HHS freezes funding in five states pending review of fraud concerns

Key Takeaways

Update: On January 9, a federal judge in New York granted an emergency injunction blocking HHS from freezing the funds.

On January 6, the U.S. Department of Health and Human Services (HHS) Administration for Children and Families (ACF) sent letters to Calif., Colo., Ill., Minn. and N.Y. announcing they are temporarily restricting access to select federal child care and family assistance grant funds while the agency conducts a program integrity review.

According to ACF, the temporary restriction will impact nearly $2.4 billion of Child Care and Development (CCDF) funds, $7.35 billion of Temporary Assistance for Needy Families (TANF) funds and $869 million of Social Services Block Grant (SSBG) funds. In Colo., Minn. and N.Y., all three of these programs are directly administered by counties. In Calif., counties are responsible for administering TANF. In the letters, ACF raised concerns that eligibility verification practices in some states may need additional review to ensure alignment with federal law. In a separate communication, ACF stated that they have activated the Defend the Spend system to review funds for all CCDF grantees.

What does this mean for counties?

Counties are the frontline providers of human services and critical social support services. In three of the affected states, county governments directly administer CCDF and SSBG and administer TANF in four. In these states, counties are responsible for functions such as eligibility determination, service delivery, enrollment, data reporting and management of provider networks. 

The temporary funding freeze has the potential to create significant operational strain on the delivery of child care and family assistance services. Counties rely on timely federal reimbursement to support eligibility staff, provider payments, case management, and the coordinated delivery of wraparound services that stabilize families and strengthen local economies. NACo is concerned that prolonged payment restrictions could disrupt services for eligible families and increase administrative burdens and errors on county human services systems. 

These measures will remain in place until ACF completes its review and NACo will continue to monitor federal guidance.