This is really the crux of the matter, and I can't really see how Ryan's proposal addresses this very basic problem. However, I grudgingly give him credit for at least trying to take the feds out of the micromanagement of it all.
Yes, getting the feds out would be a step in the right direction. If there are any solutions, they’re local ones, and the local governments would probably be a lot better at spending that money than the feds and probably with less corruption, too.
One thing never mentioned is how corruption-riddled many federal anti-poverty programs are. The only family they bring out of poverty is that of the politically connected person “running” the program.