![](media/image1.jpeg){width="1.21875in" height="1.1979166666666667in"}

This report was prepared by Policy Studies, Incorporated, for the Office
of Child Support Enforcement, Administration for Children and Families,
Department of Health and Human Services, under Contract Number
105-00-8300, Task Order 23, November 2006. Points of view expressed in
this document are those of the authors and do not necessarily represent
the official position of the Department of Health and Human Services.

Table of Contents

[**Executive Summary i**](#executive-summary)

[Introduction i](#introduction)

[Policy and Operational Background
i](#policy-and-operational-background)

[Findings From the Five-State Case Review
ii](#findings-from-the-five-state-case-review)

[Recommendations iv](#recommendations)

[Chapter I 1](#chapter-i)

[Introduction 1](#introduction-1)

[Background 1](#background)

[National Policy Context 1](#national-policy-context)

[Objectives of Study 2](#objectives-of-study)

[Methodology 2](#methodology)

[Organization of the Report 3](#organization-of-the-report)

[Chapter II 5](#chapter-ii)

[Policy and Operational Background
5](#policy-and-operational-background-1)

[Introduction 5](#introduction-2)

[Why and How Is Income Imputed? 5](#why-and-how-is-income-imputed)

[Potential Sources of Automated Income Data
8](#potential-sources-of-automated-income-data)

[Barriers to the Use of Automated Income Sources
12](#barriers-to-the-use-of-automated-income-sources)

[Policy Concerns 12](#policy-concerns)

[Process Issues 13](#process-issues)

[Data Availability and Automation Issues
14](#data-availability-and-automation-issues)

[Data Quality Concerns 15](#data-quality-concerns)

[Workload Constraints 15](#workload-constraints)

[Selected States' Practices 16](#selected-states-practices)

[Alaska 16](#alaska)

[Maine 17](#maine)

[Massachusetts 18](#massachusetts)

[Oregon 18](#oregon)

[South Dakota 19](#south-dakota)

[Texas 19](#texas)

[Chapter III 21](#chapter-iii)

[The Use of Electronic Information to Establish and Modify Orders:
Findings 21](#the-use-of-electronic-information-to)

[Introduction 21](#introduction-3)

[Data Collection and Research Methodology
22](#data-collection-and-research-methodology)

[State Participation in the Study 22](#state-participation-in-the-study)

[Sample Size and Data Collection 24](#sample-size-and-data-collection)

[Research Methodology 27](#research-methodology)

[Findings 28](#findings)

[Documentation of Original Income or Employment Source
28](#documentation-of-original-income-or-employment-source)

[Source of Income or Employer Information
28](#source-of-income-or-employer-information)

[Order Amounts 31](#order-amounts)

[Child Support Payments 32](#child-support-payments)

[Time Elapsed for Key Processes 33](#time-elapsed-for-key-processes)

[Chapter IV 37](#chapter-iv)

[Key Elements for an Approach to Using Automated Income Data
37](#key-elements-for-an-approach-to-using)

[Introduction 37](#introduction-4)

[Working Assumptions 37](#working-assumptions)

[First Tier: Use of State and Local Income Data
40](#first-tier-use-of-state-and-local-income-data)

[Second Tier: Use of Federal and Interstate Income Data
43](#second-tier-use-of-federal-and-interstate-income-data)

[Technical Issues 44](#technical-issues)

[Appendix A Feedback From States 47](#appendix-a)

# Executive Summary

## 

## Introduction

This report presents the findings of a project to explore ways to
improve the automated use of electronic sources of income information in
the establishment and modification of child support orders. The
underlying hypothesis behind increasing State child support agencies'
use of automated income information is that presenting actual income
information will reduce the need to impute income to noncustodial
parents in the order establishment process. This in turn might improve
the quality of support orders in two ways: 1) by ensuring that orders
are not set too low, thereby depriving the children of needed support;
and 2) by avoiding the entry of orders that are too high, which, if
unpaid, can lead to accumulation of excessive arrears. Ultimately, more
accurate support orders should increase both the emotional and financial
support noncustodial parents provide to their children.

This report examines the policy and operational background related to
the use of automated income information for the establishment of child
support orders. It also presents the findings of a five-State case
review on the current use of electronic information to establish and
modify orders. Finally, the report outlines a model approach that could
be used to improve the determination of child support order amounts by
increasing the automated use of electronic information and ensuring that
the most recent income information is available to the child support
agency.

## Policy and Operational Background

All jurisdictions---except for Connecticut, Mississippi, and the
District of Columbia---have policies for imputing income to noncustodial
parents.[^1] Income information is typically imputed in two
circumstances: 1) noncustodial parent income information is missing; or
2) the noncustodial parent is unemployed or underemployed. An automated
tool for obtaining recent income information for the parent may reduce
the frequency that imputed income is used as the basis for setting
support, since other evidence of actual income could be presented. While
a regular practice of imputing income facilitates getting new orders in
place quickly, it nearly always results in the entry of a support order
that is not in line with the parent's actual ability to pay support.

States have a number of income data sources that already are automated
and could be electronically matched against the child support database
to provide some income information for noncustodial parents. The two
major sources of automated income information currently used by States
are: 1) new hire information, provided through the State and National
Directory of New Hires (SDNH and NDNH); and 2) unemployment information,
provided by the State Workforce Agency (SWA) as well as NDNH. Other
automated income sources that States can use include:

-   State personal income tax returns (in States that assess income
    tax);

-   Expanded Federal Parent Locator Service (FPLS);

-   Direct links to FPLS data sources;

-   State corrections agencies;

-   State TANF systems; and

-   Bureau of Labor Statistics.

While income data sources may be technically available, States sometimes
do not use them because of barriers such as:

-   Policy concerns;

-   Process issues;

-   Data availability and automation issues;

-   Data quality concerns; and

-   Workload constraints.

## Findings From the Five-State Case Review

The project included a five-State case review to examine the use of
automated sources of information to establish and modify child support
orders in Arizona, Colorado, Maine, Tennessee, and West Virginia. Major
findings from that study include:

-   **Sources of Information.** In almost one third (29 percent) of the
    orders reviewed, the noncustodial parent's employment or income
    information came from an electronic source. Of those cases, nearly
    three quarters (73 percent) involved an employer originally
    discovered through new hire reports. Income or employment
    information came from non-electronic sources in 71 percent of the
    cases.

-   **Public Assistance Status.** We looked at whether the original
    source of employment or income information differed based on the
    public assistance status of the custodial parent

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

*Executive Summary - ii*

> (current, former, or never TANF), and found little variation.
> Electronic income or
>
> employment information was the original source in 36 percent of the
> active public assistance cases, 34 percent of the former public
> assistance cases, and 25 percent of the never-assistance cases.

-   **Order amount.** One of the more significant findings was that the
    source of information had little effect on the amount of the child
    support order. When the income or employment information originated
    from an electronic source, the average order amount was \$266 per
    month. For orders based on non-electronic sources of income
    information, the average order amount was \$279 per month. However,
    the average order amount in cases where the original source of
    income information was unknown was only \$223 per month.

-   **Cases with Payments.** For those noncustodial parents who made at
    least one payment within six months after the order was entered,
    obligors were significantly more likely to make a payment on cases
    where the source of employment information was not electronic. For
    cases in which the income or employment information was originally
    obtained from a non-electronic source, 85 percent of the obligors
    made a payment within six months. This compares with 72 percent of
    noncustodial parents who made payments on cases where the income or
    employment information was originally provided by an electronic
    source. Where no employer was identified, only 39 percent of
    noncustodial parents made a payment within six months.

-   **Child Support Compliance.** We also measured compliance with the
    child support order by comparing the amount paid to the amount due
    over a six-month period and found that where income or employment
    information originated from a non-electronic source, obligors paid
    75 percent of the amount due. This compared with 64 percent
    compliance for cases where income or employment information
    originated from an electronic source and 51 percent compliance among
    noncustodial parents where no employer was identified. The
    difference between 75 and 51 percent is statistically significant.

-   **Income Verification.** The case reviews revealed that it took less
    time to verify income from an electronic source than from a
    non-electronic source. While it took an average of 55 days to verify
    income when the information originated from a non-electronic source,
    it only took 36 days when the income information originated from an
    electronic source.

-   **Average Number of Days to Establish Order.** Even though income
    verification was accomplished more quickly when the source of the
    information was electronic, there still was no difference in the
    amount of time it took to establish the support order. For the cases
    reviewed, it took an average of 168 days from the time the income or
    employment

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

*Executive Summary - iii*

> information was received until the order was entered. The average
> number of days was the same whether the income or employment
> information originated from an electronic or non-electronic source.

## 

## Recommendations

Given the variation in States' procedural and technical capabilities,
developing a single detailed plan for all States to use would not be
practical. Nevertheless, we recommend an approach with key elements that
could be incorporated into any plan a State may develop to make better
use of automated income data:

1.  Include income information directly on the new hire report;

2.  Use electronic sources to locate and contact employers for income
    and other employment information; and

3.  Simultaneously obtain information from non-electronic sources (often
    the custodial and noncustodial parents), and use this information to
    verify electronic information and provide quality control.

To expand the use of electronic sources, here is a two-tiered approach
for leveraging both State and Federal data sources.

Key elements of the first tier are:

-   Expand and enhance the automation of new hire information;

-   Expand outreach to employers and increase new hire compliance;

-   Provide access to State personal income tax return information;

-   Gain access to other existing State databases;

-   Access credit bureau reports;

-   Review and amend State statutes to ensure that information is
    legally accessible and can be used;

-   Enhance automation and interface features in the State child support
    system;

-   Enhance State systems to provide employment histories; and

-   Create a decision matrix.

The second tier would maximize the use of automated income data that
exists in a centralized or Federally maintained system by enhancing the
FPLS. The Federal Office of Child Support Enforcement could make the
data at the Federal level more usable for State systems to:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

*Executive Summary - iv*

-   Increase the frequency of data matches;

-   Encourage or require electronic submission; and

-   Provide online access to FPLS.

In addition, we recommend that the Federal and State governments explore
the feasibility of developing a model for sharing data where states
directly access some national and State data sources for income
information rather than receiving the same data from a centralized
system that compiles and sends data to the states. We call this model a
"distributed" model in the sense that data sources accessed by states
are decentralized. For instance, a state may want to directly access the
income database of a military base within its borders or of a
neighboring state's workforce agency system in order to shorten the
cycle time of obtaining income data.

Implementing these recommendations would provide States with more recent
and accurate income information for noncustodial parents. When State
child support agencies have accurate income information for the
establishment of support orders, they are less likely to impute income
to the noncustodial parent. The result should be child support orders
that reflect the noncustodial parent's ability to pay support. This, in
turn, will benefit custodial parents and children by increasing the
emotional and financial support provided by noncustodial parents.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

*Executive Summary - v*

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# Chapter I

# Introduction

## 

## Background

This report presents the findings of a project to explore ways to
improve the automated use of electronic sources of income information in
the establishment and modification of child support orders. The
underlying hypothesis behind increasing State child support agencies'
use of automated income information is that presenting actual income
information will reduce the need to impute income to noncustodial
parents in the order establishment process. This in turn might improve
the quality of support orders in two ways: 1) by ensuring that orders
are not set too low, thereby depriving the children of needed support;
and 2) by avoiding the entry of orders that are too high, which, if
unpaid, can lead to accumulation of excessive arrears. Ultimately, more
accurate support orders should increase both the emotional and financial
support noncustodial parents provide to their children.

## National Policy Context

Most States have policies for imputing income---that is, assuming
earnings at some specified level---to noncustodial parents when actual
income information is missing or when the noncustodial parent is
unemployed or underemployed.[^2] While there are legitimate and proper
reasons to impute income in some circumstances, the practice can be
problematic if the imputed income is substantially higher or lower than
the noncustodial parent's actual income. This causes the support order
to be set at a level that either exceeds the noncustodial parent's
ability to pay, or else it fails to provide adequate support to the
children given the noncustodial parent's income level.

All States have a number of electronic income data sources that can be
accessed in an automated fashion, including State and National new hire
reports, quarterly wage and unemployment data, and State TANF systems.
Many States also have databases containing income tax return
information, departments of corrections records, and departments of
labor statistics. All of these sources of income information and their
potential as automated sources for income information are discussed in
detail in Chapter II.

## Objectives of Study

The major objective of this study was to determine how automated income
information could be used to improve States' practices in establishing
child support orders. The means to achieve this objective have evolved
somewhat since the project commenced.

In the initial stages of this project, a needs assessment was conducted
to document current practices and identify States' needs for automating
income information. It became apparent through discussions with States
during this needs assessment, however, that a one-size-fits-all approach
to the use of automated data was not feasible. Many States have already
implemented the use of integrated automated income data tools. Even for
States that are not maximizing the use of income information sources,
the variety of State automated systems, differences in State policies
for accessing and using data, as well as fiscal constraints felt by the
States made it difficult to discuss the concept of standardizing an
approach for all States in automating their access to electronic income
information. Since these conditions are State specific, the original
project plan to develop a pilot system was abandoned after consultation
with the Federal Project Officer. Instead the project was refocused to:

-   Collect and analyze State data to determine how often income or
    employer information from automated (electronic) sources is used in
    the establishment and modification of child support orders;

-   From the data collected, analyze whether certain child support
    outcomes are different in cases where income or employer information
    originated from electronic sources, compared to information provided
    by the custodial or noncustodial parent; and

-   Identify an approach with key elements that could be incorporated
    into any plan a State may develop to make better use of automated
    income data.

## Methodology

Eight States were selected as potential participants in the project:
Alaska, Maine, Massachusetts, Minnesota, Oklahoma, Oregon, Texas, and
Washington. IV-D Directors were contacted in these States to gain their
support and cooperation for the project needs assessment. With the
Directors' approval, we then contacted staff responsible for both policy
development and for their statewide automated systems. With assistance
from these staff, we researched key issues relating to the project,
including:

-   Guideline policies for each participating State;

-   State statutes, regulations, policies, and court rules for accessing
    income information in the selected States;

-   Federal legal basis for States to access income information;

-   Capabilities of each State to store and access computerized income
    data, including national new hire and quarterly wage data; and

-   Data format for computerized income files, including national new
    hire and quarterly wage data.

We used this information to develop the needs assessment. Once the
project objectives were revised (as discussed above), we analyzed how
income or employer information is used in the establishment of child
support orders. Specifically, this study addressed four research
questions:

-   How often is income or employer information from electronic sources
    used to establish or modify an order?

-   When income or employer information is originally obtained from an
    electronic source, what are the typical order amounts? Are they
    lower than order amounts from non-electronic sources?

-   Do child support payments differ for orders based on information
    from electronic sources than for orders based on non-electronic
    sources?

-   Is the length of time needed to establish or modify an order less
    for orders that were based on income or employer information
    originating from electronic sources than for those originating from
    non-electronic sources?

Five States were selected to participate in this part of the study:
Arizona, Colorado, Maine, Tennessee, and West Virginia. These States
provided a random sample of child support cases that had orders
established or modified within the past year. For the selected cases,
States provided detailed case information from their automated systems
or hard case files. Comparisons were then drawn among three groups of
cases: 1) those where the income or employment information originated
from an electronic source, 2) those where the income or employment
information originated from a non-electronic source, and 3) those where
no employer was identified.

## Organization of the Report

This report presents the findings of the needs assessment and the data
collection activities, and then sets forth a set of conclusions and
recommendations. In Chapter II, we detail the policy and operational
background for using automated income information. Chapter III presents
the results of the data collection and analysis from sampled cases in
the five States, as described above. In Chapter IV, we outline a model
approach that could improve the determination of child support order
amounts by increasing the automated use of electronic income information
and ensuring that the most recent income information is available to the
child support agency.

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# Chapter II

# Policy and Operational Background

## Introduction

This chapter assesses the issues and potential solutions for improving
the use of automated sources of income information for determining
support order amounts. Specifically, it details:

-   ***Purposes for and Methods of Imputing Income.*** Imputing income
    to the noncustodial parent is a common practice used by States in
    calculating support order amounts for noncustodial parents whose
    incomes are unknown. We discuss the circumstances of noncustodial
    parents that lead States to impute income, as well as the different
    methods States use for setting an assumed income level.

-   ***Potential Automated Sources of Income Data.*** States and the
    Federal government track work histories and earnings of workers in
    order to operate a variety of programs. These automated income and
    location databases may provide information on wages and income for
    noncustodial parents. We evaluate the Federal laws and regulations
    that allow such use. We then evaluate both Federal and State level
    automated sources of income data that could be used for determining
    support order amounts.

-   ***Barriers to the Use of Automated Income Data.*** Even when it is
    possible to obtain income information from automated databases,
    there may be barriers to its use. We examine policy concerns,
    process issues, data availability and automation issues, data
    quality concerns, and workload constraints that affect the efficient
    use of automated income data in determining support order amounts.

-   ***Practices in Selected States.*** Some States have developed
    efficient practices for accessing automated sources of income data
    for the purpose of determining support order amounts. We discuss the
    practices used in Alaska, Maine, Massachusetts, South Dakota, Texas,
    and Oregon.

## Why and How Is Income Imputed?

The Office of Inspector General (OIG) issued two reports in 2000
addressing the establishment of child support orders for low-income
noncustodial parents. For the first report, the OIG conducted a case
record review and in-depth interviews in 10 States. The purpose was to
examine the methods used to determine the financial obligations of
low-income noncustodial parents, and the relationship of those methods
to the parents' child support payment levels.[^3] In a second companion
report, the OIG reported the findings of a nationwide survey of policies
on income imputation.[^4] This survey revealed that all jurisdictions
except Connecticut, Mississippi, and the District of Columbia have
policies for imputing income.[^5] As background information, it is
useful to examine the typical circumstances in which noncustodial parent
income will be imputed. This is particularly useful, since improving the
child support enforcement (CSE) agency's access to financial information
may reduce the frequency of income imputation.

Income information is typically imputed in two circumstances:

-   ***Income Information Is Missing.*** Most States impute income to
    the noncustodial parent if actual income information is not
    available. The OIG case reviews revealed that in almost half (46
    percent) of the cases sampled where the support order amount was
    based on imputed income, the noncustodial parent had not provided
    income documentation [or]{.underline} the noncustodial parent failed
    to appear at a scheduled conference or hearing.[^6] The rationale
    for imputing income in these cases is that the court or
    administrative agency setting the order must use some income amount,
    even if the parent's actual income is unknown. Otherwise, parents
    could benefit from their failure to provide income documentation or
    sworn testimony about their income. In these cases, an automated
    tool for providing recent income information of the parent may
    reduce the frequency that imputed income is used as the basis for
    setting support, since other evidence of actual income could be
    presented.

-   ***Unemployment and Underemployment.*** Most States have a policy of
    imputing income to unemployed or underemployed noncustodial parents.
    The OIG case reviews found that income was imputed because the
    noncustodial parent was unemployed or underemployed in over a third
    (37 percent) of the cases they reviewed with imputed income.
    Underemployed typically means the noncustodial parent works less
    than full time or works at a job that does not make full use of his
    or her skills. In these cases, income may be imputed at minimum wage
    for a forty-hour workweek. The rationale for imputing income when
    the noncustodial parent is unemployed or underemployed is based on
    the assumption that noncustodial parents can and should find
    full-time employment in order to support their children. In
    addition, noncustodial parents may claim that they are unemployed
    when they actually have income from work in the underground economy
    or from some other undisclosed source. Imputing income ensures that
    noncustodial parents do not escape their obligations simply because
    they are not actively looking for work or because their income is
    hidden. Income imputation in cases of unemployment and
    underemployment is often required by State child support guidelines.
    Therefore, an automated tool may not reduce the frequency that
    income is imputed in these cases.

The OIG's survey of State policies revealed that 30 States have policies
for imputing income under either of two circumstances: 1) if the
noncustodial parent fails to provide income information; or 2) if the
noncustodial parent is currently unemployed or underemployed. Another
five States say they impute income only if the noncustodial parent fails
to provide relevant information. An additional 13 States reported that
their policy is to impute income only if the noncustodial parent is
unemployed or underemployed. It is not clear from the survey results how
these 13 States determine income on cases where information is missing.
In addition, the OIG survey did not specifically ask States if, rather
than imputing income, they would use income information from automated
sources in cases where the noncustodial parent fails to provide proof of
income. However, the other OIG report---which included case samples and
interviews with caseworkers---stated that most caseworkers they
interviewed said that if the noncustodial parent fails to appear or
provide documentation, the caseworkers search for income information
through an automated interface with the State labor or tax record
system.

While a regular practice of imputing income facilitates getting new
orders in place quickly, it can have a negative impact on noncustodial
parents' payment compliance rates. The OIG case review study found that
cases with orders determined by using imputed income have a lower rate
of payment than cases with orders determined using actual income. Of the
cases with imputed income, 44 percent generated no child support
payments over a 32-month period, while only 11 percent of the cases in
which income was not imputed generated no payments during the same
period. Of course, this finding is not surprising when one considers
that income is usually imputed when the noncustodial parent's employer
is not known, which then makes it impossible to collect the support
through income withholding.

The amount of income to be imputed also varies among States. According
to the OIG policy survey, 35 States base imputed income on the premise
that the noncustodial parent should be able to work at minimum wage for
40 hours per week. Fifteen States consider the area wage rate. In
addition, the study found that States consider such factors as the area
employment rate, as well as the noncustodial parent's education, skills
and experience, most recent job, and disabilities.

## Potential Sources of Automated Income Data

***Relevant Federal Laws and Regulations.*** Several Federal laws and
regulations permit the use of income information from automated sources
in the establishment of child support orders. In 1996 Congress passed
the Personal Responsibility and Work Opportunity Reconciliation Act
(PRWORA). Among the many provisions of this Act was the creation of a
national system of reporting of newly hired employees. All employers in
the country (including labor organizations) are required to report new
hires to a designated State agency within 20 days of hire.[^7] The
reported new hires are then matched with information in a State case
registry of child support orders to help the child support agency locate
noncustodial parents and their employers. The State agency is also
required to forward the new hire information to the National Directory
of New Hires (NDNH) to be matched against the Federal Case Registry of
child support orders.[^8] The NDNH is a component of the Federal Parent
Locator Service (FPLS). Congress has authorized States to use data from
FPLS for the purpose of establishing parentage or establishing, setting
the amount of, modifying, or enforcing child support obligations.[^9]

The new hire reporting procedures do not require that employers provide
wage information on the new hire reports submitted to the State.[^10]
However, separate from new hire reporting, employers have long been
required to submit quarterly reports of aggregate wage and identifying
information for each of their employees. These reports are generally
made to State Workforce Agencies (SWAs), which in turn must provide the
information to the Federal government along with similar data for
individuals receiving unemployment compensation.[^11]

The only other reference in Federal law to the use of automated income
data is in provisions relating to review and adjustment of support
orders. There, Congress allows States to use automated methods, such as
comparisons with wage data and State income tax data, to identify orders
eligible for review and potential modification.[^12]

***Sources of Automated Income Information.*** Ideally, the wide range
of automated income data available to CSE agencies could be used when
the noncustodial parent's income is unknown, thereby eliminating the
need for the agency or court to impute income. Exhibit II-1 below
displays possible sources of automated income information.

**Exhibit II-1**

Automated Sources of Noncustodial Parent Income Information\
Available to CSE Agencies

+------------+-----------------------------------+---------------------+
| *          | **Description**                   | **Typical Link of   |
| *Automated |                                   | Automated Income    |
| Sources of |                                   | Source to CSE       |
| Income     |                                   | Automated System**  |
| Inf        |                                   |                     |
| ormation** |                                   |                     |
+============+===================================+=====================+
| State      | The State agency charged with     | CSE caseworkers can |
| Workforce  | administration of the             | typically log on to |
| Agency     | unemployment compensation program | the SWA system from |
| (SWA)      | receives individual wage and      | their State's CSE   |
|            | unemployment information          | automated system.   |
|            | quarterly from employers covered  | Some States have    |
|            | by the State unemployment         | automated           |
|            | compensation program. In turn,    | interfaces between  |
|            | the State agency furnishes the    | SWA and CSE (e.g.,  |
|            | information to the State CSE      | Maine).             |
|            | agency for purposes of child      |                     |
|            | support actions permissible under |                     |
|            | Federal law.                      |                     |
|            |                                   |                     |
|            | **Coverage:** Varies by State,    |                     |
|            | but typically all employees whose |                     |
|            | employers pay unemployment        |                     |
|            | insurance, as well as             |                     |
|            | self-employed workers who pay     |                     |
|            | unemployment insurance.           |                     |
|            |                                   |                     |
|            | **Not Covered:** Federal          |                     |
|            | employees, current and former     |                     |
|            | military personnel, railroad      |                     |
|            | workers, public school employees, |                     |
|            | and some religious organizations. |                     |
|            | Other categories vary by State.   |                     |
+------------+-----------------------------------+---------------------+
| State New  | Employers are required to report  | States create an    |
| Hire       | all new hires to the State for    | electronic file of  |
| Reporting  | purposes of child support         | new hire reports in |
|            | enforcement. Generally, the       | their State. Most   |
|            | information required in the       | States match the    |
|            | reports is basic (e.g., name,     | electronic file     |
|            | social security number, employer, | against their CSE   |
|            | address), but States may require  | caseload,           |
|            | additional information such as    | particularly to     |
|            | income or wage rate and           | update employer     |
|            | availability of health insurance  | information for     |
|            | coverage. We are aware of only    | income withholding. |
|            | two States (Oklahoma and Maine)   |                     |
|            | that require employers to report  |                     |
|            | income or wage information. Some  |                     |
|            | States also require businesses to |                     |
|            | report newly contracted workers   |                     |
|            | who receive income that is        |                     |
|            | subject to IRS 1099 reporting.    |                     |
|            |                                   |                     |
|            | **Coverage:** Employees, and in   |                     |
|            | some instances, contractors.      |                     |
|            |                                   |                     |
|            | **Not Covered:** Self-employed    |                     |
|            | workers.                          |                     |
+------------+-----------------------------------+---------------------+
| State      | CSE caseworkers can access income | Some States have an |
| Personal   | information from State personal   | automated interface |
| Income Tax | income tax returns in a few       | with the State's    |
| Returns    | States. This type of income       | taxing authority.   |
|            | sharing is more likely in States  |                     |
|            | where the CSE agency is located   |                     |
|            | under the State's tax agency      |                     |
|            | (e.g., Massachusetts Department   |                     |
|            | of Revenue), but this occurs in   |                     |
|            | only a handful of States.         |                     |
|            | Further, not all States assess a  |                     |
|            | State personal income tax (e.g.,  |                     |
|            | Alaska).                          |                     |
|            |                                   |                     |
|            | **Coverage:** Employees and       |                     |
|            | self-employed workers who report  |                     |
|            | income to the State tax agency.   |                     |
|            |                                   |                     |
|            | **Not Covered:** Workers who do   |                     |
|            | not report income.                |                     |
+------------+-----------------------------------+---------------------+
| Expanded   | States are required to provide    | First, if FPLS      |
| Federal    | their new hire reports, State     | finds that a        |
| Parent     | case registry data,[^14] and SWA  | noncustodial parent |
| Locator    | data to the Federal Office of     | in the FCR has a    |
| Services   | Child Support Enforcement (OCSE). | new job or is       |
| Data       | OCSE merges State reports to form | claiming            |
| (          | the FPLS database. This database  | unemployment        |
| FPLS)[^13] | is expanded by incorporating      | insurance benefits, |
|            | quarterly wage data for employees | or if quarterly     |
|            | of all Federal agencies except:   | wage information is |
|            |                                   | available, it       |
|            | -   Central Intelligence Agency   | automatically       |
|            |     (CIA);                        | notifies any State  |
|            |                                   | with a related      |
|            | -   National Security Agency      | child support case. |
|            |     (NSA); and                    | Second, at the      |
|            |                                   | request of a State  |
|            | -   Federal Bureau of             | CSE Parent Locator  |
|            |     Investigation (FBI).          | Service, FPLS will  |
|            |                                   | search various      |
|            | FPLS performs automatic locate    | other (external)    |
|            | functions by comparing data from  | Federal databases   |
|            | the NDNH to data in the FCR.      | in an attempt to    |
|            |                                   | locate noncustodial |
|            | IRS data available to FPLS do not | parents and their   |
|            | include Federal personal income   | assets. Some States |
|            | reports.                          | only use the locate |
|            |                                   | component of FPLS.  |
|            | Miscellaneous income reported on  | Other States have   |
|            | IRS Form 1099 is available as an  | built automated     |
|            | external locate source.           | capacities to       |
|            | Generally, 1099 income is viewed  | periodically        |
|            | as supplemental to wage earnings. | capture income      |
|            | 1099 information includes reports | information from    |
|            | of earnings from financial        | FPLS.               |
|            | institutions, self-employment,    |                     |
|            | stocks and bonds, capital gains,  |                     |
|            | interest, royalties, and prizes.  |                     |
|            | It also includes addresses from   |                     |
|            | employers and financial           |                     |
|            | institutions who report 1099      |                     |
|            | income.                           |                     |
+------------+-----------------------------------+---------------------+
| Direct     | Some States have direct links to  | No consistent       |
| Links to   | sources also available through    | pattern.            |
| FPLS Data  | FPLS. For example, one            |                     |
| Sources    | jurisdiction located near a       |                     |
|            | military base reported that they  |                     |
|            | work directly with DoD to obtain  |                     |
|            | information. Also, a State may    |                     |
|            | have a direct agreement with      |                     |
|            | another State rather than going   |                     |
|            | through FPLS to access the other  |                     |
|            | State's SWA information.          |                     |
+------------+-----------------------------------+---------------------+
| State      | Although databases managed by     | Few, but an         |
| C          | States' corrections agencies do   | increasing number   |
| orrections | not necessarily contain income    | of jurisdictions.   |
| Agencies   | information, incarceration in     | No consistent       |
|            | itself indicates that the         | pattern.            |
|            | noncustodial parent's earnings    |                     |
|            | are limited.                      |                     |
+------------+-----------------------------------+---------------------+
| State TANF | Some noncustodial parents are     | All States can link |
| Systems    | custodians of other children      | IV-D and TANF data, |
|            | receiving Temporary Assistance to | although automation |
|            | Needy Families (TANF). Although   | capabilities vary.  |
|            | this occurs in a negligible       |                     |
|            | number of cases, this could serve |                     |
|            | as another indication of whether  |                     |
|            | the noncustodial parent was       |                     |
|            | employed.                         |                     |
+------------+-----------------------------------+---------------------+
| Bureau of  | The Federal BLS and many States   | Mostly done         |
| Labor      | track average earnings for        | manually.           |
| Statistics | particular occupations. Some      |                     |
| (BLS) on   | establishment caseworkers use     |                     |
| Average    | this information if the           |                     |
| Earnings   | noncustodial parent's occupation  |                     |
| for        | is known but his or her current   |                     |
| Particular | income is not known. Income may   |                     |
| O          | be imputed at the average wage    |                     |
| ccupations | rate for that occupation.         |                     |
+------------+-----------------------------------+---------------------+

Ideally, the child support caseworker would check for available income
information from any of these automated sources before imputing income
to a noncustodial parent. As noted in the OIG report of case record
reviews, most caseworkers who were interviewed in the 10 States involved
in the study said they frequently check SWA for noncustodial parent
income information, but they do not always use the other sources listed
in Exhibit II-1. However, this study was conducted prior to the
implementation of the expanded FPLS.

In general, various research studies indicate that income information
from SWA is matched to about 50 to 60 percent of noncustodial
parents.[^15] University of Texas researchers found that they were able
to discover income information for 9 percent more of the noncustodial
parents in their study when they used FPLS instead of just Texas SWA
quarterly wage data.[^16] The Texas researchers believe other States
might have an even higher percent of additional matches with FPLS
because many noncustodial parents move to Texas from other States in
order to find employment, and other States would discover Texas
employment through FPLS.

## Barriers to the Use of Automated Income Sources

A variety of barriers may limit the effectiveness of using noncustodial
parent income information from automated income sources. As discussed
below, these include:

-   Policy concerns;

-   Process issues;

-   Data availability and automation issues;

-   Data quality concerns; and

-   Workload constraints.

### Policy Concerns

Even where automated income information is technically available, State
policy can sometimes serve as an impediment to maximizing the use of
those automated sources. These policies often reflect a political choice
made by the State regarding the financial responsibility of parents to
their children and assumptions regarding the availability of work. Below
we provide four examples of State policies that call for overriding the
use of income information obtained from an automated source.

1.  It is not uncommon for income reported through automated sources to
    reveal that the noncustodial parent earned less than minimum wage
    for a 40-hour workweek. In fact, one California study found that
    about half of income discovered through automated sources was below
    full time, minimum wage earnings.[^17] As we mentioned above, many
    States have a policy in this case of imputing income at full-time
    minimum wage employment (e.g., Colorado). A few States have
    incorporated this policy into their child support guidelines. That
    is, the guidelines provide for a presumption of full-time, minimum
    wage employment, unless the noncustodial parent demonstrates that he
    or she has physical or mental disabilities or other constraints that
    prohibit full-time minimum wage employment. South Dakota applies
    this guidelines-based presumption to both the noncustodial and
    custodial parent. The rationale is that both parents should work in
    order to provide financial support for their children (barring
    incapacity to work full time) and that jobs are available for those
    who want to work.

2.  In other situations, information from automated sources may show
    that the noncustodial parent is unemployed, but the State's policy
    is to consider unemployment as a temporary condition (e.g., Alaska).
    In some of these States, income will be imputed by assuming that the
    noncustodial parent is able to work year-round, full time at his or
    her usual hourly rate, unless there is evidence of consistent,
    year-to-year seasonal employment. If there is consistent seasonal
    employment, some States (e.g., Vermont) will determine the
    noncustodial parent's income by averaging the seasonal income and
    unemployment benefits.

3.  Data from automated income sources can be indicative of erratic
    employment (e.g., wages vary significantly from quarter to quarter
    or may only be available for one out of the last four quarters). In
    these cases, State policy may deem this income information
    inadequate. For example, when reviewing cases for its modification
    project, Alaska's policy is to use income from automated sources
    only if it is available for four consecutive quarters.

4.  Confidentiality and privacy considerations come into play, causing
    States to limit access to data that is of a sensitive and personal
    nature. For example, many States do not allow the CSE agency access
    to State income tax records.

### Process Issues

Process barriers arise mainly from the complexity or lack of clarity in
the procedures for how child support caseworkers are to handle income
information. Below are three examples of these barriers.

1.  Separate automated sources may identify the same income source for
    the same reporting period. Depending on the sophistication of the
    IV-D system, caseworkers may have to manually designate which income
    report to use. The workers may also have to go online directly to
    the automated source (e.g., the SWA system) and review the
    information, or may even have to contact the employer to determine
    if the separate sources are reporting the same income.

2.  Caseworkers are often required to make subjective judgments if a
    noncustodial parent has seasonal or part-time employment to
    supplement full-time employment. The income information by itself is
    not necessarily sufficient to determine the temporary or part-time
    status of the income source. For example, the caseworker may have to
    research past patterns of employment to determine if the income is
    from seasonal or part-time employment. Then the caseworker must
    apply the State's procedures to determine how the seasonal or
    part-time income should be included in the calculation to determine
    a support order amount.

3.  Receipt of new income information is often sufficient to trigger the
    review and modification of an existing order. When new employer
    information is received subsequent to the establishment of the
    initial order, the child support caseworker is often responsible
    only for verification of employment and not for initiating a review
    and modification based on the new income information.

### Data Availability and Automation Issues

Technical and other problems can limit the use of automated sources even
where they are otherwise available. We have identified three problem
areas below.

1.  Not all child support caseworkers have access to income information
    available through FPLS (e.g., Jefferson County, Kentucky). In some
    States, caseworkers only receive automated updates to income
    information in selected cases (e.g., Colorado obtains it for cases
    in locate status only). In most of these situations, data
    availability is a technical issue.

2.  Even though caseworkers in some States have manual online access to
    automated income databases, they have to invest their own time in
    methodically working through child support cases and income
    databases to locate income sources for the noncustodial parents.
    Caseworkers may not receive sufficient training to efficiently use
    the income databases that are available.

3.  Even though some States' IV-D systems have automatic interfaces with
    electronic income databases, caseworkers usually have to manually
    copy the income information into the module that calculates support
    order amounts according to the State's guidelines.

### Data Quality Concerns

Even where income information is available from automated sources, its
use may be limited due to concerns regarding the quality or completeness
of the data.

1.  SWA data do not include earnings from employers who do not
    contribute to the State unemployment fund. Every state has different
    regulations about what groups and individuals are and are not
    required to report, but generally Federal agencies operating in a
    State, military installations, some religious organizations, and
    other agencies and organizations are not required to report to SWA.

2.  Federal timeframes require the CSE agency to acquire quarterly wage
    information from the SWA by the end of the fourth month following
    the end of the quarter. Consequently, the data may be six months old
    by the time the CSE agency receives it. It is not surprising that
    the longer it takes for the agency to get the information, the less
    likely it is that the noncustodial parent will still be at that job
    or will have the same wages. While the timeliness of information
    matters more for locating income sources for income withholding, it
    also limits the usefulness of the data for establishment and
    modification purposes.

3.  Income information reported to the SWA in the quarterly wage reports
    is very limited. No information is provided indicating the number of
    hours worked or the full- or part-time status of the employee.
    Therefore, the CSE agency often has to get additional information
    from the employer.

### Workload Constraints

Workload constraints can also limit an agency's use of automated
sources. If child support caseworkers are struggling with large
caseloads and have to access sources manually, it can be difficult for
them to keep employment and income information current. Even when
automated systems match data electronically, if caseworkers have to
follow up manually, they can fall behind in taking the next action on a
large number of cases. In general, if caseworkers do not have adequate
time to work their cases proactively, then they cannot use the tools
that are available to them.

## Selected States' Practices

### Alaska

Through a Federal Office of Child Support Enforcement Section 1115
demonstration grant, Alaska developed an automated tool to use income
data from electronic sources for the purposes of reviewing and modifying
current support orders. The automated tool:

-   Sorts through noncustodial parent income information from SWA and
    FPLS on cases with current support orders;

-   Determines whether the income information from the automated source
    is appropriate for use in a guidelines calculation; and

-   If deemed appropriate, the automated income information is run
    through a guidelines calculator to determine whether the suggested
    change in the order amount meets the State-determined threshold for
    order modification (i.e., a 15 percent change upward or downward).

Although the grant was intended to create an automated process for the
review and adjustment of child support orders based on income
information from automated sources, it also has proven beneficial for
support order establishment. Establishment workers use the income screen
created for the review and adjustment process, which chronologically
displays income information and source (e.g., SWA or specific FPLS
source). Information is downloaded to the screen nightly. The Alaska CSE
Division establishment unit has found the income screen particularly
useful since many of Alaska's noncustodial parents live in other States.
In addition, because some of Alaska's largest industries (e.g., seafood
processing, construction, retail trade, and hotel and lodging) only
employ laborers seasonally, noncustodial parents frequently work in
other States during the winter, when Alaska employment opportunities
dwindle. Income information from FPLS, which shows up on the income
screen, helps locate income earned in other States.

Alaska's automated application has resulted in:

-   A fourfold increase in the number of orders reviewed;

-   A substantial increase in the number of orders modified,
    particularly upward; and

-   Order amounts that better reflect the noncustodial parent's actual
    income*.*

A limitation of the application is that few cases with current support
orders are matched to income information. This is partly because the
agency's policy is to consider the match successful and appropriate for
an automated review only if income information is available from
automated sources for four consecutive quarters and the noncustodial
parent did not receive unemployment compensation during those four
quarters. As a result, the agency only achieved a successful income
match in four percent of the cases reviewed. As discussed earlier, other
studies have shown that CSE agencies that do not require four
consecutive quarters of income information achieve higher match rates.

The system design and programming of Alaska's automated approach took
almost two years to complete and cost several hundred thousand dollars.
However, this development included much more than the income screen---it
also included the design and programming of a fully automated review and
adjustment process.

### Maine

The Maine CSE agency has automated interfaces with a number of
information sources. The agency is working to increase the accuracy of
support orders and decrease the rate of noncustodial parent defaults in
order establishment and modification actions.[^18]

At the time we interviewed Maine staff members for this project, they
were involved in a major restructuring of the State's IV-D automated
system. When the new system is completed, it will automatically review
cases every year for possible modification. Eventually, the
establishment process will be similarly automated, with the system
pulling income information from electronic sources and then running a
guidelines calculation without manual input from a caseworker.

Currently, child support caseworkers in Maine use the following sources
of income:

-   New hire reports from States that require employers to report the
    employee's income;

-   Quarterly SWA wage records;

-   Manual investigation of income sources by child support caseworkers;

-   Department of Revenue tax information; and

-   Unemployment insurance records.

Maine CSE staff told us that while having a broad range of income
sources has its benefits, it does present challenges for automation. For
instance, multiple sources may report the same income, but the system
cannot identify them as being the same. Therefore, caseworkers review
the income sources for both the custodial and noncustodial parents on
income screens, and then select online (with a point and click) those
sources to include in the review and adjustment process. When the
caseworkers are satisfied with the income sources, they submit the
information automatically to the guidelines module.

### Massachusetts

The Massachusetts CSE program resides in the State's revenue agency.
This has facilitated their access to tax and quarterly wage databases
through an automatic interface. While this interface is used primarily
for enforcement purposes, access to the information also helps child
support caseworkers locate income sources for establishment or review
and modification of support orders. Caseworkers may navigate through an
online database of income data in order to obtain information for an
establishment action or to determine if they should proceed with a
review and adjustment of an existing order. They can use the income
information directly in the guidelines calculation, or they may choose
to contact the noncustodial parent's employer directly to get a more
current verification of income. While caseworkers have to manually enter
income data into the review and adjustment module, Massachusetts's plans
for future automation include an automated upload of the automated
income data into this module.

The revenue agency updates its tax files regularly throughout the year,
and particularly during the tax season. The CSE agency updates its
quarterly wage records twice per quarter. The income databases from the
revenue agency are particularly helpful in providing income data for
noncustodial parents who are self-employed and those who work for
organizations that do not report to the Commonwealth's SWA.

The fact that Massachusetts's CSE program resides within the Department
of Revenue gives it an advantage for accessing tax information, and we
did not interview any other State CSE agencies that have automated
interfaces with State tax databases. However, some other States whose
programs are not in their State's tax agencies have statutes that allow
the CSE agency to obtain tax data on a case-by-case basis (e.g., Iowa).

### Oregon

The IV-D program in Oregon has an automated interface with their State
Department of Labor quarterly wage database. The interface is updated
each night, and the most recent report from a single employer is loaded
onto the CSE program's system. However, to be complete in their
research, child support caseworkers usually manually access the
Department of Labor's database online to confirm wages from all
employers. The workers can open a dual session with the Department of
Labor system and the CSE system, but they still have to enter the income
information manually into the guidelines module.

The CSE system does not have an automatic interface with the State's
unemployment insurance database, but caseworkers have online access.
Creating an interface with the unemployment insurance database is a
likely project for future automation.

The statutory authority for the CSE program's access to the automated
income data comes from Oregon Statute §180.320. The statute gives broad
authority for the IV-D program to access electronic records maintained
by any agency of the State, including the Department of Labor. An
intergovernmental agreement between the IV-D program and the Department
of Labor also governs the exchange of information.

### South Dakota

The South Dakota CSE agency's standard practice for the establishment of
child support orders is to start with income information from automated
sources, and use income imputation as a tool of last resort.
Establishment caseworkers search for income information from automated
sources (e.g., SWA and FPLS; note that FPLS information is downloaded to
South Dakota weekly), and then proceed as follows:

-   ***If Income from an Automated Source Is Found.*** The caseworker
    calculates the support order and notifies the noncustodial parent
    that a support order is being established. The notice contains the
    support order amount calculated using the income from the automated
    source. If the noncustodial parent does not contest the action, the
    order is entered through administrative process. If the noncustodial
    parent contests the action, he or she must return a financial
    affidavit with supporting income information. In turn, if the
    financial affidavit is returned, the support order is calculated
    based on the financial affidavit. If the financial affidavit is not
    returned, the support order is entered as provided in the
    notification.

-   ***If Income from an Automated Source Is Not Found.*** If income
    information is not available from automated sources and there is no
    indication of unemployment or disability, income is imputed at the
    average South Dakota wage, which is about two-and-a-half times
    minimum wage. As a general rule, this encourages the petitioned
    noncustodial parent to complete a financial affidavit and provide
    supporting income documentation. If there is evidence of
    unemployment, the caseworker will apply the noncustodial parent's
    full-time earnings to the guidelines calculation.

### Texas

Texas's CSE agency has an automatic interface with the State's quarterly
wage records, and the child support caseworkers have online access to
the State's unemployment insurance payments. The State uses quarterly
wage and unemployment insurance benefit data from NDNH. Further, the
State gives employers the option to report income and wage data on the
State's new hire reporting form. Finally, through its online location
tool, the State can access credit report information for noncustodial
parents. It uses these data to verify income with a tool that evaluates
the noncustodial parent's debt history and determines if the reported
income can support a new debt load.

# Chapter III

# The Use of Electronic Information to

# Establish and Modify Orders:

# Findings from Five States

## Introduction 

This project examined recently established and modified child support
orders to help determine how often income or employer information from
electronic automated sources is used in the establishment and
modification of orders. The study also considered whether certain child
support order outcomes are different among cases where noncustodial
parent income or employer information originates from electronic sources
compared to when it was originally and directly received from a
non-electronic source, such as the noncustodial or custodial parent.
Specifically, this analysis addresses several research questions:

-   *How often is income or employer information from electronic sources
    used to establish or modify an order?* As we discussed in Chapter
    II, child support agencies typically ask non-custodial parents to
    provide documentation of actual income as part of the agencies'
    order establishment or modification processes. The requested
    documentation varies by State or jurisdiction, but it is likely to
    include such items as personal income tax returns, pay stubs, or an
    income affidavit. If this information is not provided, however, the
    child support caseworker may use electronic automated sources to
    discover income or identify the parent's employer. If an employer is
    discovered through an electronic source, the caseworker typically
    follows up with the employer to verify the employment and obtain
    current income of the noncustodial parent.

-   *When the child support enforcement (CSE) agency uses income or
    employer information from an electronic source in the order
    establishment process, what are the typical order amounts? Are they
    lower than order amounts from non-electronic sources?* One concern
    with using information from an electronic source is that, in some
    situations, it may result in an underestimation of the parent's
    current, actual income. In turn, this will result in an order amount
    that is lower than if it had been based on actual income. This might
    occur, for example, if the parent has more than one job, earnings
    from self-employment, or earnings from a source that is not reported
    to the State Workforce Agency (SWA). One would expect that if a CSE
    agency establishes the majority of orders using incomplete income
    information, the agency's average order amount will be lower than
    the average order amount of an agency that bases most orders on
    current documented income (such as pay stubs or tax returns).

```{=html}
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-   *Do child support payment levels differ among orders that are based
    on information from electronic sources compared with orders based on
    non-electronic sources*? One clear advantage of using information
    from electronic sources is that the employer name and address are
    already known, since they are elements of the electronic database.
    Employer information is needed for effective income withholding, and
    it can generate more regular and timely child support payments.
    Reliable employer names and addresses may not be as readily
    available from non-electronic sources. In addition, child support
    payments are likely to be even less among orders where the
    noncustodial parent's employer is unknown to the CSE agency.

-   *Is the length of time needed to establish or modify an order less
    among orders based on income or employer information originating
    from electronic sources than those originating from non-electronic
    sources?* Similar to the research question relating to child support
    payments, we examined whether orders based on income information
    from electronic sources were established or modified more swiftly
    than those based on non-automated sources of information.

In this chapter we discuss the findings relevant to each of these
research questions. Prior to this discussion, however, we provide a
short description of the data collection and research methodology.

## Data Collection and Research Methodology

### State Participation in the Study

Five States participated in the study: Arizona, Colorado, Maine,
Tennessee, and West Virginia. States were selected to include a range of
automation capacity as well as geographical diversity. Since obtaining
permission to access confidential child support data can be a lengthy
process, preference was given to States where the contractor had already
secured data-sharing permission for other projects (Arizona, Colorado,
Tennessee and West Virginia. Maine was also included as they were able
to provide the data requested. We had recruited Washington as a sixth
State, but the State's internal review board had not approved access to
confidential data before this report was prepared.

Levels of Automation

Although States were selected for analysis on the basis that they
reflected a range in the levels of automation, as project staff examined
the States' methods more closely, it became apparent that most of the
selected States were actually at the same level of automation. For
example, it was initially indicated that Washington and Maine had more
sophisticated income automation than most States. However, we discovered
that while Maine has developed very sophisticated automation, the State
was still in the process of testing and installing the new automation at
the time of this project. Consequently, during the time we examined
cases for the project, Maine's capacity to obtain automated income
information was similar to that of the other States reviewed.

The extent of automation in most States consists of interfaces with
electronic databases. This typically includes both the State and
National Directory of New Hires (SDNH and NDNH), which contain new hire
reports, quarterly wage data, and unemployment insurance information.
The NDNH contains information reported from all States as well as almost
all Federal agencies (exceptions are the Federal Bureau of
Investigation, Central Intelligence Agency and National Security
Agency). The SDNH is generally more current than the NDNH because the
NDNH requires more time to process State reports, match the information
with the Federal Case Registry, and then transmit the matched
information back to the States.

Some of the electronic interchanges occur nightly. Once a match is
identified, most State automated systems will generate a "tickler" (also
commonly called an alert) to notify the child support caseworker that
new information has been received. It may also automatically generate a
letter to an employer to verify employment if the noncustodial parent's
status on the automated system is "unlocated." The caseworker can then
access the new information through a screen on the automated system. The
information is typically provided on the locate screen, although it may
be placed on the employer history screen. The system's locate screen
usually records matches from electronic databases chronologically. The
matched NDNH information includes the date of the information, employer
name and address, and income (if the original source of the information
is quarterly wage data). States vary in how long the information is
kept.

From this point forward, using the information from the automated source
to establish or modify an order is typically a manual process. In order
to obtain or verify the noncustodial parent's income, the child support
caseworker may have to send a request to the employer that was reported
through the electronic source. If income information was provided
electronically, the caseworker may insert the income information into a
guidelines calculator to arrive at a proposed order amount. Maine's
enhanced automation, which has been fully implemented since cases were
examined for this project, eliminates this last step by automatically
entering the income amount into a guidelines calculator for active cases
that may be potentially eligible for a review. This includes cases:

-   That have at least one dependent under 17½ years of age,

-   Where the noncustodial parent has a confirmed address and employer,

-   Where the noncustodial parent's annual income is \$15,000 or more
    according to the employment (income) history,

-   Where at least 12 months have passed since the order was entered or
    last reviewed, and

-   That are paying and that have paid at least 75 percent of the
    obligation due in the last 30 days.

If the simulated guideline meets Maine's modification threshold, which
is a 15 percent difference from the current obligation amount, then the
case is targeted for review and a system alert is delivered to the
appropriate case manager. More information about Maine's process can be
found in a recent OCSE report.[^19]

### Sample Size and Data Collection

States were asked to provide a list of IV-D cases in which child support
orders had been established or modified within 12 months of the date the
list was generated. From that list, the contractor or the State selected
a random sample of 100 to 150 orders. Site visits were then conducted to
collect detailed information on the IV-D cases selected. Most of the
information was obtained through the State's automated system or hard
case files. To collect uniform data across States, the data collectors
first conducted exploratory interviews with child support administrators
and technical experts from each State. These interviews helped to
clarify relevant procedures that affect the data needed for the
analysis, and also helped with the interpretation of those data. Data
collectors also studied policy and system manuals to further their
understanding of the case file data and develop uniformity in data
collection procedures across different State systems.

Sample Size

Exhibit III-1

Number of Orders Reviewed

![](media/image2.wmf)

The targeted sample size of 100 orders was met or exceeded in every
State. As shown in Exhibit III-1, the number of orders reviewed per
participating State ranged from 103 in West Virginia to 150 in Maine. A
couple of factors contributed to the variation in number of orders
reviewed: (a) pre-arranged travel arrangements limited data collection
to two to three days per site; and (b) it was difficult to determine in
advance how much time would be needed for each State without any prior
experience with a State's automated system. It was easier to find the
data needed for the analysis in some State's automated systems than in
others.

Data Fields

An Excel spreadsheet was designed for uniform data collection in the
States. This allowed data collectors to use laptop computers and key
information directly into the spreadsheet. Data fields included:

-   *Case number.* IV-D case numbers were the only case identifier
    gathered.

-   *Source of income or employer information.* There are many sources
    of income or employment a child support caseworker may review while
    laying the groundwork for order establishment or modification. The
    original source of the income or employment information may be the
    custodial parent, the noncustodial parent, the noncustodial parent's
    attorney, or another source. The income or employment information
    could have also originated from a match with an electronic source
    (e.g., NDNH). Most of the State automated systems included a data
    field that identifies the original information source of the
    noncustodial parent's employer. Also, the information source could
    be discerned from the hard case files. Occasionally, it was in the
    case notes on the automated system.

-   *Date the income or employment information was provided.* The date
    that the income or employment information was provided or found is
    important for determining the period of time taken to verify income,
    establish or modify an order, and receive the first payment. In
    turn, these elapsed time periods can be compared to see if they
    differ by type of information source.

-   *Date that income source was verified.* This information was
    reviewed when readily available to determine how quickly income or
    employment information was verified after it was provided or
    discovered.

-   *How the income source was verified.* This information was recorded
    if readily available from the automated child support system to
    determine the most common and effective ways States verify income or
    employment.

-   *Order establishment or modification date.* As explained above, this
    date is important to analyze whether the time elapsed for
    establishing or modifying support orders varies by original
    information source.

-   *Obligation amount and frequency.* The obligation amount and
    frequency is necessary to analyze variations in order amounts by
    information source.

-   *Date of first payment after entry of order or modification.* This
    information was collected to examine whether the information source
    affected the time elapsed before the first payment was received.

-   *First payment type.* We collected data on whether the first support
    payment was made by income withholding to assess whether the
    original source of income or employment information had any bearing
    on how quickly income withholding was initiated.

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-   *Total paid the first six months after entry of the order or
    modification.* When possible, the data collection team gathered
    payment information for a period of six months to examine the
    relationship between the information source and the six-month
    payment record.

-   *Assistance type.* The team recorded whether the case was active,
    former, or never public assistance (TANF) so we could compare how
    the information sources varied based on assistance status.

### Research Methodology

The project team explored several possible research methodologies. The
ideal research design would be based on experimental and control groups.
In the experimental group, income information from electronic sources
would be used to establish and modify orders. In the control group,
orders would be established or modified as normal. If some States used
electronic sources and others did not, natural experimental and control
groups could be formed. Yet, as discussed above, this is not the
situation. States vary little in the level of automation that they use.
Consequentially, the comparisons are drawn among the following three
groups:

-   *Orders where the income or employment information originates from
    an electronic source*. An electronic source is defined as income or
    employment information that was originally identified through
    automated interfaces. This includes the NDNH, the SDNH and other
    information accessible through the automated system. If the employer
    was first identified through an electronic source, but income
    information was later obtained manually (e.g., the child support
    caseworker contacted the employer identified through the electronic
    source to get income information), the information is still
    considered to originate from an electronic source for the purposes
    of this study.

-   *Orders where the income or employment information originates from a
    non-electronic source.* A non-electronic source is defined as income
    or employment information that was [not]{.underline} originally
    identified from an automated match. The noncustodial parent, the
    noncustodial parent's attorney, or the custodial parent may have
    provided the information manually to the CSE agency (e.g.,
    photocopies of pay stubs, a financial statement, or a verbal
    statement). If the employer was identified through a non-electronic
    source but then verified through an electronic source, the
    information is still considered to originate from a non-electronic
    source for the purposes of this study.

-   *Orders where the employer was unknown at the time the order was
    entered or modified.* In these situations, no employer was known to
    the CSE agency at the time the order was established or modified,
    possibly because: 1) the noncustodial parent was self--employed or
    unemployed and the order was entered by default; or 2) it may be
    that the CSE agency was not involved in the establishment or
    modification of the order, so did not have a record of the source of
    income information used to determine the order amount.[^20]

Since cases could not be randomly assigned to these three groups, there
may be some biases. That is, differences may result from other
characteristics of the case besides the original source of the income or
employment information. For example, noncustodial parents who readily
provide income information may also be more likely to comply with the
child support order than parents who have failed to respond to requests
for income information. On the other hand, some cases may have no income
information because the noncustodial parent is unemployed, and is thus
less likely to pay child support.

## 

## Findings

### Documentation of Original Income or Employment Source

Of the 623 cases reviewed, employer or income information was known in
434 cases (70 percent). When looking at assistance types, the percentage
of cases with a known employer or income information varied
considerably, as follows:

-   58 percent for active public assistance cases (161 cases);

-   64 percent for former public assistance cases (202 cases); and

-   80 percent for cases never on public assistance (243 cases).[^21]

## Source of Income or Employer Information

Electronic Sources

Exhibit III-2 displays the original sources of the noncustodial parent's
income or employer information used to arrive at the child support
order. It is based on the 434 cases with documented income information
and it shows that in almost one third (29 percent) of the cases, the
noncustodial parent's information came from an electronic source. Nearly
three quarters of these electronic sources (73 percent) were new hire
reports. We asked child support administrators why new hire reports were
the source for such a high proportion of those cases using electronic
data. They responded that new hire reports are favored over other
sources because of the timeliness of the information. Although most new
hire reports do not contain income information, they do provide fairly
current employer information, which the CSE agency may then use to
obtain income information directly from the employer.

The CSE agency receives new hire reports from its own State prior to
receiving those from the NDNH. In cases where the employer information
originated from new hire reports:

-   46 percent were from the SDNH;

-   25 percent were from the NDNH; and

-   For the remaining 29 percent, it was unknown whether they were from
    the State or national directory.

Exhibit III-2

Original Source of Employer or Income Information

(n = 434)

![](media/image5.wmf)

The remaining 27 percent of the electronic sources included:

-   17 percent from State Workforce Agency (SWA quarterly wage);

-   3 percent from another, non-specified source from NDNH;

-   2 percent from unemployment insurance;

-   2 percent from the IV-A automated system;

-   2 percent from CSENet; and

-   1 percent from Department of Defense.

With the exception of the IV-A automated system and CSENet, all of the
other electronic sources listed above are part of the SDNH or NDNH.

-   IV-A automated system. A match with the IV‑A automated system
    indicates that the noncustodial parent is likely to have multiple
    families and is receiving public assistance for some children.
    Although national statistics are not available, research findings
    from multiple demonstration projects show the incidence of multiple
    families. For example, one third of participants in the Responsible
    Fatherhood Demonstration projects had children with more than one
    partner.[^22] Similarly, estimates from a birth cohort study of
    urban parents found that for close to 40 percent of all couples who
    had a child in the late 1990s, either the mother or father (or both)
    already had a previous child by another partner at the time of their
    common child's birth.[^23]

-   CSENet is a tool to facilitate the electronic exchange of child
    support information in interstate cases. In cases where the
    information source was CSENet, the child support caseworker most
    likely requested information from another State.

Non-Electronic Sources

As shown in Exhibit III-2, income or employment information came from
non-electronic sources in 71 percent of the cases reviewed. The specific
sources were:

-   In 23 percent of these cases, information came from the custodial
    parent;

-   In 18 percent of the cases reviewed, the information was provided by
    the noncustodial parent or the noncustodial parent's attorney;

-   In 3 percent of the cases reviewed, it was provided by a relative,
    jail, Department of Corrections, or another source; and

-   In 27 percent of the cases reviewed, the non-electronic source could
    not be identified.

In cases where the original source could not be identified, it is
possible that any of the other sources listed above (e.g., the custodial
parent) may have provided the information, but it was not traceable from
the automated system records or the case file. In these cases, the
initial source of income or employer information was typically listed as
the employer, but it is not clear from the records how the child support
caseworker knew to contact the employer. It was clear that the
information did not originate from an electronic source.

Public Assistance Status

Exhibit III-3 compares the availability of electronic employer or income
information based on the public assistance status of the case.
Electronic income or employment information was the original source of
information in 36 percent of the active public assistance cases, 34
percent of the former public assistance cases, and 25 percent of the
never public assistance cases.

Exhibit III-3

Original Source of Employer or Income Information

by Public Assistance Status

![](media/image6.wmf)

### Order Amounts

We also compared the average order amounts and found that cases where
electronic interfaces provided the original source of employment or
income information were only \$13 per month lower than those where the
information came from non-electronic sources. However, when the source
of employer or income information was unknown, the average order amounts
were substantially lower than for the other two groups. The average
order amounts were:

-   \$279 for cases where the employer or income information originated
    from non-electronic sources (n=308 cases);

-   \$266 per month where the information came from an electronic
    interface (n=126 cases); and

-   \$233 per month when the original source of income information was
    unknown (n=189 cases).

The small difference between average order amounts based on electronic
and non-electronic information does not support the hypothesis that
income and employment information from electronic sources may understate
income and therefore result in lower order amounts. However, the
comparison is limited because it did not control for number of children,
parents' incomes, and other factors that may affect order amounts. A
more rigorous comparison would control for these factors as well.

### Child Support Payments

Cases with Payments

Exhibit III-4 displays the proportion of cases---by the original source
of income or employment information---that made any payment in the first
six months after the order was entered or modified. Using this
definition, the percent of paying cases is 85 percent among orders that
were based on income or employment information provided from a
non-electronic source. For cases in which the original income or
employment information came from electronic sources, the percent of
paying cases is 72 percent. Not surprisingly, the percent of paying
cases was only 39 percent for orders where no employer was identified.

The differences in these proportions of cases making payments are
statistically significant. As we discussed earlier, when the
noncustodial parent does not provide any financial or employment
information, the order is more likely to be entered by default, and
income is often imputed. The Office of Inspector General study cited in
Chapter II found that orders based on imputed income are less likely to
generate payments.[^24]

Exhibit III-4

Percent of Paying Cases

by Source of Employment or Income Information

![](media/image8.wmf)

The percent of paying cases may be higher where the income or employment
information originated from a non-electronic source because these
parents were more involved in the establishment or modification process.
In most of these cases, the information originated from the noncustodial
or custodial parent. If the noncustodial parent provides information, it
is an indication that he or she is involved in the child support
process. If the custodial parent has knowledge of the noncustodial
parent's income or employer, it indicates that he or she may be in
regular contact with the noncustodial parent, possibly due to the
noncustodial parent's contact with the children.[^25]

Although the proportion of paying cases was higher where the income or
employment information originated from a non-electronic source than it
was for cases where the information originated from an electronic
source, we found no statistically significant difference in the
proportion of cases under income withholding between these two groups.
In 57 percent of the cases where income or employment originated from a
non-electronic source, the first payment was made through income
withholding, compared with 53 percent of the cases where the information
came from an electronic source. This suggests that the original source
of income or employment information has no bearing on how quickly income
withholding can be put into place. It also explains why there is little
difference in payment compliance between these two groups.

Child Support Compliance

We measured compliance with the child support order by comparing the
amount paid to the amount due over a six-month period. A compliance
ratio of 100 percent indicates that all child support due was paid in
the six-month period. In the sampled cases we found compliance ratios as
follows:

-   75 percent for cases (n=133) where income or employment information
    originated from a non-electronic source;

-   64 percent among cases (n=45) where income or employment information
    originated from an electronic source; and

-   51 percent on cases (n=38) where no employer was identified.[^26]

### Time Elapsed for Key Processes

Income Verification

Income verification is a standard practice for many CSE agencies, even
if the information originates from the NDNH. A letter or employment
verification form is typically sent to employers, or the child support
caseworker may telephone the employer.

Exhibit III-5 displays the average number of days taken on the sampled
cases to verify income, based on the source of income or employment
information. Specifically, it shows the number of days that have elapsed
from when the income or employment information was first identified to
when it was verified. Our case sample shows it took the CSE agencies 35
percent less time to verify income from an electronic source than from a
non-electronic source. On average, it took 55 days to verify income when
the information originates from a non-electronic source, as opposed to
36 days when the income information came from an electronic source.

Exhibit III-5

Average Number of Days to Verify Income

by Source of Income or Employment Information

![](media/image10.wmf)

Order Establishment

This study also explored whether the source of income or employment
information affected the amount of time that elapsed between when the
information was first received and the date the order was established or
modified. The results are shown in Exhibit III-6, and indicate that the
average amount of time (168 days) did not differ between cases where the
income or employment information originated from an electronic source
and those where the information originated from a non-electronic source.

## 

Exhibit III-6

Average Number of Days to Establish Order

![](media/image12.wmf)

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# Chapter IV

# Key Elements for an Approach to Using

# Automated Income Data

## Introduction

The purpose of this chapter is to outline a model approach that improves
the determination of child support order amounts by increasing the use
of automated (electronic) income information and ensuring that the most
recent income information is available to the child support agency.

Given the variation in States' procedural and technical capabilities,
developing a single detailed plan that all States could use would not be
practical. Nevertheless, we have identified key elements that we believe
could be incorporated into any plan a State may develop to make better
use of automated income data.

We begin with the basic working assumptions that guided our analysis. We
then outline the basic approach that we recommend:

4.  Include income information on new hire reports;

5.  Use electronic sources to locate and contact employers for income
    and other employment information; and

6.  Simultaneously obtain information from non-electronic sources (often
    the custodial and noncustodial parents), and use this information to
    verify electronic information and provide quality control.

To expand the use of electronic sources, we present a two-tiered
approach for leveraging State and Federal data sources. Many of our
recommendations in this area relate to enhancing the new hire reporting
system. As the analysis in Chapter III demonstrates, new hire
information is the primary electronic source used by child support
agencies to identify employers and income information.

## Working Assumptions

As the basis for drawing conclusions and making recommendations, we
present the following working assumptions:

1)  The periodic amount of a support order should be based on the
    noncustodial parent's ability to pay.

2)  Imputing income at levels higher than the noncustodial parent's
    actual income may discourage the noncustodial parent from making any
    payments, leading to the accumulation of excessive arrearages.[^27]
    Using actual income data is preferable to imputing income for
    establishing and modifying support orders. The definition of actual
    income includes all of the income for the noncustodial parent.

3)  Imperfect income data from an automated source may still be usable
    information.

4)  It is important to obtain the most recent income data, even if it
    doesn't come from an automated source.

5)  The hierarchy of income sources to determine the support order
    amount for noncustodial parents is:

    a.  Income statement or financial affidavit from the noncustodial
        parent with supporting documentation required or permissible by
        State guidelines or policy (e.g., income tax returns and pay
        stubs);

    b.  Income statement from current employer;

    c.  Income data from automated sources;

    d.  Median income for the occupation of noncustodial parent when the
        occupation of noncustodial parent is known;

    e.  Median income for IV-D population of noncustodial parents;

    f.  Average income;

    g.  Minimum wage; or

    h.  Minimum order amount.

The approach that we recommend States use to obtain income information
on which to base orders is:

**1. Include income information directly on new hire reports. New hire
reporting is an established program that has proven to be very
successful in locating child support obligors.** Adding the amount of
employee earnings to the elements reported would be a relatively easy
modification to the current system that would provide additional
valuable information to the child support agency. This could be
accomplished through voluntary encouragement aimed at employers, Federal
or State mandates, or, in the case of Federal or State employees, an
executive order.

**2. Use electronic sources to locate and contact employers for income
information.** The analysis presented in Chapter III indicates that
income or employment information from electronic sources is often used
to determine the support order amount. It shows that in 29 percent of
the orders we reviewed, the noncustodial parent's income or employer
information came from an electronic source. It also shows that child
support order amounts based on income or employment information from an
electronic source are not routinely less than when the orders are based
on income information provided by the parent. Further, there is some
evidence to suggest that the verification process is shortened when the
information comes from an electronic source.

**3.** **Simultaneously obtain information from non-electronic sources
(often the parents) and use this information to verify electronic
information and provide quality control.** By using both electronic and
non-electronic sources of information, the child support agency is more
likely to obtain information that is more recent and, therefore, more
accurate. Quality control will be enhanced by having dual sources of
income data.

To expand the quantity and quality of electronic sources, we suggest a
two-tiered approach for leveraging State and Federal data sources. The
first tier would maximize the use of automated income data that exist
within a State. Key elements of the first tier are:

-   **Expand and enhance the automation of new hire information;**

-   **Expand outreach to employers and increase new hire compliance;**

-   **Provide access to State personal income tax return information;**

-   **Gain access to other existing State databases;**

-   **Access credit bureau reports;**

-   **Review and amend State statutes to ensure that information is
    legally accessible and can be used;**

-   **Enhance automation and interface features in the State child
    support system;**

-   **Enhance State systems to provide employment histories; and**

-   **Create a decision matrix.**

Each of these elements is discussed in detail below.

The second tier would maximize the use of automated income data that
exist in a centralized or Federally maintained system by enhancing the
FPLS. We identify possible new automation efforts that the Federal
Office of Child Support Enforcement could pursue to make the data at the
Federal level more usable for State systems. These include:

-   **Increase the frequency of data matches;**

-   **Encourage or require electronic submission; and**

-   **Provide online access to FPLS.**

In addition, we briefly discuss the possibility of creating a
distributed model for accessing information where states directly access
decentralized State and federal databases rather than a centralized
database. For each tier we outline some technical issues that would have
to be resolved in order to enhance the accessibility of automated income
data.

When we talked with Oregon, South Dakota, and Washington about their
practices in using automated income data, we had an opportunity to get
their feedback on these key elements. Generally, their reactions were
favorable. We have incorporated the States' contributions in the key
elements in the outline. We also list them separately in Appendix A.

### First Tier: Use of State and Local Income Data

In Chapter II, we discuss the variety of automated income data sources
available to State and local child support agencies. These include the
basic automated income sources that should be accessed by State child
support agencies, such as State new hire reports and quarterly wage and
unemployment compensation reports. In general, this information is more
current than information gathered from other States and Federal
entities. Below, we outline how States could enhance their capacity to
use income data sources. In some instances, States may need to be more
flexible and more proactive in passing legislation to enhance their
ability to obtain and use automated income information.

-   **Expand and enhance the automation of new hire information.** In a
    moderately automated system, the child support caseworker is alerted
    by the State CSE system that a new hire report has been received,
    and the caseworker contacts the employer requesting wage
    information. In a highly automated system, employer new hire reports
    would include wage information and information regarding full-time,
    part-time, or seasonal employment, as well as the availability and
    potential use of overtime. Maine, Oklahoma, and Washington are the
    only States that we know that currently require employers to provide
    the wage rate with the new hire report. Apart from State legislation
    requiring wage reporting on new hire reports, either legislation or
    a State executive order could be used to require State government
    agencies to report new hires with starting wage information for
    State employees. In addition, automated use of new hire information
    could be enhanced if income data from the new hire file were
    automatically uploaded into the guidelines calculation module,
    instead of requiring child support caseworkers to manually copy
    income information into the guidelines module. We note however, that
    caseworkers should retain the ability to edit the income information
    being used in the guidelines module.

-   **Expand outreach to employers and increase new hire compliance.**
    As the analysis that we present in Chapter III shows, nearly three
    quarters (74 percent) of the electronic information used in
    establishing child support orders originally came from new hire
    reports. This finding underscores the importance of the new hire
    program in every functional area of child support enforcement: from
    location of noncustodial parents to establishment, enforcement, and
    modification of support orders. The critical nature of an effective
    new hire program emphasizes the need for States to maintain a
    constant awareness of employer compliance in their reporting of new
    hires. To increase employer compliance, States need to be sensitive
    to the demands the child support enforcement program places on the
    business community and work closely with businesses to design
    materials and technologies that minimize their burden in making
    timely and accurate reports. As part of this effort to improve
    compliance and develop a collaborative relationship with businesses,
    States should work more on educating employers on their reporting
    requirements. In addition, there should be a particular focus on
    outreach to the small business community, because small businesses
    employ a large number of IV-D noncustodial parents.

-   **Provide access to State personal income tax returns**. State
    personal income tax returns can be very effective for locating
    income, particularly for self-employed noncustodial parents. As we
    detail in Chapter II, Massachusetts has been successful in creating
    an automatic interface to its tax database. Legislation would
    probably be required in most States to authorize the child support
    agency to access State revenue information. Granted, this approach
    is limited as some States do not assess an income tax.

-   **Gain access to other existing State databases.** Most States have
    access to other State databases or could create the interface to
    establish access. Two of the most important systems to create
    interfaces with are the State database for State prisoners and the
    State database for the TANF program, since confirmation of
    incarceration or TANF participation implies limited earnings
    potential for the noncustodial parent. In addition, an automated
    interface with the quarterly wage database and unemployment wage
    database would eliminate the need for caseworkers to query these
    systems manually. States should explore other possibilities as well,
    such as matching against State lottery data to identify winners who
    receive annual payouts.

-   **Access credit bureau reports.** Credit bureau reports can be
    helpful in verifying income reported from sources other than
    employers. The debt load held and monthly loan repayment amounts
    made by the noncustodial parent shown in the credit bureau report
    are an indication of a certain income level. For example, the State
    of Texas takes into consideration debt information on credit reports
    to estimate a range of income for a noncustodial parent. The Texas
    model takes into consideration the noncustodial parent's periodic
    mortgage, installment, and revolving loan payments, and then makes
    assumptions about his or her annual income that could support this
    reported debt load. This method is similar to the one used by
    lending agencies to calculate whether or not a prospective homebuyer
    can afford a home given the consumer's credit history, income, and
    current debt load.

-   **Review and amend State statutes to ensure that information is
    legally accessible and can be used.** States may need to ensure that
    income information is legally accessible---through automated
    interfaces as well as manual access---and that child support
    caseworkers and appropriate State contractors can use the
    information at each step in establishing, enforcing and modifying
    support orders. Examples include: 1) allowing automated income data
    to be admitted as evidence in court of actual income when
    determining the support order amount through a judicial process;
    and 2) protecting employers from civil suits brought by noncustodial
    parents when employers provide income data to the child support
    program. Alabama, California, and Missouri are examples of States
    that already have these legal protections in place.

-   **Enhance automation and interface features in the State child
    support system.** States should ensure that they have developed a
    high level of automation that includes an automated data exchange
    with frequent updates between automated income sources and the IV-D
    system. CSE agencies may also want to retain online access for
    manual inquiry by child support workers. States should consider
    exploring more timely ways to acquire income information from
    existing income sources. For example, Oregon updates its interface
    with the State's quarterly wage reports on a nightly basis instead
    of quarterly. States could also design automated filters to sort
    through obsolete FPLS data, and pull only recent employer and income
    information that is more current than the existing IV-D system data.

-   **Enhance State systems to provide employment histories.** State
    systems could be enhanced to provide employment history tracking.
    Information would be fed to the employment histories by NDNH updates
    as well as State new hire data. By being able to review historical
    information, caseworkers would have a graphical indication of wage
    and employment information. This information would be useful both
    for child support orders and locate efforts.

-   **Create a decision matrix.** States could create a decision matrix
    to provide caseworkers with the most recent and complete income
    information. This could be highly automated or moderately automated:

    *Highly Automated:*

    -   Remove duplicates of the same income reported by multiple
        electronic sources;

    -   Identify seasonal income;

    -   Identify part-time income;

    -   Identify sub-minimum wage income;

    -   Identify outdated income sources; and

    -   Rank income data "hits" based on the most current.

        *Moderately Automated:*

```{=html}
<!-- -->
```
-   Develop a "screen" of a noncustodial parent's income and employment
    history;

-   Display all income sources on the same screen;

-   Present income and employment history for the past several years;
    and

-   Conduct manual reviews of employment history to identify appropriate
    level of income for determining the support order amount.

### Second Tier: Use of Federal and Interstate Income Data

The second tier proposes making use of electronic income information
that exists in a federally maintained, centralized system. We suggest
two possibilities: 1) enhancing the FPLS; and 2) creating a distributed
model. Many of the basic requirements are in place to enable
implementation of second tier methods. However, policy and legislative
changes are required to fully implement the proposed enhancements. We
acknowledge that some of these changes may not be easy to make in the
short term due to a variety of political, technical, financial, and
policy constraints. We present them here, nevertheless, to generate
discussion and progress towards an "ideal" system.

Enhancing the FPLS

To take full advantage of access to FPLS information, the following
enhancements could be implemented:

-   **Increase the frequency of data matches**. The FPLS could continue
    to increase the frequency of matches with sources contributing data
    to the FPLS to make the data provided to States more current.

-   **Encourage or require electronic submission.** The Federal
    government (or States) could encourage or require employers to
    submit quarterly wage and unemployment compensation information
    online or by other electronic means in order to minimize delays in
    transmitting the data to State CSE programs.

In addition to the enhancements suggested above, the following more
significant modifications could be made:

-   **Provide access to W-2 wage information.** Make W-2 wage
    information from the IRS available to the FPLS under the condition
    that it may only be used by authorized child support workers.

-   **Provide access to 1099 information to States automatically.** Make
    1099 information from the IRS for contract payments made to
    self-employed persons available on the FPLS under the condition that
    they may only be used by authorized child support workers.

-   **Provide online access to FPLS.** Providing online access to FPLS
    would allow child support caseworkers to quickly access this
    information.

Creating a Distributed Model

The Federal and State governments could also begin to think about
designing a distributed model for accessing some national data sources
for income information. In a distributed model, States could target data
sources in geographic regions or specific Federal institutions that are
most likely to yield current income information, rather than sifting
through all returned records before finding desired information. States
could also make direct links with each other (e.g., SESA networks for
income information and drivers' license data for location information).

### Technical Issues

Certain technical considerations may present barriers to fully using all
possible sources of State and Federal automated income information.
These include:

-   **Variety of State systems.** The variety of State system database
    platforms makes it difficult to specify a universal technical
    approach. It is imperative to keep record layouts synchronized
    between State and Federal systems when the record layouts change.
    Advance notification to States regarding proposed or impending
    modifications to specifications for record layouts and data provided
    electronically is essential.

-   **Limited technical resources.** The availability of State technical
    resources to perform necessary automation of electronic income data
    is limited. The potential numbers of electronic income data sources
    (e.g., credit bureau reports, State lottery information) create
    additional software development requirements. In addition, some
    States could benefit from technical assistance to create linkages to
    already available automated income sources. Oklahoma, for example,
    does not use some of its automated income sources (e.g., State
    Workforce Agency and FPLS), since they obtain wage and salary
    information on new hire reports.

-   **Need for artificial intelligence to sort income information.**
    Some States need technical assistance in the form of development of
    artificial intelligence to sort income information they already have
    and determine whether the income data are appropriate for the
    establishment or modification of a child support order. Income
    information may not be appropriate if it is dated, inconsistent from
    quarter to quarter, or less than what would be earned from full-time
    minimum wage employment.

-   **No requirement for States to download FPLS information.** The FPLS
    contains an enormous amount of potentially useful data. States have
    historically used the FPLS as a locate tool, not as a tool to
    discover income information. As a result, not all States have the
    capacity to download income information from FPLS into the State
    IV-D system. While it is not currently a Federal requirement, it
    might be worthwhile to explore the possibility of requiring States
    to modify their systems to download income data provided through
    FPLS.

    This page intentionally left blank.

# Appendix A

# 

# [Feedback from States]{.smallcaps}

Exhibit A-1 displays comments and additional input for key elements from
Oregon, South Dakota and Washington about their practices in using
automated income data.

Exhibit A-1

State Feedback and Input for Key Elements for an

Approach to Using Automated Income Data

+------------------+---------------------------------------------------+
| **Category**     | **States' Comments**                              |
+==================+===================================================+
| New Sources of   | -   Match against State lotteries to identify     |
| Automated Income |     lottery winners who receive an annuity        |
| Data             |     payout.                                       |
|                  |                                                   |
|                  | -   Access an online network of SWA databases in  |
|                  |     various States.                               |
|                  |                                                   |
|                  | -   Access an online network of drivers'          |
|                  |     licensing databases to locate noncustodial    |
|                  |     parents and target the search for income to a |
|                  |     particular State.                             |
+------------------+---------------------------------------------------+
| Barriers to      | -   Sharing W-2 information between child support |
| Accessing New    |     agencies and the State tax agencies is        |
| Sources of       |     difficult when some tax agencies do not       |
| Automated Income |     require employers to submit W‑2s to the       |
| Data             |     State. Instead they get a file of W-2s        |
|                  |     submitted by employers to the IRS.            |
|                  |                                                   |
|                  | -   Implementing mandates that the IRS places on  |
|                  |     States to safeguard IRS data, such as Federal |
|                  |     income tax returns, creates a burden that     |
|                  |     outweighs the usefulness of the data.         |
|                  |                                                   |
|                  | -   Addressing the concerns State tax agencies    |
|                  |     may have with the confidentiality of State    |
|                  |     income tax data.                              |
+------------------+---------------------------------------------------+
| Automated        | -   Some States keep an online employment history |
| Decision Matrix  |     of up to 10 years on the IV-D system.         |
|                  |                                                   |
|                  | -   A State with a small caseload reported that   |
|                  |     an employment history screen is sufficient    |
|                  |     automation for their scale.                   |
|                  |                                                   |
|                  | -   All income sources appear on the same screen. |
|                  |                                                   |
|                  | -   Benefits of maintaining an employment         |
|                  |     history:                                      |
|                  |                                                   |
|                  | ```{=html}                                        |
|                  | <!-- -->                                          |
|                  | ```                                               |
|                  | -   Tracks job changes and corresponding changes  |
|                  |     in income;                                    |
|                  |                                                   |
|                  | -   Helps identify part-time income sources;      |
|                  |                                                   |
|                  | -   Helps identify seasonal income sources;       |
|                  |                                                   |
|                  | -   Helps identify when a noncustodial parent is  |
|                  |     working fewer than 40 hours per week for the  |
|                  |     same employer; and                            |
|                  |                                                   |
|                  | -   Helps unduplicate same income information     |
|                  |     reported by multiple sources.                 |
|                  |                                                   |
|                  | ```{=html}                                        |
|                  | <!-- -->                                          |
|                  | ```                                               |
|                  | -   One State uses automation to prioritize the   |
|                  |     timeliness of FPLS data.                      |
|                  |                                                   |
|                  | -   States indicated they would like to continue  |
|                  |     to prioritize FPLS data themselves.           |
+------------------+---------------------------------------------------+
| Federal Parent   | -   FPLS is not helpful for locating income       |
| Locator Service  |     because the data need to be available more    |
| and Possible     |     timely.                                       |
| Enhancements     |                                                   |
|                  | -   Given the length of time in obtaining income  |
|                  |     data from FPLS, when States use the income    |
|                  |     data from the FPLS, they jeopardize meeting   |
|                  |     the federal timeframe for expedited process.  |
|                  |                                                   |
|                  | -   The timeliness of income data from the FPLS   |
|                  |     could be improved by allowing States online   |
|                  |     access to the FPLS and Federal Case Registry. |
+------------------+---------------------------------------------------+
| Employers        | -   Given the many other demands the child        |
| Provide Starting |     support community places on the business      |
| Wage or Income   |     community, it needs to be sensitive to asking |
| Data on New Hire |     for income information on the new hire        |
| Reporting Form   |     reporting form.                               |
|                  |                                                   |
|                  | -   While Federal mandates sometimes are helpful  |
|                  |     to force changes in States, several States    |
|                  |     are observing a trend of legislatures         |
|                  |     resisting federal mandates.                   |
|                  |                                                   |
|                  | -   It is better to use the current new hire      |
|                  |     procedures and have a child support           |
|                  |     caseworker contact the employer for income    |
|                  |     information for noncustodial parents in       |
|                  |     support order establishment and modification  |
|                  |     processes.                                    |
|                  |                                                   |
|                  | -   It is very important to collaborate with      |
|                  |     small employers because they have a           |
|                  |     disproportionately large share of             |
|                  |     noncustodial parents in their workforce.      |
+------------------+---------------------------------------------------+

[^1]: DHHS Office of Inspector General. July 2000. *State Policies Used
    to Establish Child Support Orders for Low Income Non-custodial
    Parents*, OEI-05-99-00391 (Chicago, Illinois). There have been some
    changes in the income imputation policies of these states since the
    OIG report was released.

    \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

    *Executive Summary* *- i*

[^2]: DHHS Office of Inspector General. July 2000. *State Policies Used
    to Establish Child Support Orders for Low Income Non-custodial
    Parents*, OEI-05-99-00391. Chicago, IL.

    Available at <http://oig.hhs.gov/oei/reports/oei-05-99-00391.pdf>.

[^3]: DHHS Office of Inspector General. July 2000. *The Establishment of
    Child Support Orders for Low Income Noncustodial Parents,*
    OEI-05-99-00390. Chicago, IL. Available at
    <http://oig.hhs.gov/oei/reports/oei-05-99-00390.pdf>.

[^4]: DHHS Office of Inspector General. July 2000. *State Policies Used
    to Establish Child Support Orders for Low Income Noncustodial
    Parents*, OEI-05-99-00391. Chicago, IL.

    Available at <http://oig.hhs.gov/oei/reports/oei-05-99-00391.pdf>.

[^5]: Some additional information since the OIG report was published
    indicates the following about each of the three states. Connecticut
    has a guideline deviation factor for the parent's earning capacity
    and case law indicates that the courts do deviate based on the
    parent's earning capacity, except when the parent is disabled. The
    Mississippi guideline does not address income imputation, although
    there is some case law that courts will award support based on
    earning capacity when the parent is unemployed or underemployed. The
    D.C. guideline is silent on the issue of income imputation but case
    law suggests that the courts will impute income if the parent is
    voluntarily unemployed or underemployed.

[^6]: The OIG was only able to universally determine whether income was
    imputed in three of the sampled States (Colorado, Massachusetts and
    Texas). In those three States, 45 percent of all financial awards
    established in 1996 were based on imputed income.

[^7]: Section 453A(b) of the Social Security Act.

[^8]: Section 453A(g)(2)(A) of the Social Security Act.

[^9]: Section 453(a)(2) of the Social Security Act.

[^10]: Section 453A(b)(1)(A) of the Social Security Act requires
    employers to submit: 1) the name of the new hire, 2) the address of
    the new hire, 3) the social security number of the new hire, 4) the
    name of the employer, 5) the address of the employer, and 6) the
    Federal identification number of the employer.

[^11]: 26 U.S.C. § 3304(a)(16)(B) requires the State agency
    administering the State law for unemployment compensation to provide
    wage and unemployment compensation information to the Secretary of
    Health and Human Services, as specified by the Secretary in
    regulations. While separate agencies within a State may administer
    the various functions of the unemployment compensation law, we use
    the generic term SWA to identify the agency or agencies in the State
    that track quarterly wage reports and unemployment compensation
    information. In addition, Section 453A(g)(2)(B) of the Social
    Security Act requires that the State Directory of New Hires furnish
    to the National Directory of New Hires information concerning the
    wages and unemployment compensation paid to individuals on a
    quarterly basis.

[^12]: Section 466(a)(10)(A)(i)(III) of the Social Security Act.

[^13]: This is usually referred to as the "National Directory of New
    Hires" (NDNH), which is somewhat misleading because it consists of
    SWA data (i.e., quarterly wage data) as well as information from
    State Directories of New Hires (SDNH). Few States require that
    employers include wage and salary information on new hire reports.

[^14]: State case registry data do not include income or wage data.
    Generally, it is a registry of all child support cases. However,
    FPLS combines the State case registry data into the Federal Case
    Registry (FCR) and then conducts a daily match of persons in the FCR
    with the NDNH and returns matched case and income information to the
    States.

[^15]: For example, see Karen N. Gardiner, Michael E. Fishman, and John
    Tapogna. 2001. *Automated Cost-of-Living Adjustments of Child
    Support Orders in Three States, Final Report*, Report to the
    Department of Health and Human Services, Assistant Secretary for
    Planning and Evaluation and Office of Child Support Enforcement: The
    Lewin Group. Also see Jane Venohr, David Price, and Tracy Griffith.
    2001. *Minnesota Child Support Assurance: Program Design, Caseloads
    and Costs,* report to the Minnesota Department of Human Services,
    Child Support Enforcement Division. Denver, CO: Policy Studies Inc.

[^16]: Unpublished Statistics. February 2001. Ray Marshall Center for
    the Study of Human Resources: The University of Texas at Austin.

[^17]: Elaine Sorensen and Chava Zibman. 2001. *Estimating How Much of
    California's Child Support Arrears Are Collectible Using State-Wide
    Data Bases*. Washington, D.C.: The Urban Institute. They found a
    match rate of 76 percent, but 22 percent of the matches indicated
    noncustodial parent net income below \$5,000 per year, and 36
    percent of the matches indicated noncustodial parent net income
    below \$10,000 per year. Net income from full-time, Federal minimum
    wage employment would be about \$9,000 per year.

[^18]: Many CSE agencies are looking for ways to decrease the default
    rate, as studies have shown that noncustodial parents who default
    are less likely to pay support. Having accurate income information
    does not automatically mean that the noncustodial parent will
    respond to the agency's communications and legal pleadings. However,
    it seems logical to assume that if---because of faulty income
    information---the agency arrives at a proposed order amount that is
    too low, the noncustodial parent has little incentive to provide
    accurate information, and is therefore likely to default.

[^19]: Office of Child Support Enforcement (July 2006). *Automated
    Systems for Child Support Enforcement: A Guide for Enhancing Review
    and Adjustment Automation*. U.S. Department of Health and Human
    Services, Administration for Children and Families (Washington,
    D.C.). Available on the Internet at:

    <http://www.acf.hhs.gov/programs/cse/pol/DCL/2006-06-22s.pdf>

[^20]: The specific reason why income information or the employer 's
    name was not known when the order was established could not be
    discerned from the data.

[^21]: Public assistance status was not available on 17 cases.

[^22]: Center for Policy Research and Policy Studies Inc. (2003) *OCSE
    Responsible Fatherhood Programs: Client Characteristics and Program
    Outcomes*. Report to the federal Office of Child Support Enforcement
    (Denver, Colorado).

[^23]: Carlson, M. and Furstenberg, F., Jr. (2006) *The Consequences of
    Multi-Partnered Fertility for Parental Involvement and
    Relationships*. Working paper #2006-28-FF. Center for Research on
    Child Well-being, Princeton University.

[^24]: DHHS Office of Inspector General. July 2000. *The Establishment
    of Child Support Orders for Low Income Noncustodial Parents,*
    OEI-05-99-00390. Chicago, IL. Available at
    <http://oig.hhs.gov/oei/reports/oei-05-99-00390.pdf>.

[^25]: As an aside, the percent of paying cases varied little between
    those cases where the original source of income or employer
    information is the noncustodial or custodial parent.

[^26]: The compliance rate for cases where no employer was identified
    was significantly lower statistically than the compliance rate for
    cases where the income or employer information came from a
    non-electronic source. Other differences are not statistically
    significant.

[^27]: The States in Administration for Children and Families Regions I,
    II and III met to review and compare arrears management practices.
    The group cited income imputation that is not based on the
    noncustodial parent's ability to pay as a cause for the accumulation
    of unreasonable arrearages. *Working Paper Draft: Northeast Hub
    Meeting on Managing Arrears*, May 2001; page 4. See also Paul Legler
    (2003) *Low-Income Fathers and Child Support: Starting Off on the
    Right Track*, Final Report prepared for the Annie E. Casey
    Foundation: Policy Studies Inc.