Child Support Enforcement: State and Localities Move to Privatized
Services (Fact Sheet, 11/20/95, GAO/HEHS-96-43FS).
Pursuant to a congressional request, GAO provided information on the
privatization of state child support enforcement programs, focusing on
the number of ongoing and planned state contracts for location services,
collections, payment processing, and full-service programs as of October
1995.
GAO found that: (1) one or more child support services are privatized in
20 states and at the local office level in 18 states; (2) there are 21
full-service contracts for child support services and half of these are
served by one major contractor; (3) four major contractors provide most
of the services for 40 other collection and location service contracts;
and (4) there are nine contracts for payment processing services and
eight contracts for location services.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-96-43FS
TITLE: Child Support Enforcement: State and Localities Move to
Privatized Services
DATE: 11/20/95
SUBJECT: Child support payments
State programs
Cost effectiveness analysis
Collection procedures
Service contracts
State and local procurement
State/local relations
Law enforcement
IDENTIFIER: Aid to Families with Dependent Children Program
AFDC
**************************************************************************
* This file contains an ASCII representation of the text of a GAO *
* report. Delineations within the text indicating chapter titles, *
* headings, and bullets are preserved. Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are *
* identified by double and single lines. The numbers on the right end *
* of these lines indicate the position of each of the subsections in the *
* document outline. These numbers do NOT correspond with the page *
* numbers of the printed product. *
* *
* No attempt has been made to display graphic images, although figure *
* captions are reproduced. Tables are included, but may not resemble *
* those in the printed version. *
* *
* A printed copy of this report may be obtained from the GAO Document *
* Distribution Facility by calling (202) 512-6000, by faxing your *
* request to (301) 258-4066, or by writing to P.O. Box 6015, *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time. *
**************************************************************************
Cover
================================================================ COVER
Fact Sheet for the Chairman, Committee on the Budget, House of
Representatives
November 1995
CHILD SUPPORT ENFORCEMENT - STATES
AND LOCALITIES MOVE TO PRIVATIZED
SERVICES
GAO/HEHS-96-43FS
Child Support Privatization Initiatives
(106607)
Abbreviations
=============================================================== ABBREV
AFDC - Aid to Families With Dependent Children
HHS - Department of Health and Human Services
Letter
=============================================================== LETTER
B-270169
November 20, 1995
The Honorable John R. Kasich
Chairman, Committee on the Budget
House of Representatives
Dear Mr. Chairman:
Facing budgetary and staffing constraints and increasing federal
performance standards, state child support enforcement programs are
struggling to serve their ever- increasing caseloads. As states
confront the need to improve their services to the public, many are
turning to the private 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 to develop information on these
privatization initiatives. Specifically, you asked us to determine
(1) the extent of, rationale for, and perceived advantages and
disadvantages of privatizing child support functions; (2) the terms
of these contracts; (3) the legal issues surrounding privatization;
and (4) what is known about the cost effectiveness of these efforts.
In August 1995, we briefed your staff on the status of our ongoing
work. Subsequently, in response to inquiries from officials of the
Department of Health and Human Services (HHS) and several states
about our inventory of state privatization efforts, you asked us for
an interim report on that information. This fact sheet contains an
inventory of ongoing and planned state contracts for location
services, collections, payment processing, and full- service programs
as of October 1995.\1
We gathered this information by visiting and interviewing child
support officials and contractors in Georgia, Maryland, Mississippi,
Tennessee, and Virginia. We also interviewed by telephone child
support officials and contractors in the remaining states and
gathered additional data through our analysis of child support
contracts. Our inventory of child support contracts may not be
complete, because where programs are state-supervised but locally
administered, state officials said that they were not always fully
aware of local privatization efforts.
In summary, we found that one or more child support services are
privatized statewide in 20 states and at the local office level in 18
states (see app. I).\2 We identified 21 contracts for full-service
child support operations, about half of which are served by one of
two major contractors. We also identified 40 other contracts for
collections and related location services; four major contractors
provide most of these services. Finally, there are nine contracts
for payment processing services and eight contracts for location
services only. Appendix II contains detailed information about these
contracts, including the contractor, contract terms, and the types of
services provided. Appendix III contains a list of related GAO
products on child support enforcement.
--------------------
\1 We focused on these services because of recent increases in the
number of contracts for such services and their direct relationship
to the collection of child support. We did not include services
traditionally contracted out such as genetic testing, legal services,
and automated systems, nor did we include contracts solely for
paternity acknowledgement or customer service.
\2 Three new contracts are planned to be awarded in two states that
have existing privatization contracts and at least five new contracts
are planned to be awarded in four states that have no privatization
contracts. Five of the current states with contracts have privatized
services at both the statewide and local levels.
AGENCY COMMENTS
------------------------------------------------------------ Letter :1
We discussed this report with HHS' Office of Child Support
Enforcement officials who generally agreed with the data presented.
They provided technical comments on the data, which we have
incorporated as appropriate.
---------------------------------------------------------- Letter :1.1
We will send copies of this fact sheet to the Chairmen of the Senate
Committee on Finance and the House Subcommittee on Human Resources,
Committee on Ways and Means; the Secretary of HHS; and HHS' Assistant
Secretary for Children and Families. We will also make copies
available to others on request.
We will continue to keep you and your office informed of our progress
in reviewing the costs and outcomes of state privatization
initiatives. If you or your staff have any questions about this fact
sheet, please contact David P. Bixler, Assistant Director, at (202)
512-7201 or Kevin M. Kumanga, Senior Evaluator, at (202) 512-4962.
Other major contributors to this fact sheet include Gerard V. Grant,
Christopher Morehouse, and Suzanne S. Sterling.
Sincerely yours,
Jane L. Ross
Director, Income Security Issues
STATEWIDE OR LOCAL CHILD SUPPORT
PRIVATIZATION INITIATIVES AS OF
OCTOBER 1995
=========================================================== Appendix I
(See figure in printed
edition.)
CONTRACT INFORMATION ON STATE AND
LOCAL CHILD SUPPORT PRIVATIZATION
INITIATIVES ONGOING OR PLANNED AS
OF OCTOBER 1995
========================================================== Appendix II
Start
date
Full (contr
serv Loca Payment act Type of
ice\ te Collecti processi Contract length Payment cases
a only ons\b ng or \c) terms\d, e served\f
--------------- ---- ---- -------- -------- -------- ------ ---------- ----------
Alabama
-----------------------------------------------------------------------------------------
17 of 67 X To be (2.5 Aid to
counties awarded years) Families
With
Dependent
Children
(AFDC)
arrears
Arizona
-----------------------------------------------------------------------------------------
Apache, X RSI 5/94 Variable All
Coconino, Enterpri (4 rates each
Graham, ses, years) year based
Greenlee, Inc. on
Maricopa, performanc
Mohave, and e\
Yuma Counties
Apache, X Equifax 6/94 Variable All
Coconino, Accounts (4 rates each
Graham, Receivab years) year based
Greenlee, le on
Maricopa, Service performanc
Mohave, and e
Yuma Counties
Santa Cruz and X\g Policy 3/94 32-24 All
Yavapai Studies, (4 percent\h
Counties Inc. years)
(PSI)
Arkansas
-----------------------------------------------------------------------------------------
Jefferson X Hunt Law 9/95 Fixed fee All
County Firm (1.8 of
years) $810,000,
reimbursab
le
expenses
up to
$490,000
plus
incentives
Greene County X Greene 9/95 Fixed fee All
County (1.8 of
Child years) $175,000,
Support reimbursab
Enforcem le
ent, expenses
Inc. up to
$290,000
plus
incentives
Garland County X Owen 7/95 Fixed fee All
Support (2 of
Services years) $390,000,
, Inc. reimbursab
le
expenses
up to
$460,000
plus
incentives
Craighead X Brent 7/95 Negotiated All
County Davis, (2 contract\i
Esq. years)
3rd Judicial X Randolph 7/95 Negotiated All
District Co., (2 contract\i
Judge/ years)
Multi
Services
, Inc.
14th Judicial X Multi 7/95 Fixed fee All
District Services (2 of
, Inc. years) $300,000
reimbursab
le
expenses
up to
$330,000
California
-----------------------------------------------------------------------------------------
Los Angeles X Lockheed 7/95 Fixed fee All
County Martin (5 of $15.3
IMS years) million
plus
incentives
Colorado
-----------------------------------------------------------------------------------------
Statewide X Lockheed 8/91 Fixed fee All
Martin (5.5 of $8.75
IMS years) million
El Paso County X Maximus 1/96 19-10 All
(5 percent\h
years)
Mesa County X Lockheed 2/95 Negotiated All
Martin (11 contract\i
IMS months
)
Mesa County X Technica 2/95 Negotiated All
l (11 contract\i
Manageme months
nt )
Resource
s (TMR)
Rio Blanco X Colorado 1/95 16 AFDC
County Child (1 percent\j arrears
Support year)
Services
, Inc.
(CCSSI)
Delta County X CCSSI 6/95 16 percent AFDC
(7 arrears
months
)
Archuleta X CCSSI 5/95 Negotiated AFDC
County (7 contract\i arrears
months and some
) current
AFDC
Las Animas X CCSSI 4/95 Negotiated AFDC and
County (8 contract\i non-AFDC
months arrears
)
Connecticut
-----------------------------------------------------------------------------------------
Statewide X Lockheed 10/ 23.75 Closed
Martin 95 percent\k AFDC cases
IMS (3
years)
Statewide X Shawmut 6/95 Variable All
Bank (5 fee per
years) service
Florida
-----------------------------------------------------------------------------------------
Statewide (2 X To be 11/ AFDC and
contracts) awarded 95 non-AFDC
(1 arrears
year)
Georgia
Statewide X GC 1995 7.89 AFDC
Services (3 percent arrears\l
Limited years)
Partners
hip (GC
Services
)
Statewide X Lockheed 3/94 $46.50 per At staff
Martin (2.3 location discretion
IMS years)
Fulton County X\g Child 7/94 11.5-10 All non-
Support (5 percent\h AFDC
Services years)
of
Georgia
(Policy
Studies,
Inc.)
Hawaii
-----------------------------------------------------------------------------------------
Statewide X Lockheed 10/ Fixed fee All
Martin 95 plus
IMS (1 volume
year) adjustment
s
Idaho
-----------------------------------------------------------------------------------------
Statewide X Equifax 11/ 21 percent AFDC
Credit 93 arrears on
Informat (4 closed
ion years) cases
Services
Illinois
-----------------------------------------------------------------------------------------
Statewide X Lockheed 7/94 Negotiated AFDC and
Martin (2 contract\i non-AFDC
IMS years) arrears
Statewide X GC 7/94 Negotiated AFDC and
Services (2 contract\i non-AFDC
years) arrears
Statewide X Hanover 7/94 Negotiated AFDC and
Credit (2 contract\i non-AFDC
years) arrears
Statewide X Harvard 7/94 Negotiated AFDC and
Collecti (2 contract\i non-AFDC
on years) arrears
Services
Statewide X Midwest 7/94 Negotiated AFDC and
Account (2 contract\i non-AFDC
Consulta years) arrears
nts
Indiana
-----------------------------------------------------------------------------------------
Marion County X Trans 1993 Negotiated At staff
Union contract\i discretion
Marion County X TRW 1993 Negotiated At staff
contract\i discretion
Marion County X Associat 1993 Negotiated At staff
ed contract\i discretion
Iowa
-----------------------------------------------------------------------------------------
To be X To be 11/95 All
determined awarded intrastate
(local office cases for
level) paternity
and
support
order
establishm
ent only
Kansas
-----------------------------------------------------------------------------------------
Statewide X GC 12/ 17 percent All
Services 93
(5
years)
Maryland
-----------------------------------------------------------------------------------------
Statewide X GC 12/94 12.85 AFDC and
Services percent non-AFDC
arrears
Baltimore X To be 11/ All
County awarded 96
(3
years)
Queen Anne X To be 11/ All
County awarded 96
(3
years)
Baltimore City X Nations 1989 Variable All
Bank fee per
service
Massachusetts
-----------------------------------------------------------------------------------------
Statewide X Shawmut 10/ Variable All
Bank 95 fee per
(3 transactio
years) n
Statewide X Lockheed 10/ Negotiated AFDC and
Martin 92 contract\i non-AFDC
IMS (3 arrears
years)
Statewide X GC 10/ Negotiated AFDC and
Services 92 contract\i non-AFDC
(3 arrears
years)
Michigan
-----------------------------------------------------------------------------------------
Bay County X David M. 1/95 20 percent AFDC, non-
Friend of the Griffith AFDC, and
Court & service
Associat fee
es arrears
Branch County X David M. 8/92 Negotiated AFDC, non-
Friend of the Griffith contract\i AFDC, and
Court & service
Associat fee
es arrears
Cass County X David M. 1/92 Negotiated AFDC, non-
Friend of the Griffith contract\i AFDC, and
Court & service
Associat fee
es arrears
Emmet County X David M. 10/ Negotiated AFDC, non-
Friend of the Griffith 93 contract\i AFDC, and
Court & service
Associat fee
es arrears
Iosco/Oscoda X David M. 6/92 Negotiated AFDC, non-
County Friend Griffith contract\i AFDC, and
of the Court & service
Associat fee
es arrears
Midland County X David M. 5/95 20 percent AFDC, non-
Friend of the Griffith AFDC, and
Court & service
Associat fee
es arrears
Minnesota
-----------------------------------------------------------------------------------------
Statewide X Lockheed 12/ 16 percent All non-
Martin 94 AFDC
IMS (4 arrears;
years) interstate
AFDC
arrears
Mississippi
-----------------------------------------------------------------------------------------
Hinds and X Maximus 7/94 40.1-27.6 All
Warren Counties (5 percent\h,
years) m
Missouri
-----------------------------------------------------------------------------------------
Statewide X GC 7/94 9.9 AFDC
Services (3 percent arrears
years)
Nebraska
-----------------------------------------------------------------------------------------
Douglas County X PSI 2/93 15-13 All
(5 percent\h
years)
Nevada
-----------------------------------------------------------------------------------------
Statewide X GC 3/94 20 AFDC
Services (2 percent\n arrears
years)
New Hampshire
-----------------------------------------------------------------------------------------
Statewide X Credit 7/94 Variable All
Bureau (2 fee per
Services years) service\o
of New
Hampshir
e
New Mexico
-----------------------------------------------------------------------------------------
Statewide X GC 11/ 22 AFDC
Services 93 percent\p arrears\q
(3
years)
Statewide X CRW 2/94 21 AFDC
(TRW) (2 percent\p arrears\q
years)
New York
-----------------------------------------------------------------------------------------
Statewide\r X Lockheed 1/93 Fixed fee All
Martin (3 of $6.3
IMS years) million
New York City X Equifax 3/94 Variable All
(3 fee per
years) service\s
North Carolina
-----------------------------------------------------------------------------------------
Sixteen state X Educatio 12/ 19, 18.4, AFDC and
run programs nal 95\t and 20 non-AFDC
Recovery (1.5 percent, arrears
Services years) respective
(GC ly
Services
),
Payco-
General
American
Credit,
and A.M.
Miller
and
Associat
es
Ohio
-----------------------------------------------------------------------------------------
Huron County X David M. 10/ Fixed fees AFDC and
Griffith 94 per non-AFDC
& (2 service: arrears
Associat years) $14.84 per
es location.
$10.63 per
collection
\u
Clark County X David M. 7/95 15 percent At county
Griffith (6 discretion
& months
Associat )\v
es \
Lawrence County X GC 7/95 18 percent At county
Services (6 discretion
months
)\v
Lucas County X United 7/95 23.5 At county
Creditor (6 percent\w discretion
s months + $45
Alliance )\v per
Corp. location
Oklahoma
-----------------------------------------------------------------------------------------
Pittsburg X Kibois 1993 Cost- All
County, Haskell Communit (4 reimbursem
County y Action years) ent
Foundati
on
(nonprof
it)
Comanche X Great 1993\ Cost- All\x
County, Cotton Plains (4 reimbursem
County Improvem years) ent
ent
Foundati
on
(nonprof
it)
Pennsylvania
-----------------------------------------------------------------------------------------
Dauphin County X David M. 8/93 Negotiated AFDC and
Griffith (3 contract\i non-AFDC
& years) arrears
Associat
es
Tennessee
District 7 X\g Maximus 7/92 16 All
(5 percent\
years)
District 20 X\g Maximus 7/93 12-10.5 All
(5 percent\h
years)
District 10 X\g PSI 7/91 13.5 All
(5 percent
years) fixed
District 29 X\g PSI 2/92 19-15 All
(5 percent\h
years)
District 27 X\g PSI 1/95 17-14 All
(5 percent\h
years)
Texas
-----------------------------------------------------------------------------------------
Statewide X Lockheed 9/93 13.24 AFDC and
Martin (4 percent non-AFDC
IMS years) arrears\q
Utah
-----------------------------------------------------------------------------------------
Statewide X Lockheed 12/ 13.95 AFDC
Martin 94 percent arrears
IMS (3 + $46.50
years) per
location
Vermont
-----------------------------------------------------------------------------------------
Statewide X Vermont 1/95 Variable All
National (1.5 fee by
Bank years) type and
volume of
transactio
n\y
Virginia
-----------------------------------------------------------------------------------------
Statewide X GC 6/95 20 percent AFDC and
Services (1 non-AFDC
year) arrears
Hampton and X Lockheed 2/94 10 All
Chesapeake Martin (5 percent\z
District IMS years)
Offices
Alexandria/ X To be All
Arlington/ awarded
Falls Church
Washington
-----------------------------------------------------------------------------------------
Statewide X To be AFDC
awarded arrears
West Virginia
-----------------------------------------------------------------------------------------
Statewide X One 7/95 Variable All
Valley (5 fee by
Bank years) type of
transactio
n plus
cost
reimbursem
ent
Wyoming
Districts 1,2,3 X\g PSI 6/95 17.5-16 All
(4 percent\h
years)
Districts 8,9 X Gray & 5/95 $724,000 All
Associat (4 + 8
es years) percent of
collection
s over
$2.5
million
-----------------------------------------------------------------------------------------
Note: We did not identify planned or ongoing contracts in 13 states
and the District of Columbia. The 13 states are Alaska, Delaware,
Kentucky, Louisiana, Maine, Montana, New Jersey, North Dakota,
Oregon, Rhode Island, South Carolina, South Dakota, and Wisconsin.
\a Full service includes location, paternity and support order
establishment, payment processing, and collections.
\b Collections and related location services.
\c Length of contract can include possible annual renewals.
\d Unless otherwise noted, payment terms are expressed as a
percentage of contractor-generated collections.
\e Payment terms vary, depending on factors such as volume, quality,
type of cases referred, and use of multiple or single contractors.
\f Arrears may be defined differently in each jurisdiction (for
example, no voluntary payment in 90 days or 6 months).
\g State performs payment processing.
\h First figure is the payment figure for the contract's first year;
second figure is the rate reached by the end of the contract period.
\i Payment terms of negotiated contracts are not disclosed because
they are considered private information.
\j Total cost of contract capped at $3,000.
\k Total cost of contract capped at $2.95 million.
\l Cases referred to the contractor are primarily AFDC arrears, but
may also include any type of case, since referral is made at the
discretion of state staff.
\m Terms are based on statewide operation of full-service programs
that have not yet been implemented and are pending legislative
approval. In addition, contractor received $2.98 million for
start-up costs between April and June 1994 and $14,180,262 as a flat
fee for the first 15 months. Currently, contractor receives $400,000
a month plus incentives for operating the two programs shown.
\n Total cost capped at $75,000 in fiscal year 1994 and $125,000 in
fiscal year 1995.
\o Total cost capped at $10,000 in fiscal year 1995 and $16,000 in
fiscal year 1996.
\p Total cost of contract capped at $225,000.
\q Caseload includes some cases that are not in arrears.
\r Counties have been phased in over the life of the contract;
Lockheed reached full statewide coverage in March 1995.
\s Total cost of contract capped at $5,115,000.
\t Date of first referral of child support cases to a contractor who
currently has a contract with the state attorney general for
collections.
\u Total cost of contract capped at $9,999.
\v This effort is a pilot.
\w Total cost of contract capped at $10,000.
\x Contract excludes incoming interstate cases.
\y Total cost of contract capped at $150,000.
\z Contract includes a performance guarantee, reducing contractor's
revenue by 10 percent per month for failure to meet certain goals.
Source: Interviews with state officials and contractors; contracts
and other documents obtained by GAO.
RELATED GAO PRODUCTS
============================================================ Chapter 0
Child Support Enforcement: Opportunity to Reduce Federal and State
Costs (GAO/T-HEHS-95-181, June 13, 1995).
Child Support Enforcement: Families Could Benefit From Stronger
Enforcement Program (GAO/HEHS-95-24, Dec. 27, 1994).
Child Support Enforcement: Federal Efforts Have Not Kept Pace With
Expanding 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 Wage
Withholding; More HHS Action Needed (GAO/HRD-93-99, June 15, 1993).
Child Support Assurance: Effect of Applying State Guidelines to
Determine Fathers' Payments (GAO/HRD-93-26, Jan. 23, 1993).
Child Support Enforcement: Timely Action Needed to Correct System
Development Problems (GAO/IMTEC-92-46, Aug. 13, 1992).
Medicaid: Ensuring That Noncustodial Parents Provide Health
Insurance Can Save Costs (GAO/HRD-92-80, June 17, 1992).
Child Support Enforcement: Opportunity to Defray Burgeoning Federal
and State Non-AFDC Costs (GAO/HRD-92-91, June 5, 1992).
Interstate Child Support: Wage Withholding Not Fulfilling
Expectations (GAO/HRD-92-65BR, Feb. 25, 1992).
Interstate Child Support: Mothers Report Less Support From
Out-of-State Fathers (GAO/HRD-92-39FS, Jan. 9, 1992).
Interstate Child Support Enforcement: Computer Network Contract Not
Ready to Be Awarded (GAO/IMTEC-92-8, Oct. 23, 1991).
*** End of document. ***