Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

STATE USE OF DEBT 


COMPROMISE TO REDUCE CHILD 


SUPPORT ARREARAGES
 

Daniel R. Levinson
 

Inspector General 


October 2007
 

OEI-06-06-00070
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

Office of Inspector General 
 http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

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abuse, and mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on 

significant issues. Specifically, these evaluations focus on preventing fraud, waste, or 

abuse and promoting economy, efficiency, and effectiveness in departmental programs. 

To promote impact, the reports also present practical recommendations for improving 

program operations. 

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The Office of Investigations (OI) conducts criminal, civil, and administrative 

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Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. OCIG imposes program exclusions and civil 

monetary penalties on health care providers and litigates those actions within HHS. 

OCIG also represents OIG in the global settlement of cases arising under the Civil False 

Claims Act, develops and monitors corporate integrity agreements, develops compliance 

program guidances, renders advisory opinions on OIG sanctions to the health care 

community, and issues fraud alerts and other industry guidance. 
 

 

 

 

Δ EXECUTIVE SUMMARY 

OBJECTIVE 

To determine the prevalence, characteristics, and outcomes of debt 

compromise programs used by State child support enforcement (CSE) 

agencies to reduce child support arrearages. 

BACKGROUND 

The Office of Child Support Enforcement (OCSE) estimates that 

$100 billion in unpaid child support has accumulated since the inception 

of a national CSE program in 1972. In an effort to reduce or eliminate 

possibly uncollectible debt, some States use debt compromise, a process 

whereby a State settles a portion or all of the child support debt owed to 

the State by a noncustodial parent. For this evaluation, we identified 

debt compromise practices among all States based on responses to a 

survey, evaluated program outcomes through site visits to five States, 

and examined a sample of 259 cases that underwent debt compromise. 

FINDINGS 

CSE agencies in 20 States operate fully implemented or pilot debt 

compromise programs, and another 23 States settle arrearage debt 

on a case-by-case basis. Of the 20 States that have debt compromise 

programs, 12 are fully implemented and 8 are pilot programs. Twentythree other States compromise arrearages on a case-by-case basis, and 

the remaining eight States do not allow compromise of arrearages. 

Debt compromise resulted in an average of $9,383 settled per case 

in selected States, with lump sum payments made in 45 percent of 

cases and averaging $5,515. In the five States, the estimated average 

arrearage per case was $22,029, of which $9,383 was settled. 

Noncustodial parents in 45 percent of cases paid lump sums at the time 

of the agreements averaging $5,515, which was disbursed to States for 

reimbursement of public assistance and/or to custodial parents for 

payment of past due child support. 

Forty-one percent of sample cases closed following debt 

compromise, either after lump sum payments or with all debt 

settled. In all closed cases in our sample, the noncustodial parent owed 

only an arrearage. Noncustodial parents in 65 percent of cases that 

closed paid lump sums as part of the debt compromise agreements. In 

OEI-06-06-00070 S TATE USE OF DEBT C OMPROMISE TO REDUCE CHILD S UPPORT ARREARAGES i 
 

 

 

 

 

 

 

 

EXECUTIVE SUMMARY 

the remaining 35 percent of cases that closed, the full amount of the 

arrearage was settled because CSE officials determined that the 

noncustodial parents were unable to pay any amount or that the 

families were best served by settling all of the debt. 

When sample cases remained open following debt compromise, 

four of five States did not routinely follow up when noncustodial 

parents paid irregularly. Fifty-nine percent of cases in our sample 

remained open following compromise. Although all five selected States 

conduct general reviews of all child support cases, only California 

reported routinely monitoring debt compromise cases that remain open 

to determine whether noncustodial parents meet their agreements. We 

found that noncustodial parents in 60 of the 154 sample cases paid 

irregularly or not at all following debt compromise but found evidence of 

rescission in only 2 of these 60 sample cases. 

Cases are eligible for debt compromise based on a number of 

factors, including large arrearages, and local managers typically 

negotiate agreements. Eighteen of the twenty States with programs 

consider the amount of the arrearage in determining eligibility. Other 

factors included whether dependents are emancipated and how long the 

arrearage has been in the caseload. After determining eligibility, local 

managers most often make the determination to allow debt compromise. 

CSE officials in States with programs report a largely positive view 

of debt compromise, although a few express concern that settling 

debt is contrary to the enforcement process. Officials in 17 of the 

20 States with programs reported advantages, including receiving debt 

payments previously considered uncollectible. Officials from three 

States noted drawbacks to debt compromise, including the belief that it 

conflicts with the agency’s mission to enforce and collect child support. 

RECOMMENDATION 

We recommend that OCSE issue guidance encouraging States to 

routinely monitor cases that remain open following debt compromise 

agreements to ensure that noncustodial parents meet their agreements. 

Because of the high level of interest in debt compromise, we suggest 

that OCSE also consider issuing guidance regarding the administration 

of debt compromise programs to assist States that are considering new 

programs or revising current practices. Topics could include the criteria 

used for determining eligibility, the proportion of the debt to be settled, 

OEI-06-06-00070 S TATE USE OF DEBT C OMPROMISE TO REDUCE CHILD S UPPORT ARREARAGES ii 
 

 

 

EXECUTIVE SUMMARY 

suggestions for training staff in making determinations, and use of debt 

compromise to close child support cases only owing arrearages. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

The Administration for Children and Families (ACF) and the Assistant 

Secretary for Planning and Evaluation (ASPE) jointly provided 

comments in response to our draft report. ACF concurred with our 

recommendation and suggestion and outlined current and planned 

guidance activities. In describing this current and proposed guidance, 

ACF did not explicitly address providing guidance to States regarding 

monitoring of open cases following debt compromise agreements. 

Because the lack of monitoring of debt compromise cases poses a 

vulnerability to the integrity of State debt compromise programs, we 

recommend that ACF provide guidance to States specific to this issue. 

ASPE commented that the report was useful in providing information 

regarding a policy area in which little research exists. 

OEI-06-06-00070 S TATE USE OF DEBT C OMPROMISE TO REDUCE CHILD S UPPORT ARREARAGES iii 
 

 

Δ TABLE OF CONTENTS 

EXECUTIVE SUMMARY ..................................... i 
 

INTRODUCTION ........................................... 1 
 

FINDINGS ................................................. 5 
 

CSE agencies in 20 States operate debt compromise programs . . . 5 

Compromise resulted in an average of $9,383 settled per case.... 6 
 

Forty-one percent of cases closed following debt compromise ..... 7 
 

States did not routinely follow up on irregular payers .......... 7 
 

Cases are eligible for compromise based on a number of factors . . 8
 

CSE officials report a largely positive view of compromise ...... 10 
 

RECOMMENDATION ...................................... 12 
 

Agency Comments and Office of Inspector General Response . . . 13 

APPENDIXES ............................................. 14 
 

A: Descriptions of Child Support Programs in Selected States . . 14 

B: Detailed Methodology ................................ 17 
 

C: Status of Debt Compromise for All States ................ 20 
 

D: Estimates and Confidence Intervals..................... 22

 E: Agency Comments ................................... 23 
 

ACKNOWLEDGMENTS .................................... 26 
 
 

 

 

 

Δ INTRODUCTION 

OBJECTIVE 

To determine the prevalence, characteristics, and outcomes of debt 

compromise programs used by State child support enforcement (CSE) 

agencies to reduce child support arrearages. 

BACKGROUND 

The Office of Child Support Enforcement (OCSE) estimates that just 

over $100 billion in unpaid child support (referred to as arrearages) has 

accumulated since the inception of a national CSE program in 1975.1 

State CSE agencies collect payments toward both current child support 

orders for children still living in the custodial parent’s home, and 

arrearage debt that accumulates when noncustodial parents do not pay 

all of the current support owed. The collection of current child support 

has risen considerably in recent years, but arrearage debt remains high. 

In fiscal year (FY) 2005, State CSE agencies overall collected 60 percent 

of the $29 billion due in current support and 7 percent of the $107 

billion due in arrearages. However, 40 percent of noncustodial parents 

with arrearages paid nothing toward their arrearages in 2005. 2 State 

collection rates for both current support and arrearages are among the 

criteria OCSE considers in determining incentive funding to States.3 

States have implemented a number of strategies to reduce arrearages, 

including the use of debt compromise. 

Debt Compromise Programs 

Debt compromise is a process of reducing or eliminating child support 

debt owed to the State by settling a portion or all of arrearages that are 

owed from a prior outlay of public assistance, referred to as “assigned” 

debt. Custodial parents may allow noncustodial parents to also settle 

1 Office of Child Support Enforcement, Administration for Children and Families, 

Department of Health and Human Services, FY 2002 and FY 2003 Annual Report to 

Congress. Available online at 

www.acf.hhs.gov/programs/cse/pubs/2005/reports/annual_report/table_64.html. 

Accessed August 1, 2007. 

2 Office of Child Support Enforcement FY 2005 Preliminary Report to Congress, May 

2006. Available online at 

www.acf.hhs.gov/programs/cse/pubs/2006/reports/preliminary_report. Accessed May 9, 

2007. 

3 Social Security Act § 458(b)(6). The Social Security Act was amended by the Child 

Support Performance Incentive Act of 1998, to determine incentive payments to States 

based on performance in five areas: paternity establishment, order establishment, 

current collections, arrearage collections, and cost-effectiveness. 

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INTRODUCTION 

debt that is owed to them from unpaid support, referred to as 

“unassigned debt,” either at the time of the debt compromise agreement 

or at another time. However, debt owed to custodial parents is settled 

only at the discretion of the custodial parent and is generally not subject 

to State-determined debt compromise criteria. States often require that 

noncustodial parents pay lump sums toward the arrearages and/or 

improve payments of current support. In a 1999 memorandum to State 

CSE agencies, OCSE acknowledged debt compromise as an option under 

State law to negotiate arrearages in cases where parents marry or 

remarry and are faced with large child support arrearage payments.4 

OCSE’s policy allows State legislatures and CSE agencies to design 

their own debt compromise programs and determine eligibility. 

However, OCSE has not issued guidelines regarding the administration 

of State debt compromise programs and does not track or monitor those 

States that have implemented such programs. In its annual 

Compendium of Best Practices, OCSE has several times included 

information about State programs for addressing child support arrears, 

including references to debt compromise.5 

Title IV-D of the Social Security Act made child support payments a 

judgment “with the full force, effect and attributes of a State 

judgment.”6 Although child support debt cannot be retroactively 

modified, this provision allows States to settle assigned arrearages if 

State law allows. This provision means that States may reduce 

arrearages in the same manner they might settle any other debt owed 

the State. Depending on the policies of individual States, reductions in 

child support debt are determined by State or local courts, by State CSE 

agencies, or by a combination of the two. OCSE estimates that about 

half of arrearages are owed to State governments as reimbursement for 

public assistance benefits paid to families, and the remaining 

arrearages constitute outstanding obligations to custodial parents 

(settled only at the discretion of the custodial parent).7 Although a 

4 Office of Child Support Enforcement PIQ-99-03 Memorandum, “Public Policy 

Supporting Compromise of Arrearages,” March 22, 1999. Available online at 

www.acf.hhs.gov/programs/cse/pol/PIQ/1999/piq-9903.htm. Accessed May 9, 2007. 

5 Office of Child Support Enforcement, “Compendium of State Best Practices and Good
 

Ideas in Child Support Enforcement,” 2003, 2005, and 2007. 

6 Social Security Act § 466(a)(9). 

7 Office of Child Support Enforcement FY 2003 Report to Congress, June 2004. Available 

online at 

www.acf.hhs.gov/programs/cse/pubs/2004/reports/preliminary_data/index.html#_ftn1. 

Accessed May 9, 2007. 

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INTRODUCTION 

portion of any reimbursement for public assistance is ultimately owed to 

the Federal Government,8 Federal distribution laws require States to 

reimburse the Federal portion only when child support is actually 

collected.9 Therefore, States are allowed to settle public assistance debt 

when deemed appropriate without remaining obligated to reimburse the 

Federal portion. 

The concept of debt compromise has gained popularity among State 

CSE agencies and child advocacy groups. Advocates contend that the 

burden of large arrearages may reduce noncustodial parents’ ability or 

willingness to make current support payments and may discourage 

family unity. A July 2000 Office of Inspector General report concerning 

low-income noncustodial parents found that many methods used by 

States for child support enforcement did not generate child support 

payments by low-income noncustodial parents.10 

Debt compromise is one of several strategies used by States to meet the 

challenge of reducing arrearages. Other strategies include reducing or 

eliminating interest, establishing orders appropriate to the noncustodial 

parent’s income, reviewing and adjusting orders as circumstances 

change, limiting retroactive support, and notifying parents at the first 

missed payment to address arrearages before they are unmanageable. 

 OEI-06-06-00070 

METHODOLOGY 

Data Collection and Analysis 

To determine the prevalence and characteristics of debt compromise 

practices among States, we surveyed all States and the District of 

Columbia (hereafter referred to as States). From States with some 

experience with debt compromise, we requested documentation 

regarding their practices, including relevant State laws or policies, 

eligibility requirements, and participation levels in 2005. To evaluate 

the outcomes of debt compromise programs relative to current child 

support collections, we purposively selected five States (California, 

Massachusetts, New Mexico, Texas, and Washington) for a detailed 

review of child support cases with debt compromise agreements. We 

8 Social Security Act §§ 1905(b) and 1101(a)(8)(B). 

9 Social Security Act § 457(a)(1)(2)(3). 

10 Office of Inspector General, Department of Health and Human Services, 

“Establishment of Child Support Orders for Low Income Non-custodial Parents,” OEI-05-

99-00390, July 2000. Available online at http://oig.hhs.gov/oei/reports/oei-05-99-

00390.pdf. Accessed May 9, 2007. 

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INTRODUCTION 

selected States that represented a diverse mix in regard to program 

characteristics such as how large the caseload was, whether the State 

relied primarily on judicial or administrative procedures, and how long 

debt compromise had been used. (See Appendix A for descriptions of the 

child support programs in these States.) 

From the five States, we randomly selected a total of 259 sample cases 

for review from a list of all cases involved in debt compromise 

agreements since each program’s inception. We conducted case reviews 

during site visits to the State CSE office in each of the five States. The 

case reviews entailed collecting data regarding amounts of arrearages, 

amounts compromised, payment histories, case characteristics, and 

additional requirements imposed on noncustodial parents as a part of 

the debt compromise agreements. We projected our findings to the 

population of debt compromise cases in the five selected States. 

We also interviewed State child support agency officials about staff 

involvement in developing and implementing debt compromise 

programs, their experiences, and their perceptions of program results. 

To determine the outcomes of debt compromise in cases with current 

payment obligations, we analyzed payment data for each sample case 

for 12 months prior to the compromise agreement and 12 months after. 

We compared the payment frequency to determine whether these 

measures changed following debt compromise. Additionally, for the 

same periods before and after debt compromise, we differentiated cases 

with current support orders from those with only arrearage obligations. 

We also categorized payment behavior in each case into two groups 

based on regularity of payment. Cases that had no more than 3 missed 

payments on a biweekly payment schedule (26 payments) or no more 

than 1 missed payment on a monthly schedule (12 payments) were 

categorized as “Regular Payment.” All other cases were categorized as 

“Irregular Payment.” These measures were used to identify changes in 

the noncustodial parent’s behavior after a compromise agreement. 

See Appendix B for a detailed description of the methodology. 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

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FINDINGS 

 

 

Δ FINDINGS 

CSE agencies in 20 States operate fully 

implemented or pilot debt compromise 

programs, and another 23 States settle 

arrearage debt on a case-by-case basis 

Twelve States have fully 

implemented debt compromise 

programs, meaning that the 

programs are based on State 

policy and have established 

procedures (see Table 1). Eight 

additional States have pilot programs, five of which operate only in 

selected counties. In return for settling arrearages, States negotiate 

with the noncustodial parent to make a lump sum payment toward the 

arrearage (19 States), make regular payments on the arrearages and 

any current support orders (19 States), take steps toward involvement 

with the dependent child (8 States), participate in a fatherhood program 

(7 States), attend a parenting program (5 States), or maintain 

employment (4 States) or impose a combination of these requirements. 

Table 1: 

State Use of Debt Compromise 

Debt Compromise Use Number of States 

Operate debt compromise programs 

Fully implemented (12) 

Pilot programs (8) 

20 

Use debt compromise on a case-by-case basis 23 

Debt compromise not offered 8 

Source: Office of Inspector General analysis of responses from 51 States, 2006. 

Twenty-three States allow compromise of arrearages on a case-by-case 

basis, determining amounts, criteria, and conditions for individual cases 

and without formal policies. For example, one State agency reported 

compromising arrearages in rare cases if the debt is considered 

uncollectible or if it is determined to be in the best interest of the child. 

Officials from 15 of the 23 States reported that their agencies are 

considering implementing formal debt compromise programs. The 

remaining eight States reported that they do not allow compromise of 

arrearages owed to the State. Six of these eight States have laws that 

specifically prohibit the compromise of any debt owed to the State. (See 

Appendix C for a list of all States and their debt compromise status.) 

All States reported that they will negotiate reductions in unassigned 

debt owed to custodial parents if requested by either party. 

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FINDINGS 

Debt compromise agreements resulted in an 

average of $9,383 settled per case in selected 

States, with lump sum payments made in 

45 percent of cases and averaging $5,515 

The estimated average arrearage 

per case of cases involved in debt 

compromise agreements in the five 

selected States was $22,029. This 

arrearage amount was reduced 

through debt compromise 

agreements by an average of $9,383 per case (see Table 2). 

Noncustodial parents in 45 percent of cases made lump sum payments 

at the time of the debt compromise agreements. The average lump sum 

paid was $5,515, disbursed to States for reimbursement of public 

assistance provided to the custodial parent and family and/or to 

custodial parents for payment of past-due child support. 

Table 2: 

Averages of Arrearages Owed and Settled and Lump Sum Payments Made For 

Debt Compromise Cases in Five Selected States 

Selected State Average 

Arrearage Owed 

n = 259 

Average Arrearage 

Settled 

n = 259 

Average 

Lump Sum Paid 

at Compromise* 

n = 117 

California $21,009 $16,324 $4,061 

Massachusetts $11,029 $3,544 $8,108 

New Mexico $16,514 $11,000 $2,617 

Texas $19,349 $13,824 $1,139 

Washington $24,446 $7,828 $5,838 

All 5 States $22,029 $9,383 $5,515 

Source: Office of Inspector General analysis of a sample of 259 cases in five States, 2006. 

See Appendix D for confidence intervals. 

*Average lump sum paid may be greater than average arrearage owed because cases with 

lump sums were a subset (45 percent) of total cases. 

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F I NDING S 

Among the 41 percent of sample Forty-one percent of sample cases closed cases that closed following debt

following debt compromise, either after lump compromise (105 cases), 

sum payments or with all debt settled noncustodial parents in 

65 percent of cases (68 cases) 

paid a lump sum to close their cases.11 In all of these cases, there was 

no current support due and the parents owed only an arrearage. 

Officials in all five States reported case closure was a benefit of debt 

compromise. In New Mexico, the State with the highest proportion of 

closures (68 percent), officials reported that their debt compromise 

program targets older cases with no current support due. 

In the remaining 35 percent of cases that closed at compromise 

(37 cases), the noncustodial parent did not make a lump sum payment 

and the full amount of the arrearage was settled. In these cases, CSE 

officials determined that the noncustodial parent was unable to pay any 

amount toward the arrearage (because parents were receiving disability 

benefits, were being incarcerated for long periods, or were gravely ill) or 

that the families were best served by settling all of the debt. Examples 

include cases in which the parents reconciled and cases in which the 

children were emancipated and the noncustodial parent had another, 

newer case with dependent children in need of current support. 

When sample cases remained open following debt 

compromise, four of five States did not routinely 

follow up when noncustodial parents paid irregularly 

Fifty-nine percent of cases in our 

sample remained open following 

compromise, because noncustodial 

parents were either still obligated 

to pay toward current child 

support and any arrearage still owed (62 percent) or obligated to pay 

only toward remaining arrearages (38 percent). CSE agency officials in 

the five States reported that they would rescind agreements and 

reinstate debt if noncustodial parents with cases that remained open 

did not fulfill the conditions of their debt compromise agreements. 

However, although all five selected States conduct routine general 

reviews of child support cases, only California reported routinely 

monitoring debt compromise cases that remain open to determine 

11 Although the data presented in Table 2 on page 6 are statistical projections to all debt 

compromise cases in the five selected States, data for the subsets of open and closed cases 

reflect only the cases in our sample. Projecting estimates for these smaller populations 

would result in a low level of precision. 

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F I NDING S 

whether noncustodial parents meet their agreements.12 In reviewing 

payment records, we found that noncustodial parents in 60 of the 

154 sample cases paid irregularly (44 cases) or not at all (16 cases) 

following debt compromise. However, we found evidence of rescission in 

only 2 of the 60 cases with irregular or no payments and no other 

evidence of corrective action toward irregular payers in these cases. 

Officials in 18 of the 20 States 

Cases are eligible for debt compromise based on a with programs considered the 

number of factors, including large arrearages, and amount of the arrearage in 

local managers typically negotiate agreements determining eligibility for debt 

compromise, allowing for 

settlement if the arrearage was so large that they considered repayment 

unlikely. Other factors States considered include: 

•	 children are emancipated and the custodial parent is not owed 

current support (13 States); 

•	 the case and resulting arrearage have been in the caseload for a 

lengthy period, typically more than 5 years (11 States);13 

•	 a lengthy period has passed since the last payment, typically more 

than 1 year (11 States); 

•	 there has been a significant change in the circumstances of the case; 

e.g., the noncustodial parent has been incarcerated (11 States); 

•	 the noncustodial parent has incurred a new child support case with 

current support owed and the existing case had only an arrearage 

owed to the State (11 States); and 

•	 most or all of the arrearage is attributable to interest and/or 

penalties (7 States). 

Large arrearages accumulated in part because States charged interest on 

the principal and established orders with retroactive balances 

Four of the five States we reviewed charged noncustodial parents 

interest on arrearages owed to the State.14 Interest rates ranged from 

12 Although California has no formal policy or procedure for monitoring debt compromise 

cases, CSE officials report that local offices follow open cases closely and that the State 

has rescinded 11 agreements since the debt compromise program’s inception in 2005. 

13 In contrast, California eligibility requires a recent history of regular payment. 

Available online at www.childsup.cahwnet.gov/pub/policy/css/2004/css04-07.pdf. 

Accessed May 9, 2007. 

14 Washington does not charge interest on arrearages. Available online at 

http://apps.leg.wa.gov/WAC/default.aspx?cite=388-14A-7110. Accessed May 9, 2007. 

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FINDINGS 

4 percent to 18 percent and comprised 21 percent of the arrearages owed 

in the cases that we reviewed from these four States.15 CSE agency 

officials in three of these States reported that they believe interest and 

penalties serve as incentives for noncustodial parents to pay arrearages 

and/or deter accumulation of arrearages. The fourth State, New Mexico, 

reduced its interest rate from 14 percent to 4 percent after CSE officials 

came to view interest as too punitive and counterproductive.16 They 

reported their belief that high interest rates increased debt to an 

amount that becomes unpayable and discouraged parents from 

attempting to pay. The Texas CSE agency also lowered its interest rate 

from 12 percent to 6 percent, effective in 2002.17 

Of the five States reviewed, arrearages in Massachusetts and Texas 

may be attributed in part to “retroactive” balances imposed when 

creating the child support order. In these cases, time had elapsed 

between the birth and the time the child support orders were put in 

place, and States established the orders with arrearages equal to what 

the noncustodial parent would have paid from the dependents’ births 

and, in some cases, medical costs incurred at birth. Both States have 

stopped retroactive accumulation of arrearages.18 

For cases that meet eligibility requirements, local managers commonly 

make the final determination to allow debt compromise agreements 

All 20 States with debt compromise programs conduct a negotiation 

process with noncustodial parents to determine the amount of arrearage 

to be settled. In 12 of the 20 States, this amount is largely 

predetermined based on State policies (such as in Massachusetts, where 

the amount settled is usually equal to the amount of interest and 

penalty). In the remaining eight States, managers and caseworkers 

15 For example, Massachusetts charges 12-percent interest and an additional penalty of 

6 percent on the principal owed. As State policy, the debt settled through its compromise 

program was always the amount of the interest and penalty owed. Available online at 

http://www.mass.gov/?pageID=dorterminal&L=6&L0=Home&L1=Businesses&L2=Help+ 

%26+Resources&L3=Legal+Library&L4=Regulations+(CMRs)&L5=18%2c+119A%2c+175 

%3a+Child+Support+Enforcement&sid=Ador&b=terminalcontent&f=dor_rul_reg_reg_83 

0_cmr_119a_6_1&. Accessed May 9, 2007. 

16 Reference to reduction in policy is available online at 

http://legis.state.nm.us/lcs/lfc/lfcdocs/budget/2007RecommendVolI.pdf. Accessed May 9, 

2007. 

17 Texas Statutes Family Code 157.265, Accrual of Interest on Child Support. Available 

online at http://tlo2.tlc.state.tx.us/statutes/fa.toc.htm. Accessed May 9, 2007. 

18 The Massachusetts CSE agency stopped retroactive accumulation of arrearages in 

1998 and the Texas CSE agency stopped in 2002. 

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F I NDING S 

have discretion to determine amounts settled based on the 

circumstances of individual cases. Additionally, 12 of the 20 States offer 

to negotiate compromise of debt owed to custodial parents in 

conjunction with the negotiations regarding debt owed to the State. 

Ten of the twenty States with programs reported that managers in their 

local CSE offices make final decisions regarding debt compromise. In 

another eight States, decisions are made by individual caseworkers or 

staff specifically assigned to arrearages management or debt 

compromise programs. These caseworkers are typically given prior 

training in debt compromise criteria and negotiation procedures, then 

largely given autonomy to make decisions after reviewing case 

information and communicating with the noncustodial parent. In the 

remaining two States, judges approve debt compromise agreements, 

often with input from CSE agency staff. 

CSE officials in States with programs report a 

largely positive view of debt compromise, 

although a few express concern that settling 

debt is contrary to the enforcement process 

State CSE officials in 17 of the 

20 States with debt compromise 

programs expressed positive views 

of debt compromise practices, citing 

a number of advantages to reducing 

debt in carefully selected cases. Officials in the remaining three States 

and in the eight States without programs reported concerns about using 

debt compromise. 

The officials who were positive most often mentioned the advantage of 

receiving at least a portion of arrearages previously considered 

uncollectible and the benefit of more regular subsequent payment. One 

official indicated that all parties benefit–the custodial parent and 

dependents receive more consistent support, the noncustodial parent is 

released from the burden of overwhelming debt, and the State 

government collects at least a portion of what was previously owed. 

Other advantages included reduced caseloads because of case closure 

and improved family involvement by noncustodial parents. 

CSE agency officials in the remaining three States with programs and 

in the eight States without programs raised concerns about debt 

compromise, reporting that negotiating agreements can take staff time 

away from managing and enforcing more active cases. They also 

expressed a belief that debt compromise conflicts with the CSE agency’s 

primary mission of collecting child support for families. These officials 

reported that debt compromise could appear to reward poor payers and 

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FINDINGS 

send a signal to noncustodial parents that they are not responsible for 

child support debt and that the settlement of debt in selected cases is 

unfair to other parents who pay all that is owed. 

Officials in the 31 States that compromise debt on only a case-by-case 

basis (23 States) or not at all (8 States) reported a number of reasons for 

not implementing programs, including reluctance of State legislatures 

to approve settlement of State debt and negative public opinion toward 

settling debt incurred through public assistance programs. 

Additionally, officials in all of these 31 States reported that they prefer 

to address potential problems by attempting to prevent arrearages, 

listing methods such as establishing orders appropriate to the 

noncustodial parent’s income and adjusting orders as circumstances 

change. Even given these concerns and practices, 17 of these 31 States 

reported that they are considering implementing debt compromise 

programs and are in the process of weighing the costs and benefits. 

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Δ RECOMMENDATION 

Twenty States have implemented debt compromise programs, 23 other 

States use debt compromise on a case-by-case basis, and many of these 

States are considering full programs. We found that States were often 

able to close cases following debt compromise and that debt compromise 

resulted in lump sums payments to States and families. Additionally, 

officials in States with programs reported a largely positive view of debt 

compromise. However, four of the five States did not routinely follow up 

with noncustodial parents who paid irregularly or not at all following 

debt compromise to ensure that they meet their agreements. To 

enhance the effectiveness of State use of debt compromise, we 

recommend that OCSE: 

Issue Guidance Encouraging States To Routinely Monitor Cases that 

Remain Open Following Debt Compromise Agreements 

We recommend that OCSE issue program guidance to States 

emphasizing the need to routinely monitor cases that remain open 

following debt compromise to ensure that noncustodial parents meet 

their agreements, such as regular payment of current support and 

arrearages, and develop standards and alternatives for corrective 

action. 

Because of the high level of interest in and use of debt compromise, we 

suggest that OCSE also consider issuing guidance regarding the 

administration of debt compromise programs to assist States that are 

considering new programs or revising current practices. This guidance 

could be based on information and insights from States with mature 

programs, and topics could include the criteria used for determining 

which cases are eligible for debt compromise, the proportion or nature of 

the debt to be settled, suggestions for training staff in making case 

determinations, and use of debt compromise to close child support cases 

in which only arrearages are owed. Such guidance would need to make 

clear that States are not required to implement debt compromise 

programs and that States may use discretion in implementing the 

guidance. 

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RECOMMENDATION 
 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

The Administration for Children and Families (ACF) and the Assistant 

Secretary for Planning and Evaluation (ASPE) jointly provided 

comments in response to our draft report. 

ACF concurred with our recommendation to issue guidance encouraging 

States to routinely monitor cases that remain open following debt 

compromise agreements and with our suggestion to issue guidance to 

States regarding administration of debt compromise programs to assist 

States that are considering new programs or revising current practices. 

ACF outlined current and planned guidance activities, including hosting 

teleconferences focused on debt compromise for interested States and 

establishing an electronic workplace for States to share documents and 

information on arrears issues, including debt compromise. ACF also 

plans to develop guidance materials addressing arrears management 

issues as part of the implementation of a new initiative, Project to Avoid 

Increasing Delinquencies (PAID). ACF indicates that the PAID 

Steering Committee will review this report and determine the type of 

guidance that the States desire on the subject of debt compromise. 

In describing this current and proposed guidance, ACF did not explicitly 

address providing guidance to States regarding monitoring of open cases 

following debt compromise agreements. Because the lack of monitoring 

of debt compromise cases poses a vulnerability to the integrity of State 

debt compromise programs, we recommend that ACF provide guidance 

to States specific to this issue. 

ASPE commented that the report was useful in providing information 

regarding a policy area in which little research exists. ACF and ASPE 

also provided technical comments, which we incorporated as 

appropriate, and ACF submitted a number of questions and 

observations regarding debt compromise programs that cannot be 

answered by this study but could be considered in future work. 

ACF’s and ASPE’s comments are included in Appendix E. 

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Δ APPDENDIX B APPENDIX A 

DESCRIPTIONS OF CHILD SUPPORT PROGRAMS IN 

SELECTED STATES 

We selected 5 States for site visits (California, Massachusetts, New 

Mexico, Texas, and Washington) from among the 12 States with fully 

implemented Statewide programs that had at least 1 year of experience 

with debt compromise. We also considered geographic location and 

child support program characteristics, such as how large the caseload 

was and whether the States relied primarily on judicial or 

administrative procedures (see Table A). The selected States all review 

and adjust child support cases every 3 years and review any case upon 

request. These States use similar enforcement measures for collections 

and dealing with arrearages, including license revocation, property or 

asset seizure, and tax intercepts. 

Table A: 

Program Characteristics for Selected States 

State Caseload Size 

FY 2005 

Calculation 

Model 

Procedures 

Order 

Establishment 

Order 

Enforcement 

California 1,762,996 Income 

Shares Judicial Judicial and Administrative 

Massachusetts 268,640 Percentage 

of Income Judicial 

Primarily 

Administrative 

(some judicial) 

New Mexico 70,217 Income 

Shares Judicial Judicial and 

Administrative 

Texas 913,551 Percentage 

of Income 

Primarily 

Administrative 

(some judicial) 

Judicial and 

Administrative 

Washington 341,069 Income 

Shares 

Judicial and 

Administrative Administrative 

Source: Office of Child Support Enforcement Preliminary Data Report, FY 2005. 

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APPENDIX A 

California. California was the only State selected for review with a 

county-administered program. The Department of Child Support 

Services is a component of the California Health and Human Services 

Agency and comprises 52 local child support agencies, including 

11 counties that have combined to form 6 regional agencies. The State 

relies solely on judicial procedures for child support order 

establishment. Support amounts are determined using an income 

shares calculation model, calculating a percentage of each parent’s net 

disposable income and adjusting the amount based on the percentage of 

time each parent has primary physical responsibility for the child. 

California’s interest rate for missed payments and adjudicated 

arrearages as well as retroactive support is 10 percent per year. 

Interest accrues from the date of the missed payment or a judgment 

establishing either an arrearage or retroactive support resulting from 

paternity establishment. 

Massachusetts. Massachusetts’ program is administered by the State’s 

Department of Revenue through five regional offices, two satellite 

offices, and a customer service call center. Child support and custody 

orders are established through the courts and support amounts are 

calculated as a percentage of parents’ income. Massachusetts imposes 

12-percent interest and an additional penalty of 6 percent on delinquent 

payments and arrearges. Some noncustodial parents may not be 

required to pay interest or may be eligible to apply for a waiver. 

New Mexico. New Mexico has a State-administered program of seven 

offices overseen by the CSE Division of the New Mexico Human Services 

Department. The courts establish paternity and finalize child support 

orders. Support amounts are determined by an income shares 

calculation model, which considers the income of both parents. 

Noncustodial parents with delinquent payments and arrearage balances 

currently face an interest rate of 4 percent. 

Texas. The Texas Child Support Division operates a State-administered 

program within the Office of the Attorney General. Sixty-eight offices 

(regional and local) report to the State CSE. Texas uses a quasiadministrative process to establish support obligations, referring cases 

to the courts in situations involving paternity establishment and 

retroactive support, a minor parent, an incarcerated parent, histories of 

family violence, foster care, or interstate child support cases. Child 

support amounts in Texas are calculated as a fixed percentage of the 

noncustodial parent’s net resources with adjustments for multiple 

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APPENDIX A 

family obligations. However, courts have discretion to deviate from 

these general guidelines. Interest accrues on the delinquent child 

support at 6-percent simple interest annually. Payments are considered 

delinquent if not received before the 31st day after payment is due. For 

court-imposed retroactive support, interest accrues from the date the 

order is rendered. 

Washington. Washington operates a State-administered program. 

Washington’s Division of Child Support includes 10 field offices and is 

part of the State’s Department of Social and Health Services. In 

establishing support orders, Washington uses the administrative 

process if no court order specifically establishes or relieves a parent of 

support obligation. Custody issues and paternity establishment are 

handled through the judicial process. Support amounts are set under 

an income shares calculation model based on the income of both 

parents. Interest is imposed only in cases for which retroactive 

arrearages are imposed by the courts. 

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Δ APPENDIX B 

DETAILED METHODOLOGY 

Data used in this evaluation were collected through a survey of all 

States and a review of a sample of 259 debt compromise cases from five 

States with debt compromise programs. 

Data Collection and Analysis 

Survey of All States. To determine the prevalence and characteristics of 

debt compromise practices among States, we surveyed all States and 

the District of Columbia (hereafter referred to as States). Respondents 

were CSE program directors or managers directly involved with 

administering the debt compromise program in their States. Survey 

questions included whether States had any experience with debt 

compromise programs recently or in the past, whether they actively 

pursued debt compromise, and what the current status of their 

programs was. We asked States with operating programs to provide 

additional details related to eligibility, compromise requirements, 

policies for making determinations, caseloads, and participation levels. 

Site Visits to Selected States. To determine the outcomes of debt 

compromise programs on cases, we purposively selected five States 

(California, Massachusetts, New Mexico, Texas, and Washington) to 

review child support cases with compromise agreements. We selected 

these from among the 12 States with at least 1 year of experience with a 

Statewide debt compromise program. We also considered geographic 

location and child support program characteristics, such as how large 

the caseload was and whether a State relied primarily on judicial or 

administrative procedures. 

We conducted site visits and interviewed State CSE agency staff and 

managers in each of the five States. State officials provided information 

about staff involvement in developing and implementing debt 

compromise programs, their experiences in identifying and working 

with cases, and their perceptions of debt compromise program results. 

From each of the five States, we requested a list of all cases involved in 

debt compromise agreements since the inception of their programs. The 

resultant population was a total of 6,719 cases. We selected a random 

sample of 55 debt compromise cases from each State for further review. 

Upon review, 16 cases sent by States did not meet our criteria, resulting 

in a final sample of 259 cases (see Table B on next page). 

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APPENDIX B 

Table B: 

Distribution of Debt Compromise Sample Cases by Selected State 

Selected State Total Cases 

Original 

Number of 

Cases Sampled 

Final 

Number of 

Cases 

Sampled 

Calculated 

Weights 

California 992 55 51 18.04 

Massachusetts 530 55 54 9.64 

New Mexico 325 55 50 5.91 

Texas 589 55 52 10.71 

Washington 4,283 55 52 77.81 

Total 6,719 275 259 N/A 

Source: Office of Inspector General analysis of debt compromise cases in five States, 2006. 

Case Reviews. For each sample case, we collected the amounts of 

arrearages, amounts compromised, and remaining arrearages. We 

reviewed case files to determine whether any additional requirements 

had been imposed on noncustodial parents in exchange for the debt 

reduction, whether CSE agencies followed up, and whether the cases 

had current support orders or only arrearages. 

We also obtained payment records for each sample case, including all 

payments made for the 12-month period before a compromise agreement 

and 12 months after compromise.19 For the 154 cases that remained 

open after debt compromise, we compared these measures to determine 

whether the regularity of payments changed following debt compromise. 

Cases closed as a result of a compromise agreement had no further 

payment history and were not included in this analysis. We categorized 

the payment behavior of noncustodial parents during each 12-month 

period into three groups: 

•	 Regular Payment—payments were made with no more than 

3 missed payments on a biweekly payment schedule (26) or no more 

than 1 missed payment on a monthly schedule (12); 

19 Seven cases in our California sample were so recent that only 6 months of payment 

data was available, rather than 12 months. 

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APPENDIX B 

•	 Irregular Payment—payments were made, but there were more 

than three missed payments on a biweekly payment schedule or 

more than one missed payment on a monthly schedule; 

•	 No Payment—no record of payments for the 12-month period. 

Cases classified as having irregular payment or no payment were 

combined for final analysis, leaving two groups: regular payment and 

irregular payment. Because of the small number of cases that remained 

open following debt compromise (154), we did not project the findings of 

this analysis to the population of debt compromise cases in the five 

selected States. 

We also identified lump sum payments from case notes, compromise 

agreements, and payment histories and verified that all anticipated 

lump sums were ultimately paid. We calculated average lump sum 

amounts based on verified payment amounts. 

Statistical Projections. We analyzed arrearage and payment data for the 

259 cases in the sample and projected our findings to the population of 

debt compromise cases in the five selected States. Table B on the prior 

page presents the weights used to address the differing proportions of 

all debt compromise cases in each State to the number of cases in our 

sample. Appendix D includes estimates, standard errors, and 

confidence intervals for dollar amounts reported as arrearages owed, 

arrearages settled, and lump sums paid. 

Data Limitations. Because we purposively selected States, we do not 

project our findings beyond the population of debt compromise cases in 

the five selected States. Outcomes observed in the five sample States 

are not intended as a measure of the effectiveness of the debt 

compromise programs in those States. 

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Δ APPENDIX C 

 STATUS OF DEBT COMPROMISE FOR ALL STATES 

Table C: 

Status of Debt Compromise for All States 

State Program Status Start Date 

Alabama Case-by-Case 

Alaska Pilot Program 2005 

Arizona Case-by-Case* 

Arkansas No Program 

California Fully Implemented Program 2003 

Colorado Case-by-Case 

Connecticut Pilot Program 2006 

Delaware Case-by-Case 

District of Columbia Case-by-Case 

Florida Case-by-Case 

Georgia Case-by-Case 

Hawaii Case-by-Case 

Idaho No Program 

Illinois Case-by-Case 

Indiana No Program 

Iowa Pilot Program 2001 

Kansas Pilot Program 1985 

(limited basis) 

Kentucky Case-by-Case 

Louisiana Case-by-Case 

Maine Case-by-Case 

Maryland Pilot Program 2000-2003 

Massachusetts Pilot Program 2000 

Michigan Fully Implemented Program 2005 

Minnesota Case-by-Case 

Mississippi No Program 

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APPENDIX C 

State Program Status Start Date 

Missouri No Program 

Montana Fully Implemented Program 1998 

Nebraska Fully Implemented Program 1993 

(approximately) 

Nevada Case-by-Case 

New Hampshire Case-by-Case 

New Jersey Case-by-Case 

New Mexico Pilot Program 2005 

New York No Program 

North Carolina Fully Implemented Program 2005 

North Dakota Fully Implemented Program 2005 

Ohio Case-by-Case 

Oklahoma Case-by-Case 

Oregon Fully Implemented Program None listed 

Pennsylvania Case-by-Case 

Rhode Island Case-by-Case 

South Carolina Case-by-Case 

South Dakota Case-by-Case 

Tennessee No Program 

Texas Fully Implemented Program 2001 

Utah Fully Implemented Program None listed 

Vermont Fully Implemented Program None listed 

Virginia No Program 

Washington Fully Implemented Program 1977 

(approximately) 

West Virginia Fully Implemented Program None listed 

Wisconsin Pilot Program None listed 

Wyoming Case-by-Case 

Source: Office of Inspector General, Debt Compromise State Survey, 2006. 

*Arizona CSE officials reported plans to implement a full debt compromise program in 2007 or 2008. 

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Δ APPENDIX D 

ESTIMATES AND CONFIDENCE INTERVALS 

Table D: 

Estimates and 95-Percent Confidence Intervals for Arrearage and Payment Data 

Mean 

Estimate 

Standard 

Error 

Lower Limit Upper Limit 

Average Arrearage 

(n=259) $22,029 1,852.0 $18,381 $25,676 

California $21,009 2,151.0 $16,771 $25,247 

Massachusetts $11,029 1,385.0 $8,300 $13,757 

New Mexico $16,514 1,851.0 $12,868 $20,159 

Texas $19,349 3,273.0 $12,902 $25,795 

Washington $24,446 2,815.0 $18,902 $29,989 

Average Settled 

(n = 259) $9,383 1,013.0 $7,388 $11,378 

California $16,324 1,868.0 $12,646 $20,002 

Massachusetts $3,544 530.0 $2,499 $4,588 

New Mexico $11,000 1,363.0 $8,315 $13,685 

Texas $13,824 2,88.0 $8,194 $19,453 

Washington $7,828 1,472.0 $4,928 $10,727 

Average Lump Sum Paid 

at Compromise (n = 117) $5,515 664.4 $4,207 $6,823 

California $4,061 1,107.0 $1,882 $6,241 

Massachusetts $8,108 991.3 $6,156 $10,061 

New Mexico $2,617 813.4 $1,016 $4,219 

Texas $1,139 151.2 $841 $1,436 

Washington $5,838 1,596.0 $1,596 $8,981 

Source: Office of Inspector General analysis of 259 cases in five States, 2006. 

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Agency Comments

Δ APPENDIX E 
 

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APPENDIX ~ E 
 

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APPENDIX ~ E 
 

 

 

Δ ACKNOWLEDGMENTS 

This report was prepared under the direction of Kevin K. Golladay, 

Regional Inspector General for Evaluation and Inspections and A. 

Blaine Collins, Deputy Regional Inspector General for Evaluation and 

Inspections in the Dallas regional office. 

Ruth Ann Dorrill served as the team leader for this study and Scott 

Whitaker served as the project leader. Other principal Office of 

Evaluation and Inspections staff from the Dallas regional office who 

contributed to this report include Dana McClellen; central office staff 

who contributed to this report include Ayana Everett and Barbara 

Tedesco. 

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