DOCUMENT RESUME ED 394 638 PS 023 940 TITLE INSTITUTION ... · Facing budgetary and staffing constraints and increasing federal performance standards, state child support enforcement

DOCUMENT RESUME

ED 394 638 PS 023 940

TITLE Child Support Enforcement: States and Localities Moveto Privatized Services. Fact Sheet for the Chairman,Committee on the Budget, House of Representatives.

INSTITUTION General Accounting Office, Washington, DC. Health,Education, and Human Services Div.

REPORT NO GAO/HEHS-96-43FSPUB DATE Nov 95NOTE 19p.

PUB TYPE Reports Evaluative/Feasibility (142) StatisticalData (110)

EDRS PRICE MF01/PC01 Plus Postage.DESCRIPTORS *Child Support; *Compliance (Legal); Contracts;

Parent Responsibility; *Privatization; PublicAgencies; Public Policy

IDENTIFIERS Noncustodial Parents

ABSTRACTThe House of Representatives requested that the

Health, Education, and Human Services Division (HEHS) examineprivatization of child support enforcement programs in the UnitedStates. HEHS was to determine: (1) advantages and disadvantages ofprivatization, and the extent of these programs currently; (2) terms

of contracts; (3) legalities of programs; and (4) relative costeffectiveness. In general, it was found that one or more childsupport enforcement services are privatized statewide in 20 statesand at the local office level in 18 states. Twenty-one contracts forfull-service child support operations were identified, as were 40other contracts for collections and related location services; 4major contractors provide most of these services. Finally, ninecontracts were identified for payment processing services, and eightfor location services only. This report presents statistical chartsof the findings in two appendices. Appendix 1 contains a map showing"Statewide or Local Child Support Privatization Initiatives as ofOctober 1995." Appendix 2 contains an eight-page table of "ContractInformation on State and Local Child Support PrivatizationInitiatives Ongoing or Planned as of October 1995," by state.Information in the table includes type of prrvatized service,contractor, terms of contract, and types of cases administered.Appendix 3 includes a listing of 12 related General Accounting Officereports related to child support enforcement. (SD)

************************************************************************ Reproductions supplied by EDRS are the best that can be made

from the original document.**************************************-*********************************

4:6.4 V

United States General Accounting Office

Fact Slt for the Chairman, Committeeon the Budget House of Representatives

November 1995.CHILD .:SUPPORTH-ENFOSCEME.N717...-

GAO/1111S-96-43FS BEST COPY AVAILABLE

United StatesGeneral Accounting OfficeWashington, D.C. 20548

Health, Education, andHuman Services Division

B-270169

November 20, 1995

The Honorable John R. KasichChairman, Committee on the BudgetHouse of Representatives

Dear Mr. Chairman:

Facing budgetary and staffing constraints and increasing federalperformance standards, state child support enforcement programs arestruggling to serve their ever-increasing caseloads. As states confront theneed to improve their services to the public, many are turning to theprivate sector to augment their child support enforcement programs.While states continue to expand these public and private partnerships,little is known nationally about such efforts. In May 1995, you asked us todevelop information on these privatization initiatives. Specifically, youasked us to determine (1) the extent of, rationale for, and perceivedadvantages and disadvantages of privatizing child support functions;(2) the terms of these contracts; (3) the legal issues surroundingprivatization; and (4) what is known about the cost effectiveness of theseefforts.

In August 1995, we briefed your staff on the status of our ongoing work.Subsequently, in response to inquiries from officials of the Department ofHealth and Human Services (tills) and several states about our inventory ofstate privatization efforts, you asked us for an interim report on thatinformation. This fact sheet contains an inventory of ongoing and plannedstate contracts for location services, collections, payment processing, andfull-service programs as of October 1995.'

We gathered this information by visiting and interviewing child supportofficials and contractors in Georgia, Maryland, Mississippi, Tennessee, andVirginia. We also interviewed by telephone child support officials andcontractors in the remaining states and gathered additional data throughour analysis of child support contracts. Our inventory of child supportcontracts may not be complete, because where programs arestate-supervised but locally administered, state officials said that theywere not always fully aware of local privatization efforts.

'We focused on these services because of recent increases 41 the numlwr of cimtracts fin. such servicesand their direct relationship to the collection of child support We did not include services traditionallycontnuied out such as genetic test Mg, legal services, and automated systems, ma- did we includecimtracts solely fiir paternity twknowk,dgement or customer service.

Page 1 GA0/11EIIS-96-43FS Child Support Privatization Initiatives

Agency Comments

B-270169

In summary, we found that one or more child support services areprivatized statewide in 20 states and at the local office level in 18 states(see app. 1).2 We identified 21 contracts for ft service child supportoperations, about half of which are served b. ne of two majorcontractors. We also identified 40 other contracts for collections andrelated location services; four major contractors provide most of theseservices. Finally, there are nine contracts for payment processing servicesand eight contracts for location services only. Appendix II containsdetailed information about these contracts, including the contractor,contract terms, and the types of services provided. Appendix III contains alist of related GAO products on child support enforcement.

We discussed this report with Ms' Office of Child Support Enforcementofficials who generally agreed with the data presented. They providedtechnical comments on the data, which we have incorporated asappropriate.

We will send copies of this fact sheet to the Chairmen of the SenateCommittee on Finance and the House Subcommittee on HumanResources, Committee on Ways and Means; the Secretaiy of rills; and nits'Assistant Secretary for Children and Families. We will also make copiesavailable to others on request.

'Three new contracts are planned to be awanled in t wo states that have existing privatizatimicontracts and at least five new contracts are planned I() be awarded in Nair states that have noprivatization contracts. Five of the current states with contracts have privatized services at both thestatewide and local levels.

Page 2 4 GAO/IIE,1114-96-43FS Child Support Privatization Initiatives

B-270169

We will continue to keep you and your office informed of our progress inreviewing the costs and outcomes of state privatization initiatives. If youor your staff have any questions about this fact sheet, please contact DavidP. Bixler, Assistant Director, at (202) 512-7201 or Kevin M. Kurnanga,Senior Evaluator, at (202) 512-4962. Other major contributors to this factsheet include Gerard V. Grant, Christopher Morehouse, and Suzanne S.Sterling.

Sincerely yours,

Jane L. RossDirector, Income Security Issues

Page 3 GA0/11EIIS-96-43FS Child Support Privatization Initiatives

Contents

Letter

Appendix IStatewide or LocalChild SupportPrivatizationInitiatives as ofOctober 1995

Appendix IIContract Informationon State and LocalChild SupportPrivatizationInitiatives Ongoing orPlanned as of October1995

Related GAO Products

1

6

7

16

Abbreviations

A'I /C Aid to Families With Dependent Childrennits Department of Ilea lth and I Inman Services

Page 4 6 GAO/IIEHS-96-43FS Child Support Privatization Initiatives

Appendix I

Statewide or Local Child SupportPrivatization Initiatives as of October 1995

05;s:,

v.e--".

None Underway

Locations, Collections. or Payment Processing

Full Service

OM Full Service and Other Functions

Page 6 GAWHEIN-96-43FS Child Support Privatization Initiatives

Appendix II

Contract Info ation on State and LocalChild Support Privatization InitiativesOngoing or Planned as of October 1995

Privatized services

Full Locate Paymentservice only Collections° processing Contractor

Alabama_ . . .

17 of 67 counties

ArizonaApache, CoconinoGraham, Greenlee,Mancopa, Mohave. andYuma Counties

Apache, Coconino.Graham, Greenlee,Maricopa. Mohave, anaYuma Counties

Santa Cruz and Yavapai X',

Counties

Arkansas

Jefferson County

Greene County X

Garland County X

Craighead County X

3rd Judicial District X

To beawarded

RSIEnterprises,Inc.

Start date(contract Paymentlengthc) terms°. e

(2.5 years)

5/94(4 years)

Equifax 6/94Accounts (4 years)ReceivableService

_

Policy 3/94Studies, Inc (4 years)(PSI)

Hunt LawFirm

9/95(1 8 years)

Greene 9/95County Child (1 8 years)SupportEnforcement.Inc

Owen 7/95Support (2 years)Services Inc

Brent Davis. 7/95Esq (2 years)

Randolph 7/95Co.. (2 years)Judge/MultiServices Inc

Variable rateseach yearbased onperformance

Variable rateseach yearbased onperformance

32-24 percent'

Type of casesserved'

Aid to FamiliesWith DependentChildren(AFDC) arrears

All

All

Ali

Fixed fee of All$810,000,reimbursableexpenses up to$490,000 plusincentives

Fixed fee of All$175,000,reimbursableexpenses up to$290,000 plusincentives

Fixed fee of All$390.000,reimbursableexpenses up to$460,000 plusincentives

Negotiated Allcontract

Negotiated All

contract

(continued)

Page 7 GAO/HEHS-46-13FS Child Support Privatization Initiatives

Appendix IIContract Information on State and LocalChild Support Privatization InitiativesOngoing or Planned as of October 1995

Privatized servicesStart date

Full Locate Payment (contract Payment Type of casesservice° only Collections° processing Contractor lengthc) termsd.e served'...._.... _ _

14th Judicial District X Multi 7/95 Fixed fee of AllServices, Inc (2 years) $300,000

reimbursableexpenses up to$330,000

California

Los Angeles County X Lockheed 7/95 Fixed fee of AllMartin IMS (5 years) $15.3 million

plus incentives.... .. _ ._ __...... ..... ._ .Colorado.... __ _.. . _.... . ... .._ ...._ ..... .. .. _Statewide X Lockheed

/9Fixed fee of All

Martin IMS 8(5.51years) ,8.75 million.. ._...... _____. __ ._..

El Paso County X Maximus 1/96 19-10 percent- All. . .

. . ._ . .(5 years)

..Mesa County X Lockheed 2/95 Negotiated All

Martin IMS (11 contractmonths).... ... . .

Mesa County X Technical 2/95 Negotiated AllManagement (11 contractResources months)(TMR).....

Rio Blanco County X Colorado 1/95 16 percent AFDC arrearsChild (1 year)SupportServices,Inc. (CCSSI)

Delta County X CCSSI 6/95 16 percent AFDC arrears(7 months)_.

Archuleta County X CCSSI 5/95 Negotiated AFDC arrears(7 months) contract and some

current AFDCLas Animas County X CCSSI 4/95 Negotiated AFDC and

(8 months) contract non-AFDCarrears

ConnecticutStatewide X Lockheed 10/95 23.75 percenr Closed AFDC

Martin IMS (3 years) casesStatewide X Shawmut 6/95 Variable fee per All

Bank (5 years) serviceFlorida

Statewide (2 contracts) X To be 11/95 AFDC andawarded (I year) non-AFDC

arrears

(continued)

9

Page fi GA0/11EIIS-96-43FS Child Support Privatization Initiatives

Georgia

Statewide

Statewide

Fulton County

Hawaii

Statewide

Idaho

Statewide

IllinoisStatewide

Statewide

Statewide

Statewide

Statewide

Indiana

Marion County

Marion County

Marion County

Appendix 11Contract Information on State and LocalChild Support Privatization InitiativesOngoing or Planned as of October 1995

Privatized services

Full Locate Paymentservice only Collections6 processing

l'age 9

X

Start date(contract Payment

Contractor lengthc) terms'',

GC Services 1995 7.89 percentLimited (3 years)Partnership(GC Services)

Lockheed 3/94 $46.50 perMartin IMS (2.3 years) location

ChildSupportServices ofGeorgia(PolicyStudies. Inc.)

7/94 11.5-10 percent'(5 years)

Lockheed 10/95Martin IMS (1 year)

Type of casesserved

- _

AFDC arrears

At staffdiscretion

All non-AFDC

Fixed fee plus Allvolumeadjustments

Equifax 11/93 21 percent AFDC arrearsCredit (4 years) on closed casesInformationServices

LockheedMartin IMS

7/94 Negotiated(2 years) contract

GC Ser.vices 7/94 Negotiated(2 years) contract

HanoverCredit

HarvardCollectionServices

MidwestAccountConsultants




Trans Union 1993 Negotiatedcontract

TRW 1993 Negotiatedcontract

Assi iciated 1993 Negotiatedcontract

AFDC andnon-AFDCarrears





At staffdiscretion

At staffdiscretion

At staffdiscretion

(continued)

GAO/IIEHS-96-13FS Child Support Privatization Initiatives

Appendix IIContract Information on State and LocalChi Id Support Privatization InitiativesOngoing or Planned as of October 1995

Privatized services Start dateFull Locate Payment (contract Payment Type of casesservice° only Collections° processing Contractor length') terms" served'

. _

Iowa

To be determined X To be 11/95 All intrastate(local office level) awarded cases for

paternity andsupport orderestablishmentonly

Kansas. -

Statewide X GC Services 12/93 17 percent All(5 years)

Maryland

Statewide X GC Services 12/94 12.85 percent AFDC andnon-AFDCarrears

Baltimore County X To be 11/96 Allawarded (3 years)

Queen Anne County X To be 11/96 Allawarded (3 years)

Baltimore City X Nations Bank 1989 Variable fee per Allservice

MassachusettsStatewide X Shawmut 10/95 Variable fee per All

Bank (3 years) transaction

Statewide X Lockheed 10/92 Negotiated AFDC andMartin IMS (3 years) contract non-AFDC

arrears..

Statewide X GC Services 10/92 Negotiated AFDC and(3 years) contract non-AFDC

arrears

Michigan

Bay County X David M 1/95 20 percent AFDC,Friend of the Court Griffith & non-AFDC, and

Associates service feearrears

Branch County X David M. 8/92 Negotiated AFDC,Friend of the Court Griffith & contract non-AFDC, and


Cass County X David M. 1/92 Negotiated AFDC,Friend of the Court Griffith & contract non-AFDC, and


(continued)

I I

Page 10 GAOMEIIS-96-43FS Child Support Privatization Initiatives

Emmet CountyFriend of the Court

losco/Oscoda CountyFriend of the Court

Midland CountyFriend of the Court

Minnesota

Statewide

MississippiHinds arid WarrenCounties

Missouri

Statewide

Nebraska

Douglas County

Nevada

Statewide

New Hampshire

Statewioe

New Mexico

Statewide

Statewide

New York

Statewide'

Appendix HContract Information on State and LocalChild Support Privatization InitiativesOngoing or Planned as of October 1995

Privatized services Start dateFull Locate Payment (contract Payment Type of casesservice only Collectionsb process;ng Contractor lengthc) termsd.e served'

_.... _ . __ _...

X David M. 10/93 Negotiated AFDC,Griffith & contract non-AFDC, andAssociates service fee

X

arrears

X David M. 6/92 Negotiated AFDC,Griffith & contract nonAFDC, andAssociates service fee

arrears

X David M. 5/95 20 percent AFDC,Griffith & non-AFDC, andAssociates service fee

arrears

X

X

X

Page 11

Lockheed 12/94 16 oercer it All non-AFDCMartin IMS (4 yea s) arrears:

interstate AFDCarrears

Maximus 7/94 40.1-27.6 All(5 years) percent-

GC Services 7/94 9.9 percent(3 years)

PSi

AFDC arrears

2/93 15-13 percent All(5 years)

GC Services 3/94 20 percen*-(2 years)

AFDC arrears

Credit 7/94 Variable fee per AllBureau (2 years) service'Services ofNewHampshire

GC Services 11/93 22 percent" AFDC arrears"(3 years)

CRW (TRW) 2/94 21 percent" AFDC arrears"(2 years)

Lockheed 1/93 Fixed fee of AllMartin IMS (3 years) S6.3 million

(continued)

GAO/HEIIS-96-4:1FS Child Support Privatization Initiatives


Privatized services Start dateFull Locate Payment (contract Payment Type of casesservice only Collections° processing Contractor lengthl termsd, e servedf

New YCYK City X Equifax 3/94 Variable fee per All(3 years) services

North CarolinaSixteen statu run X Educational 12/95 19, 18.4, and 20 AFDC andprograms Recovery (1.5 years) percent, non-AFDC

Services (GC respectively arrearsServices),Payco-GeneralAmericanCredit, andA.M. MillerandAssociates

Ohio

Huron County

Clark County

Lawrence County

Lucas County

David M. 10/94 Fixed fees per AFDC andGriffith & (2 years) service: $14.84 non-AFDCAssociates per location. arrears

$10.53 percollection-

David M. 7/95 15 percent At countyGriffith & (6 discretionAssociates months)"

GC Services 7/95 18 percent At county(6 discretionmonths)

United 7/95 23.5 percent* At countyCreditors (6 + $45 discretionAlliance months) per locationCorp.

Oklahoma.

Pittsburg Cour.ty. Haskell X Kibois 1993 Cost- AllCounty Community (4 years) reimbursement

ActionFoundation(nonprofit)

Conlailc.no County X Great Plains 1993 Cost- All'Corm, County Improvement (4 years) reimbursement

Foundation(nonprofit)

Pennsylvania

Dauphin County X David M 8/93 Negotiated AFDC andGriffith & (3 years) contract non-AFDCAssociates arrears

(continued)

3Page 12 GAOMEIIS-96-43FS Child Support Privatization Initiatives

Appendix IIContract Information on State and LocalChild Support Pnvatization InitiativesOngoing or I'lanned as of October 1995

Privatized services Start dateFull Locate Payment (contract Payment Type of casesservice only Collectionsb processing Contractor lengthc) termsd, e served'

Tennessee.

District 7 X Maximus 7/92 16 percent All(5 years)

District 20 X° Maximus 7/93 12-10.5 percent All(5 years)

_ .

District 10 X° PSI 7/91 13.5 percent All(5 years) fixed

_

District 29 X PSI 2/92 19-15 percent' All(5 years)

District 27 PSI 1/95 17-14 percent' All(5 years)

Texas

Statewide X Lockheed 9/93 13.24 percent AFDC and non-Martin IMS (4 years) AFDC arrears°

Utah

Statewide X Lockheed 12/94 13.95 percent AFDC arrearsMartin IMS (3 years) + $46.50 per

location

Vermont

Statewide X Vermont 1/95 Variable fee by All

VirginiaStatewide

Hampton and X

Chesapeake DistrictOffices

Alexandria/Arlington/ X

Falls Church

Washington

Statewide

West Virginia

Statewide

Page 13 1 ,1

National Bank (1.5 years) type andvolume oftransaction Y

GC Services 6/95 20 percent AFDC and(1 year) non-AFDC

arrears

Lockheed 2/94 10 percent' AllMartin IMS (5 years)

To be Allawarded

To beawarded

AFDC arrears

One Valley 7/95 Variable fee by AllBank (5 years) type of

transaction pluscostreimbursement

(continued)

GA0/11E11S-96-43F5 Child Support. Privatization Initiatives

Wyoming

Districts 1,2 3

V_


Privatized services. _ Sthrl date

Full Locate Payment (contract Payment Type of casesservice° only Collectionsb processing Contractor length°) termsb, e served'

. _

X" PSI 6/95 17.5-16 percent.- All(4 years)

Districts 8 9 X Gray & 5/95 $724,000 AllAssociates (4 years) + 8 percent of

collections over$2.5 million

Note We did not identify planned or ongoing contracts in 13 states and the District of ColumbiaThe 13 states are Alaska, Delaware, Kentucky, Louisiana, Maine. Montana. New Jersey. NorthDakota. Oregon, Rhode Island, South Carolina, South Dakota, and Wisconsin

^Full service includes location, paternity and support order establishment, payment processing.and collections

'Collections and related location services

'Length of contract can include possible annual renewals

'Unless otherwise noted, payment terms are expressed as a percentage of contractor-generatedcollections

'Payment terms vary, depending on factors such as volume, quality, type of cases referred, anduse of multiple or single contractors

'Arrears may be defined differently in each Jurisdiction (for example, no voluntary payment in 90days or 6 months)

9State performs payment processing

'First figure is the payment figure for the contract's first year, second figure is the rate reached bythe end of the contract period

Payment terms of negotiated contracts are not disclosed because they are considered privateinformation

Total cost of contract c. )ped at $3,000

'Total cost of contract capped at $2 95 million

Cases referred to the contractor are primarily AFDC arrears, but may also include any type ofcase, since referral is made at the discretion of state staff

-Terms are based on statewide operation ol full-service programs that have not yet beenimplemented and are pending legislative approval In addition, contractor received $2 98 millionfor start-up costs between April and June 1994 and $14,180,262 as a flat fee for the first 15months Currently, contractor receives $400,000 a month plus incentives for operating the twoprograms shown

otal cost capped at $75.000 in fit- ;al year 1994 and $125,000 in fiscal year 1995

'Total cost capped at $10.000 in fiscal year 1995 and $16.000 in fiscal year 1996

1 5

Page 14 GAO/IIEI1S-96-43FS Child Support Privatization Initiatives


c'Total cost of contract capped at $225.000

JCaseload includes some cases that are not in arrears

'Counties have been phased in over the life of the contract, Lockheed reached full statewidecoverage in March 1995

'Total cost of contract capped at $5.115,000

'Date of first referral of child support cases to a contractor who currently has a contract with thestate attorney general for collections.

-Total cost of contract capped at $9,999

'This effort is a pilot

"Total cost of contract capped at $10,000

'Contract excludes incoming intarstate cases

YTotal cost of contract capped at $150.000

'Contract includes a performance guarantee. reducing contractor's revenue by 10 percent permonth for failure to meet certain goals

Source. Interviews with state officials and contractors, contracts and other documents obtainedby GAO

Page 15 GAO/IIEHS-96-43FS Child Support Privatization Initiatives

Related GAO Products

Child Support Enforcement: Opportunity to Reduce Federal and StateCosts (GAOPT-11E11S-95-181, June 13, 1995).

Child Support Enforcement: Families Could Benefit From StrongerEnforce.aent Program (GA0/11Ells-95-24, Dec. 27, 1994).

Child Support Enforcement: Federal Efforts Have Not Kept Pace WithExpanding Program (GAO/T-HEHS-94-209, July 20, 1994).

Child Support Enforcement: Credit Bureau Reporting Shows Promise(GAO/HEHS-94-175, June 3, 1994).

Child Support Enforcement: States Proceed With Immediate WageWithholding; More lins Action Needed (GA0/MD-93-99, June 15, 1993).

Child Support Assurance: Effect of Applying State Guidelines toDetermine Fathers' Payments (GA0/MID-93-26, Jan. 23, 1993).

Child Support Enforcement: Timely Action Needed to Correct SystemDevelopment Problems (GA0/1MTEC-92-46, Aug. 13, 1992).

Medicaid: Ensuring That Noncustodial Parents Provide Health InsuranceCan Save Costs (GA0/11RD-92-80, June 17, 1992).

_

Child Support Enforcement: Opportuniiy to Defray Burgeoning Federaland State Non-AFDC COStS (GAO/HRD-92-91, June 5, 1992).

Interstate Child Support: Wage Withholding Not Fulfilling Expectations(GAO/HRD-92-6513R, Feb. 25, 1992).

Interstate Child Support: Mothers Report Less Support From Out-of-StateFathers (GAO/I-IRD-92439F8, Jan. 9, 1992).

Interstate Child Support Enforcement: Computer Network Contract NotReady to Be Awarded (GA0/1MTEC-92-8, Oct. 23, 1991).

(106607) Page 16 GA0/11EIIS-96-43FS Child Support Privatizadon Initiatives

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