Why Workforce Boards Should Prepare for a High-Risk TANF Designation

The federal program that funds a significant share of workforce development board operations is also the one drawing the most pointed federal scrutiny right now. Temporary Assistance for Needy Families, better known as TANF and administered in Florida as the Welfare Transition Program (WTP), has accumulated audit findings, widespread misuse of funds, lack of federal accountability, and inflation-driven funding cuts in volumes that don’t typically go unanswered. A high-risk TANF designation in a finalized future OMB Compliance Supplement would formalize what’s already showing up in audit reports, and workforce boards have time to prepare for it.

Why TANF Sits Where It Sits

TANF is a federal block grant administered by the Department of Health and Human Services that provides $16.5 billion annually to states, territories, and tribes. Created in 1996 to replace Aid to Families with Dependent Children, it funds cash assistance, work supports, job training, and a wide range of services for low-income families. States receive the money, set their own program rules within federal limits, and pass significant portions through to local administrators including workforce development boards.

That block grant structure is TANF’s defining feature and its defining complication. The flexibility of states to use and to tailor programs locally also produces inconsistent eligibility documentation, layered cost allocation across funding streams, and subrecipient monitoring obligations that look different in every state. For workforce boards running TANF alongside WIOA, SNAP Employment and Training, and state workforce funds, the program’s compliance footprint can be one of the heaviest in the portfolio. Staff allocate time across programs, participants move between them, costs get shared, and every one of those touchpoints becomes an audit risk if the paperwork doesn’t keep up.

The Federal Pressure Has Been Building

The Government Accountability Office (GAO) has documented persistent TANF compliance problems in two recent reports that read as a coordinated case for elevated oversight. The first, published in April 2025, identified 37 states with 162 TANF audit findings in their single audit reports. Fifty-six were material weaknesses, the most severe category. One-hundred-five had findings that were repeated from prior years. Three had remained unresolved for over a decade. Several involved significant deficiencies that could lead to improper payments.

The second report, issued three months earlier, examined HHS’s first formal TANF fraud risk assessment, completed in July 2024. The assessment identified 21 fraud risks, but GAO found it wasn’t fully consistent with leading fraud risk management practices, and HHS had no formal plan to update it or coordinate with the agencies actually administering TANF on the ground.

Take those two reports together and the picture is clear: a federal program with repeat audit findings going back over multiple years, material weaknesses concentrated across dozens of states, and an oversight agency that hasn’t built the fraud risk framework GAO expects. That’s the kind of evidence that drives elevated audit attention regardless of whether OMB makes the designation formal.

What a Higher-Risk Designation Would Change

OMB’s “higher-risk” classification in Appendix IV of the Compliance Supplement tells single auditors that a program warrants additional scrutiny when they select major programs and design their testing. The 2025 Compliance Supplement currently lists only two programs in that category: the Medicaid Cluster and Abandoned Mine Land Reclamation Grants. Adding TANF would put it in much tighter audit company.

For workforce boards, the practical effect is intensified testing. If TANF crosses the Type A program threshold, it would be required to be tested as a major program rather than subject to auditor discretion. Sample sizes may increase, internal control testing goes deeper, and auditors approach documentation with more skepticism. None of this happens in a vacuum. It would land on top of the 2024 Uniform Guidance revisions already in force: the single audit threshold increased from $750,000 to $1 million effective for fiscal years beginning on or after October 1, 2024, the Type A program threshold moved to $1 million, and the de minimis indirect cost rate climbed from 10% to 15%. The audit environment has already shifted. A high-risk TANF designation would shift it further.

Where Workforce Boards Should Tighten Now

Documentation discipline is the through-line across every TANF finding GAO has flagged, and it’s also the most fixable one. Pull a sample of participant files and check whether eligibility determinations are documented contemporaneously or reconstructed after the fact. This includes initial eligibility determinations, income verification, household composition documentation and retention of supporting records. Look at time and effort reporting for staff allocated across TANF and other funding streams. If staff are charging time without after-the-fact documentation of actual activity, that could be an audit finding waiting to happen, and the fix belongs before fieldwork, not during.

Subrecipient monitoring is the second recurring pressure point. For material subrecipients receiving TANF pass-through funds, auditors typically expect more than an annual questionnaire: documented site visits, expenditure reviews, and risk assessments tailored to each subrecipient’s profile. Cost allocation methodology for shared personnel and overhead needs to be written, approved, and applied consistently rather than assembled at year-end. A pre-audit internal review catching these gaps now buys time to remediate and document the correction, which is materially better than reading about them in the schedule of findings and questioned costs.

Get Ahead of the Next Compliance Supplement

The designation hasn’t been finalized yet, and that’s the opportunity. While the GAO findings make a compelling case for elevated scrutiny, OMB has not formally stated that a high-risk TANF designation is forthcoming. That determination remains preliminary until it appears in a finalized Compliance Supplement. Workforce boards that treat the GAO reports as advance notice will walk into their next single audit with documentation already built for the higher standard, whether or not the formal designation arrives in 2026.

James Moore’s nonprofit team works with workforce development boards and other federal grant recipients on single audit readiness, subrecipient monitoring, and TANF compliance. Contact us today to build TANF audit readiness into your next fiscal year. 

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