Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Child Support Enforcement 
State Disbursement Units 
Sharing the Implementation 
Experiences of Six States 
JUNE GIBBS BROWN 
Inspector General 
AUGUST 2000 
OEI 06-00-00041  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-
452, is to protect the integrity of the Department of Health and Human Services 
programs as well as the health and welfare of beneficiaries served by them.  This 
statutory mission is carried out through a nationwide program of audits, investigations, 
inspections, sanctions, and fraud alerts.  The Inspector General informs the Secretary 
of program and management problems and recommends legislative, regulatory, and 
operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the 
Office of Inspector General.  It conducts short-term management and program 
evaluations (called inspections) that focus on issues of concern to the Department, the 
Congress, and the public.  The inspection reports provide findings and 
recommendations on the efficiency, vulnerability, and effectiveness of departmental 
programs. 
OEI's Region VI prepared this report under the direction of Chester B. Slaughter, 
Regional Inspector General and Judith V. Tyler, Deputy Regional Inspector General. 
Principal OEI staff included: 
DALLAS  HEADQUARTERS

Blaine Collins
 Joan Richardson, Program Specialist

Ruth Ann Dorrill

Clark Thomas, Ph.D. 

Scott Whitaker

Jnette Oshitoye

Nancy Watts

Lisa White

Jennifer Kahende

Patricia Martin

To obtain copies of this report, please call the Dallas Regional Office at 214-767-3310. 
Reports are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  E X E C U T I V E  S U M M A R Y  
PURPOSE 
To describe States experiences in developing and operating State Disbursement Units 
(SDUs), to highlight strategies they employed to deal with difficulties encountered, and 
to share insights from their experiences with States still implementing or refining their 
SDUs. 
BACKGROUND 
Requirements for Centralized State Disbursement Units:  Congress requires States 
to process child support payments through centralized State Disbursement Units 
(SDUs). The primary objectives of SDUs are to provide employers with a single location 
in each State to send income withholding payments, and to make payment processing 
more efficient and economical. Federal requirements specify deadlines for SDU 
implementation and standards for operations, and outline areas of State discretion, 
such as the option to employ private contractors. While most States met their 
implementation deadlines, a number of States have yet to fully implement their SDU 
and others continue to refine their centralized procedures. 
Concerns About Implementation:  In December 1999, the Office of Inspector General 
(OIG) received a letter from Congressman Bob Clement of Tennessee expressing 
concern about the effectiveness of his States new system for collecting and disbursing 
child support payments. In response, the OIG initiated a study of the Tennessee SDU, 
reviewing 16 cases that experienced delayed payments under the new system. 
Additionally, we surveyed all States and undertook an in-depth review of SDU 
implementation in six States. 
Methodology: Information in this report comes primarily from interviews of key 
participants involved in SDU operations in the six focus States, chosen to provide 
variety regarding prior collection and disbursement methods, when centralization 
occurred, and whether contractors are used. We did not verify the accuracy of their 
responses.  Rather, our goal was to present the self-reported experiences and 
perspectives of key players who are implementing and operating the centralized units in 
order to facilitate their learning from one another. 
FINDINGS 
After Problematic Implementation, Our Focus States Now Report They Disburse 
Payments Faster and Provide Better Customer Service 
Overall Assessment  Managers in focus States generally report improvements in 
payment processing speed and customer service, but also note that most 
improvements were only realized after early implementation challenges were 
surmounted. Respondents report that almost all payments are currently being 
processed within two business days. Additionally, parents may access payment 
i 
SDUs: Experiences of Six States  OEI 06-00-00041  information anytime through toll-free automated telephone response systems, and talk 
to live customer service representatives during regular office hours. However, only four 
of the six focus States report providing employers a single location to send all income 
withholding payments. 
Working with Payers and Local Offices  To minimize startup problems, most focus 
States conducted extensive planning and preparation, involving State child support 
managers, and local staff and clerks of court who previously processed payments. 
These local offices had a great impact on early implementation, particularly by helping 
ensure the accuracy of case information being transferred to the new SDU database, 
by continuing to process payments for some cases or mis-directed payments, and by 
entering new case information into the SDU database. However, States report having 
problems coordinating with some local processors, severely complicating 
implementation in some areas. States also worked closely with employers and 
noncustodial parents to get payments properly sent to the SDU, and to ensure 
payments included enough information to be automatically credited and disbursed to 
the correct child support case. 
Using Contractors  All focus States use contractors to perform some collection and 
disbursement functions, primarily because private companies offered technical 
expertise and labor resources. Managers recommend clearly outlining areas of 
responsibility for contractors, and establishing specific performance criteria prior to 
awarding any SDU contracts. Focus States also accomplish some SDU tasks in-house, 
or through other State agencies, providing SDU managers direct control over these 
functions. 
Implementing Incrementally  Five focus States used pilot projects or implemented 
their SDU incrementally, allowing managers to test procedures and equipment, and 
address difficulties before they affected a large number of payments. 
Determining SDU Caseloads  Managers report that three focus States chose to 
centralize payment processing for all child support cases, rather than only those 
required by Federal law, because this practice is more efficient and simplifies 
procedures for payers. However, two focus States do not centrally process cases with 
income withholding ordered prior to January 1, 1994, reportedly, because no Federal 
matching funds are provided for processing these cases through the SDU. 
Disbursement Delays and Complexity  Despite planning and coordination, all focus 
States reported initial problems in disbursing all payments in a timely manner. Many 
payments received by SDUs could not be quickly credited and disbursed to the proper 
case, primarily because the SDU database, or the payment documents, did not contain 
enough case information to allow an automated match. These payments typically 
required further research, and some were not disbursed until days or weeks after their 
receipt by the SDU. Other payments were inappropriately sent to previous local 
processors, again causing disbursement delays. 
Upgrading Customer Service  State customer service units also initially had difficulty 
handling the large volume of inquiries and complaints from parents and employers. 
While focus States typically improved customer service by disbursing payments more 
quickly, and thereby, reducing call volume, some States had to upgrade their telephone 
systems, add new lines, or increase staffing levels of call centers. 
ii 
SDUs: Experiences of Six States  OEI 06-00-00041  Focus States Continue to Deal with Problem Payments and Cases, and Have Yet to Fully 
Utilize Payment Information to Enhance Support Enforcement 
On-going Challenges to Timely Processing  Focus States continue to struggle with 
quickly processing a relatively small, but troublesome, number of payments. Focus 
States are challenged to get new case information into their database quickly enough 
to allow timely processing of first payments. Due mostly to human error, some 
payments are applied to the wrong case, creating difficulties as States attempt to rectify 
these errors. SDUs continue to have trouble processing poorly labeled payments, and 
must devote special attention to payers who make payments on multiple cases. 
Additionally, some payments from other States and Federal employers are troublesome 
because of poor labeling or because they are not properly directed to the SDU. 
Managers report educating payers to help ensure timely processing, and encouraging 
the use of electronic payment methods by other States and large employers. 
Exploiting SDU Information to Enhance Enforcement  Focus State managers report 
that their SDUs and customer service units generate a great deal of information about 
cases, allowing them to effectively monitor staff and contractor performance. A 
continuing challenge, however, is for States to expand use of this SDU information to 
aid in enforcement of child support by identifying cases with interruptions or changes in 
payments. 
RECOMMENDATIONS 
FOR STATES 
Centralize Pre-1994 Income Withholding Cases  States should process all income 
withholding cases centrally, including those created prior to 1994, thereby providing 
employers with a single location for sending payments. 
Consider Centralizing All Non-withholding Cases  States should assess the benefits 
of processing all child support cases centrally, to simplify operations and capitalize on 
automated processing. 
Employ Incremental Implementation  States that have not yet fully implemented their 
SDU should consider using pilot programs and other incremental implementation 
methods. 
Promote Use of Electronic Payments  States should actively promote the use of 
Electronic Funds Transfer by employers and other payers when practical and 
beneficial. 
Exploit SDU Information to Enhance Enforcement  States should develop strategies 
to routinely use SDU payment information to aid in support enforcement. 
iii 
SDUs: Experiences of Six States  OEI 06-00-00041  FOR THE OFFICE OF CHILD SUPPORT AND ENFORCEMENT 
Encourage Improved Performance by Federal Government Payers  OCSE should 
collaborate with States to encourage Federal government payers to improve their 
payment labeling and submission practices. 
Provide Technical Assistance on Interstate Payment Processing  OCSE should 
provide additional technical assistance to States to aid in the transmission of payments 
for interstate cases. 
Consider Federal Funding for Processing Pre-1994 Income Withholding Cases 
To help States meet the Congressional goal of providing employers with a single 
location in each State to send all child support payments, OCSE should consider 
proposing legislation which would provide States with Federal matching funds to 
centrally process payments for all income withholding cases, including those created 
prior to 1994. 
AGENCY COMMENTS 
The Administration for Children and Families (ACF) agreed with the findings and 
conclusions presented in these two reports. ACF concurred with each of the 
recommendations directed to OCSE and recounted its efforts to assist States with SDU 
implementation. ACF also expressed a desire to collaborate with the OIG in quickly 
disseminating to States the information provided in these reports. ACF comments are 
provided in their entirety in Appendix A. 
iv 
SDUs: Experiences of Six States  OEI 06-00-00041  T A B L E  O F  C O N T E N T S  
PAGE

EXECUTIVE SUMMARY  i

INTRODUCTION  1

FINDINGS 
Overall Assessment of Centralization  3

Preparation for Centralization  4

Contact with Employers and Parents  10

Customer Service  12

Payment Processing  15

Problem Payments and Cases  21

RECOMMENDATIONS  24

AGENCY COMMENTS  26

ENDNOTES  27

APPENDIX 

A: ACF Comments  28
 II NN TT RR OO DD UU CC TT II OO NN  
PURPOSE 
To describe States experiences in developing and operating State Disbursement Units 
(SDUs), to highlight strategies they employed to deal with difficulties encountered, and 
to share insights from their experiences with States still implementing or refining their 
SDUs. 
BACKGROUND 
In the 1996 Personal Responsibility and Work Opportunity Reconciliation Act 
(PRWORA), Congress required States to centralize collection and disbursement of 
child support payments into State Disbursement Units (SDUs).1 The primary objectives 
of centralization are to provide employers with a single location in each State to send 
income withholding payments, and to make payment processing more efficient and 
economical. Federal law requires that States: 
!	 Implement the SDU by a Deadline of October 1, 1998 or 
October 1, 1999 for States with Previous Clerks of Court Involvement 
!  Provide Employers with a Single Location to Send Payments 
!  Disburse Payments Within Two (2) Business Days 
!  Process All Payments for a Specified Caseload2 
(With Discretion to Include All Cases) 
!  Provide Payment Information to Parents 
!  Operate the SDU Through a State Agency or Contractors 
!  Staff SDUs Sufficiently to Perform Required Functions 
!  Automate Procedures as Much as Feasible, Efficient, and Economical 
!  Integrate the SDU with the States Automated Child Support System 
!  Monitor SDU Performance 
Several States already had centralized procedures and had to make relatively minor 
changes to meet Federal requirements. In other States, however, local child support 
staff or clerks of court traditionally processed many payments, making centralization 
more challenging. Congress anticipated that some States with reliable local systems 
might be reluctant to centralize. Therefore, PRWORA allowed States to be granted a 
waiver to operate their SDU by linking local disbursement units through an automated 
information network, if the Secretary of DHHS agreed that the linked system would not 
cost more nor take more time to establish or operate than a centralized system. 
However, even when a linked system is used, Congress specified that employers must 
still be given only one location for sending payments within each State. States that 
failed to implement an SDU by their deadline, unless granted a waiver, potentially faced 
stiff penalties, though these have subsequently been reduced.3 
1 
SDUs: Experiences of Six States  OEI 06-00-00041  Federal Financial Participation (FFP) is available for administrative expenses of the 
SDU at a rate of 66 percent.4 However, States which choose to process all child 
support payments through their SDU do not receive Federal funds for processing any 
cases not mandated by Federal law. For processing non-public assistance cases, 
SDUs are allowed, but not required, to charge parents processing fees. 
In December 1999, the Office of Inspector General (OIG) received a letter from 
Congressman Bob Clement of Tennessee expressing concern about the effectiveness 
of his States new system for collecting and disbursing child support payments. In 
response, the OIG initiated a study of the Tennessee SDU, reviewing 16 cases that 
experienced delayed payments under the new system. Additionally, we surveyed all 
States and undertook an in-depth review of SDU implementation in six States. 
METHODOLOGY 
Information in this report comes primarily from interviews of key participants involved in 
SDU operations in six focus States. The six focus States we visited for on-site 
interviews were Arizona, Florida, Iowa, Minnesota, Pennsylvania, and Tennessee. 
These States were chosen to provide variety regarding when centralization occurred, 
and whether the State uses contractors or other partners in payment processing. Iowa 
and Minnesota had a Federal deadline for SDU implementation of October 1, 1998, 
while the other four focus States had an October 1, 1999 deadline. All six focus States 
had some form of local payment processing prior to enactment of the Federal SDU 
requirements. All site visits occurred in February and early March 2000. In each focus 
State, analysts interviewed SDU program managers, SDU information system 
managers, payment-related customer service managers, SDU contractor managers, 
and supervisors of staff that process payments. We also toured the primary SDU 
payment processing facility. Where appropriate, we interviewed at least one 
representative of local entities that were responsible for payment processing prior to 
centralization.5 
Limitations. In conducting this inspection, we did not attempt nor intend to evaluate 
SDU operations. For example, we did not try to measure the relative costs or 
efficiencies of various operational arrangements. We also did not verify the accuracy of 
participant responses. Rather, this report examines the self-reported experiences and 
insights of key personnel having first-hand experience implementing and operating 
SDUs. 
This study was conducted in accordance with the Quality Standards for Inspections 
issued by the Presidents Council on Integrity and Efficiency. 
2 
SDUs: Experiences of Six States  OEI 06-00-00041  F I N D I N G S  
OVERALL ASSESSMENT OF CENTRALIZATION 
State Disbursement Unit Implementation Was Often Problematic, But Focus States Now 
Report They Disburse Payments Faster and Provide Better Customer Service 
Overall Assessment 
Compared to the methods focus States used to process payments prior to 
centralization, most SDU managers and others who participate in payment processing 
believe SDUs have helped States improve their operations. Respondents generally 
report that payment processing is faster, and that parents can access payment 
information and receive customer service more easily than before centralization. The 
results have been positive. It's made it easier on employers and custodial parents. 
Overall, centralization and SDUs were good ideas. 
Startup Problems 
However, respondents from each focus State report that the improvements generated 
by centralized processing were not all realized during the early weeks or months of 
SDU operations. It was very difficult at the beginning. There were technological, 
mechanical, and political barriers. Respondents anticipated startup problems, yet were 
often strained to respond to challenges quickly enough to prevent disbursement or 
customer service delays. States report that more difficult problems took weeks to work 
out, and new challenges continually arise.6 
Processing Payments Within Two Days 
Respondents from all focus States report that their SDUs now meet or exceed the 
Federal requirement for processing payments within two business days. We are 
getting over 99 percent of checks out in one day, now that we are over the hump. Part 
of the improvement in payment processing speed involves the amount of time previous 
local processors took to disburse payments. It's a lot faster across the State now. 
There were two local offices before that would only process payments once a week. 
However, a few managers point out that even though SDUs are processing payments 
within two business days, it may take longer for payments to be received by the SDU 
than by previous local disbursement units. These managers explain that payments 
mailed from rural locations to SDUs located in urban areas often experience postal 
delays. Additionally, some employers apparently hold payments up to seven days, as 
allowed by law, before mailing income withholding payments to SDUs. 
Enhanced Customer Service 
Respondents also generally report improving payment-related customer service to 
parents and local offices. Each focus State now offers 24-hour access to automated 
payment information, as well as call centers staffed by customer service 
representatives during business hours. However, during the early weeks of SDU 
operations, most focus States acknowledge that parents often had difficulty accessing 
payment information or talking to customer service representatives because of 
inadequate telephone systems and under-staffed call centers. 
3 
SDUs: Experiences of Six States  OEI 06-00-00041  Most Focus State Respondents Report That SDUs Have Eased Employer Burden, But 
Employers Must Still Send Payments to Multiple Locations in Some States 
Managers in four focus States report easing employer burden by providing employers 
with a single location to send all child support payments. These States process virtually 
all child support payments through their SDU. Employers like centralization. A big 
employer could easily be sending 50 or more checks to different counties, whereas with 
the SDU they can send one check. Some still send a separate check for each payment, 
but still have the benefit of sending the checks to one address. However, two focus 
States report that centralization has not eased employer burden because the SDU 
serves only as one additional location for employers to submit payments. In these 
States, the SDU does not process payments for cases that had income withholding 
ordered before January 1, 1994. Instead, employers must send some payments to the 
SDU and continue to send some payments to local disbursement units. 
PREPARATION FOR CENTRALIZATION 
Focus State Respondents Said That Forming Planning Workgroups Helped Them Gain 
Cooperation to Better Coordinate With Potentially Reluctant Participants 
The Coordination Challenge 
A major challenge to SDU implementation involved coordinating groups of people who 
had not previously worked together on such a major project. Specifically, State child 
support agency staff needed to work closely with contractors, local child support staff, 
and clerks of court, as well as their State legislatures. Program managers from some 
focus States indicate that coordination was complicated because some legislators and 
clerks of court preferred to keep payment processing local, resenting the Federal 
requirement to centralize and automate payment processing. Locally-elected clerks of 
court in one State reportedly also had incentives to resist centralization because they 
collected fairly substantial fees for processing the payments of non-public assistance 
cases and viewed payment processing as a service that helped them garner local 
constituent support. 
Stakeholder Implementation Workgroups 
To ease coordination, focus States established planning workgroups, typically 
consisting of program, policy, systems and customer service managers from the State 
child support agency, local child support staff, clerks of court and their staff, legislators, 
and employers. Workgroups helped draft necessary State legislation, design the 
States new processing structure, and determine the logistics of the transition. 
Respondents report that the workgroups helped gain the support of clerks of court and 
local staff by making them part of the planning. What this created was an environment 
of shared ownership. To assist their workgroup in preparing for implementation, one 
States primary contractor hired a separate national consulting firm to create a planning 
document for the project, a reportedly useful tool for the States coordination efforts. 
The planning document was more readily accepted because it was derived by an 
independent, outside source, rather than by one of the interested parties. 
Respondents emphasized the importance of workgroups also involving front-line staff 
who processed payments before the SDU, because of their familiarity with clients, case 
information, and previous procedures. 
4 
SDUs: Experiences of Six States  OEI 06-00-00041  Risks of Non-Coordination 
While all focus States utilized workgroups at various stages of SDU implementation, some 
did not include all the groups in the early planning, waiting, for example, until implementing 
legislation had been passed. In one focus State, the child support agency developed an 
implementation plan and went directly to their State legislature to seek approval of the 
plan, without involving others, theorizing that because of the Federal requirement, there 
was little need to garner the support of all participants. Respondents from this State 
acknowledge that this approach caused problems for SDU implementation, because all 
parties did not coordinate their efforts. 
States Report that Deciding Not to Centralize all Child Support Cases Can Complicate 
Disbursement Unit Implementation and Continuing Operations 
Federal law allows, but does not require, States to process payments on all child support 
cases centrally. As detailed in our companion report, 32 States report their SDUs will 
process payments from all types of child support cases, rather than only those required by 
Federal law.7 Three of our focus States have centralized all child support cases, and one 
State goes beyond the Federal requirements by centrally processing all cases with income 
withholding orders, but still processes some non-public assistance cases locally. The other 
two States have centralized only those cases for which the State would receive Federal 
matching funds for processing payments through the SDU. 
Complexities of Partial Centralization 
Respondents report that when all cases are not centralized, employers do not have a 
single location in the State to send all child support payments, a goal that Congress 
enumerated in PRWORA. In States that do not mandate centralized processing of 
payments on cases established prior to January 1, 1994, employers are generally required 
to send most of their income withholding payments to the SDU each pay period, but also 
send some checks to individual local clerks of court for the pre-1994 cases. Additionally, 
when all cases are not centralized, dual structures must be maintained for processing 
some payments locally. The local disbursement unit typically must continue to maintain 
payment processing equipment, bank accounts, post office boxes, and staff dedicated to 
payment processing. Finally, when all cases are not centralized, cases may switch 
between centralized and local processing, such as when parents go on and off of public 
assistance or when a noncustodial parent leaves an employer. This back and forth 
between us and the clerks, it causes a lot of problems because its hard to determine 
which cases to centralize and which ones to not centralize. To avoid this problem, one 
focus State instituted a policy wherein once a case was processed through the SDU, it 
would remain with the SDU. 
Focus States Report Hiring Contractors For Some Disbursement Unit Functions, Primarily 
Because Private Companies Had Experience and Resources Not Available to State 
Agencies 
Capitalizing on Contractor Capabilities 
In most focus States, legislatures worked with the child support agency to determine 
whether various functions of the SDU should be operated by State employees or 
contractors. States considered whether the agency had necessary expertise and time to 
establish and operate in-house structures. Internally, we felt like we simply did not have 
the staff to perform the SDU, but we did do cost analysis. Because of their expertise and 
systems support, some of the private companies would be able to provide better service. 
5 
SDUs: Experiences of Six States  OEI 06-00-00041  Also the time frame prompted us. We were working against the clock. Five of the six 
focus States contract out the receipting function, in which contractors receive, post, and 
deposit child support payments. Use of contractors for receipting largely eliminated the 
need for State agencies to add new staff. One of the advantages of using a private 
company, is that its easier for him to hire staff than for us, because State employees have 
to pass a civil service test, when really all we need is for them to be good at the keypad. 
Allocating Functional Responsibilities 
Only two focus States chose to make their SDU receipting contractor also responsible for 
disbursement. The other States either had laws requiring that only a State agency, such 
as the State Treasury or Comptroller, could issue such checks, or they felt it would be 
more efficient to do this function in-house because the State already owned check printing 
equipment and had experience in the area. Focus States also used contractors for smaller 
aspects of SDU implementation, such as initial mailings to payers. It is easier to hire a 
contractor than to do it in-house. With the bureaucracy, if we do special mailings in-house, 
we have to pay overtime. With a private company, mailings can be out in a week. It is 
much easier this way. 
In Negotiating With Contractors, Managers Report Benefits from Focusing on Performance 
Results, Rather than on Specific Methods of Operations 
Targeting Performance Results 
Focus States which planned to contract out portions of their SDU crafted Requests for 
Proposals (RFPs) that focused on expected performance results, rather than being overly 
prescriptive regarding the specifics of how to achieve those results. States also attempted 
to ensure that RFPs clearly specified the responsibilities of the eventual contractor, as well 
as the measures the State would use to monitor and evaluate contractor performance. 
Managers report that when performance expectations and measures are included in the 
RFP, there are fewer problems later when they are adopted and integrated into the actual 
contract. States also attempted to issue their RFPs early in the planning process to give 
bidders sufficient time to evaluate the project and to devise plans for how to accomplish 
the tasks requested in the RFP. However, some focus States report their RFPs went out 
relatively late in the process, possibly suppressing the number of bids the State received. 
One of these States received only two bids, significantly limiting the choices of their 
contract evaluation team. 
Gauging Contractor Expertise 
In evaluating RFPs, States report primarily considering the bid price and the expertise of 
private companies, with the latter carrying more weight than the former. States typically 
gauged the expertise of a company by deriving a technical score which reflected prior 
experience in child support and payment processing, as well as staffing and other 
resources. There were not very many people with the resources or the expertise to even 
try to implement our SDU. Large companies appear to have an advantage over smaller 
companies due to the necessarily heavy investment in payment processing equipment. 
The smaller contractor had not done a statewide operation before, so they were not able 
to demonstrate a competence and understanding. The larger contractor had a host of staff 
that they could fly in if there was a problem. We had problems with network testing in the 
beginning and the next day a whole planeload of them came in. 
6 
SDUs: Experiences of Six States  OEI 06-00-00041  Respondents Report That Contracts Should Include Performance Standards, Incentives, 
and Penalties, Not Just Contractor Payment Terms 
Contract Types and Safeguards 
Focus States typically pay SDU contractors a transaction fee for every payment 
processed, or a fixed price for all services. Per-transaction contracts can cause 
contractor revenues to fluctuate, while fixed-price contracts protect States from 
unexpected charges. We have a fixed-price contract. If the contractors costs exceed 
what we contracted to pay them, that is their tough luck. If costs are less, then that is 
their good fortune. They assume the risk, so whatever unforeseen charges they have, 
contractually the State is not responsible. Focus States included terms in their 
contracts with private companies that allow them to cancel the contract or impose 
penalties in the event the company does not perform up to contract standards. Private 
company SDU managers in focus States report that, while initially equipping, staffing, 
and launching an SDU is costly, their investment is well rewarded in the long run. 
Keys Aims in SDU Contracting 
State project managers identify three critical aspects of SDU contracts: 1) establishing 
a framework for operations that clearly defines the responsibilities of all parties; 2) 
maintaining State control over the functions they are contracting out; and 3) providing 
private companies with incentives to meet performance expectations. Contract 
managers indicate that to maintain control of all SDU functions, some contracts had to 
have special provisions, such as requiring the contractor to report directly to the State 
child support agency. They also might empower the agency with the authority to 
approve or deny the use of individual sub-contractors, as well as the right to terminate 
any sub-contractor based on performance. To ensure quality performance and 
encourage improvement, focus States included both minimum performance standards 
and incentive structures in their contracts. One State structured their SDU contract such 
that the private company did not earn any money until after the SDU was operating 
Statewide for at least thirty days, at which time the contractor received a milestone 
payment. A manager from another State reports dissatisfaction with their initial contract 
because the performance standards were too easily met, and feels the private 
company had little incentive for improvement. 
Focus State Respondents Report That Close Coordination with Clerks of Court Was 
Essential to Both Initial Transition and On-going Payment Processing 
For States in which clerks of court had previously handled payment processing, 
communication was an important part of implementation. Not only were clerks of court 
involved in the conversion of case information, but they still process some non-public 
assistance cases locally and accept payments at their offices when necessary. SDUs 
must also collaborate with clerks of court regarding cases that leave public assistance. 
Involving Clerks of Court 
Some focus States held workshops for clerks of court as a part of a continuing 
education program. These workshops helped keep clerks of court abreast of the status 
of SDU implementation and changes to their responsibilities. Another State used 
computer based training for clerks of court and local offices, with training on entering 
information about new cases, and entering and retrieving payment information on their 
new automated system. Another State assigned SDU staff to work in clerks of court 
7 
SDUs: Experiences of Six States  OEI 06-00-00041  offices during the first few days they were required to use the new automated system. 
While respondents generally report that these efforts were useful, some indicate this 
training was not extensive enough in some places and may have provided inconsistent 
information to different clerks of court. I went the first day and went back the next day. 
Some of the things that were said the second day were not the same things said the 
first day. So your understanding of what was going to occur depended on which 
workshop you attended. 
Verifying the Completeness and Accuracy of Case Information Was Critical as States 
Built and Implemented Their Payment Processing Databases 
Primacy of Data Accuracy 
SDU operations are significantly affected by the quality of available case and payment 
information. To credit a payment to the proper case, SDU automated systems attempt 
to match information provided with payments to case information contained in the 
SDUs database. Problems with data accuracy affect every aspect of processing, from 
the creation of billing statements to processing and disbursing payments. Not only must 
information accompanying payments be correct, but information in the SDU payment 
database must also be accurate in order to properly match incoming payments. One 
SDU manager maintains that having incorrect information can be worse than having no 
information, because staff will act on the bad information rather than trying to find 
accurate data. 
Constructing New Databases 
Each focus State designed and constructed a new SDU database, typically combining 
information about public assistance cases already stored by the State child support 
agency with information about non-public assistance cases previously stored by clerks 
of court. To prepare and transfer case information to the SDU database, one focus 
State had clerks of court verify their data prior to conversion. Although this State did not 
receive full cooperation from all clerks of court, the method was reportedly very 
effective because local staff were most familiar with their cases and could often 
recognize when information was missing or inaccurate. Another method was to receive 
data from local offices, and verify it by responses to initial correspondence. This 
strategy caused some initial delays in disbursement, but was used by one focus State 
because managers did not believe there was time to conduct local verification. Another 
focus State entered information from local offices and completed the verification 
process at the State level, an effort that took nearly two years. 
Problems Transferring Case Information 
States encountered various problems transferring case information to the SDU 
database. Workers in some States had difficulty determining which cases to convert 
because they had to manually review the original orders to decide when income 
withholding was ordered and only convert those ordered on or after January 1, 1994. A 
manager explains, We had to go into those paper files in the clerks office, read the 
orders, and pick up that income assignment date. At least occasionally, this resulted in 
workers missing some cases that should have been centralized. Respondents also 
report that local case files did not always include complete information, especially 
Social Security Numbers (SSN) for each of the parties to the case. When they 
converted, the SSN was missing. This was troublesome for us because, even if a client 
has their case number, they cannot use the automated voice response system if it does 
8 
SDUs: Experiences of Six States  OEI 06-00-00041  not recognize their SSN. Respondents also indicate missing SSNs caused problems 
once centralized processing began because many employers initially only included their 
employees SSNs and not the case numbers with payments, so the payments could not 
easily be credited to the proper case when that SSN was not already in the database. 
Yet another problem occurred because conversion in some focus States occurred 
months before SDU implementation, causing conversion efforts to miss recent address 
changes and new cases. 
Quality Checks on Data Accuracy 
To help minimize these problems, focus States report instituting quality checks. A 
manager describes using two levels of quality control, First, we made sure that we 
were converting the right cases and secondly we made sure they were setting up the 
cases correctly so the money would process automatically. Another State indicates 
that they quickly worked on any cases with missing information, such as SSN, by 
contacting the parties directly to acquire the information. Another State involved 
parents in checking the data entered through conversion by sending out statements 
detailing the current amount of each cases current obligation and any arrearages. 
These notices encouraged parents to contact their State agency to question any of the 
information, thereby uncovering many conversion errors. 
Most Focus States Used Pilot Projects and Incrementally Implemented Their 
Disbursement Units, Allowing Managers to Address Difficulties Promptly 
Five of the six focus States used some form of incremental implementation of their 
SDU, initially processing only a segment of the eventual SDU caseload. Some States 
ran pilot programs, typically by initially notifying payers in only two or three counties to 
begin sending their payments to the SDU. Different methods were used, such as 
phasing in a few counties at a time, either regionally, or based on the size of each 
countys caseload, or adding interstate cases or cases paid directly by noncustodial 
parents first, then adding cases paid by employers later. Some focus States 
coordinated their case information conversion efforts with their incremental 
implementation by entering data in the SDU from various counties in the same order as 
they later began centralized processing. One State reports adding extra staff on the 
first few days that new groups of cases were added, recognizing that the first payment 
made to the SDU by particular payers would likely require more manual attention to 
properly credit payments to cases. 
Benefits of Incremental Approaches 
Respondents report that incrementally adding cases to the SDU allowed them to solve 
difficulties on a smaller scale, before the problems affected a large number of 
payments. Incremental implementation was also helpful in gauging required staffing 
levels, allowing for initial performance evaluations of private companies, and in making 
technical modifications to State databases, computer software, and processing 
equipment in ways not anticipated during initial planning. 
Disadvantages of Incrementalism 
However, respondents do report some general disadvantages of incremental 
implementation. Managers from two States report that their incremental approach may 
have provided a false sense of security regarding SDU operations because their 
system operated better when processing only a portion of cases than it did when the 
full case load was first added. When we first started with smaller counties, we did not 
9 
SDUs: Experiences of Six States  OEI 06-00-00041  see the level of difficulty until we really basically stress-tested the system. Another 
problem involves employers who are withholding payments for employees who have 
cases in different counties. Respondents report that some employers either wanted to 
continue sending all checks as they had in the past, or to centralize all their payments 
at once, so they only had to change their payroll software once, instead of multiple 
times based on the SDUs incremental implementation strategy. To avoid this problem, 
one focus State gave employers the option not to begin sending any payments to the 
SDU until all of their employees cases were centralized. 
CONTACT WITH EMPLOYERS AND PARENTS 
EMPLOYERS 
SDU Managers Stress the Importance of Communicating with Employers and Building an 
Accurate Employer Database 
Employers play a critical role in child support enforcement by reporting when they hire 
new employees and by withholding income from wages to pay child support. 
Respondents report that coordination with employers was essential to the initial 
success of the SDU because of the large portion of cases processed through SDUs 
which involve income withholding. 
Employer Outreach and Education 
Some focus States mailed one or more letters directly to employers, while others 
contracted with private companies to conduct employer outreach. One State held four 
different employer outreach conferences to communicate the procedures for remittance 
of payments. Several States trained certain staff to handle all calls and inquiries from 
employers to insure provision of consistent information. 
Verifying Employer Information 
In addition to education, some States attempted to obtain or verify information about 
income withholding orders for each employer prior to beginning centralized processing. 
Typically, this involved requesting a list of cases from employers, or sending them a list 
based on information contained in the new SDU database. Managers in these States 
report their efforts helped identify many errors and omissions in the new database. We 
imported employer information into our database and used it the first day. Some States 
say they don't have the time or capability. But they have to recognize that it's something 
that can slow up the process of implementation. Respondents note that large 
employers have much greater technological capabilities for transferring information to 
SDUs. With small employers, it is probably the owner who is doing all the paperwork. 
They dont want to be bothered and dont have uniform procedures. Focus States that 
did not attempt to verify employer payment information prior to beginning centralized 
processing instead built their employer database from information included with 
payments as they came to the SDU. At least two focus States opted for this strategy 
because they did not have sufficient time to exchange correspondence with employers 
prior to implementation. 
Employer Communication Problems 
States report problems initially communicating with employers due to wrong addresses, 
often because the business had recently moved. States also report that some initial 
10 
SDUs: Experiences of Six States  OEI 06-00-00041  notices did not go to the correct department within a business, typically because the 
payroll division was not at the same location as the obligors workplace. You need to 
have the correct address of where that payroll comes from. Large companies have 
payroll offices all over the country. Respondents speculate that some correspondence 
intended for employer payroll departments was discarded when received by other 
persons within a company, possibly delaying initial use of the SDU by some employers. 
Some States appear to have invested time to obtain correct addresses and re-send 
correspondence, whereas other States only responded with corrective action after 
employers failed to re-direct payments to the SDU. 
CUSTODIAL PARENTS 
Despite Education About the New Disbursement Unit, Some Custodial Parents were 
Reportedly Wary of Centralization 
States attempted to educate custodial parents about changes they should expect due 
to SDU implementation. Staff emphasize that education was critical because some 
parents were nervous and scared that the changes would effect their family budgets. 
Although payment time is reportedly faster Statewide, staff suggest that some custodial 
parents felt centralization reduced service because they were used to picking their 
checks up at local offices and could no longer do so. They were used to one-day 
service. These people just hammered us. They were not tolerant at all. Some custodial 
parents who had not previously received public assistance did not like receiving checks 
from the State and felt they were being subjected to the stigma associated with welfare. 
Another barrier here was that customers who were part of the clerk's system [non-
public assistance] did not want to deal with big State government. They wanted to deal 
with their locally-elected clerks of court. 
NONCUSTODIAL PARENTS 
States Encountered Several Obstacles to Effective Communication with Noncustodial 
Parents Prior to Centralization and Tout the Importance of Timely, Informative Notices 
SDUs initially communicated with noncustodial parents in ways similar to those used to 
communicate with employers. The primary goals of communication were to instruct the 
noncustodial parent payer to verify case information, to re-direct payments to the SDU, 
and to offer noncustodial parents information, such as customer service phone 
numbers. Some focus States had problems initially getting re-direct notices to all 
noncustodial parents because of wrong addresses, or because out-dated records 
incorrectly listed a payer as employed and paying through income withholding. One 
State reports it sent notices out too early and began receiving payments at the new 
post office box before the SDU was ready to process them. Another State reports 
sending notices out too late, which did not allow enough time to correct addresses and 
send second notices prior to SDU implementation. Managers of one State believe its 
initial notices contained too much information, confusing payers and generating 
unnecessary, excessive phone calls to the States customer service staff. 
11 
SDUs: Experiences of Six States  OEI 06-00-00041  Focus States Keep Noncustodial Parents Informed of Account Balances and Monthly 
Obligations by Mailing Regular Statements 
As part of centralized payment processing, all focus States are sending regular 
statements to noncustodial parents. These notices contain such information as the 
amount of the monthly obligation, arrearage balances, fees, interest charges, recently 
credited payments, and notices of changes in child support payment policies or 
operations. States mostly send statements to all noncustodial parents, including those 
with income withholding orders, so that payers can verify that payments were recorded 
properly. Prior to centralization, some noncustodial parents had not received regular 
statements, and many reportedly inquired about or protested balances and charges of 
which they were not aware. The first mailing from SDUs often generated enormous 
payer response, requiring caseworkers to review and adjust a number of case records. 
Respondents report that some of these calls were generated by the statements 
containing inaccurate information, perhaps due to payments being applied to the wrong 
case during the early weeks of centralization. The positive aspect of this was that it 
provided another opportunity to detect misapplied or incorrect payments. 
Some Focus States Ease Payment Processing By Sending Noncustodial Parents 
Coupons to Return With Their Support Payments 
Two focus States send payment coupons with the billing statement. Respondents 
report that use of remittance coupons by noncustodial parents eases payment 
processing for SDUs because it contains all necessary information needed by the SDU 
for automated processing. These coupons resemble credit card or utility bills, requiring 
payers to return a portion of the statement with their check. Although billing statements 
are usually sent only once a month, payment coupons may be sent as many times per 
month as the court order dictates, whether monthly, bi-weekly, or weekly. Coupons are 
scanned when they come into the SDU with the payment, so that processors 
immediately have all the information they need to credit the payment. However, 
coupons are often not returned with payments. To increase use, one State that 
currently sends coupons plans to make improvements in their structure and format. 
Theyre not very user-friendly. They dont present themselves as something they need 
to use or is convenient to use. I think we can put some effort into that and increase the 
amount of people that are sending them back. Some focus States do not use coupons, 
relying instead on automated equipment that reads account information contained in 
the barcode of most checks. We studied whether or not we should send out coupons 
with a return envelope, but if a noncustodial parent makes one payment on a check, 
then we have that in our database and we can identify any future payments from that 
bank account. 
CUSTOMER SERVICE 
To Provide Parents with Payment Information and Handle Complaints, States Provide 
Telephone Response Systems, Coupled With Live Customer Service Representatives 
Focus States provide a two-pronged approach to providing parents with customer 
service regarding payment processing. First, all focus States provide access to 
payment information through automated telephone response systems. These 
systems contain receipt and disbursement information about recent child support 
payments processed through the SDU and are designed to be accessed anytime 
12 
SDUs: Experiences of Six States  OEI 06-00-00041  through toll-free phone numbers. Second, automated phone systems typically allow 
parents the option of selecting another service, a call center staffed with live customer 
service representatives (CSRs), who are usually accessible during weekday business 
hours.The SDU call center actually improved customer service because, before, 
centralization customers could only talk to a live rep between 2 PM and 4 PM, whereas 
with the new, single phone number, humans are available between 9 AM and 5 PM. 
CSRs generally have access to more information than is offered by their automated 
telephone systems. For instance, a telephone system may contain information that a 
disbursement was made for a certain amount on a specific date, whereas a CSR may 
be able to tell a client the address to which the payment was mailed. Managers report 
that CSRs record all communications with clients, making it easier for caseworkers to 
retrieve accurate, up-to-date payment information from their States automated 
systems. Managers report cross-training staff in order to maximize resources when 
work flow changes day-to-day. We put the new staff on the payer/payee lines. If it gets 
more detailed than strictly payment information, new employees may transfer callers to 
more experienced staff. 
Respondents in focus States also report that call centers provide a quick method of 
identifying cases with problems and areas of potential improvement. One State, for 
instance, instituted weekly meetings in which call center team leaders identify issues 
that need to be discussed with local offices and courts to improve operations. Staff also 
report that call centers can alert local offices to needs of specific clients regarding 
enforcement, and are useful for processing address changes. Some call centers 
provide special telephones lines dedicated to receiving calls from other States, 
employers, local child support staff, or clerks of court. These calls can then be routed to 
CSRs assigned and trained to handle inquiries from specific entities. One focus State 
went further in specializing customer service by creating a separate call center for 
employers. 
In addition to these centralized efforts, local staff and clerks of court continue to provide 
payment information to non-public assistance parents in some focus States. This 
information is either provided in response to a parents direct request to the local office, 
or through a referral by a CSR. Referrals generally address enforcement issues or 
other case activities not directly related to payment processing. When local offices 
communicate with parents, they are generally expected to send a description of the 
contact to the call center as a narrative field in the SDU database. 
Focus States Experienced Problems in Providing Quality Customer Service During the 
Early Weeks of Centralization, Primarily Due to High Call Volume 
Underestimated Call Volume and Staffing Needs 
All focus States report receiving more calls than anticipated to their call centers during 
the early weeks of centralization. This sometimes resulted in unanswered calls, busy 
signals, and long hold times. Respondents primarily attribute excessive calls to the 
SDUs initial inability to disburse payments in a timely manner. Additionally, some 
States report underestimating customer service needs and, therefore, not having 
enough phone lines or staff to handle the volume of calls. One State reports under-
staffing its call center because the State legislature would only provide funding for a 
smaller call center than managers and contractors projected would be needed. To 
13 
SDUs: Experiences of Six States  OEI 06-00-00041  address initial under-staffing, some focus States added more CSR positions, and 
others hired temporary employees to answer simpler calls or to assist CSRs. 
Local Non-Cooperation 
Respondents also report that the action of some local entities unnecessarily added to 
the volume of calls to their call center. For instance, a local clerk of court in one county 
reportedly placed a recorded message on their phone system directing anyone who 
called to dial the call centers toll-free number, even though many callers had 
enforcement-related inquiries that should have been handled by the local office. This 
resulted in the call center receiving inquiries regarding issues that CSRs could not 
address. 
Technical Problems 
Some staff report that their automated telephone systems did not offer all the 
information they were designed to provide because of problems in linking to the 
underlying case database. Even five months after centralization, one States telephone 
system did not include payment information for an entire segment of the SDU caseload. 
Another State only updates case information for portions of the SDU caseload on a 
weekly basis, even though parents may wish more current information. Due to 
conversion problems, some parents could not access their case information because 
the database did not contain their SSN, which some systems use as a password for 
parental access. When these problems occurred, callers either heard a recorded 
message telling them to call back when the system would be available, or routed calls 
to the States call center, further adding to the backlog of callers. Also, many callers 
called back multiple times, some apparently after receiving responses to initial inquiries. 
The phone lines for one States call center were inadequate and would disconnect 
callers for no apparent reason. The problem was not evident until processing was 
centralized and the volume of calls increased. The State upgraded their phone lines 
one month after beginning SDU operations. Another States automated system was 
apparently offline most nights and many other hours during the first three months of 
SDU operations, primarily due to planned downtime for batch processing and Y2k 
preparations, as well as unplanned circumstances. Respondents also report excessive 
response times when CSRs attempted to access information from the State database, 
which was not adequately equipped to absorb the new users. 
Improving Customer Service 
The primary method States used to reduce call center volume was to improve payment 
processing so that payments were disbursed timely. Respondents report that once their 
SDU disbursed almost all payments within two business days, inquiries and complaints 
declined dramatically. One manager explained, If it's not working properly, then 
everybody's going to press the zero button and youre going to get more calls than you 
want. If you're behind in processing payments, your call volume just goes right through 
the roof. Once you get that resolved, then the phones calm down. 
To further improve service to customers regarding payments, respondents suggest that 
States specify performance criteria in their contracts, provide call centers with 
equipment that allows immediate monitoring of customer service calls, and limit call 
center inquiries to only payment processing issues. The rationale for the last 
14 
SDUs: Experiences of Six States  OEI 06-00-00041  suggestion is that local caseworkers have the responsibility for taking action on 
paternity and enforcement issues, and therefore, should receive calls regarding those 
issues. 
Staffing Customer Service Centers Poses Challenges to States 
Training and Hiring Complexities 
Respondents report that some CSRs did not efficiently provide service to parents 
because of inexperience and lack of training. While all focus States report training their 
CSRs, most also report that learning to navigate their States automated system is 
difficult and requires extensive practice for efficient use. Staff suggest that child support 
customer service is more difficult than many other types of call center work because of 
the complex State automated child support systems. They also note that the strong 
economy has made hiring and keeping customer service staff particularly difficult, 
resulting in a high turnover rate among CSRs. One manager argued that private 
companies are better suited than State agencies for operating call centers because 
contractors are more able to reward experienced CSRs for good performance through 
incentive programs. Some managers tried to improve performance by sending CSRs to 
county offices to familiarize them with prior payment processing. 
Effect of Customers on Staff 
Respondents report that the attitude of callers had a strong affect on CSRs, especially 
during the early weeks of centralized processing. Many callers were understandably 
upset about not receiving expected money, and often took their frustration out on 
CSRs. CSRs, reportedly, received numerous calls from irate or hostile parents who 
either had not received their regular child support or who had not been credited with 
making their payments. Another factor was non-public assistance clients who were 
often reluctant to deal with public social service agencies. Some parents, reportedly, 
had initial negative impressions of centralization due to the tone of reporting by mass 
media. Clients may also have been dissatisfied with call center responses because 
they did not initially understand the scope of operations of these units. This 
environment sometimes resulted in trained CSRs quitting, further exacerbating call 
center staffing problems. 
PAYMENT PROCESSING 
Disbursement Units in Focus States Use Both Manual and Automated Payment 
Processing Structures, Both of Which Offer A Means of Improving Service 
Manual Processing 
Smaller focus States mostly rely on manual processes in which staff enter payment 
information into the SDU database using 10-key machines and equipment which scans 
the bank routing codes of checks. Using this process, the bank routing codes allow 
SDU software to automatically display individual case information on the processors 
screen, allowing them to check for accuracy and record the payment. If the payers 
bank routing code has not previously been scanned into the database, staff search the 
SDU automated system manually to identify the appropriate case, using additional 
information such as name and SSN. Staff then balance groups or batches of 
payments using software applications or adding machines to ensure they have 
accounted for all payments and to check for errors. 
15 
SDUs: Experiences of Six States  OEI 06-00-00041  Automated Processing 
The largest two focus States use highly-automated processes in which staff use 
scanning equipment to record images of payments, rather than completing data entry. 
The systems optical character recognition software attempts to use the images to 
identify the payer and payment amount, and automatically post the payment to the 
proper case. Staff make images of all documents received, including actual checks, 
money orders, envelopes, and other communication that payers send to the SDU. A 
manager using this system reports that imaging requires less human attention and 
training, and can process payments faster. Its a completely different concept than 
working with the paper. This method requires multi-million dollar investments in 
hardware and equipment, which may be leased or owned by a contractor, depending 
upon the stipulations of the contract. 
For both of these systems, payments are initially received in mail rooms. Mail room staff 
use machinery to open and sort payments, separating checks from other 
correspondence. Checks are grouped into batches of about 50 payments to make 
imaging and data entry more manageable, and must be balanced as a unit by the 
payment processor. Payments from large employers may be processed separately, as 
might out-of-State checks. A batch number and header form then follows the batch of 
payments throughout the process, allowing for easier handling and tracking. After they 
are entered into the system, using either imaging or manual data entry, payment 
batches are transmitted electronically overnight. The system then credits individual 
payments to cases, goes through the distribution process, updates the case files, and 
creates a check writer file. The check writer files are electronically transmitted to a 
disbursement unit which prints and mails checks to custodial parents. 
Staff Involved in Receipting Payments are Typically Divided into Three Groups: Mail 
Sorting, Payment Processing, and Research 
Mail sorting staff tend to hold the lowest paid jobs at the SDU, requiring less training 
and fewer technical skills. However, these jobs support a critical aspect of SDU 
operations and require consistency and attention to detail. Mail room staff arrive early 
each day, open and sort mail mechanically, pull out exceptional payments, bundle 
payments for processing, and forward any other documentation received. We work 
really hard with the mail room to get them to understand that they set the tone of the 
day. If you are slow here, payments are slow to get to the scan room, and then slow to 
get to the processing floor. To ensure no lost or stolen payments, SDUs typically 
videotape all mail room activities. Only one focus State reported a single incidence of 
theft by an employee since SDU implementation.8 
SDU managers report that payment processing staff, must be highly skilled, with both 
policy and systems knowledge, and must be able to efficiently utilize a variety of 
automated tools. Processors typically receive payments from the mail room and post 
them to the proper case on the SDU database. Fully training processors takes longer 
than some other SDU positions, primarily because it takes time to learn to use the 
States child support automated systems. We can teach the SDU system within a 
couple days, whereas the States automated system takes a long time. There are 
hundreds of screens and places to look. New workers are usually processing within two 
days, but it takes a good two weeks or a month before their turnaround gets up. 
16 
SDUs: Experiences of Six States  OEI 06-00-00041  The last group, research staff, use an even greater number of systems and databases 
than processors, and need skills to use these resources in more complex ways. Their 
job is primarily to research payments which processing staff could not match to a case. 
Researchers usually have access to other information resources, such as address look-
up services and driver license directories, in addition to State child support and SDU 
systems. They also regularly contact employers and local child support and clerks of 
court staff. Research staff may also sometimes handle payment adjustments, 
misapplied payments, interstate cases, overpayments, or payments made with 
insufficient funds. 
States Cross-train Staff, and Use Overtime and Temporary Workers to Meet the Varying 
Staffing Needs of Disbursement Units 
Adequately forecasting the workload is difficult for SDU managers, especially during 
the initial months of operation, when they often added temporary staff. SDU staff 
typically work five-day weeks, including one weekend day. Hours of work on Monday 
are usually always longer than the rest of the week, and work hours often fluctuate, 
depending on the flow of payments. Staff are allowed to go home early on slower days, 
or reassigned to other tasks when their primary job is complete. Since the SDUs needs 
change throughout the week, staff are cross-trained, so that a single worker may 
process payments, conduct research, or operate imaging equipment during the same 
week. 
One SDU manager recommends that front-line supervisors be given the authority to 
request overtime on a heavy mail day. This way, if youre an hour or two from getting 
things done that day, you can make it pretty informal and just ask who wants overtime 
that night. This encourages supervisors to complete each days payments without 
carrying over into the next day, and likely does not require that all staff work longer 
hours. On busy days, SDU managers and other child support staff may also assist in 
processing payments. If we have a heavy day like a Monday, we are all out on the 
floor doing data entry. I have told my team from day one that nobody is exempt from 
doing whatever it takes to get the job done. Managers in one State found benefit in 
using State child support staff for temporary assistance during startup. It benefitted 
us in the long run, because now the people better understand the automated [payment] 
system. 
Because most of payment processing is automated, staff can be monitored closely on 
their performance. For example, automated mail sorting machines are able to count the 
number of envelopes processed per hour, just as payment processing software can 
track the number of payments entered or scanned. Managers also compute error rates 
for mistakes such as placing the wrong number of payments in a batch, neglecting to 
identify post-dated or unsigned checks, or posting payments to the wrong case. 
Several focus States had instituted incentive programs for staff which reward them with 
additional pay if their speed is high while maintaining a low error rate. 
State Disbursement Units Scan and Store Images of Payment Documents in Order to 
Meet Record- Keeping Requirements and to Aid In Researching Unidentified Payments 
Most focus States make images of documents for storage purposes, but some still keep 
paper documents for a period of time. SDUs can store a vast number of document 
images on tape backups, then easily view documents as needed in the future.Our hard 
drive is large, but eventually you run out of space. Most of this stuff is going to get 
17 
SDUs: Experiences of Six States  OEI 06-00-00041  accessed within the first 30 days, and youre not going to go back to it that often. So, 
after about 30 days, we go ahead and burn CDs and clear it off the hard drive. 
Managers in one State devised an image jukebox that contained storage discs and 
could be accessed by staff with only a 60-second delay. 
States also image documents in order to assist research staff in identifying poorly 
labeled payments. With payments that cannot be properly posted, staff use images of 
documents, rather than paper documents, to research the items. These images of 
envelopes, notes and other paperwork may provide clues for matching the payment to 
the proper case. This can be particularly useful when generic money orders are used 
for payments and lack sufficient information. Respondents from one State also report 
using imaged data in performance audits conducted by the child support agency. 
Two focus States do not use imaging equipment, but store paper documents, and 
therefore, attempt to minimize the number of documents retained. We dont keep the 
envelope unless its a money order or a cashiers check that we cant identify right 
away, then we will keep the envelope, because there may be an address on there that 
the State can use to identify. One manager instructs mail room staff to set aside 
payments for scanning only when there is a difference in the address on the check and 
the return address on the envelope. 
Disbursement Unit Managers Recommend Two Strategies to Meet the Complex 
Challenges of High Volume Payment Processing 
Managers report that operating an SDU is more complicated than other payment 
receipting operations, such as those for utility bills, because payments of child support 
must be matched to the proper case and the money disbursed to families or the State. 
With other bills, all they need is your account number and the money. With child 
support, you have to know the dollar amount, the custodial parents name, SSNs, the 
obligation date, the case identifier, and all the other things that are in the file. Although 
child support staff may have long been involved in processing payments at the local 
level, When you do things in volume, the problems multiply a lot faster. SDUs are 
under great pressure to process payments quickly, because child support is so 
important to family well-being. Managers report that SDUs are blamed for any number 
of system breakdowns, even those outside of their control, such as slow postal delivery. 
We take all the heat for delayed payment regardless of what caused it. We were 
having problems and legislative complaints that had nothing to do with the SDU. 
One general strategy reported by managers is to hold daily meetings that involve 
managers and supervisors of the various parts of the SDU. We do a roundtable, 
getting statistics on the type of customer service calls from yesterday, the amount of 
mail for the day, and any issues with the network. If its a light mail day, we will 
determine how to re-direct staff. As a second strategy, managers advise addressing 
processing problems immediately when they are detected. One of our keys to 
success is being pro-active in addressing problems. Processing payments is not rocket 
science, but it takes attention to detail. When there's a problem identified, you have to 
take action before it multiplies. Addressing specific problems may be most effective 
when done in the context of focusing on the SDUs primary objective. There's a 
tendency to focus on all the associated stuff. But if all of your resources go into 
research, for example, you'll never catch up. It will keep building as it goes. Payment 
18 
SDUs: Experiences of Six States  OEI 06-00-00041  processing is where you focus the resources. Get the payments out the door. Once you 
do that, everything else fixes itself. 
States Quickly Research Payments That Are Not Initially Identified, Often Resulting in 
Timely Disbursement 
Researching Unmatched Payments 
When payments are not immediately posted to a case by the payment processing 
equipment or staff, they are transferred to research staff who have greater access to 
case information and devote time to identifying payments. Payments may also require 
research if the amount of a support order does not match the amount paid. Some focus 
States give contractors a fixed number of days (between two and five) to research 
unidentified payments, after which time the State child support agency takes 
responsibility for further research. Respondents report that many research items are 
properly identified the same day, and are disbursed along with other payments received 
that day, while only a small percentage of payments take additional time to process. 
Identification Tools 
To identify payments, SDU researchers commonly examine checks, envelopes and 
other documents included with payments, and attempt to match one or more items to 
information stored in the SDU database or State automated system. When needed, 
researchers can check old case numbers, drivers license and birth certificate records, 
and automated telephone directories. Staff can also call parents, local caseworkers, or 
employers to help identify cases, or send notices to payers asking for more information. 
If all these efforts fail, States label unidentified payments as suspense, and may only 
periodically continue research. The reality is that by the time you put it into suspense, 
you are not going to be able to find that guy. Money orders are particularly difficult to 
research, because they sometimes include only a barely legible signature. 
Undistributed Funds 
Payments not identified quickly are either held as undistributed funds or returned to 
the payers. States and SDU contractors have incentives to keep the amount of 
undistributed funds low to meet performance expectations. However, managers report 
they prefer not to return money to payers, because the action runs counter to the 
primary objective of getting money to families. Rather, focus States mostly hold money 
until payments can be posted. This way, the burden stays here, we have the money 
and once we get the information, we can post. If we sent it back, the custodial parent 
does not have the money. 
Local Offices Continue to Provide Payment Processing Services, Such as Accepting 
Some Payments Locally and Assisting in Researching Unidentified Payments 
Local child support offices and clerks of court in focus States continue to accept a small 
number of payments at their offices, such as the first payment on a new case made as 
part of an agreement between parties, or when a judge orders a party to make an 
immediate payment. Local staff generally encourage payers to begin making payments 
to the SDU as quickly as possible, but are willing to collect payments directly. I dont 
know of any office that will turn away money. Clerks of court insist they must continue 
to have authority and procedures for accepting payments, because they are so ordered 
by their courts. As States initially implemented their SDUs, a large number of payers 
19 
SDUs: Experiences of Six States  OEI 06-00-00041  continued to send payments to local processors incorrectly. Staff report that some 
payers apparently ignored notices to re-direct payments to the SDU, while others did 
not receive notification, often due to wrong addresses. Local offices also report 
inappropriately receiving payments from local jurisdictions in other States, and having 
difficulty communicating with these local offices to tell them to send payments to the 
SDU. Respondents report that SDUs and clerks of court attempt to notify these payers 
to redirect the next payment. We had stages. We did the phone calls, then a memo, 
then a phone call again. We worked on these pretty hard. It took longer than I 
expected, but after 8 months, we were down to very few direct payments locally. 
Payments accepted locally are either sent to the SDU for processing (usually by a 
courier service), or processed locally, with funds transferred to the SDU electronically. 
When clerks of court are the record-keepers for non-public assistance cases, they can 
locally post payments to their States automated systems. Respondents report that 
local processing saves time, and reduces risk when payments are made in cash. Since 
courier deliveries arrive at the SDU later than the morning mail, they may not be 
processed until the following day. To avoid such delays, one State encourages the 
courts to fax information about local payments to the SDU, so staff there can post the 
payment for inclusion in the same days disbursement cycle. During the first weeks of 
centralization, another State had staff drive around to offices and courthouses in 
nearby counties to retrieve misdirected payments. Some clerks of court reportedly did 
not comply with these efforts. We had one clerk, in particular, who took the child 
support receipts and walked into a local child support office and dumped them out on 
the receptionist's desk. Other clerks reportedly returned misdirected payments to 
payers, significantly delaying disbursement to the affected families. 
In addition to handling payments, local staff may also be called upon to update the 
State case database, as they receive information on address and employment 
changes. Some local offices enter information directly into the SDU database, while 
others have systems that interface with the central database. Additionally, some local 
staff help research unidentified payments. We realized that we still have to develop 
partnerships with the clerks of court and others - that we have a continued partnership. 
To Improve Efficiency, SDUs Are Beginning to Encourage Use of Electronic Funds 
Transfer for Support Payments, Particularly From Employers and Other States 
Respondents report that Electronic Funds Transfer (EFT) increases the speed and 
efficiency of SDUs because it directly transfers funds from employers accounts to the 
proper State bank accounts, bypassing some steps of traditional SDU payment 
processing. EFT also transfers an electronic data file containing payment and case 
information which can be automatically read into the SDU database. Use of EFT also 
helps SDUs avoid data entry and other processing errors. EFT simplifies payment 
procedures for large companies who withhold income for several employees. However, 
smaller businesses might not realize as many benefits as large companies, and may 
not have the necessary equipment to use EFT. 
Contractors in some focus States are assisting in efforts to increase use of EFT. When 
we talk with a business about using EFT, we tailor our approach. Medium-size 
employers may not have as much cost savings and may only sign on for convenience. 
It is probably not worth the cost of setting up for small businesses. We have 
20 
SDUs: Experiences of Six States  OEI 06-00-00041  collaborated with other States to get large, multi-State employers on board. We target 
employers who poorly label checks or have problematic formats. We also target 
businesses that the county clerks tell us keep sending checks to them. EFT is easier for 
employers. Eventually, when all States are up with EFT, it will really be more 
advantageous to businesses because that will be standard operating procedure. 
However, a contractor in one State does not get paid for processing EFT payments and 
therefore has little incentive to encourage its use. 
Respondents suggest that some noncustodial parents would also like to set up 
methods to electronically send payments to the SDU. Additionally, focus States are 
beginning to offer automatic withdrawal from payer bank accounts, and some plan to 
establish a method for paying through the Internet. Managers also consider Internet 
pay to be a good option for small businesses, because it is not as complicated as EFT 
and only requires a personal computer and Internet access. Internet payment works in 
essentially the same manner as an automatic withdrawal. The mechanics of it appear 
quite easy, we just have to look into security issues and figure out how the data would 
flow. 
PROBLEM PAYMENTS AND CASES 
Misapplied Payments 
Child support payments are sometimes posted, or misapplied, to the wrong case 
because of human or systems errors. Misapplied payments may be caused by simple 
recording or data entry errors, or may be the result of confusion over the support 
obligation. For example, while a noncustodial parent may have two support cases, the 
SDU may attribute the entire payment to only one case. At least half of our misapplied 
work was within one payer, not across payers. Particularly complicated are situations 
wherein the noncustodial parent is paying on both a public assistance case and a non-
public assistance case. SDU managers report advising staff to watch those cases, and 
help keep the information correct. They are complicated. I would advise that States just 
starting their SDU observe those cases and make sure they split accurately. Other 
case characteristics might also increase the odds of a misapplied payment, such as 
when a client leaves or returns to public assistance, or when custody of a child 
changes.  At least one SDU attempts to avoid misapplied payments by requiring 
processors to match three different pieces of information before posting a payment. 
While this effort slows processing, staff report they, quickly realized it was better to 
hold a payment than to post it to the wrong case. Other States attempt to find 
misapplied payments by conducting automatic reviews of cases in which the current 
payment is significantly different from their previous average payment. States also rely 
on customer complaints to help detect misapplied payments. The best thing about 
processing child support is that someone is expecting it. When misapplied payments 
are disbursed to the wrong parties, State often have difficulty collecting it back. Some 
State child support agencies had to obtain special legislative permission before they 
could even attempt to recoup these misapplied payments. 
Poorly Labeled Payments 
Managers report that poorly labeled payments, with incorrect or incomplete information, 
cause problems for SDUs. Noncustodial parents sometimes make payments without 
including a case number or other identifying information. States usually send letters to 
payers immediately upon receiving payments without case numbers, informing them 
that they must properly identify the case. Once somebody gets a letter back saying yes 
21 
SDUs: Experiences of Six States  OEI 06-00-00041  we have taken your money but we have not posted your payment, they start to take 
some action. Letters to noncustodial parents in one State inform the payer that they 
could be held in contempt of court for not properly labeling payments. Unfortunately, 
the correspondence does not always result in assistance from the payer. I have seen 
letters returned where they will attach the original information from the check stub and 
tape it on there. It is the same garbage information that we got the first time. 
Employers are also sometimes guilty of poor labeling. Employer checks often include 
multiple payments, and must contain case information for all paying employees. When 
checks from employers are placed in suspense because of a single unidentified 
payment, it often delays disbursement for many more cases. 
Payers with Multiple Cases 
Prior to centralized processing, some noncustodial parents with multiple cases in 
different jurisdictions were able to pay support on one case and not on others, because 
local processors might have been unaware of cases outside their counties. Managers 
report that SDUs correct this inequity by distributing payments across all of the obligors 
cases based on State distribution rules. We believe it is fairer for everyone to get a 
share of the payment. Despite the apparent fairness of following distribution rules, 
some custodial parents protested the changes because they had previously been 
receiving more support. Noncustodial parents also complained about the loss of control 
over their support payments. Needless to say, some families were delighted to start 
getting money that had previously inappropriately gone to the obligors other children. 
One local office manager recommends that States make special notifications to parents 
describing how centralization will likely affect parties to cases with multiple obligees. 
Payments on New Cases 
Because new child support cases originate at the local level, local child support staff 
and clerks of court are responsible for providing new case information to SDUs. In all 
focus States, local staff enter new case information electronically into a shared case 
database which provides information for payment processing. Typically, clerks of court 
enter non-public assistance cases and local child support staff enter public assistance 
cases. SDU managers report that sometimes local staff do not immediately enter case 
information when new support orders are established, causing SDUs to receive a first 
payment for a case before the case information is in the SDU database. These 
payments usually can not be processed and are often listed as undistributed funds. 
Sometimes this occurs because private attorneys are allowed to mail income 
withholding orders directly to employers who begin withholding money immediately. To 
avoid these situations, one State has SDU staff contact local offices or clerks of court 
to prioritize data entry for such cases, which managers report is usually accomplished 
the same day. 
Payments on Interstate Cases 
Respondents report that SDUs may be unaware that some payers in their State also 
have child support orders in other States.9 Therefore, SDUs that receive payments from 
these payers may inappropriately disburse the entire payment to families in their 
caseload, while not sending any money to families in other States. To avoid this 
unintended situation, some SDUs use the Federal Case Registry to identify all obligees 
on a case. 
Interstate cases often require States to forward money and payment information to 
SDUs in other States. However, respondents report no standardized process exists for 
22 
SDUs: Experiences of Six States  OEI 06-00-00041  all States to facilitate this transfer. For example, some States may require information 
for processing that is not included in another States database. When States collect 
child support for families with cases in other States, they typically combine all payments 
for each State and issue one check to the other State. However, respondents report 
that if even one of these payments cannot be identified, some other States will not 
process any of the payments, but return the large check. Managers also report that 
some other States send individual checks for each interstate case they collect on, 
unnecessarily multiplying the number of checks the receiving States SDU must 
process. To address these issues, some focus States designate specialized staff for 
dealing with other States. They often contact other States for information about cases 
and attempt to coordinate payment transfers between SDUs. One focus State made an 
effort to identify all interstate cases during their initial conversion efforts, and staff gave 
them special attention once the SDU received payments on those cases. Another focus 
State concentrated its coordination efforts on border States because they had the most 
interstate payment activity. 
Payments From Federal Agencies 
SDUs in all focus States report receiving a large number of payments from Federal 
agencies, including withheld income from Federal employers, Social Security benefits, 
and Internal Revenue Service tax intercepts. Some respondents report these Federal 
payments are often poorly labeled or incorrectly sent to local offices, causing problems 
for the SDU. Federal checks reportedly provide only the payers name, but not other 
necessary information, such as a State case number or SSN of the payer which could 
help the SDU process the payment. Even when the SSN is included, it is often difficult 
to locate on the check and is sometimes buried within longer identification codes. Also, 
some Federal checks, reportedly, do not identify the department or agency of the 
payer. The problem with U.S. Treasury checks is you often dont know who its coming 
from, particularly if its from a branch of the military. In attempting to rectify these 
persistent problems, some managers report being unable to locate the entity that 
issued the checks, or being told that the Federal government cannot improve payment 
labeling, possibly because of the large number of checks it issues. 
SDU managers also complain that Federal agencies often send checks at the end of 
one month, for the following months obligation, potentially causing too many payments 
to be recorded one month and not enough the other month. Depending on the 
circumstances of the case, this could cause families to receive less child support than 
they would have if payments were received in the month owed. At least one focus State 
routinely holds Federal checks until the first day of the month to avoid this problem. 
Checks Returned for Insufficient Funds 
Because SDUs often disburse payments the same day payment is received, any 
checks that are returned for insufficient funds (NSF) or due to stop payment orders 
pose significant problems. Once a payers check has been returned or bounced by a 
financial institution, SDU staff must adjust the case account and ensure that the system 
does not readily accept future checks from that account. To accomplish this, some 
SDUs assign particular staff to research and handle NSF and other problem checks. 
These workers adjust account balances and flag the case in the automated system for 
special processing of future payments. SDUs attempt to recoup the money from the 
payer, but if they refuse, the State may have to withhold future disbursements from 
families until the balance is paid off. 
23 
SDUs: Experiences of Six States  OEI 06-00-00041  R E C O M M E N D A T I O N S  
Based on our analysis of the experiences and insights of payment processing participants in 
focus States, we make a number of recommendations to State child support enforcement 
agencies as they implement and refine their disbursement units. We also recommend action 
by the Federal Office of Child Support Enforcement (OCSE) to aid in State implementation and 
operation of SDUs. 
RECOMMENDATIONS FOR STATES 
CENTRALIZE PRE-1994 INCOME WITHHOLDING CASES 
States Should Process All Income Withholding Cases Centrally, Including Those 
Created Prior to 1994, Thereby Providing Employers with a Single Location for 
Sending Payments.  Providing employers with a single location in each State to send 
all income withholding payments was enumerated by Congress as a primary objective 
of centralization. Focus States report that central processing of such payments eases 
the burden on employers, minimizes client confusion, allows for a clearer division of 
responsibility between State and local offices, and helps take full advantage of the 
efficiencies and economies of centralization by maximizing use of automation. 
However, some States continue to use local payment processing for cases with income 
withholding initially ordered prior to January 1, 1994, requiring some employers to send 
payments to multiple locations within the State. 
CONSIDER CENTRALIZING ALL NON-WITHHOLDING CASES 
States Should Assess the Benefits of Processing All Child Support Cases 
Centrally, to Maximize Use of SDU Staff and Equipment.  Respondents from focus 
States report that SDUs speed payment processing and improve customer service, 
relative to local processing. Many States have used their discretion to require all 
payments, not only those required by Federal law, to be processed centrally, thereby 
spreading these positive outcomes to all families with child support orders. Centralizing 
all payments may also increase efficiency by taking greater advantage of SDU 
infrastructure. 
EMPLOY INCREMENTAL IMPLEMENTATION 
States That Have Not Yet Fully Implemented Their SDU Should Consider Using 
Pilot Programs and Other Incremental Implementation Methods.  Focus States 
report numerous advantages of using pilot programs and incrementally implementing 
centralization. These advantages include an enhanced ability to insure accurate and 
complete databases, address technical challenges, and train staff. States that have not 
begun centralized processing, or that still need to add large groups of cases to their 
SDU caseload, should consider utilizing these methods when practical. 
24 
SDUs: Experiences of Six States  OEI 06-00-00041  PROMOTE USE OF ELECTRONIC PAYMENT METHODS 
States Should Actively Promote Use of Electronic Funds Transfer (EFT) by 
Employers and Other Payers When Practical and Beneficial.  Focus States consider 
increased use of EFT by employers as an important goal of on-going SDU operations. 
Widespread use of EFT, particularly by large employers, potentially benefits the SDU, 
employers, and parents, by reducing human error and further speeding transmission of 
payments. States should actively engage in employer education, helping to promote 
use of EFT among employers. They should also collaborate with other States to 
increase use of EFT by multi-State employers. 
EXPLOIT SDU INFORMATION TO ENHANCE ENFORCEMENT 
States Should Develop Strategies to Routinely Use SDU Payment Information to 
Aid in Support Enforcement.  Highly automated SDUs are able to track payment 
activity on individual cases that can potentially be used to identify cases which may 
need enforcement action, such as cases that have recently had disruptions in payment 
trends. SDUs in focus States are apparently not sharing such information with their 
enforcement staff in any consistent or routine ways. States should develop and 
implement methods for routinely notifying enforcement staff of payment interruptions, 
such as automated flags that trigger alerts to local caseworkers. 
RECOMMENDATIONS FOR OCSE 
ENCOURAGE IMPROVED PERFORMANCE BY FEDERAL GOVERNMENT PAYERS 
OCSE Should Collaborate With States to Encourage Federal Government Payers 
to Improve Payment Labeling and Submission Practices.  SDU managers in focus 
States cite particular difficulties processing checks issued by Federal agencies. They 
report Federal checks often contain inadequate or confusing information, are 
sometimes sent to the wrong location, and may be submitted too early to allow proper 
disbursement to custodial families. OCSE should collaborate with States in 
communicating and working with Federal employers to overcome these problems. 
PROVIDE TECHNICAL ASSISTANCE ON INTERSTATE PAYMENT PROCESSING 
OCSE Should Provide Additional Technical Assistance to States to Aid in the 
Transmission of Payments for Interstate Cases.  SDU managers in focus States 
report unique difficulties in processing payments for interstate cases, particularly SDUs 
being unaware that obligors have cases in other States and the lack of any standard 
procedures for transferring money and payment information between States. OCSE 
should further assist States in developing new solutions or using available technologies 
to share case information between States, and help develop and implement uniform, 
automated standards for transferring money and payment information. 
25 
SDUs: Experiences of Six States  OEI 06-00-00041  CONSIDER FEDERAL FUNDING FOR PROCESSING PRE-1994 INCOME WITHHOLDING 
CASES 
To Help States Meet the Congressional Goal of Providing Employers With A Single 
Location in Each State to Send all Child Support Payments, OCSE Should 
Consider Proposing Legislation to Provide States with Federal Matching Funds to 
Centrally Process Payments for Income Withholding Cases Created Prior to 1994. 
As detailed above, there are numerous benefits to payers and the State when all 
income withholding orders are processed centrally. Additionally, providing employers 
with a single location to send payments was a primary objective of Federal law. Federal 
matching funds are currently not available for non-public assistance income withholding 
cases created prior to 1994. In response, some States are still processing these cases 
locally. This requires employers to continue sending payments to multiple locations, 
and managers in focus States report that it also causes confusion among payers, local 
offices and SDUs. 
AGENCY COMMENTS 
The Administration for Children and Families (ACF) agreed with the findings and 
conclusions presented in these two reports. ACF concurred with each of the 
recommendations directed to OCSE and recounted its efforts to assist States with SDU 
implementation. ACF also expressed a desire to collaborate with the OIG in quickly 
disseminating to States the information provided in these reports. ACF comments are 
provided in their entirety in Appendix A. 
26 
SDUs: Experiences of Six States  OEI 06-00-00041  ENDNOTES

1.Social Security Act, Title IV-D, SEC. 454B [42 U.S.C. 654b]. 
2.The required caseload includes all public assistance cases, plus non-public assistance cases 
requesting services and those cases with income withholding ordered on or after January 1, 
1994. 
3.OCSE Action Transmittal 00-03, January 19, 2000. 
4.States can receive enhanced FFP at 80 percent for some of their PRWORA-related 
expenses. If a State has not already used all of their enhanced funds, SDU development costs 
could be matched at the higher rate, but operational costs are limited to 66 percent. 
5.We interviewed local clerks of court in Arizona, Florida, Iowa, Pennsylvania, and Tennessee. 
In Minnesota, we interviewed local child support office staff. 
6. Because its SDU initially had so many undistributed payments, the legislature in one focus 
State gave the child support agency authority to send interim payments to families that 
appeared to have missed their regular payments due to SDU implementation. On a daily basis, 
State agency staff compared undistributed payments being held by the SDU to complaints 
from custodial parents about not receiving payment. Workers attempted to match a complaint 
with an undistributed payment. If a definitive match was found, payment was posted to the 
case and the funds were disbursed. If a match was not found, but it appeared that the family 
had been receiving regular payments prior to the SDU implementation, the State issued an 
emergency interim payment to the family and continued researching the case. The customer 
service unit reports receiving over 9,000 requests for interim payments, some of which may 
have been duplicate requests from the same custodial parent. The State issued about 3,900 
interim payments during the first four months of SDU operations. 
7.Child Support Enforcement State Disbursement Units: State Implementation Progress 
OEI 06-00-00041, pg 5. 
8.This was a case in which an employee stole money orders. 
9.OCSE estimates that about 30 percent of all child support cases in the nation are interstate 
cases. 
27 
SDUs: Experiences of Six States  OEI 06-00-00041  APPENDIX A  A - 1
 APPENDIX A  A - 2 
COMMENTS OF THE ADMINISTRATION FOR CHILDREN AND FAMILIES ON THE

OFFICE OF INSPECTOR GENERAL'S DRAFT REPORTS: "CHILD SUPPORT

ENFORCEMENT STATE DISBURSEMENT UNITS, STATE IMPLEMENTATION

PROGRESS" (OEI-06-00-00040) AND "CHILD SUPPORT ENFORCEMENT STATE

DISBURSEMENT UNITS, SHARING THE IMPLEMENTATION EXPERIENCES OF SIX

STATES" (OEI-06-00-00041)

The Administration for Children and Families (ACF) does not

disagree with the findings and conclusions of these two draft

reports.  ACF welcomes the efforts of the Office of Inspector

General to examine this critical area of activity.  These reports

-- especially the one that recounts the experiences of six States

-- may be directly helpful to those States that have not yet

completed the implementation of their State Disbursement Units

(SDUs).  ACF intends to cooperate with the OIG in disseminating

these reports to the States as soon as they are available in

final form, in the expectation that the sooner States have an

opportunity to review the reports and incorporate their

experience, the greater is the likelihood that they will be able

to benefit from the reports' findings.

The Office of Child Support Enforcement (OCSE) within ACF has

worked extensively with both States and employers to assist in

the implementation of SDUs.  This work has been done by Central

Office staff and, to a large extent, by Regional Office staff. 

For example, OCSE has administered several technical assistance

efforts to improve SDU operation.  Workshops -- often featuring

State representatives -- were held at conferences to discuss

State implementation issues.  A technical assistance guide,

developed with the assistance of both Federal and State staff,

was distributed to all the States.  The guide focussed on

critical considerations in planning an SDU, and in preparing a

Request for Proposal for centralized processing of child support

payments. 

In addition, ACF maintains a matrix of SDU program and system

contacts.  The matrix includes such data as "contact" information

as well as the status of each State SDU and whether the function

is performed by the State or contracted out.  This information is

distributed to all States and displayed on the OCSE website. 

The employer services staff within OCSE works directly with

national employer groups to assist States and to resolve SDU-

related problems, and they work directly with Federal agency

payroll officials, as described below in response to the

recommendation regarding Federal government payers.
 APPENDIX A  A - 3 
OIG Recommendations

OCSE Should Collaborate With States to Encourage Federal

Government Payers to Improve Payment Labeling and Submission

Practices.  SDU managers in focus States cite particular

difficulties processing checks issued by Federal agencies.  They

report Federal checks often contain inadequate or confusing

information, are sometimes sent to the wrong location, and may be

submitted too early to allow proper disbursement to custodial

families.  OCSE should collaborate with States in communicating

and working with Federal employers to overcome these problems.

ACF Response

ACF agrees with this recommendation.  ACF is planning a

publication that will add to its ongoing activities to improve

federal check labeling and processes to assist State SDUs.  A

number of Staff of the Office of Child Support Enforcement (OCSE)

within ACF have provided technical assistance to SDUs through the

Federal Agency Initiative.  The Federal Agency Initiative at OCSE

is an effort to respond to SDUs' requests for help.  They are

asking for help both in re-directing child support payments from

Federal agencies, and in identifying the payer or the case with

which Department of the Treasury child support payments (paper

checks) should be associated.

ACF is completing a publication entitled Working with Federal

Agencies as Employers, which will be sent to all States.  This

publication will include detailed information on sending income

withholding orders to Federal agencies, re-directing child

support payments from Federal agencies to SDUs, identification of

Treasury checks, and moving toward electronic child support

payments (EFT/EDI).

ACF's activities on behalf of States and their SDUs have included

the following specific Federal agency efforts:

Defense Finance and Accounting Service or DFAS:

OCSE negotiated with DFAS to name two points-of-contact within

the DFAS Garnishment Department for States to contact for re-

direction of all DFAS child support payments (and spousal support

if appropriate) to SDUs.  This information was sent to all States

in a Dear Colleague Letter dated April 26, 2000.

In addition, OCSE worked out a process for re-direction of DFAS

(and other Federal agency) child support payments to SDUs as

follows:
 APPENDIX A  A - 4 
DFAS sends the State a file of all child support payments

currently being sent to that State. The State reviews the file to

make certain that each payment should indeed be re-directed to

the SDU.  This also gives the State an opportunity to make

changes (e.g., to the case ID by adding a FIPS code or other

county identifier to the payment record).

The State returns the file to DFAS, and DFAS makes the necessary

changes to re-direct the child support payments to the SDU.

Social Security Administration (SSA) and Department of the

Interior

OCSE worked with the Social Security Administration (SSA) to re-

direct its employees' child support payments to SDUs.  Payroll

for SSA is handled by the Department of the Interior.  Re-

direction of child support payments (and spousal support where

appropriate) from SSA employees was completed on February 23,

2000. 

OCSE has also been working with staff at the SSA Beneficiary

Garnishments Operations, who have the responsibility for re-

direction of beneficiaries' garnishment child support payments. 

SSA designated a contact at each of the eight payment processing

centers for States to work with in re-direction of SSA

beneficiary garnishment payments to SDUs.

U.S. Postal Service (USPS): 

OCSE has worked closely with the USPS as it re-directs child

support payments to the SDUs.  As a result, the USPS has begun a

pilot project to send child support payments electronically via

electronic funds transfer/electronic data interchange (EFT/EDI)

to eight SDUs.

Department of the Treasury

OCSE worked with the Department of Treasury's Financial

Management Service (FMS) to produce a memo, issued in March 2000,

reminding Federal payroll agencies to include certain standard

identifying data elements on the child support payments they

prepare.  This is an effort to reduce the number of unidentified

Treasury checks (which sometimes become undistributed

collections).

OIG Recommendation

OCSE Should Provide Additional Technical Assistance to States to

Aid in the Transmission of Payments for Interstate Cases.  SDU

managers in focus States report unique difficulties in processing

payments for interstate cases, particularly SDUs being unaware
 APPENDIX A  A - 5 
that obligors have cases in other States and the lack of any

standard procedures for transferring money and payment

information between States.  OCSE should further assist States in

developing new solutions or using available technologies to share

case information between States, and help develop and implement

uniform, automated standards for transferring money and payment

information.

ACF Response

ACF agrees that additional technical assistance is needed by

States and their SDUs, and has plans in place to provide

additional assistance.  These plans include the dissemination of

these OIG reports, especially the Six State report, and the

conduct of national technical assistance activities on this

subject, for the benefit of State staff who manage and oversee

SDUs.  OIG staff will be invited to participate in these

activities, to present on the information and conclusions of

these reports, to discuss the lessons these reports offer, and to

respond to questions from the field.  Moreover, ACF will begin

working with representatives of State SDU's to identify specific

issues requiring technical assistance.

OIG Recommendation

To Help States Meet the Congressional Goal of Providing Employers

With a Single Location in Each State to Send all Child Support

Payments, OCSE Should Consider Proposing Legislation to Provide

States with Federal Matching Funds to Centrally Process Payments

for Income Withholding Cases Created Prior to 1994.  As detailed

above, there are numerous benefits to payers and the State when

all income withholding orders are processed centrally. 

Additionally, providing employers with a single location to send

payments was a primary objective of Federal law.  Federal

matching funds are currently not available for non-public

assistance income withholding cases created prior to 1994.  In

response, some States are still processing these cases locally. 

This requires employers to continue sending payments to multiple

locations, and managers in focus States report that it also

causes confusion among payers, local offices and SDUs.

ACF Response

ACF acknowledges that providing employers with a single location

to which payments would be sent was a central objective of

Federal policy when the SDUs were first required by law.  ACF

will consider this recommendation of the OIG as it develops the

next President's Budget and the next set of legislative

proposals.