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Correspondence

    April 19, 2011

Filed via EDGAR and

Delivered via Facsimile (703) 813-6986

    Ms. Sharon Virga

    Ms. Ivette Leon

    Senior Staff Accountant

    Assistant Chief Accountant

    Securities and Exchange Commission

    Securities and Exchange Commission

    Division of Corporation Finance

    Division of Corporation Finance

    100 F Street, N.E.

    100 F Street, N.E.

    Washington, D.C. 20549

    Washington, D.C. 20549

    Re:

    TeamStaff, Inc.

Form 10-K for the fiscal year ended September 30, 2010

Filed February 14, 2011

Form 10-Q for the quarter ended December 31, 2010

File No. 0-18492

Dear Ms Virga and Ms. Leon:

We are counsel to TeamStaff, Inc. (“TeamStaff” or the “Company”) and are in
receipt of your letter dated March 31, 2011 concerning comments to the above-referenced filings of
the Company. This letter sets forth the Company’s responses to the Staff”s comments as set forth in
such letter. In presenting this response, we have followed the enumerated comments and section
headings as set forth in your letter. For your convenience, we have repeated each of the comments
set forth in the Staff’s letter and followed each comment with the Company’s response.

The Company’s responses are as follows:

Form 10-K for the Year Ended September 30, 2010

Report of Independent Registered Public Accounting Firm, page F-2

Comment 1. In light of the disclosures in the filing, please tell us why your independent
registered public accounting firm did not include a going concern paragraph in their report. It
appears that you have disclosed management’s plan for dealing with the potential going concern
issue.

Securities & Exchange Commission

April 19, 2011

Page 2

Response

    1.

    As part of their audit of the Company’s consolidated financial statements, the Company’s
independent registered public accounting firm performed, pursuant to AU Section 341, certain
procedures in order to determine whether they should add an explanatory paragraph in their
report, raising substantial doubt about the Company’s ability to continue as a going concern.
After a discussion between the Company and its auditors regarding your comment, we advise you
that they concurred with management’s decision that a liquidity disclosure in the financial
statements was more appropriate than a substantial doubt disclosure in their report and
related notes to the financial statements for the following reasons:

    a.

    The Company advised its auditors during their audit that it obtained an
increase to the Company’s line of credit with Presidential Financial Corporation to
increase the maximum available line under this facility from $2.5 million to $3 million
in 2011, subject to eligible accounts receivable. With respect to this line of credit,
it should be noted that the Company expects that its normal operating accounts
receivable generated in the ordinary course of business will be eligible under the line
of credit, since such receivables are typically due from U.S. government agencies.
Further, with respect to this line of credit, we obtained a commitment from the lender
that such line of credit would not be terminated without cause prior to February 29,
2012.

    b.

    The Company advised its auditors of commitments from its largest shareholder
and certain officers and directors, whereby these parties agreed to invest (or lend) up
to $500,000 to the Company. This commitment remains available through February 29,
2012. If the funding is advanced in the form of a debt arrangement, the repayment date
would not occur before February 29, 2012. The Company and its auditors further received
representations from the parties that they understood that this funding and the related
length of the commitment were significant factors in the auditor’s conclusion that a
liquidity paragraph in the notes to the financial statements was more appropriate than
a substantial doubt paragraph in their report.

    c.

    The Company provided its auditors with forecasted results and cash flows from
operations, which supported the Company’s ability to continue as a going concern
through September 30, 2011 in accordance with professional standards. With respect to
these forecasted operating results and cash flows, the auditors reviewed: (a) the
assumptions used in these projections, which included the performance of certain
contemporaneous procedures on revenue levels and results for the quarterly period
ended December 31, 2010, (b) effects of implemented cost reduction initiatives, (c)
relationship with the Company’s lender, (d) the aforementioned commitments of additional
funding and (d) the status of major customer arrangements.

Securities & Exchange Commission

April 19, 2011

Page 3

Critical accounting policies, page 29

Goodwill and Intangible assets, page 30

Comment 2. Refer to your disclosure on this page 30 and on page F-12. We note that you combined
your accounting policy on goodwill impairment with your accounting policy on impairment of
indefinite intangible assets. Please revise to disclose your policies on impairment of each of
these assets separately.

Response

With the Staff’s concurrence, the Company will separately disclose its accounting policy on
impairment of goodwill from its accounting policy on impairment of indefinite intangible assets in
future filings, commencing with our Quarterly Report on Form 10-Q for the period ended March 31,
2011.

Comment 3. We note that goodwill represents approximately 34% of your total assets as of September
30, 2010. Based on your disclosures it appears that you have one operating subsidiary and one
reporting unit and that all the goodwill is attributable to TeamStaff GS reporting unit. In light
of the consistent net losses and other negative disclosures in the filing, explain to us in detail
how your goodwill balance is not impaired or partially impaired as of September 30, 2010 and why
you did not perform an impairment test as of December 31, 2010.

Response

In connection with its goodwill and intangible asset impairment analysis as of September 30,
2010, the Company obtained a valuation report from an independent, accredited third party appraisal
firm which indicated that the goodwill balance was not impaired. Further details are provided in
the response at paragraph 4 of this response, below. An interim impairment test was considered, but
not performed, as of December 31, 2010 as nothing had come to the Company’s attention to indicate
that the assumptions underlying the goodwill impairment analysis as of September 30, 2010 no longer
remained appropriate or that additional negative indicators arose in the intervening period. The
Company had also updated the forecast used in the September 30, 2010 valuation report with the most
recent operating data available through December 31, 2010
in an effort to utilize enhanced, current data. In an effort to provide near-term risk
disclosures to readers of the financial statements, the Company also disclosed (in Note 2 —
Liquidity): “A decrease in revenue or other adverse change in the assumptions underlying the
valuation of the Company’s goodwill and intangible assets may also result in an impairment loss in
the value of the Company’s goodwill and/or intangible assets in future periods.” Through the filing
dates of the Company’s Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the
quarter ended December 31, 2010, no such matters were evident.

Securities & Exchange Commission

April 19, 2011

Page 4

Comment 4. To help us understand your conclusions, please describe your goodwill impairment test to
us in detail, including at a minimum: 1) the reporting units you identified and how they were
identified, 2) how you determined the fair value of your reporting units and why you believe that
methodology is appropriate, 3) a description of key assumptions used and how the key assumptions
were determined, and 4) the percentage by which fair value exceeded carrying value as of the most
recent step one test. Tell us the cash flows that management used and how they were developed as
well as the disclosure in your filing that supports management’s conclusions. Refer to your basis
in the accounting literature.

Response

As noted in paragraph 3 above, the Company retained an independent, accredited third party
appraisal firm to value the Company’s goodwill and intangible assets as of September 30, 2010. In
regard to the specific questions that the Staff raises in this comment, the Company’s responses are
as follows:

    (1)

    The reporting unit in regard to goodwill was determined to be the
Company’s primary operating subsidiary, TeamStaff Government Solutions, Inc.
(“TeamStaff GS”). All of the goodwill being tested arose from the acquisition of
this legal entity, which constitutes a reporting unit for which discrete, separate
financial information is maintained and regularly reviewed by management. The
Company’s other continuing reporting unit for which separate financial information
is maintained and regularly reviewed by management is its Corporate Administration
unit. As noted in paragraph 5a below, a third reporting unit, TeamStaff Rx, was
considered a discontinued operation in the prior fiscal year culminating in the
sale of substantially all of its assets in January 2010.

    (2)

    The fair value of the reporting units was determined with assistance
from an independent third party appraisal firm. As disclosed in the financial
statements,
the estimate of fair value was based on the income approach, which estimated the
fair value of the TeamStaff GS unit based on the projected future discounted cash
flows. The discounted cash flow approach was considered appropriate because it:
requires a direct mapping of expected earnings to the asset being valued; bases
underlying enterprise value on an asset’s forecasted cash flow; and incorporates the
non-linear, time value of money.

Securities & Exchange Commission

April 19, 2011

Page 5

    (3)

    Key assumptions in the valuation study were the estimates of
probability weighted future cash flows, the estimated terminal value of the
reporting unit and a discount factor applied to the estimated future cash flows and
terminal value assuming a hypothetical sale of TeamStaff GS in 2016. Estimates of
future probability weighted cash flows (which included revenue from existing
arrangements) were developed by management having regard to current expectations
and potential future opportunities. Forecasted gross profit and operating expenses
were consistent with the Company’s historical and projected experience. A terminal
value for the reporting unit was estimated based upon data of public companies that
management believes to be similar with respect to the Company’s economics, services
and markets. The discount factor used (12.11%) was a cost of capital estimate
obtained from a leading third party data provider that was deemed appropriate by
the independent appraisal firm.

    (4)

    The fair value of the TeamStaff GS reporting unit as of September 30,
2010 exceeded the carrying value of goodwill by more than 42%.

As noted above, the estimates of future cash flows were developed by management having regard to
current expectations and potential future opportunities and were probability weighted in regard to
likelihood of occurrence. As required by ASC 350 35-31, Intangible Assets Other Than Goodwill, the
intangible assets other than goodwill (i.e. tradenames) being tested at the same time as goodwill
were tested for impairment prior to testing goodwill. On a consolidated basis, with the inclusion
of the Corporate Administration reporting unit in addition to the TeamStaff GS reporting unit, it
was determined that a write down of $1.3 million in other intangible assets was appropriate, as the
fair value of the intangible assets on a consolidated basis was less than their combined carrying
value by that amount. This conclusion was disclosed in Note 2 — Long Lived Assets and was further
discussed on pages 19 and 30 of the Company’s filing. Note 2 — Long Lived Assets stated in part:
“At September 30, 2010, we performed a goodwill and intangible asset impairment analysis. For the
purposes of this analysis, our estimates of fair value are based on the income approach, which
estimates the fair value of the TeamStaff GS unit based on the future discounted cash flows. Based
on the results of the work
performed, the Company has concluded that an impairment loss of $1.3 million is warranted at
September 30, 2010. ...The resulting estimated fair value of tradenames was less than the carrying
value at September 30, 2010 by approximately $1.3 million, resulting in an impairment charge of
that amount being taken against the tradenames.” The separate disclosure proposed in response to
Staff Comment 2 above in respect of the accounting policies for intangible asset and goodwill
impairment will provide additional clarity in regard to the conclusions reached.

Comment 5. We note that for purposes of your valuation allowance, you have determined that it is
more likely than not that no portion of the valuation allowance attributable to NOLs will be
utilized during the carryforward period. We also note the expiration of your task order with DVA
disclosed on page 32. Please explain any discrepancies in assumptions between your accounting for
income taxes and your assessment of impairment.

Securities & Exchange Commission

April 19, 2011

Page 6

Response

With respect to the Staff’s request to explain any discrepancies in assumptions between the
accounting for income taxes (specifically as it relates to the adjustment of a valuation allowance
for deferred income tax assets) and the assessment of impairment for goodwill and identified
intangibles, the Company advises Staff of the following:

    (a)

    The Company performed an evaluation, pursuant to ASC 740, to assess whether it
was appropriate to reverse either a portion or all of a 100% valuation allowance of
deferred income tax assets. The result of that evaluation was that projected taxable
income for the next five years was not sufficient to utilize any significant net
operating loss carry-forwards or future deductible amounts. Therefore, the 100%
deferred tax valuation allowance was not reduced.

    (b)

    In accordance with ASC 350, the Company performed a fair value assessment of
the indefinite lived intangible asset (tradenames). This fair value assessment
indicated that the tradenames asset was impaired by approximately $1.341 million. This
impairment charge was recorded in the September 30, 2010 consolidated financial
statements.

    (c)

    In accordance with ASC 350, the Company performed a “Step 1” impairment test
related to its recorded goodwill. The results of this test indicated that the fair
value
exceeded its carrying value and no “Step 2” test of impairment of the Company’s goodwill
was required.

    (d)

    With respect to the Staff’s specific question regarding discrepancies between
the evaluation of the deferred income tax valuation allowance and the Step 1 impairment
test for goodwill, please note the following:

    1.

    The assessment of the valuation allowance did
not contemplate the sale of the reporting unit (i.e. terminal value).

    2.

    The assessment of the valuation allowance
considered the Company’s ability to generate future consolidated
taxable income, while the Step 1 goodwill impairment test evaluated
future operating cash flows.

    3.

    The Step 1 impairment test operating cash flows
considered only those cash flows of TeamStaff GS, while the deferred
income tax valuation assessment considered the consolidated results of
operations for Federal and states’ income tax purposes for the Company
and its subsidiaries as a whole.

Securities & Exchange Commission

April 19, 2011

Page 7

Notes to Consolidated Financial Statements

(4)