Child Support Enforcement: Better Data and More Information on
Undistributed Collections Are Needed (19-MAR-04, GAO-04-377).
Congress established the child support enforcement program in
1975 to ensure that parents financially supported their children.
State agencies administer the program and the Office of Child
Support Enforcement (OCSE) in the Department of Health and Human
Services oversees it. In 2002, state agencies collected over $20
billion in child support, but $657 million in collections from
2002 and previous years were undistributed--funds that were
delayed or never reached families. One method used to collect
child support, intercepting federal tax refunds, involves all
state agencies, OCSE, and two Department of the Treasury
agencies--the Internal Revenue Service (IRS) and the Financial
Management Service (FMS). GAO was asked to address (1) how the
total amount of undistributed collections changed over the years,
(2) the causes of undistributed collections, (3) states' efforts
to reduce these funds, and (4) OCSE's efforts to assist states.
GAO analyzed OCSE data, administered a survey, visited 6 state
agencies and interviewed officials.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-377
ACCNO: A09509
TITLE: Child Support Enforcement: Better Data and More
Information on Undistributed Collections Are Needed
DATE: 03/19/2004
SUBJECT: Child support payments
Data integrity
Federal aid to states
Federal/state relations
Offsetting collections
State-administered programs
Tax refunds
Undistributed offsetting receipts
HHS Child Support Enforcement Program
HHS Temporary Assistance for Needy
Families Program
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GAO-04-377
United States General Accounting Office
GAO Report to the Chairman, Committee on
Finance, U.S. Senate
March 2004
CHILD SUPPORT
ENFORCEMENT
Better Data and More Information on Undistributed Collections Are Needed
GAO-04-377
Highlights of GAO-04-377, a report to the Chairman, Committee on Finance,
U.S. Senate
Congress established the child support enforcement program in 1975 to
ensure that parents financially supported their children. State agencies
administer the program and the Office of Child Support Enforcement (OCSE)
in the Department of Health and Human Services oversees it. In 2002, state
agencies collected over $20 billion in child support, but $657 million in
collections from 2002 and previous years were undistributed-funds that
were delayed or never reached families. One method used to collect child
support, intercepting federal tax refunds, involves all state agencies,
OCSE, and two Department of the Treasury agencies-the Internal Revenue
Service (IRS) and the Financial Management Service (FMS). GAO was asked to
address (1) how the total amount of undistributed collections changed
March 2004
CHILD SUPPORT ENFORCEMENT
Better Data and More Information on Undistributed Collections are Needed
OCSE reported that the amount of undistributed collections for fiscal year
1999 was $545 million and $657 million for fiscal year 2002; however,
these amounts may not be accurate. State agencies had different
interpretations of what comprised undistributed collections and data
reported by several state agencies were found to be unreliable throughout
this time period. OCSE revised the reporting form, but data accuracy
concerns remain, in part, because OCSE does not have a process to ensure
the accuracy of undistributed collections data.
Federal law, some state policies, and inaccurate or missing information
were the underlying causes of nearly all types of undistributed
collections. State agencies determined how long they held collections from
joint tax refunds and if they held collections received before they were
due. Federal law allows collections intercepted from joint tax refunds to
be held for up to 180 days and in response to GAO's survey, 34 state
agencies reported holding them for 180 days. Missing or inaccurate
information, such as invalid addresses, also leads to undistributed
collections. Based on state agencies' survey responses, GAO determined the
median value of the undistributed collections from joint tax refunds was
about $1.8 million and the median value of four other types of
undistributed collections exceeded $350,000.
Median Amounts for Five Types of Undistributed Collections Reported by
State Agencies as of June 30, 2003
over the years, (2) the causes of undistributed collections, (3) states'
efforts to reduce these funds, and (4) OCSE's efforts to assist states.
GAO analyzed OCSE data, administered a survey, visited 6 state agencies
and interviewed
Types of undistributed collections
Median amount rounded
Number of State agencies that reported an Amount
From joint tax refunds $1,750,000 32
Received before they were due $466,000 33
Pending legal resolution $431,000 24
officials. With an invalid address for custodial parents $399,000
GAO recommends that OCSE periodically review undistributed collections
data and that OCSE, IRS, and FMS work together to identify a way to share
information on collections held from joint tax refunds. OCSE did not
explicitly agree or disagree with the recommendations. IRS and FMS agreed
with the recommendation.
www.gao.gov/cgi-bin/getrpt?GAO-04-377.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Cornelia M. Ashby at (202)
512-7215 or [email protected]).
With data problems (overpayments, no active case, missing or inaccurate
data, etc.) $363,000
Source: GAO survey.
State agencies GAO visited took steps to better understand and reduce
undistributed collections. Of the 6 state agencies visited, 5 had analyzed
their undistributed collections cases, 4 adopted performance goals, and
officials from all 6 state agencies stressed the importance of researching
collections that were missing information. In addition, officials stated
that using automated processes to receive and distribute collections
helped reduce the number of collections with missing or inaccurate
information.
OCSE has provided some assistance to help state agencies reduce their
undistributed collections. However, the Department of the Treasury has not
provided OCSE information that would allow state agencies to distribute
collections from joint tax refunds to families sooner. Further, OCSE's
efforts to obtain this information have been minimal.
Contents
Letter
Results in Brief
Background
OCSE Reported Millions in Undistributed Collections, but Data
Were Unreliable
Federal Law, Some State Policies, and Inaccurate, or Missing
Information Delayed or Prevented Distribution of Certain
Collections
State Agencies Took Steps to Reduce Undistributed Collections
OCSE Has Assisted States' Efforts to Reduce Undistributed
Collections, but the Department of the Treasury Has Not
Provided Information That Would Help States Distribute
Collections from Some Joint Tax Refunds Sooner
Conclusion
Recommendations for Executive Action
Agency Comments and Our Evaluation
1
3 5
8
14 19
25 30 31 31
Appendix I Scope and Methodology
Appendix II Survey of State Directors of Child Support Enforcement
Appendix III Comments from the Department of Health and Human Services
Appendix IV Comments from the Department of the Treasury
Appendix V GAO Contacts and Staff Acknowledgments 48
GAO Contacts 48
Staff Acknowledgments 48
Tables
Table 1: Amount of Tax Refund Offset Collections from 1999 to 2002
Table 2: Categories and Types of Collections to Be Reported as
Undistributed
Table 3: Overestimates of Undistributed Collections and Year Reported
Table 4: Time Period Collections from Joint Tax Refunds Are Held
Table 5: Amounts for Nine Types of Undistributed Collections Reported by
State Agencies as of June 30, 2003
Table 6: Summary of State Agencies' Responses Regarding the Helpfulness of
OCSE Efforts
6
11
12 15
19
28
Figures
Figure 1: Types of Collections and Number of State Agencies That Included
Them in Undistributed Collections Reported to OCSE 10
Figure 2: Number of Years State Agencies Reported Holding Collections
before Declaring Them Abandoned Property 16 Figure 3: Portion of
Collections Distributed to Parents Electronically 23
Abbreviations
CSE Child Support Enforcement
EFT Electronic Funds Transfer
FMS Financial Management Service
FPLS Federal Parent Locator Service
HHS Department of Health and Human Services
IRS Internal Revenue Service
OCSE Office of Child Support Enforcement
PRWORA Personal Responsibility and Work Opportunity
Reconciliation Act TANF Temporary Assistance to Needy Families TOP
Treasury Offset Program
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
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copyright holder may be necessary if you wish to reproduce this material
separately.
United States General Accounting Office Washington, DC 20548
March 19, 2004
The Honorable Charles E. Grassley
Chairman
Committee on Finance
United States Senate
Dear Mr. Chairman:
In 2002, the Office of Child Support Enforcement (OCSE), in the
Department of Health and Human Services, reported that billions of
dollars in child support were collected but that payments totaling
$657 million were delayed or never reached the families for whom they
were intended. These undistributed child support payments are a concern
because child support is an important source of income for many families.
According to a 2003 report, for 36 percent of poor children living in
families headed by single mothers, child support payments comprised
almost one-third of the family's income in 2001. The 1996 Personal
Responsibility and Work Opportunity Reconciliation Act (PRWORA)1
generally requires state child support enforcement agencies to disburse
child support collections within 2 business days, if sufficient
information
identifying the recipient is provided. In addition, portions of child
support
collections must be distributed to state government programs, such as
Temporary Assistance to Needy Families (TANF), to reimburse them for
cash assistance provided to families.
Although state child support enforcement agencies administer the child
support program, the federal government plays a major role.2 OCSE funds
two-thirds of the program's administrative costs; establishes policies and
guidance; provides technical assistance, such as designing curricula and
providing support for staff training; and oversees and monitors state
agencies. Additionally, OCSE is responsible for taking the necessary steps
to help resolve issues at the federal level that affect the child support
program such as processes that prevent child support payments from
reaching families in a timely manner. OCSE and state agencies collect
1Pub. L. No. 104-193, S: 312(b) (Aug. 22, 1996).
2In this report we will refer to the state child support enforcement
agencies as state agencies.
child support through various methods, such as intercepting the federal
tax refunds of noncustodial parents-parents who do not have primary care,
custody, or control of their children-who are delinquent in paying their
child support.3 If the noncustodial parent has a new spouse and files a
joint tax return, generally, only the portion of the refund due to the
noncustodial parent should be intercepted. Federal law allows state
agencies to hold collections from certain intercepted federal joint tax
refunds for up to 6 months to provide time for the new spouse to ask for
his or her share of the refund by filing an "injured spouse" claim with
the Department of the Treasury.
In an effort to understand the issues associated with undistributed child
support collections, you requested that we address the following
questions: (1) How has the total amount of undistributed collections
changed in the last few years? (2) What are the causes of undistributed
collections? (3) What are state agencies doing to reduce undistributed
collections? (4) How has OCSE assisted state agencies' efforts to reduce
the amount of undistributed collections?
We obtained information from several sources that provided some data for
all of the objectives. We conducted a mail survey of all 54 IV-D child
support enforcement agencies. Forty-eight state agencies responded to the
survey. We did not assess the reliability of the data the state agencies
reported in response to our survey. However, we reviewed the data for
completeness and reasonableness. We conducted site visits to 6 state
agencies. We selected California, Florida, Iowa, New York, Texas, and
Virginia because they represented diversity in amounts of undistributed
collections, and geographical location, and they provided examples of
statewide and county administered programs. We interviewed federal and
state officials, reviewed related reports and analyzed applicable laws and
regulations. In addition, we took specific steps to address each of the
objectives. To address how undistributed collections have changed, we
analyzed OCSE data for fiscal years 1999 to 2002 reported by state
agencies. The fiscal year 1999 data was the earliest year with data
comparable to fiscal year 2002; the most current data available at the
time
3Under some circumstances, the Secretary of the Treasury may collect past
due child support by offsetting federal tax refunds and other types of
federal payments. Collections from federal joint tax refunds are held only
for non-TANF cases. In this report, the use of the word "non-TANF" means
that the child support is owed to a custodial parent who is not a TANF
recipient. Joint tax refunds subsequently mentioned in this report refer
to federal non-TANF joint tax refunds.
Results in Brief
of our review. We assessed the reliability of undistributed collections
data reported to OCSE and found that the data were inconsistent and
unreliable. We also reviewed state and federal reports that discussed
issues associated with calculating and reporting undistributed
collections. To identify the causes of undistributed collections, steps
state agencies have taken to reduce undistributed collections, and
assistance OCSE has provided to state agencies, we reviewed relevant
research and audit reports; examined OCSE guidance and documents related
to funded projects; and interviewed child support advocates and experts.
We conducted our work between May 2003 and March 2004 in accordance with
generally accepted government auditing standards. See appendix I for more
details on our scope and methodology and appendix II for a copy of our
survey.
OCSE reported that the amount of undistributed collections for fiscal year
1999 was $545 million and $657 million for fiscal year 2002; however,
these amounts may not be accurate because state agencies had different
interpretations of what comprised undistributed collections and data
reported by several state agencies were found to be unreliable throughout
this time period. A little more than half of the 48 state agencies that
responded to our survey reported that they included collections they would
distribute in the next 2 business days and collections to be distributed
to other government programs, while the others did not. In its 2002
preliminary annual report, OCSE acknowledged the limitations of its data
due to reporting discrepancies and has revised the reporting form and
related instructions to provide state agencies with uniform definitions of
undistributed collections. However, even with a new form and uniform
definitions, concerns remain about data accuracy within state agencies.
For example, 1 state reported in 2003 that it had overestimated its
undistributed collections amount by more than $160 million due to
accounting errors. Data accuracy concerns remain, in part, because OCSE
does not verify or periodically review undistributed collections data as
it does other performance and financial data.
Federal law and some state policies as well as inaccurate or missing
information were underlying causes for nearly all undistributed
collections. Federal law allows collections from joint tax refunds to be
held for up to 180 days. In response to our survey, 34 state agencies
reported that they held these collections for 180 days. Inaccurate or
missing case information also contributed to undistributed collections.
For example, information needed to determine the correct amount of the
collection to be distributed to custodial parents who are current or
former
TANF recipients was sometimes incorrect or missing, which caused payments
to be delayed. Additionally, invalid addresses for custodial parents
caused payments to be returned. Our analysis of state agency survey data
found that many state agencies reported holding more that $1 million from
joint tax refunds and several hundred thousand dollars in other types of
collections.
To better understand and reduce undistributed collections, state agencies
we visited devoted resources to analyzing and resolving their
undistributed collections, established performance goals, and encouraged
the use of automated payment processes. Nearly all of the state agencies
we visited conducted extensive analyses of the specific causes of
undistributed collections. For example, 1 state agency commissioned a
study with a private firm to determine the causes of undistributed
collections based on a review of thousands of cases. Four state agencies
adopted specific performance goals and 1 state agency had a goal to
maintain an undistributed collections balance of no more than 1 percent of
total collections. State agencies we visited highlighted the importance of
dedicating staff to resolving cases with missing information and invalid
addresses for custodial parents. Additionally, state agencies reported
that the increased use of electronic processes for receiving and
distributing funds reduced the amount of undistributed collections because
fewer collections had missing or inaccurate information. Thirty-seven
state agencies reported using direct deposit to distribute child support
payments and 9 state agencies reported using debit cards, which work like
other automated teller machine cards, credited with the child support
payments. Officials from 2 state agencies we visited told us that these
processes reduced the cost of operating the program. For example,
officials from 1 state agency reported saving over $300,000 per month with
the use of direct deposit.
OCSE has provided some assistance to help state agencies reduce
undistributed collections, but does not have the information needed to
help reduce undistributed collections from some joint tax refunds. OCSE
has focused attention on reducing undistributed collections, shared best
practices and information with state agencies at child support
conferences, and funded several projects related to undistributed
collections. To address one of the causes of undistributed collections, in
March 2003, OCSE issued guidance informing the state child support
enforcement program directors that they could use the Federal Parent
Locator Service (FPLS)-a computer matching system with access to federal
information sources-to help locate custodial parents. However, the
Department of the Treasury has not provided OCSE with some information on
"injured spouse" claims filed with tax returns and resolved,
that would allow state agencies to more quickly distribute collections
from joint tax refunds. OCSE's efforts to obtain more information on
"injured spouse" claims have been minimal.
In this report, we are recommending that the Secretary of Health and Human
Services (HHS) direct the Commissioner of the Office of Child Support
Enforcement to periodically review undistributed collections data from
state agencies to help improve the accuracy of the data; and we are also
recommending that the Secretary of Health and Human Services and the
Secretary of the Treasury work together to identify a cost-effective
approach for obtaining information related to intercepted tax refunds so
that these collections can be distributed to families sooner.
The Department of Health and Human Services and the Department of the
Treasury provided written comments on a draft of this report. In
commenting on the draft, the Department of Health and Human Services did
not explicitly agree or disagree with our recommendations, but raised
concerns about implementing them. The Department of the Treasury agreed
with our recommendation. Copies of the written comments from the
Department of Health and Human Services are in appendix III and the
comments from the Department of the Treasury are in appendix IV.
Child support is not legally owed until a child support order is issued
that stipulates the amount the legally identified noncustodial parent-the
parent who does not have primary care, custody, or control of the child-
is required to pay and when these payments are due. The Child Support
Enforcement (CSE) program, established in 1975 under Title IV-D of the
Social Security Act,4 established federal standards for state CSE programs
to ensure that parents provide support to their children. Services
provided through the CSE program include locating absent noncustodial
parents, establishing paternity and support orders, and collecting and
distributing child support payments. All 50 states, the District of
Columbia, Guam, Puerto Rico, and the Virgin Islands operate CSE programs.
However, many aspects of implementing the child support program are
generally under the purview of the state rather than the federal
government.
For fiscal year 2002, OCSE reported over 16 million child support cases
and collections of more than $20 billion. One method for collecting child
support is intercepting federal tax refunds. Congress enacted the Federal
Background
442 U.S.C. S:S: 651-669b.
Tax Refund Offset program in 1981.5 Initially the Internal Revenue Service
(IRS), an agency within the Department of the Treasury, OCSE, and the
state agencies operated the program. In 1998 the Financial Management
Service (FMS), another agency within the Department of the Treasury,
assumed primary responsibility for the program. Now, all state agencies,
OCSE, IRS, and FMS play a role in the program. Table 1 shows the amount of
collections offset from tax refunds from 1999 to 2002.
Table 1: Amount of Tax Refund Offset Collections from 1999 to 2002
Calendar year Child support offsets (in billions)
1999 $1.3
2000 $1.4
2001 $1.7
2002 $1.5
Source: OCSE.
To start the offset process, state agencies identify those noncustodial
parents that meet the program criteria. For example, for non-TANF cases,
the amount of past due support the noncustodial parent owes must be at
least $500. The state agencies, or OCSE on behalf of the state agencies,
must send a written notice to the noncustodial parent at least 30 days in
advance of sending his or her name to OCSE for the offset program. This
notice includes, among other things, information about filing "injured
spouse claims."6 State agencies send OCSE the names of the eligible
noncustodial parents and the amount owed and OCSE transmits this
information to FMS. FMS adds this information to its debtor file that
includes information on those who owe child support as well as those who
owe other federal debts.7 IRS processes the tax returns, and then forwards
information to FMS on those individuals who are due refunds. FMS compares
this information to its debtor file and, if there is a match, offsets the
refund by the amount of child support owed. After the refunds have been
offset, FMS notifies the individual, and transfers the offset funds and
5Omnibus Budget Reconciliation Act of 1981, Pub. L. No. 97-35, S: 2331
(Aug. 13, 1981).
6IRS Form 8379.
7The Treasury Offset Program (TOP) is a centralized debt collection
program developed by FMS. TOP is designed to assist agencies in the
collection of delinquent debt owed to the federal government. FMS
disburses payments on behalf of over 400 federal agencies.
information to OCSE. OCSE then distributes the funds and information to
the appropriate state agency.
When a noncustodial spouse has filed a joint tax return, FMS may offset
the refund if either person owes child support. FMS, acting on behalf of
the Secretary of the Treasury, must notify OCSE, which notifies the state
agencies when the withholding is being made from a refund based on a joint
return, and provides the names and addresses of each taxpayer. Under these
circumstances, the state agency is permitted to delay distribution of the
amount withheld until the Secretary of the Treasury notifies the state
agency that the spouse has received his or her proper share of the refund.
This delay may not exceed 6 months. However, the law allows a spouse 6
years to file an "injured spouse" claim. If the spouse files a timely
"injured spouse" claim and is found to be entitled to a portion of the
withheld amount, IRS will process the claim and allocate the appropriate
amount to each person. If the spouse's claim is filed after the funds have
been forwarded to the state agency, and the spouse is found to be entitled
to a portion of the withheld amount, FMS sends the spouse his or her
portion and the state agencies must reimburse the Treasury. OCSE data
shows that from March to August 2003, almost $200 million dollars were
collected from offsets of non-TANF joint tax refunds.
PRWORA amended portions of the Social Security Act, including some
provisions that pertained to child support enforcement. One provision
required state agencies to establish a state disbursement unit to
centralize collection and disbursement of child support payments in order
to receive federal funds.8 In addition to distributing collections from
noncustodial parents to custodial parents, state agencies also distribute
collections to
8State disbursement units are also responsible for collecting and
disbursing all payments under support orders, including spousal support.
other government programs such as TANF9 and Foster Care programs10 as
reimbursement for benefits provided to families. For example, as a
condition of receiving temporary cash assistance, parents must apply for
child support enforcement services and agree to give all or a portion of
their child support to the state. In fiscal year 2002, OCSE reported that
custodial parents who were receiving public assistance comprised about
three million cases, and those who formerly received public assistance
comprised about seven million cases.
State agencies are required to report collection and distribution
information quarterly to OCSE through the Quarterly Report of Collections,
Form OCSE-34A. On the form, net undistributed collections equal the total
amount of undistributed collections, less those considered undistributable
or abandoned property according to state laws.
OCSE has reported millions in undistributed collections from fiscal year
1999 to 2002, but the amounts may not be accurate. State agencies had
different interpretations of what comprised undistributed collections and
some state agencies reported data that were found to be unreliable
throughout this time period. Although OCSE revised the reporting form for
fiscal year 2004, which should improve consistency in the types of
collections reported as undistributed, data accuracy remains a concern.
OCSE does not audit or periodically review undistributed collections data
as it does other performance and financial data.
OCSE Reported Millions in Undistributed Collections, but Data Were Unreliable
Types of Collections Reported as Undistributed Differed
Although OCSE reported that the amount of undistributed collections for
fiscal year 1999 was $545 million and $657 million for fiscal year 2002,
OCSE also reported and our survey results indicated that state agencies
9The 1996 Personal Responsibility and Work Opportunity Reconciliation Act
created TANF. TANF emphasizes the importance of work and personal
responsibility rather than dependence on government benefits. After 2
years of assistance, or sooner if the state determines that the recipient
is ready, TANF adults are generally required to be engaged in work or
work-related activities. A lifetime limit of 60 months (or less, at the
state's option) is placed on adults' receipt of cash benefits. Families
receiving TANF benefits or benefits under the federally assisted foster
care program or the Medicaid program automatically receive CSE services
free of charge. Under PRWORA, TANF recipients generally must assign their
rights to current child support payments to the state.
10Foster care programs are authorized under Title IV-E of the Social
Security Act.
varied in the types of collections they reported as undistributed. In its
preliminary annual report for fiscal year 2002, OCSE acknowledged that
interpretation of the data on undistributed collections was limited due to
the variation in the types of collections included.11 This report
indicated that some state agencies included collections to be distributed
within 2 business days; collections received before they were due; and
collections to be distributed to other government programs, while other
state agencies did not. In our survey, we asked state agencies if they
included these types of collections as well as collections to be
distributed pending legal resolution and collections received from
intercepting joint tax refunds. Of the 48 state agencies that responded,
nearly all indicated that they included collections received before they
were due to the custodial parent, collections pending legal resolution,
and collections received from joint tax refunds. Thirty of the state
agencies responded that they included collections to be distributed in 2
business days and 28 state agencies included collections to be distributed
to other government programs. Figure 1 illustrates the state responses.
11OCSE's final annual statistical report for fiscal year 2002 was published
November 2003.
Figure 1: Types of Collections and Number of State Agencies That Included
Them in Undistributed Collections Reported to OCSE
Number of state agencies
joint tax refundsPending legalresolutionReceived beforedue date2 business
daysother governmentprograms
Did not include type of collection
Included type of collection
Source: GAO survey.
OCSE has taken steps to improve data consistency. OCSE revised its 34A
form and related instructions in fiscal year 2003 to improve the
consistency of undistributed collections data. According to OCSE
officials, this change was also made to provide more information about the
composition of undistributed collections. Prior to the changes, all
collections were reported under one category, and it was not possible to
distinguish between collections pending distribution and collections
requiring further research in order to distribute them.
As of fiscal year 2004, state agencies are required to report total
collections under two categories. The first category, "undistributed
collections pending distribution," includes collections that state
agencies reasonably expect to distribute through typical business
processing in the future. For example, collections held because of a legal
dispute over the amount of support owed will be distributed as soon as the
matter is
resolved. The second category, "undistributed collections unresolved,"
includes collections that require the child support staff to obtain more
information before they can be distributed. These include but are not
limited to collections (1) lacking information to match them to a case,
(2) missing current addresses for a parent, and (3) from checks that were
issued but the time frame for which to cash them had expired. According to
OCSE officials, another new reporting form has been developed for use
beginning in fiscal year 2005 that will require state agencies to report
amounts for 10 types of undistributed collections included under the two
categories. These officials informed us that the form is subject to review
and approval by the Office of Management and Budget. Table 2 summarizes
the two categories and the 10 types of collections to be reported as
undistributed collections.
Table 2: Categories and Types of Collections to Be Reported as
Undistributed
Undistributed collections pending distribution Undistributed collections
unresolved
Collections that were received within the past 2 business Unidentified
collections.
days following receipt, and pending distribution within
federal timelines.
Collections being held for up to 6 months that were offset Collections
pending the location of the custodial or noncustodial from non-TANF joint
tax refunds. parent.
Collections received before they were due. Collections initially
disbursed by check that remain uncashed and considered stale-dated and
non-negotiable in accordance with state law and procedures.
Collections held pending resolution of legal disputes and Collections with
inaccurate or missing information. (Examples include
any timely appeal (Examples include contested paternity or dispute over
the balance of support owed.)
but are not limited to collections received that do not correspond to the
amount owed or collections received for accounts that have been closed or
have not yet been opened.)
Collections processed but not yet distributed to other state Other
collections remaining undistributed. or federal agencies administering
programs such as TANF.
Source: Form OCSE-34A.
Some State Agencies In addition to differences in the types of
undistributed collections that Reported Inaccurate state agencies
reported, 4 state agencies reported data accuracy problems Amounts of
Undistributed in 2002 and 2003 that were found to be overestimates. The
cumulative Collections amounts of these undistributed collections ranged
from about $5 million
to $168 million and, according to state officials, the actual amounts of
undistributed collections were lower than reported. The state agencies and
the amounts of the overestimates are summarized in table 3.
Table 3: Overestimates of Undistributed Collections and Year Reported
State agency Amount of overestimate Year reported
California $168,000,000a 2003
Michigan $25,000,000 2002
Missouri $5,000,000 2002
Nebraska $5,300,000 2003
Source: State agencies and GAO analysis.
Note: Not all state agencies could provide information needed to determine
the exact time period associated with these overestimates.
a OCSE officials reported that this amount was recalculated to be about
$163 million and noted that this claim as well as similar claims from
other state agencies are subject to federal review.
Most of the errors were accounting mistakes discovered by the state
agencies. Officials from the California Department of Child Support
Services reviewed the state's accounting of undistributed collections and
found that some local officials had included collections in their totals
multiple times because they had misinterpreted a policy. They thought that
disbursements could only be reported if collections were also reported in
the same period and, as a result, when they disbursed funds they again
added these collections into their totals. This resulted in overstating
amounts for total collections and for undistributed collections.
Nebraska's overestimate occurred partly because collections received
before they were due for non-TANF cases were immediately distributed, but
the officials did not show them as being distributed until the official
due date. In Missouri, nearly all of the overestimate was spousal support
collected by the state disbursement unit that was erroneously reported as
child support collections. For the remainder, in Missouri, when a
collection from a joint tax refund had been distributed to a custodial
parent and the amount was later adjusted in the same reporting quarter
because of an "injured spouse" claim, the adjusted amount was added as a
new collection. An audit of Michigan's child support program revealed that
it failed to account for the distribution of payments that noncustodial
parents paid directly to custodial parents.
The reports related to these overestimates also indicated that having
multiple jurisdictions involved with recording collections contributed to
the errors. Local agencies in California used forms that did not always
include the federal data elements used by the state agency to report
undistributed collections. Nebraska discovered errors when its state
disbursement unit took over the collection and distribution process from
clerks at multiple courts.
OCSE Did Not Hold State Agencies Accountable for Accurately Reporting
Undistributed Collections
While OCSE is required to audit some child support data, it does not have
a process to ensure the accuracy of data on undistributed collections.
OCSE is required to audit the reliability of the performance indicators
used as the basis for paying financial incentives to state agencies.12
Officials told us they are conducting these audits annually. To ensure the
reliability of the data, OCSE selects representative sample cases for a
detailed audit and reviews supporting documentation to check for errors.
OCSE is also required to conduct financial audits to determine whether
federal and other funds used to administer the program are being
appropriately expended and properly accounted for. These audits are
required to include an examination of collections and disbursements of
child support payments for proper processing and accounting treatment.
Although OCSE's general instructions for the collection of data used for
its annual report reminds state agencies that they should report reliable
and complete information, OCSE officials told us they have only reviewed
data on undistributed collections in special circumstances. For example,
the Department of Health and Human Services and OCSE conducted at least
three special reviews of California's undistributed collections data since
fiscal year 1994 that revealed problems with the accuracy and reliability
of the data. According to OCSE officials, the agency does not have the
resources to routinely review data on undistributed collections in the way
it reviews other program data.
Reviews of undistributed collections data do not have to be done the same
way other program data are reviewed. To minimize the impact on OCSE's
resources, the reviews of the undistributed collections data could be done
in conjunction with one of the other routine audits and could be limited
to a portion of the state agencies on a rotational basis, for example, one
third of the states each year. Without more accurate data on undistributed
collections, OCSE cannot be certain about the amount of collections that
are not being distributed to families in a timely manner. Further, without
accurate data, OCSE cannot determine whether undistributed collections are
more problematic for certain state agencies than for others.
1242 U.S.C. S: 652(a)(4)(C). Moreover, the Child Support Performance and
Incentive Act of 1998 requires that states have complete and reliable data
for purposes of computing incentives. 42 U.S.C. S: 658a(b)(5)(B). The
performance measures for incentive payment base amounts are paternity
establishment, support order establishment, current payments distributed,
and cost effectiveness. 42 U.S.C. S: 658a(b)(4). According to HHS, the
Secretary is required to conduct an audit for each fiscal year for
incentive purposes.
Federal Law, Some State Policies, and Inaccurate, or Missing Information
Delayed or Prevented Distribution of Certain Collections
The underlying causes for nearly all undistributed collections were
federal law, state policies, as well as inaccurate or missing information.
Federal law allowed state agencies to hold collections from joint tax
refunds and state agencies set polices that guided how long these refunds
and other collections were held. Invalid addresses for custodial parents
or missing case information also contributed to undistributed collections.
For example, information needed to determine the correct amount of the
collection to be distributed to families who are or were receiving public
assistance was sometimes inaccurate or missing, and delayed distribution
of these collections. Our analysis of state agency survey data found that
many state agencies reported holding more that $1 million from joint tax
refunds and several hundred thousand in other types of collections.
Federal Law and State Federal law and policies in some state agencies
contributed to certain Policies Determined How collections being counted
as undistributed. While state agencies are Long Certain Collections
generally required to distribute collections in 2 days, federal law allows
Were Held state agencies to hold collections from joint tax refunds for up
to 180 days.
Our survey results revealed that the majority of state agencies held
collections intercepted from joint tax refunds for 180 days and a few
distributed them in 1 to 2 days. Table 4 summarizes this survey data.
Table 4: Time Period Collections from Joint Tax Refunds Are Held
Number of state agencies Number of days collections are held
1-2
23-30
60a
99-170
180b
Source: GAO survey.
Note: Two state agencies did not answer this question.
aOne state indicated that it distributed these collections 60 days after
the end of the month it received them.
bWe converted the responses that were 6 months to 180 days. One state
reported that it distributed collections from tax refunds within 1 day
following the 180-day hold and another state indicated 2 days, following
the 180-day hold.
In addition, state agencies had policies on whether or not they held child
support collections received before they were due.13 Depending on how
early collections are received, they may be held for several months and
counted as undistributed collections during that time. Twenty-one state
agencies reported that they immediately distributed collections that were
received before they were due for non-TANF cases and 20 state agencies
reported that they held these collections until they were due. Seven state
agencies had other policies. For example, 1 state agency reported that it
authorized its case managers to distribute the collections based on the
preferences of the custodial parent and another state reported it would
hold as much as 1 month of support received before it was due and refund
the remaining amount to the noncustodial parent.
State policies regarding how long undistributed collections are held
before they are declared abandoned affects reported amounts of
undistributed collections. Eleven state agencies reported that their
policies require undistributed collections to be declared abandoned
property after 1 year, while 1 state indicated its policy was to hold
collections for up to 7 years. Eleven state agencies did not specify a
number of years after which undistributed collections were declared
abandoned property. Figure 5 shows the range of times reported by 44 state
agencies.
13These collections are also referred to as future payments.
Figure 2: Number of Years State Agencies Reported Holding Collections
before Declaring Them Abandoned Property
Number of state agencies 12
11 11
Some undistributed collections were the result of invalid addresses for
custodial parents or missing information. State officials told us that
custodial parents often moved without informing the child support agency
of their new address and that the U.S. Postal Service did not forward
collections to new addresses, but rather returned them to the child
support enforcement agency. According to state officials, noncustodial
parents did not always include identifying information on their payments.
For example, state officials said they sometimes received money orders
from noncustodial parents that were illegible or lacked information, such
as the case number or full name, needed to match them to the right case.
Missing or inaccurate information on TANF or former TANF cases contributed
to undistributed collections. Officials from 2 state agencies we visited
explained that some collections could not be distributed to the custodial
parent until they determined the correct amount owed to the
10 8
6
4
2
0 ss s ss
ear1 year
ber of y
No specifiedm
nu
ear2 y
ear3 y
ear5 y
ear7 y
Source: GAO survey.
Notes: Three state agencies did not report whether or not they specified
number of years. One state agency reported that it specified a number of
years after which undistributed collections are reclassified as abandoned
property, but did not indicate how many years.
Inaccurate or Missing Information Contributed to Undistributed Collections
government. According to Florida officials, this contributed to nearly 50
percent of its approximate $28 million in undistributed collections. The
state cited two major reasons for this problem: (1) data inaccuracies due
to the conversion of cases from the former statewide system to the state
agency's new automated system and (2) difficulties exchanging information
between the automated systems of the child support agency processing the
payments and the TANF agency. A 2001 report issued by the Department of
Health and Human Services' Office of Inspector General found that 11 state
agencies experienced difficulties in distributing child support to
families leaving TANF.14 Among the reasons state agencies cited were
problems exchanging information with TANF agencies and inaccurate
addresses for custodial parents receiving TANF benefits. The report also
noted that 28 of 51 state agencies surveyed reported problems with the
automated exchanges of information between the child support enforcement
and the TANF agencies. These problems included incompatible design of
state TANF and child support enforcement agencies' automated systems and
timing of information exchanges, which, according to the report, could
have caused child support payment delays and underpayments after clients
left the TANF program.
State officials also said that missing information from employers as well
as inaccurate payments contributed to the amount of undistributed
collections. For example, according to state officials, employers,
including some federal agencies, did not always identify the cases for
which the withheld wages were designated or mailed one check for multiple
cases with the sum of the withheld wages not matching the total amount of
the check.15 Additionally, some employers sent payments for more than was
due. In its examination of undistributed collections, a report from a
private firm indicated that in New York City, 40 percent of undistributed
collections were from payments that were not due. In some instances
employers sent inaccurate payments because the state agencies had not
notified them that the amount to be withheld had changed. Such changes
would be needed in cases such as those in which previously owed child
support had been paid and only current support was to be withheld, or if
14Distributing Collected Child Support to Families Exiting TANF.
Department of Health and Human Services, October 2001. OEI-05-01-00220.
15Wage withholding is a procedure whereby an employer automatically
deducts a specified amount from an employee's wages or income to pay a
child support obligation. All support orders issued after January 1, 1994,
must contain provisions for wage withholding, except when there is a good
cause not to require it or an alternative arrangement is reached by both
parties.
the child had reached the age at which child support payments terminated.
Officials from 1 state agency we visited, told us that they waited to
notify employers about changes in the amount to be withheld until
overpayments had been collected. In other cases, officials told us that
employers sent inaccurate payments because they did not always correctly
calculate the amount to be withheld. For example, if a child support order
stipulated that $100 was to be paid each month and $50 were deducted in
each of 26 biweekly pay periods, at the end of the year, the noncustodial
parent would have paid $1,300 instead of the $1,200 that was owed.
Depending on the state's policy, this $100 overpayment could be returned
to the noncustodial parent, distributed to the custodial parent before it
was due, or held until it was due.
Many State Agencies Reported Holding More than $1 Million from Joint Tax
Refunds and Several Hundred Thousand Dollars in Other Types of Undistributed
Collections
In response to our survey, 32 state agencies provided dollar amounts for
undistributed collections from joint tax refunds. The median value
reported for these collections was $1.8 million. Of these 32 state
agencies, 19 reported an amount of $1 million dollars or higher with 3
reporting amounts greater than $10 million dollars. In 15 state agencies
this was the largest amount reported for any of the nine types of
undistributed collections we listed on the survey. For the 9 state
agencies that provided values for all nine types, we determined that
undistributed collections from joint tax refunds ranged from 27 to 48
percent of total undistributed collections. Our survey requested data as
of June 2003, and OCSE officials explained that the amount of
undistributed collections from joint tax refunds is generally higher in
March through September.
Many officials cited the potential financial loss as the primary reason
they are unwilling to assume the risk of releasing these collections
before 180 days. State agencies are fully responsible for payments made in
error and must either attempt to recover money that has been distributed
to custodial parents or suffer the financial loss that comes from
reimbursing the Treasury for the "injured spouse" claims. One state agency
we visited, Texas, reduced the time it held collections from joint tax
refunds from 120 days to 90 days after analysis of its data showed that
the benefit of distributing these collections outweighed the financial
risk of holding them.
While high values were consistently reported for undistributed collections
from joint tax refunds, our analysis also revealed that the median value
of four other types of undistributed collections that state agencies
reported exceeded $350,000. These undistributed collections included those
received before they were due, pending legal resolution, with an invalid
address for custodial parents, and with data problems. Table 5 illustrates
the median amounts and ranges reported for the nine types included in our
survey as well as the number of state agencies that reported an amount.
Table 5: Amounts for Nine Types of Undistributed Collections Reported by
State Agencies as of June 30, 2003
Number of
Maximum state
agencies
Median amount Minimum amount (in that reported
Types of undistributed (rounded) amount millions) an amount
collections
Collections from joint tax $1,750,000 0 $13.9
refunds
Collections received before $466,000 0 $8.0
they were due
Collections pending legal $431,000 $9,700 $10.2
resolution
Collections with an invalid
address for custodial $399,000 $1,300 $5.2
parents
Collections with data
problems (overpayments, no
active
case, missing or inaccurate $363,000 0 $14.2
data, etc.)
Collections sent to
custodial parents that can
no longer be
cashed $125,000 0 $5.8
Collections lacking
sufficient information to $94,000 $1,100 $4.5
identify them
Collections to be
distributed in 2 business $65,000 0 $4.7
days
Collections to be
distributed to other 0 $3.7
government programs $6,200
Source: GAO survey.
Note: The types of undistributed collections are slightly different from
the types OCSE uses because we administered our survey before the 34A form
was officially revised.
State Agencies Took Steps to Reduce Undistributed Collections
State agencies we visited took various steps to better understand and
resolve undistributed collections. They devoted resources to analyzing
their undistributed collections to help identify the specific causes.
Additionally, 4 state agencies we visited established specific performance
goals and all state agencies we visited emphasized regular monitoring of
undistributed collections. State agencies also implemented processes to
resolve cases with missing information and used electronic processes that
helped to reduce the number of collections with invalid addresses for
custodial parents and unidentified collections.
State Agencies Analyzed To help reduce their undistributed collections,
officials from 5 of 6 state and Monitored agencies we visited stated that
they devoted resources to better Undistributed Collections understanding
these collections. Beginning in 2000, California assembled a
team from various units within the state child support enforcement
agency, such as the fiscal and information technology units, to analyze
their undistributed collections. The initiative lasted 3 years and
included the design and implementation of a new collections and
distribution reporting system, verification of the amount and sources of
undistributed collections, and publication of a report in June 2003.
Another state agency, New York, awarded a yearlong, million dollar
contract to a private firm to analyze its undistributed collections. The
contractor developed a sampling plan and reviewed thousands of
undistributed collections to determine their sources and how long the
money had been held. In addition, the contractor evaluated technological
solutions and identified general strategies for reducing the largest types
of undistributed collections.
Officials from 4 state agencies we visited emphasized that in order to
reduce undistributed collections, it is necessary to establish performance
goals and measures and compare program results with those goals. Four of
the state agencies we visited established performance goals and measures
to help them monitor undistributed collections. Florida established a
series of performance accountability measures, including resolution of
collections requiring additional research and timeliness of disbursements,
to track the overall operation of its disbursement unit. Virginia
established its goal for undistributed collections at 3 percent of monthly
collections and was considering lowering that baseline to 2 percent as
well as maintaining less than $50,000 in unidentified collections. An
objective in California's strategic plan is to ensure that no more than 1
percent of collections due families remain undistributed at any time.
Texas established benchmark amounts for each type of undistributed
collections.
Officials from all of the state agencies we visited highlighted the
importance of monitoring undistributed collections to ensure that goals
are being met. Three of the state agencies we visited had detailed
automated reports to help them monitor undistributed collections. These
reports varied from state to state, but the examples provided included
data on the total dollar value of undistributed collections, number of
cases, number of collections, and dates collections were received. Also,
several state agencies produced data reports for each field or local
office. For example, a monthly management report in Virginia enabled the
state officials to monitor the performance of its 22 district offices.
According to our survey, nearly all state agencies indicated that they
routinely produced
statistical data on undistributed collections. For example, 27 state agencies
produced daily reports and 12 produced weekly reports.16
State Agencies Took Steps to Address Missing Information and Improve Payment
Processes
Resolving Missing Information and Invalid Addresses
State agencies we visited dedicated staff and focused resources on
resolving cases with missing information and invalid addresses. Some state
agencies used automated methods to receive and transmit collections.
Additionally, 1 state agency automated two processes that helped reduce
its undistributed collections.
Officials from all of the state agencies we visited highlighted the
importance of dedicating staff to researching collections involving
missing information. In Virginia, the state disbursement unit separated
collections with missing information, such as a social security or case
number, from those with this information. The team contacted employers,
courts, or other state agencies to obtain the needed information. A
database of the most difficult collections along with contact information
and instructions was maintained in order to reduce processing time on
similar collections received in the future. The team typically resolved
unidentified collections within 72 hours. Other state disbursement units
we visited also had specific staff dedicated to researching payments with
missing information in order to distribute them as soon as possible.
State agencies also focused resources on resolving cases with invalid
addresses for custodial parents. State officials cited the importance of
allowing staff to access federal, state, and private databases to locate
custodial parents. Officials in 1 state said they had a contract with a
private vendor because they found this information to be most useful.
Virginia's system automatically searched databases to match cases that
needed information. Such databases included FPLS,17 state licensing
agencies, and credit bureaus. In Texas, an indicator was added to case
records to allow field workers to automatically refer cases with invalid
addresses to special enforcement investigators. In addition, a new report
16Three of the 27 state agencies that reported producing daily reports
also reported that they produced weekly reports.
17FPLS is a computerized national location network operated by OCSE. FPLS
obtains address and employer information, as well as data on child support
cases in every state, compares them and returns matches to the appropriate
states. This helps child support enforcement agencies locate noncustodial
parents.
was created to show all cases with collections held due to missing
addresses so that field staff could focus their efforts on these cases.
This change resulted in the distribution of almost $1 million in the first
4 months of implementation. Also, state officials from the 4 state
disbursement units we visited told us that customer service
representatives routinely verified addresses when contacted by custodial
or noncustodial parents.
Using Automated Processes
Officials from 4 of the 6 state agencies we visited encouraged employers
to use Electronic Funds Transfer (EFT) when transmitting collections to
the state disbursement unit as a way to improve efficiency and reduce
undistributed collections. According to OCSE officials and a
representative from the American Payroll Association, converting to
electronic payments for child support means having to purchase software or
make programming changes to payroll systems, which can initially be
costly. As an alternative to EFT, 5 state agencies, including 1 we
visited, Florida, developed a process to allow employers to send payments
to the state disbursement unit over the Internet. A state agency's Web
based payment service operates much like other online banking services in
that an employer registers for the service, receives a user identification
and password and can then access the Web site each pay period to make the
payments for each of its employees. State agencies generally offered these
services free of charge to employers.
State agencies also provided alternative ways for noncustodial parents to
transmit their payments. Florida offered noncustodial parents the option
of paying their support over the Internet. Texas had a pilot project with
a grocery chain to allow noncustodial parents to pay their child support
at their stores, and then the stores would transmit the payment to the
state disbursement unit electronically. In another pilot project, New York
partnered with a private vendor that sells money orders. Noncustodial
parents could provide the payment to the vendor who would then transmit
the payment electronically to the state disbursement unit.
In addition to receiving collections electronically, many state agencies
distributed collections to parents electronically. Thirty-seven state
agencies that responded to our survey indicated they offered direct
deposit-a process whereby money is directly transferred to a checking or
savings account-and 9 reported that they issued a state debit card.
Officials from all the state agencies we visited explained that direct
deposit is not an option for many of their customers because they do not
have bank accounts. For anyone without a bank account, a state debit card
is an alternative. The card may be used to purchase goods or services
as well as to obtain cash. Safeguards have been included that prevent
custodial parents from withdrawing cash or making purchases that would
cause an overdraft of the available child support funds. In response to
our survey, most state agencies indicated that they send 40 percent or
fewer of their collections to parents electronically. Figure 6 shows the
portion of collections that state agencies reported distributing to
parents electronically.
Figure 3: Portion of Collections Distributed to Parents Electronically
Number of state agencies
18 17
16
14
12
10
8
6
4
2
0 0 1-20 21-40 41-60 61-80 81-98 99-100 Percent
Source: GAO survey.
While most state agencies offered at least one form of electronic
distribution to parents, in 2003, Iowa began requiring all parents to
receive collections electronically. Exceptions to this requirement were
based on individual circumstances.18 Officials told us that as of January
2004, about 95 percent of custodial parents in Iowa were receiving
collections electronically.
Automated processes to receive and distributed collections can help reduce
undistributed collections. According to state agency officials,
18Officials told us that some exceptions were granted to individuals, for
example, if they could not reasonably access a financial institution.
methods that allow state agencies to receive collections electronically
can help reduce undistributed collections due to fewer incorrect or
unidentified collections. Electronic methods for distributing collections
to families can also reduce the number of undistributed collections. With
direct deposit and state debit cards, funds are transferred from the state
directly to a financial institution and even if the custodial parent
changes addresses, the collections can continue to be deposited. As such,
by using direct deposit and state debit cards, undistributed collections
due to invalid addresses of the custodial parents and those due to paper
checks that can no longer be cashed are reduced.
In addition to reducing undistributed collections, officials from 2 state
agencies told us that electronic distribution to parents reduces many
processing costs and requires limited manual intervention. Iowa officials
predicted a combined savings to the state and federal government of about
$35,000 a month by sending collections to parents electronically.
Officials in Texas reported a cost savings of $1.34 per transaction by
using direct deposit versus mailing a check, a savings of over $300,000 in
a typical month.
Additionally, Texas automated two of its child support processes that will
help prevent undistributed collections. In 2000, Texas established an
automated mechanism to issue refunds to noncustodial parents for
collections that exceeded the amount owed. Previously, manual intervention
was required to release these collections. According to officials, this
program saved hundreds of hours of staff time and enabled them to quickly
process refunds. Also in 2000, Texas developed an automated process to
issue new wage withholding orders to employers when circumstances of cases
changed, such as a reduction in the amount owed. In the first 60 days
after implementation, Texas issued over 15,000 new orders to employers.
State Agencies Reported Earning Interest and Income
Many state agencies reported earning interest and program income. OCSE
issued a memorandum in 1989 that encouraged state agencies to deposit all
child support collections in interest-bearing accounts. According to our
survey, 32 state agencies reported that they kept all undistributed
collections in interest-bearing accounts, 4 state agencies reported
keeping some undistributed collections in interest-bearing accounts and 11
state agencies reported that they did not keep their collections in these
accounts. One state agency did not answer the question. State agencies are
required to deduct interest earned and income from program costs and can
charge fees to help recover some of their administrative costs. For
example, state agencies are required to charge non-TANF families an
application fee, and can charge fees for tax refund offsets and various
services and expenses such as case maintenance fees, or a fee to establish
a support order. Our prior reports concluded that most states either did
not charge fees or charged minimal fees.19 For fiscal year 2002, state
agencies reported earning almost $50 million in interest and income. The
amounts reported ranged from $0 to $15 million.
OCSE has provided some assistance to help state agencies reduce their
undistributed collections. OCSE focused attention on reducing
undistributed collections, shared best practices, and funded projects.
However, OCSE does not have information on some "injured spouse" claims
that could reduce the amount of time collections from some joint tax
refunds are held.
OCSE Has Assisted States' Efforts to Reduce Undistributed Collections, but the
Department of the Treasury Has Not Provided Information That Would Help States
Distribute Collections from Some Joint Tax Refunds Sooner
OCSE Provided Some In fiscal years 2002 and 2003, OCSE focused on reducing
undistributed Assistance to State collections. In its fiscal year 2002
annual report, OCSE stated that it was Agencies taking actions to
understand the composition of undistributed collections
and identify efforts state agencies could take to distribute more
collections to families. Additionally, OCSE emphasized that improved
customer service by state agencies helps reduce undistributed collections.
According to state officials, customer service representatives are
19U.S. General Accounting Office, Child Support Enforcement: Opportunity
to Defray Burgeoning Federal and State Non-AFDC Costs, GAO/HRD-92-91
(Washington, D.C.: June 5, 1992); Child Support Enforcement: Opportunity
to Reduce Federal and State Costs, GAO/T-HEHS-95-181 (Washington, D.C.:
June 13, 1995); and Child Support Enforcement: Clear Guidance Would Help
Ensure Proper Access to Information and Use of Wage Withholding by Private
Firms, GAO-02-349 (Washington, D.C.; Mar. 26, 2002).
encouraged to ask for updated information from parents, thereby reducing
the number of cases with incorrect addresses. In fiscal year 2003, OCSE
partnered with the National Council of Child Support Directors to refine
the categories of undistributed collections and obtain state data and best
practices. Also, OCSE issued guidance in March 2003 to reduce the number
of cases with invalid addresses. This guidance informed state agencies
that they could access FPLS to locate custodial parents as well as to
locate noncustodial parents.
OCSE funded research and provided technical assistance to state agencies
to help them reduce undistributed collections. Between fiscal years 2000
and 2002, OCSE awarded three contracts. The first contract awarded in
fiscal year 2000, for about $135,000, funded research to identify
approaches for reducing undistributed collections in 11 state agencies
with large caseloads or amounts of collections. In addition, this
contractor reviewed undistributed collections in two New York counties and
identified factors in their business processes and automated systems that
prevented them from further reducing these collections. According to OCSE,
a second contract was also awarded in fiscal year 2000 for about $112,000
that funded research focused on understanding the extent and causes of
undistributed collections across state agencies and highlighting best
practices for distributing such collections. Additionally, OCSE officials
said that a third contract was awarded in fiscal year 2002 for about
$300,000 that funded research to review undistributed collections in 5
state agencies.
Beginning in fiscal year 2000, OCSE made projects designed to reduce
undistributed collections a priority for demonstration grants, and awarded
five grants.20 In fiscal year 2000, OCSE awarded one grant for about
$188,000, and in fiscal year 2002, OCSE awarded four grants-one each to
Texas, and the District of Columbia and two to Indiana-for a total amount
of about $500,000. The goals for each of the fiscal year 2002 projects
were different. For example, the goal for one project was to
20Section 1115 of the Social Security Act authorizes OCSE to provide
funding to state Title IV-D agencies for demonstration activities intended
to add to the knowledge and to promote the objectives of the Child Support
Enforcement Program. The four priority areas for fiscal year 2002 were to
(1) increase the rate of cases with collections through better use of
automation and improved public-private collaboration projects for
interstate cases, (2) increase the rate of cases with collections from
low-income noncustodial parents, (3) reduce and limit the amount of
undistributed collections by having states better track and distribute
more of the undistributed child support that they have collected, and (4)
further the national goals of the Child Support Program.
evaluate the use of state debit cards as a way to reduce undistributed
collections.
Further, OCSE actively encouraged more use of EFT, which as previously
stated can help reduce undistributed collections. In July 2003, the OCSE
Commissioner sent a letter to 80 private sector employers that employ a
large number of noncustodial parents encouraging them to use EFT to pay
the child support they withheld from their employees' wages. During
several conferences sponsored by employer organizations, OCSE promoted
electronic payment by distributing literature and making presentations.
Additionally, in 2002 OCSE staff assisted the NACHA- Electronic Payments
Association's Child Support Task Force by helping to identify issues
associated with promoting the electronic collection and distribution of
child support payments. OCSE also worked with several federal agencies on
issues related to electronic payment. For example, OCSE worked with the
Defense Finance and Accounting Service to encourage more use of electronic
payments.
OCSE shared information about initiatives state agencies took to reduce
undistributed collections in its publications. Each month OCSE published
its "Child Support Report" with information about various child support
topics. Descriptions of successful state efforts related to undistributed
collections were featured in several editions. OCSE also published an
annual compendium of best practices in child support enforcement and
several of the entries in its 2002 edition were related to undistributed
collections.
In addition to these publications, OCSE has discussed or arranged sessions
on undistributed collections at conferences, forums, and training
sessions. OCSE officials also reported that regional meetings have
included sessions focused on reducing undistributed collections. For
example, officials from Region VII organized a workshop where perspectives
on reporting and best practices were addressed.21 In July 2003, OCSE
initiated monthly audio conference calls to foster discussions on
implementing best practices such as electronic funds distribution. As of
21Region VII includes Iowa, Kansas, Missouri, and Nebraska.
December 2003, OCSE had arranged five calls with a range of 25 to 38 state
agencies participating.22
As part of our survey, we asked state agencies how helpful various OCSE
efforts related to undistributed collections have been. For the most part,
state agencies reported that OCSE's efforts have been helpful and many
reported that discussions of best practices at forums were greatly or
extremely helpful. However, several state agencies reported that OCSE's
efforts were hardly or not at all helpful. Table 6 summarizes the state
agencies' responses.
Table 6: Summary of State Agencies' Responses Regarding the Helpfulness of
OCSE Efforts
Somewhat or Greatly or Have not
Hardly or not moderately extremely participated
OCSE effort at all helpful helpful in effort
helpful
Dissemination of
best practices 5 31 9
In-person training 7 9 4
Discussion of
best practices at
forums 7 18 15
Policy documents 8 30 6
Source: GAO survey.
Note: One state did not answer this question at all and 1 state did not
provide a response about the helpfulness of the policy documents.
The Department of the Treasury Has Not Provided OCSE Information on
Collections from Some Joint Tax Refunds
OCSE and state agencies are not receiving information from the Department
of the Treasury about approved "injured spouse" claims that are submitted
at the time a tax return is filed. Such information is important because
state agencies may delay disbursement of tax-offset collections for a
period of up to 180 days to allow for the possibility of a reversal based
on an "injured spouse" claim. IRS officials explained that while they do
not know the type of debt owed when they process the claims, they have
estimated that about 55,000 "injured spouse" claims related to the offset
of non-TANF joint tax refunds for child support have
22OCSE told us that these discussions are recorded and available to state
agencies that could not participate in the original call.
been filed with the tax returns each year.23 Additionally, these officials
commented that when the claims were filed with tax returns and approved,
the amount due the "injured spouse" was allocated before the file was sent
to FMS. However, the information FMS sent to OCSE, which was then
forwarded to the state agencies, did not identify these collections as
having had their "injured spouse" claims satisfied. As our survey results
show, most state agencies delayed distributing all collections from joint
tax refunds.
IRS officials explained that federal law and current processes have played
a role in determining the information provided to OCSE on approved
"injured spouse" claims. IRS officials stated that their disclosure
statute24
allows, but does not require, them to provide OCSE and the states with
information on specific tax offsets for payment of past due child support.
The officials also explained that they include data on the payment file
they send to FMS that could enable FMS to determine whether the "injured
spouse" claim has been processed. Furthermore, the IRS officials said that
it would be very costly to reprogram the IRS data systems to enable them
to provide OCSE information on "injured spouse" claims.
FMS officials we spoke with stated that until recently, they were not
aware that OCSE needed notification on the payment of injured spouse
claims25
and they expressed concern about the cost associated with changing their
system in order to provide the information to OCSE. The FMS officials
added that neither IRS nor OCSE emphasized the need for information on
injured spouse claims when FMS became responsible for and set up their
systems to support the tax-offset program. Furthermore, in order for FMS
to send OCSE more information about injured spouse claims, they would
23About 182,500 injured spouse claims were filed related to offsets for
child support and about 60 percent, 110,000, were filed with the original
return. Approximately half of the claims are for non-TANF cases.
2426 U.S.C. S: 6103(l)(10).
25Under the Social Security Act provision on collection of past-due
support from federal tax refunds, a state "may delay distribution of the
amount withheld until the State has been notified by the Secretary of the
Treasury that the other person filing the joint return has received his or
her proper share of the refund, but such delay may not exceed six months."
42 U.S.C. S: 664(a)(3)(B). While this section of law does not explicitly
require Treasury to affirmatively inform OCSE or the states that an
injured spouse claim has been paid, we believe that the statute
contemplates that Treasury notify the state when the other person filing
the joint return has received his or her share of the refund. See H.R.
Conf. Rep. No. 98-925, at 56 (1984).
have to reprogram their data files and change at least two data systems.
They also stated that it would take at least 3 years to modify the systems
and would be very costly. FMS officials suggested that the more
costeffective solution would be for IRS to send OCSE the requested
information
Although the offset program has been operating for almost 20 years, OCSE's
efforts to obtain the information on "injured spouse" claims from the
Department of the Treasury began in late 2001. According to OCSE
officials, they have discussed the need for additional information with
officials from the Department of the Treasury on several occasions.
Further, in February 2003, OCSE's Commissioner sent a letter to the
Department of the Treasury requesting that the two agencies involved in
the Tax Offset Program, IRS and FMS, provide information that identifies
which joint tax refunds involve "injured spouse" claims. FMS and IRS
formed a work group to investigate ways to shorten the process related to
satisfying these claims. However, according to an FMS official, there has
been little movement in response to OCSE's letter and as of January 2004,
the Department of the Treasury had not responded to OCSE's letter. If the
Department of the Treasury provided OCSE and state agencies with
information on the satisfied "injured spouse" claims filed with the
initial tax returns, state agencies could immediately release the offset
collections to the families.
Receipt of child support is critical for many custodial parents and their
children. However, no one is certain about the amount of child support
collections that are not distributed to families on time, if at all. By
revising the quarterly collections form, OCSE has taken the first step to
improving data about undistributed collections, but more reliable data are
needed in order for OCSE and the state agencies to know more about
undistributed child support collections and to be able to take appropriate
actions to help reduce them.
While the total amount of undistributed child support collections is
uncertain, it is clear that millions of dollars being held for months are
collections from joint tax refunds. State agencies need more information
about those "injured spouse" claims that are filed with the tax returns
and approved. As the federal partner and overseer of this program, it is
OCSE's role to work with other federal agencies, such as the Department of
the Treasury, to remove barriers that hinder fulfilling its mission.
Furthermore, since collections held from joint tax refunds represent a
large amount of state agencies' total undistributed collections, it is in
the
Conclusion
best interest of the child support program for OCSE to focus more
attention on getting this information. Additionally, the Secretary of the
Treasury needs to provide OCSE and state agencies information about
satisfied "injured spouse" claims. If the Department of the Treasury
provides this information, collections held from some joint tax refunds
could reach families sooner.
Recommendations for To better measure the amount of and help reduce
undistributed collections, we are making three recommendations.
Executive Action
We recommend that the Secretary of Health and Human Services direct the
Commissioner of OCSE to
o review undistributed collections data from state agencies periodically
in conjunction with one of the other routine reviews to help improve the
accuracy of the data and
o work closely with the Department of the Treasury to identify a cost-
Agency Comments
and Our Evaluation
effective approach for obtaining information on "injured spouse" claims in
order to enable collections from some joint tax refunds to reach families
sooner.
We also recommend that the Secretary of the Treasury direct the
Commissioner of IRS and the Commissioner of FMS to work together with OCSE
to identify a cost-effective approach for providing OCSE information
needed to identify those collections that have had their "injured spouse"
claims satisfied so that these collections can be distributed to families
sooner.
We received written comments on a draft of this report from HHS. These
comments are reprinted in appendix III. The department did not explicitly
agree or disagree with either of our recommendations. In response to our
recommendation to review undistributed collections data, HHS stated that
conducting these reviews in conjunction with the data reliability audits
would substantially increase the time needed to complete them due to the
variability of the undistributed collections data and that the data
reliability audits must be completed on time. As we stated in our report,
such reviews of undistributed collections data could be done in a number
of ways and would not necessarily have to be done with data reliability
audits. Also, HHS stated that its audit resources are insufficient to
routinely audit any other function or area except data reliability. We
also
noted their concern about limited resources in the report. With regard to
the recommendation that OCSE work with IRS and FMS, HHS stated that it has
been working with IRS and FMS. We added more detail to this section in the
report. HHS also agreed with our finding that information on approved
injured spouse claims could significantly reduce undistributed collections
and get money to families in a timelier manner. However, the HHS comments
also noted concerns about a direct exchange of information between IRS and
OCSE because OCSE's current interaction is strictly with FMS, and it would
be more complex, time consuming and costly to add the additional
interfaces and processing that would be required for a direct exchange
with IRS. We did not recommend a specific approach for sharing the
information.
We also received written comments on a draft of this report from the
Department of the Treasury. These comments are reprinted in appendix
IV. The Department of the Treasury agreed with our recommendation. In
commenting, the Acting Chief Financial Officer stated that although
neither IRS nor FMS can readily provide OCSE information on satisfied
injured spouse claims, and that significant programming changes would be
needed, IRS and FMS would work together with OCSE to develop a
costeffective way to advise OCSE when injured spouse claims have been
satisfied.
In addition to written comments, officials from HHS, FMS, and IRS provided
technical comments. We incorporated these comments in the report as
appropriate.
As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from
its issue date. At that time we will send copies of this report to
appropriate congressional committees, the Secretary of Health and Human
Services, the Secretary of the Treasury, and other interested parties. In
addition, this report will be available at no charge on GAO's Web site at
http://www.gao.gov.
If you have any questions regarding this report, please call me on (202)
512-8403. Other contacts and acknowledgments are listed in appendix V.
Sincerely yours,
Cornelia M. Ashby Director, Education, Workforce, and Income Security
Appendix I: Scope and Methodology
To accomplish our objectives, we conducted a mail survey of all 54 IV-D
child support enforcement directors, conducted site visits to 6 state
agencies, interviewed federal and state officials, as well as reviewed
related reports and analyzed laws and regulations.
We sent each director a self-administered mail-back questionnaire. To
ensure that our survey questions were clear, unbiased, specific, and easy
to understand, we pretested the survey instruments in 3 state agencies and
discussed the appropriateness of the survey questions with OCSE. We
electronically mailed follow-up letters and replacement copies of the
survey to nonrespondents to encourage response. Forty-eight state agencies
participated in the survey. Nonrespondents included Arizona, Indiana,
Guam, Mississippi, New Jersey, and Virgin Islands. We requested data as of
June 30, 2003, and administered the survey from September to November
2003. We did not assess the reliability of the data reported by state
agencies in response to our survey. However, we reviewed the data for
completeness and reasonableness.
We visited Virginia, New York, Florida, Texas, Iowa, and California. We
selected the state agencies so as to obtain diversity in the amount of
collections and balances of undistributed collections, geographic
location, number of clients served, and whether the child support program
was county or state administered. Of the state agencies we visited,
3-Iowa, Texas, and Virginia-had undistributed collection balances lower
than the national average of 3 percent and were cited by the Office of
Child Support Enforcement (OCSE) as having best practices in reducing and
or improving payment distribution practices. Two of the state agencies-
California and New York-had balances of undistributed collections that
were higher than the national average of 3 percent while 1 state, Florida,
had a balance of about 3 percent.
In addition to our overall approach, we took specific steps for each of
the objectives. To address how the data on undistributed collections has
changed in the last few years, we reviewed and analyzed OCSE data on
undistributed collections for fiscal years 1999 to 2002 as reported by
state agencies. We began with fiscal year 1999 data because that was the
earliest year with data comparable to fiscal year 2002; the most current
year data were available at the time of our review. As a part of our
analysis we (1) reviewed and compared the data for each fiscal year and
(2) identified issues associated with the calculation and reporting of
undistributed collections through interviews with state and OCSE
officials. Additionally, we analyzed survey responses that identified the
types of funds state agencies classify and report as undistributed
collections. We cited findings
Appendix I: Scope and Methodology
from an internal review conducted in California, however, we did not
verify the methodology used in this review. To identify the causes of
undistributed collections, we reviewed relevant literature and past audit
reports on the causes of undistributed collections. We cited relevant
findings from two of these reports. The report issued by the Department of
Health and Human Services Office of Inspector General was conducted in
accordance with Quality Standards for Inspections issued by the
President's Council on Integrity and Efficiency. We did not verify the
methodology used in the report produced by a private firm. We also
reviewed laws, regulations, and policies governing child support
distribution practices to gain an understanding of the required time
frames for distribution of child support payments. We interviewed child
support advocates and experts to obtain their opinions on the causes for
undistributed collections.
To identify what state agencies are doing to reduce undistributed
collections and to determine what guidance OCSE has given state agencies
to help reduce undistributed collections, we reviewed relevant documents
and agency audit reports. We also reviewed documents issued by the
National Council of Child Support Directors and collected information on
relevant OCSE-funded research. In addition, we also interviewed child
support advocates and experts, as well as federal and state officials to
obtain their perspectives on how OCSE has helped state agencies reduce
undistributed collections and additional actions that OCSE can take.
Appendix II: Survey of State Directors of Child Support Enforcement
Appendix II: Survey of State Directors of Child Support Enforcement
Appendix II: Survey of State Directors of Child Support Enforcement
Appendix II: Survey of State Directors of Child Support Enforcement
Appendix II: Survey of State Directors of Child Support Enforcement
Appendix II: Survey of State Directors of Child Support Enforcement
Appendix II: Survey of State Directors of Child Support Enforcement
Appendix III: Comments from the Department of Health and Human Services
Appendix III: Comments from the Department of Health and Human Services
Appendix III: Comments from the Department of Health and Human Services
Appendix IV: Comments from the Department of the Treasury
Appendix IV: Comments from the Department of the Treasury
Appendix V: GAO Contacts and Staff Acknowledgments
GAO Contacts Carolyn M. Taylor (202) 512-2974, [email protected] Rebecca
A. Christie (312) 220-7720, [email protected]
Staff In addition to those named above the following individuals made
important contributions to this report: Vernette Shaw, Carolyn Boyce,
Acknowledgments Jay Smale, Corinna Nicolaou, James Rebbe, and Paul
Schearf.
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