More than $30 billion in taxpayer-funded
welfare money intended to help America's poorest families has instead
beeen used as a 'slush fund' - diverted into programs ranging from
college scholarships to government budget backfills.
The
Temporary Assistance for Needy Families program, known as TANF, was
created nearly three decades ago to provide direct financial support and
services to struggling families.
Today,
the program distributes about $16.5 billion annually in federal funds,
supplemented by roughly $15 billion in state contributions.
But federal auditors and analysts say the
program's structure, which gives states broad control over spending with
limited reporting requirements, has made it difficult to track how
billions of dollars are ultimately used.
States
often use TANF money to finance programs with only indirect connections
to helping poor families, said Hayden Dublois of the Foundation for
Government Accountability. He described the system's lack of oversight
as 'fraud by design.'
He estimates that roughly one in five TANF dollars, or about $6 billion each year, is misspent.
Former President Bill Clinton is
seen signing a controversial welfare reform bill in White House Rose
Garden in 1996. At the time he spoke of 'ending welfare as we know it'
Despite the program's size, fewer families now receive direct cash assistance than in previous decades.
Federal
data shows that about 849,000 families received monthly TANF payments
in fiscal year 2025, down from approximately 1.9 million families in
2010.
Instead, states have increasingly directed funds to contractors, nonprofits and other government programs.
Nick
Gwyn, a policy expert with the Center on Budget and Policy Priorities,
said the shift reflects a broader transformation in how the program
operates.
'The program has drifted away from the core purpose of supporting families with very little income,' Gwyn told the WSJ.
Audits conducted in multiple states have uncovered persistent problems with oversight and financial reporting.
In
Louisiana, auditors found in 2024 that state officials failed to verify
required work participation hours tied to TANF eligibility - the 13th
straight year auditors flagged the same issue.
The audit also found gaps in documentation showing how TANF funds were distributed to contractors.
Minnesota Governor Tim Walz has
faced scrutiny amid major fraud investigations involving federally
funded child care and nutrition programs in his state
Americans line up for food
assistance, as critics warn billions in welfare funds intended to help
vulnerable families may be diverted to programs with limited direct
benefit to those in need
Louisiana officials said they agreed with the findings and would improve oversight.
In
Connecticut, auditors reported that the state did not adequately review
financial reports from more than 130 subcontractors receiving $53.6
million in TANF funds, making it difficult to confirm whether the money
was spent on approved purposes.
Connecticut officials said they would strengthen compliance procedures.
Auditors
also identified oversight problems in Florida, underscoring how
weaknesses in TANF spending controls extended across states regardless
of political leadership.
In Oklahoma, state auditor Cindy Byrd said her office has similarly found weak documentation tracking TANF expenditures.
State
and federal records show TANF money has been used for a wide range of
programs critics say fall outside the program's intended mission.
These
include college scholarship programs benefiting students from
middle-income families, payments to antiabortion pregnancy centers, and
child welfare programs already supported by other federal funding
sources.
In Michigan, more than $750
million in TANF funds were directed into scholarship programs between
2011 and 2024, according to the Michigan League for Public Policy.
In
Texas, federal data shows the state spent about $251 million in TANF
funds in fiscal year 2023 on foster care and child welfare programs,
while just 1.9 percent of TANF spending went directly to basic
assistance payments.
Ann Flagg, who
oversaw TANF at the federal level during the Biden administration, said
the program's layered structure made it difficult for federal officials
to monitor spending.
'Knowing that
there were so many layers between the activity on the ground and the
federal perch, there were many, many instances, I am sure, that funds
were used in crazy ways,' Flagg said.
The biggest scandal involving TANF funds took place in Mississippi. The
embezzlement scheme saw at least $77 million of taxpayers' money go
toward frivolous things instead of helping those in need in America's
poorest state, according to authorities.
Instead
of helping the less fortunate, cash was splurged on a lavish home in
Jackson, cars, paying off a non-profit leader's speeding ticket, and
funding a new $5 million volleyball stadium at Mississippi University,
among other items, authorities said.
A
total of seven people have pleaded guilty to state or federal charges
related to the fraud case, but former WWE wrestler Ted DiBiase Jr
decided to plead not guilty and stand trial.
Concerns
about misuse of public welfare funds have been amplified by a series of
major fraud scandals in Minnesota, where federal and state
investigators uncovered schemes involving millions of taxpayer dollars
intended for child care and food programs.
Trump's fraud crackdown was ignited by issues in Minnesota, but the state's cases are unrelated to TANF.
In
one case dating back to the 2010s, authorities found the operators of
several daycare centers billed the government for services that were
never provided, with surveillance footage appearing to show parents
briefly bringing children to facilities before leaving immediately.
Prosecutors
later said the scheme allowed providers to collect reimbursement
payments despite not delivering actual care, and several individuals
pleaded guilty to felony theft by swindling.
More
recently, federal authorities have investigated what they described as a
vast fraud network involving federally funded child nutrition programs.
FBI
Director Kash Patel said the bureau had 'surged personnel and
investigative resources to Minnesota' to dismantle fraud schemes
exploiting federal assistance programs.
Patel
warned that such activity may represent 'the tip of a very large
iceberg,' adding that 'fraud that steals from taxpayers and robs
vulnerable children will remain a top FBI priority in Minnesota and
nationwide.'
Federal watchdog agencies have also repeatedly warned about weaknesses in TANF oversight.
The
Government Accountability Office found that audits in 37 states
identified 162 deficiencies in financial oversight, including 56
considered severe.
The agency criticized what it described as 'opaque accounting practices' among groups receiving TANF funds.
The GAO has recommended since at least 2012 that Congress strengthen reporting requirements and expand federal oversight.
Those recommendations have not been enacted.
The ongoing fraud scandal in
Minnesota dates back a decade as a 2015 video shows parents appearing to
pretend to drop their children off at a phony daycare center
In testimony to Congress, GAO official Kathy Larin said states often use TANF funds precisely because of their flexibility.
'States
told us they use TANF because it's more flexible and can cover costs
not eligible' under other federal programs, she said.
TANF
was created in 1996 as part of sweeping welfare reform legislation
signed by President Bill Clinton, who described the measure as 'ending
welfare as we know it.'
The reforms
replaced an open-ended federal entitlement with block grants, giving
states significant authority over spending decisions.
Supporters
credited the program with reducing welfare dependency, but critics say
the system created incentives for states to redirect funds away from
direct aid.
Robert Rector, a senior
fellow at the Heritage Foundation who helped draft the legislation, said
the program has drifted from its original goals.
Recipients gather at a food
distribution site, highlighting the low-income families the TANF program
was originally designed to support through direct assistance and
services
'Today all states are in
de facto violation of the law' because they aren't spending all TANF
funds on the intended purposes outlined in the original law, Rector
said.
He added that both Republicans and Democrats share responsibility for failing to enforce stricter oversight.
The
Trump administration has recently moved to freeze billions in federal
welfare-related grants to several states over concerns about fraud and
misuse, including funds tied to TANF.
Several states challenged the move in court, and a federal judge temporarily blocked the freeze.
Despite
growing scrutiny and repeated warnings from auditors and watchdog
agencies, Congress has not enacted any comprehensive reforms.
