Q & A: Penalty Process

Publication Date: April 30, 2012

Current as of: May 20, 2019

Penalty Process:

Q1: When exactly is a penalty assessed?

A1: We will follow the provisions of the final TANF regulations both during the interim period before the regulations go into effect and for penalties taken under the final rules. In both cases, if a State is subject to a penalty for misuse of TANF funds (whether intentional or not) or failure to repay a Federal loan, we will reduce the State’s family assistance grant for the quarter that immediately follows our final decision. For any other penalty violation, we will reduce the State’s family assistance grant for the fiscal year that immediately follows our final decision. However, with respect to penalties assessed for violations that occurred during fiscal years 1997, 1998 and 1999, we would take a penalty sooner at the request of the State.

In any case, we will not assess a penalty until the reasonable cause and corrective compliance process is concluded, if applicable. Also, if the State appeals to the Departmental Appeals Board, we will not assess a penalty until the appeals process is completed.

Q2: Could you summarize the penalty provisions?

A2: Please consult the following two tables. The first provides the regulatory citation, primary method for determining penalty liability⁴, and penalty amount for each TANF provision. The second shows whether reasonable cause and corrective compliance are available.

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⁴As discussed in the preamble at 62 FR 17800-17802, we may use additional methods such as supplemental reviews to identify a State's penalty liability.

TABLE 1. TANF PENALTY PROVISIONS -- REGULATORY CITATIONS, PRIMARY METHOD OF DETERMINING PENALTY LIABILITY, AND PENALTY AMOUNTS
VIOLATION	REG	PRIMARY METHOD	PENALTY AMOUNT
Misusing TANF funds	263.10	Single audit	Amount of misused TANF funds
Intentionally misusing TANF funds	263.10	Single audit	Amount of penalty for misuse plus 5% of adjusted SFAG
Failing to submit report as required	265.8	Self-evident	4% reduction of adjusted SFAG for each quarter State fails to report as required
Failing to meet minimum work participation rate	261.50	TANF Data Report	Up to 21% of adjusted SFAG
Failing to participate in IEVS	264.11	Single audit	2% of adjusted SFAG
Failing to penalize recipients for child support enforcement non-cooperation	264.31	Single audit	1% to 5% of adjusted SFAG, depending on number of violations
Failing to repay Federal loan	264.40	Self-evident	Outstanding loan amount plus interest
Failing to meet TANF MOE requirement	263.8	TANF Financial Report	Dollar-for-dollar reduction of amount of SFAG payable
Failing to enforce the 5-year time limit	264.2	TANF Data Report	5% of adjusted SFAG
Failing to remit contingency funds if the Contingency Fund MOE requirement is not met	264.76	TANF Financial Report	Amount of contingency funds not remitted
Sanctioning parents needing care for child under 6	261.57	Single audit	Up to 5% of adjusted SFAG
Failing to replace penalty reduction with State funds	264.50	TANF Financial Report	No more than 2% of adjusted SFAG plus amount of shortfall
Failing to meet TANF MOE requirement in year when WtW was received	263.8	TANF Financial Report	Reduction of the SFAG payable by the amount of the WtW formula grant paid
Failing to penalize recipients who refuse to engage in work	261.54	Single audit	1% to 5% of adjusted SFAG

TABLE 2. TANF PENALTY PROVISIONS-- AVAILABILITY OF REASONABLE CAUSE AND CORRECTIVE COMPLIANCE
VIOLATION	REASONABLE CAUSE AVAILABLE	CORRECTIVE COMPLIANCE AVAILABLE
Misusing TANF funds	X	X
Intentionally misusing TANF funds	X	X
Failing to submit report as required	X	X
Failing to meet minimum work participation rate	X	X
Failing to participate in IEVS	X	X
Failing to penalize recipients for child support enforcement non-cooperation	X	X
Failing to repay Federal loan
Failing to meet TANF MOE requirement
Failing to enforce the 5-year time limit	X	X
Failing to remit contingency funds if the Contingency Fund MOE requirement is not met
Sanctioning parents needing care for child under 6	X	X
Failing to replace penalty reduction with State funds
Failing to meet TANF MOE requirement in year when WtW was received
Failing to penalize recipients who refuse to engage in work	X	X

Q4: Are States bound by the guidance OFA provides in the form of program instructions, policy announcements, and Q's and A's?

A4: OFA has a long history of issuing policy guidance in the form of program instructions, policy announcements, and other documents. OFA has treated such guidance as authoritative and binding upon States and applied such guidance when making decisions on matters such as audit findings, QC penalties, and State plan approvals.

Under TANF, guidance issued in the form of program instructions, policy announcements, and posted Q's and A's has similar significance. While we no longer approve State plans or take QC penalties, we do apply such policy guidance in making decisions about audit findings and TANF penalties.

The TANF Q's and A's format differs from the format that we previously used, but is no less authoritative. We adopted the electronic Q&A format because we thought it would be more user-friendly and accessible. Also, we thought Q's and A's were more appropriate for TANF -- in that they could accommodate not only specific policy interpretations, but also statements about options available to States under the general principle of State flexibility.

Our goal in issuing guidance continues to be to give States as much flexibility as possible to implement effective, innovative and creative programs that support work and responsibility. However, as States gain experience operating their programs and explore the new possibilities available to them under TANF, we continue to receive requests for additional policy guidance.