What GAO Found The number of states that reported counting third party nongovernmental expenditures toward their state MOE spending increased over the past 5 years—from 3 states in fiscal year 2007 to 13 states in fiscal year 2011. The largest number of states reported its use in fiscal years 2009 and 2010, the years during which states accessed TANF Emergency Contingency Funds provided by the American Recovery and Reinvestment Act of 2009 (Recovery Act). Third party nongovernmental MOE spending as a percentage of total MOE expenditures varied greatly among the 13 states that reported using it in fiscal year 2011 and ranged from less than one percent in several states to nearly half of one state’s overall MOE spending. Food assistance was the most commonly cited service provided by third party nongovernmental organizations that states counted towards MOE requirements. Other services included medical or dental services, employment assistance, and family stabilization services. States often reported that the option to count third party nongovernmental expenditures was an important tool to help them meet TANF MOE spending requirements as well as the TANF work participation requirements. A total of 17 states, most of those that used the option in fiscal year 2011 as well as 5 additional states, reported that they definitely or probably will count third party MOE spending in the near future.Why GAO Did This StudyEach year, the Temporary Assistance for Needy Families (TANF) block grant provides $16.5 billion in federal funds to states to assist low-income families. While the block grant provides states with a fixed amount of federal dollars annually, it also includes a requirement that states maintain a significant portion of their own historic financial commitment, called maintenance-of- effort, to welfare-related programs. In fiscal year 2011, states spent a total of $33 billion for TANF-related benefits and services—$18 billion in federal TANF funds and $15 billion in state MOE. This total includes any expenditures made by third parties, such as nonprofit organizations, that states counted toward their MOE requirement. Some concerns have been raised that counting third party nongovernmental expenditures towards a state’s MOE may not be in keeping with the intent of MOE requirements directed toward state and local governments. Concerns have also been expressed that this option may reduce the overall level of services available to low-income families in a state if, for example, that state counts services already provided by third parties while reducing its own spending.Consequently this report discusses the (1) extent to which states count third party nongovernmental expenditures toward their states’ MOE requirements, (2) types of third party nongovernmental benefits and services provided, and (3) the reasons states cited for counting third party nongovernmental MOE.For more information, contact Kay E. Brown at (202) 512-7215 or brownke@gao.gov.