The Administration for Children and Families, a division of the Department of Health and Human Services, is investigating whether, and how, federal welfare funds have been used at liquor stores, casinos, and strip clubs – all prohibited under federal law.

Under legislation that extended a payroll tax holiday, passed by Congress and signed into law earlier this year, states are directed to prevent recipients of funds under the Temporary Assistance to Needy Families (TANF) program from using their benefits at “any liquor store; any casino, gambling casino, or gaming establishment; or any retail establishment which provides adult-oriented entertainment in which performers disrobe or perform in an unclothed state for entertainment.”

HHS will cut off block grants to states that do not adequately comply with the provision. States are required to report their efforts to HHS in 2014, but ACF’s Office of Family Assistance is already looking to issue a regulation that addresses the misuse of TANF funds.

Such misuse was widespread enough to require congressional action and federal enforcement.

A recent investigation by the House Ways and Means Committee highlighted eight instances, in eight different states, of TANF funds being used at establishments prohibited by law. Another report from the committee claims that nearly $5 million in state-issued TANF funds was withdrawn from casino ATMs in California from 2007 to 2010.

The committee claims that the reauthorization of TANF, which included these restrictions on the use of the program’s cash awards, “ensures that welfare funds cannot be accessed at ATMs in strip clubs, liquor stores, and casinos.”

But while it does outlaw those uses, other provisions in the reauthorization make it fairly easy for TANF recipients to circumvent its prohibitions. According to the ACF’s request for comment, each state must also provide HHS with:

…an explanation of how the State plans to ensure that (1) recipients of the assistance have adequate access to their cash assistance, and (2) recipients of assistance have access to using or withdrawing assistance with minimal fees or charges, including an opportunity to access assistance with no fee or charges.

So while state measures to prevent the misuse of TANF funds may weed out, say, the withdrawal of cash at casino or liquor store ATMs, the law also requires that recipients have easy access to TANF cash. That may prevent states from being able to entirely weed out the misuse of those funds.