An evaluation was conducted of Vermont's Welfare Restructuring Project (WRP), one of the earliest statewide welfare reform programs designed to increase work and reduce reliance on welfare. To assess the difference WRP made, parents applying for or receiving cash assistance in Vermont from July 1994 to December 1996 were assigned randomly to one of these three groups: WRP group that received financial work incentives and were subject to work requirements (full WRP group); WRP Incentives Only group that received the incentives but were not subject to the work requirement; and Aid to Needy Families with Children (ANFC) group subject to pre-WRP welfare rules (no incentives or work requirement). Groups were followed for six years, using computerized records and survey methods. Findings indicated the following: (1) the full WRP program increased employment and reduced reliance on cash assistance for single-parent families; (2) WRP had little effect on family income, material hardship, children's school performance, or other family and child outcomes; (3) the program's work requirement was needed to generate impacts--financial incentives alone did not lead to increases in employment or income; (4) WRP increased employment among most subgroups, and increases were largest for the most disadvantaged; (5) very few community service employment positions were needed for the work requirement; (6) it saved money for taxpayers; and (7) WRP did not affect employment, earnings, income, material hardship, or outcomes for children for two-parent families with an unemployed parent. (Contains 26 references.) (YLB)