Why can you not use social security for household bills, but you have to report it as income?

My sister collects a social security check for her daughter because her father died a few years ago, she was told she could not use it on any household bills or rent, only on her daughter, or they would take it away. So when she applied for help (welfare, got denied cause her income was too high) and student loans they made her report it as income.
Unfortunatley she is not the only one i have heard this from. I thought myself it was a misunderstanding the first time i heard it.

Per Social Security Policy in GN 00602.020 Using Title II Benefits to Support Other Family Members

Where a child beneficiary resides in a household with other individuals, the representative payee may provide a reasonable share of the child’s benefits for basic household expense items such as food and housing, in addition to providing for the beneficiary’s immediate and foreseeable needs.

If your child is disabled and you receive SSI for the child their are other restrictions on how you can use the money in their dedicated account.

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