidized private sector employment	__	__	__	__
(c) subsidized public sector employment	__	__	__	__
(d) work experience	__	__	__	__
(e) OJT	__	__	__	__
(f) job search & job readiness	__	__	__	__
(g) community service programs	__	__	__	__
(h) vocational educational training	__	__	__	__
(i) job skills training	no	__	no	__
(j) education directly related to employment	no¹	__	no¹	__
(k) high school or GED	no¹	__	no¹	__
(l) providing child care services to a community service participant	__	__	__	__
¹Teen parents may count due to participation in these activities. Refer to §271.33.