Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

AUGUST 2000 

OEI 06-00-00040 

Child Support Enforcement 

State Disbursement Units 

State Implementation Progress 
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 

Blaine Collins

Ruth Ann Dorrill

Clark Thomas, Ph.D. 

Scott Whitaker

J’nette Oshitoye

Nancy Watts

Lisa White

Jennifer Kahende

Patricia Martin

HEADQUARTERS

Joan Richardson, Program Specialist

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 
EXECUTIVE SUMMARY 

PURPOSE 

To describe States’ progress in implementing State Disbursement Units (SDUs), and 

share their experiences and perceptions as an informed basis for learning from one 

another and identifying opportunities for improvements. 

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 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 requirements specify deadlines for 

SDU implementation and standards for operations, and outline areas of State 

discretion, such as the option to have private contractors operate SDUs. To meet these 

requirements, several States had to make relatively minor changes to their previous 

centralized systems. In other States which had traditionally processed payments 

through local child support offices or clerks of court, centralization of payment 

processing was a major endeavor. 

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 State’s 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 survey responses of 

SDU program managers from all States. These respondents provided details about the 

current status of SDU implementation, problems they encountered in developing and 

operating SDUs, strategies they employed to ensure quality SDU performance, and 

their assessment of current operations. 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 unit in 

order to facilitate their learning from one another. 

FINDINGS 

Thirty-eight States Report They Have Fully Implemented the Federal Law to 

Centralize Payment Processing of Most Child Support Payments 

Thirty-eight States and territories report fully implementing their SDU by April, 2000. 

Three States have Federal waivers to link their local disbursements units. All but one of 

the 12 remaining States report plans to complete their SDU implementation by 2001. 

SDUs: State Implementation Progress i OEI 06-00-00040 
OCSE granted two of these States extensions to their SDU implementation deadline 

and gave the remaining 10 States an opportunity to request an alternative penalty by 

submitting a “corrective compliance plan” and demonstrating a good faith effort to 

implement their SDU. 

Twenty-five States implemented, or plan to implement, their SDU incrementally, a 

strategy that allows program managers to resolve startup problems and make technical 

changes without affecting a large number of cases. While almost half of State child 

support agencies directly operate their SDUs, many contract with private companies 

and clerks of court to perform some or all SDU functions. While the Federal law 

requires only that SDUs process payments for public assistance cases and cases with 

income withholding ordered on or after January 1, 1994, 32 States will process 

payments from all types of child support cases through their SDU. In order to monitor 

the effectiveness of their SDU, most States track the timeliness of disbursements and 

the extent of undistributed payments. 

States Experienced a Number of Problems in Implementation, But Managers Report The 

Severity of Most Problems Has Diminished Over Time 

Most SDUs encountered problems when they first centralized payment processing. 

While some problems remain as continuing operational concerns, the severity of many 

of these problems have diminished subsequent to startup periods. SDU managers 

report they initially had problems getting payments mailed to the SDU and that many 

payers either continued to send payments to local sites instead of new SDU post office 

boxes, or failed to include information necessary for identifying the cases to which 

payments should be applied. In some States, when payments contained insufficient 

information or were mailed to the wrong location, disbursements were significantly 

delayed. 

Managers also report problems negotiating with contractors, and coordinating with local 

child support staff and clerks of court who had previously processed payments locally. 

For example, many SDUs had to convert local case information to central databases 

prior to SDU implementation, requiring a good deal of collaboration with local staff and 

clerks of court. Managers in some Sta9tes report these efforts were often problematic, 

resulting in payments being received by the SDU for which it had no associated case 

information. Managers also indicate difficulty in staffing their SDUs due to variable 

workloads. 

A Majority of Managers Believe Their State Disbursement Units Have Improved Payment 

Processing, Particularly After an Initial Startup Period 

Based on monitoring and experience, a majority of SDU managers believe their SDU 

achieves better results than previous local processes. Managers cite general 

improvements in payment processing speed, service to custodial and noncustodial 

parents, and in easing the burden on employers. However, several States report 

improvements were not realized until after an initial startup period. Despite the positive 

perceptions of the majority of managers, others report their SDU has made little 

difference or even had negative effects on some program functions. 

SDUs: State Implementation Progress ii OEI 06-00-00040 
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. 

SDUs: State Implementation Progress iii OEI 06-00-00040 
TABLE OF CONTENTS 

PAGE

EXECUTIVE SUMMARY i

INTRODUCTION 1

FINDINGS 

SDU Operations 

Current Implementation Status 3

Use of Incremental Implementation 4

Entities Operating SDUs 4

SDU Caseloads 5

Parental Access to Payment Information 6

Monitoring SDUs 6

Challenges to Effective SDU Operations 

Coordinating with Employers and Parents 7

Coordinating with Other Entities 8

Poorly Labeled Payments 9

Lack of Automated Case Information 9

Payments Mailed to the Wrong Location 9

Customer Service Demands 10

Staffing Issues 11

State Assessment of SDUs 

Overall Assessment 11

Payment Processing Speed 11

Service to Parents 12

Burden on Employers 13

Undistributed Payments 13

SUMMARY 13

AGENCY COMMENTS 14

ENDNOTES 15

APPENDICES 

A: Coordination and Operational Problems A-1 

B: ACF Comments B-1 
INTRODUCTION 

PURPOSE 

To describe States’ progress in implementing State Disbursement Units (SDUs), and 

share their experiences and perceptions as an informed basis for learning from one 

another and identifying opportunities for improvement. 

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 State’s 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 

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 

SDUs: State Implementation Progress 1 OEI 06-00-00040 
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 State’s 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 survey responses of SDU program 

managers from all States, as well as the District of Columbia, Puerto Rico and the 

Virgin Islands.5 Additionally, we use information from interviews of key participants 

involved in SDU operations in six focus States. The six focus States we visited for onsite 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. In 

each focus State, analysts interviewed SDU program managers, SDU information 

system managers, contractor managers, and managers of staff that process payments. 

We also toured the primary SDU payment processing facility. Where appropriate, we 

also interviewed at least one representative of local entities that were responsible for 

payment processing prior to centralization.6 All data collection occurred in February, 

March, and April 2000. 

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 

State responses. Rather, this report examines the self-reported experiences and 

perceptions of key personnel who are implementing and operating SDUs. 

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

issued by the President’s Council on Integrity and Efficiency. 

SDUs: State Implementation Progress 2 OEI 06-00-00040 
FINDINGS 

OPERATIONS OF STATE DISBURSEMENT UNITS 

To meet Federal requirements, States had to develop and implement SDUs for 

processing child support payments, as well as mechanisms to provide information to 

parents and methods for monitoring SDU activities. 

Thirty-eight States Report They Have Fully Implemented the Centralized Processing of 

Child Support Payments as Required by Federal Law 

As of April 2000, thirty-eight States and territories have SDUs that process payments 

for the Federally-required caseload. Eighteen of these States were already processing 

payments centrally prior to 1998, the first year in which SDU implementation was 

Federally-required (Figure 1). Another 20 States began centralized payment processing 

since 1998. Three additional States were granted a waiver which releases them from 

the Federal SDU requirements by linking local disbursements units.7 Four States have 

partially implemented their SDUs, already processing a substantial portion of the 

required payments, and the remaining eight States have not yet begun centralization. 

Most States without fully implemented SDUs, except those with waivers, expect to 

complete their SDU implementation by 2001, but one State estimates it will not 

complete implementation until 2006. OCSE granted two of these States extensions to 

their SDU implementation deadline and gave the remaining 10 States an opportunity to 

request an alternative penalty by submitting a “corrective compliance plan” and 

demonstrating a good faith effort to implement their SDU.8 

Figure 1: State Disbursement Unit Implementation Dates 

(as Reported by States) 

9 9 

20 

11 

1 

3 

Before 1990 1990-97 1998 - April 2000 May 2000 - 2001 2006 Waiver 

Based on Responses from 50 States, the District of Columbia, Puerto Rico, and the Virgin Islands 

SDUs: State Implementation Progress 3 OEI 06-00-00040 
Half of Managers Report Current or Planned Use of Incremental Implementation 

Methods, Initially Processing Payments for Only a Segment of Their Caseload 

To ease startup difficulties, 25 States implemented, or plan to implement, their SDUs 

incrementally. These States have developed unique strategies, including phase-ins 

based on county, payer type, or case type. Managers report that incremental 

implementation allows SDUs to recognize and solve problems early, while affecting 

only a portion of their caseload. Incremental implementation may also help managers 

gauge payment volume for staffing purposes, and provides early performance 

information. It also allows technical staff to make modifications in State databases, 

computer software, and processing equipment as technical glitches or needed 

structural changes are identified. SDU phase-in periods have ranged from a single 

disbursement cycle (one month) to many months. Some States also operated pilot 

projects prior to beginning more widespread implementation. Pilot projects often 

involved only one large county or a handful of smaller counties, allowing managers to 

test procedures with a closely controlled set of payments prior to finalizing plans for full 

implementation. 

Other States considered and then discarded the idea of incremental implementation for 

various reasons. After securing the necessary legislative authority for their SDU and 

beginning development, managers in some States did not perceive they had enough 

time for an incremental implementation prior to their Federal deadline. Others report 

they preferred to initially implement statewide, hoping to deal with startup problems 

over a shorter, though more intense, period. Some managers also note that payers not 

included in initial phases of incremental implementation may hear of the SDU and begin 

sending payments to the centralized unit too early. 

State Disbursement Units are Operated by Child Support Agencies or By Private 

Contractors Who Perform Some Part of Payment Processing 

SDUs perform two primary functions: receipting, which includes receiving, posting, and 

depositing child support payments; and disbursement, which includes printing and 

mailing payments. Managers in 22 States report the child support agency performs, or 

will perform, the receipting function, and will perform the disbursement function in 35 

States (Table 1). A few of these States report having cooperative agreements with 

other State agencies, such as the State Treasury, to print and mail checks, typically 

because the other State agency already has check printing equipment and expertise. 

Table 1: CURRENT OR PLANNED ENTITIES PERFORMING MAJOR SDU FUNCTIONS 

Function Child Support Agency Private Companies Clerks of Court 

Receipting 22 (42%) 27 (52%) 3 (6%) 

Disbursing 35 (67%) 14 (27%) 3 (6%) 

Percentages based on the 52 respondents answering this question. 

Most of the remaining managers report their SDUs currently contract, or plan to 

contract, with private companies to perform receipting (27 States) and disbursing (14 

States). Three private companies contract with more than one State: Lockheed Martin 

IMS (13 States); Tier Technologies (7); and System & Methods, Inc. (2). These 

SDUs: State Implementation Progress 4 OEI 06-00-00040 
companies may be awarded additional contracts by States still preparing for 

implementation. Private contractors in some States use sub-contractors to perform 

various functions, such as check printing. In three States, local clerks of court who 

performed receipting and disbursing functions prior to SDU implementation were 

awarded contracts to continue performing these functions centrally. 

Thirty-two States Report Their Disbursement Units Will Process All Types of Child 

Support Cases, Rather Than Only Those Required by Federal Law 

SDUs are Federally-required to process payments for a specified caseload, but have 

discretion over whether to centralize processing of payments for all child support cases. 

Thirty-two States currently process, or plan to process, payments for all case types 

through their SDU. Additionally, a few States report they process payments through 

their SDU for more cases than just those which are required, but still process some 

cases locally. For example, States may centrally process any case with an income 

withholding order, even though the SDU is only required to process cases with income 

withholding ordered after January 1, 1994. Cases that are not processed through the 

SDU are typically handled locally, as they were before SDU implementation. Federal 

funding is not available for processing cases not mandated to be handled by the SDU. 

Some States recoup at least a portion of their costs by charging fees to custodial 

parents in non-public assistance cases, regardless of whether the cases are processed 

centrally or locally. 

Managers in States processing all child support cases through their SDUs report a 

number of advantages, such as the ability to provide employers with a single address to 

send all child support payments. They also report that processing all cases through the 

SDU avoids any need to switch cases between central and local processing, thereby 

avoiding confusion for parents and employers. Managers also maintain that centralizing 

all cases may be a more efficient use of State resources. When some cases continue 

to be processed locally, these local processors must devote resources to payment 

processing, including post office boxes, bank accounts, databases, processing 

equipment, and staff time, even though they may be handling only a fraction of the 

volume they were before SDU implementation. Some managers argue that since 

continued local processing limits the number of payments processed centrally, it fails to 

take full advantage of efficiencies and cost savings achievable through highlyautomated SDUs. 

Some States Do Not Plan to Centralize All Cases, Primarily Because They Lack Funding 

for the Conversion or Are Satisfied With Their Local Systems 

While Federal Financial Participation (FFP) is available to reimburse States for SDU 

expenses incurred through processing the Federally-required cases, States which 

process additional cases through their SDU must bear the expense of conversion and 

processing. Although some States have discovered greater efficiencies in processing 

all payments through SDUs, others incur only minimal expense when payments are 

processed through local entities such as clerks of court. Advocates for continued local 

processing of some cases also report being reluctant to change a method that is 

already successful, considering their local jurisdictions to be more responsive to clients 

and fearing a heavy reliance on automated systems. Finally, managers point out that 

SDUs may never truly process payments for all child support cases in their State 

SDUs: State Implementation Progress 5 OEI 06-00-00040 
because many noncustodial parents are court-ordered to pay the custodial parent 

directly, with no government processing or tracking of payments. 

States Use a Number of Methods to Provide Parents With Access to Payment 

Information, Primarily Relying on Telephone Contact 

In attempting to promote service to parents under a centralized system, States offer a 

number of options for accessing payment information. Almost all States (49) provide, or 

plan to provide, parents with telephone access to customer service staff (Table 2). This 

staff is often housed in a centralized customer service call center, staffed either by the 

State or a contractor. Call center staff typically answer payment questions from 

employers and local child support offices, as well as from parents. Call center staff in 

some States have access only to case payment information, but not other case 

information such as paternity or enforcement matters, and may be instructed to only 

respond to payment-related inquiries. In other States, call center staff have full access 

to caseload databases and are trained to answer multiple questions regarding case 

management, enforcement, and State policy, in addition to payment inquiries. 

Table 2: SDU SERVICES FOR RESPONDING TO PARENTAL INQUIRIES 

Service to Parents Planned Services 

Current and 

Time Frame 

Response 

Speak by Telephone With Customer Service Staff 49 (92%) Immediate 

Query Automated Telephone Response System 49 (92%) Immediate 

Speak by Telephone with Local Caseworker 47 (87%) 1 to 2 Days 

Make Appointment with Local Caseworker 41 (77%) 1 to 2 Days 

Leave Internet Electronic Mail Message 24 (45%) 1 to 2 Days 

Query Through Database Internet Website 13 (25%) Immediate 

Response Time Frame based on the most common responses of States. 

Most States also report current or planned use of some form of automated telephone 

response system, often linked to the State’s customer service call center. Through 

these automated systems, parents may first access information stored in SDU 

databases, such as the last date a payment was received on a case, and are able to 

transfer to a customer service representative to inquire about more detailed matters. In 

many States, local caseworkers are also available to answer payment inquiries by 

phone (47) and in person (41). However, managers report that this type of local service 

will not be as immediate as call center service. Several States also report current or 

planned use of the Internet to enhance customer service and parental access to 

payment information. 

Managers Report Use of Performance Indicators to Monitor State Disbursement Units, 

Primarily Focusing on the Timeliness of Processing 

Forty-seven States report current or planned use of performance indicators to help 

monitor and evaluate SDU payment processing. These performance indicators mostly 

provide information about the timeliness of child support disbursements, and the ability 

SDUs: State Implementation Progress 6 OEI 06-00-00040 
of the SDU to limit undistributed payments. For example, 39 States report current, or 

planned, tracking of the elapsed time between receipt of each payment and 

disbursement to custodial parents, and 35 of these will further compute and track the 

percentage of payments processed within two business days (Table 3). These 

measures may be used to gauge the overall effectiveness of their SDU, as well as to 

help detect procedural weaknesses and forecast staffing needs. 

Thirty-five States track how long it takes to research previously unidentified payments. 

When SDU automated systems are unable to initially match a payment to a case, staff 

must research any information provided with the payment, such as a return address on 

an envelope. Staff typically search a number of available databases, and may call 

employers to obtain additional identifying information. Many research items are 

matched during the same processing cycle, allowing payments to be identified and 

disbursed within two business days. Many States also track the amount (34) and 

number (32) of their SDU’s undistributed payments. The number of undistributed 

payments on a given day may assist supervisors in adjusting the workload of research 

staff, while the dollar amount of undistributed payments may serve as a better indicator 

of the overall impact on families. 

Table 3: USE OF SDU PERFORMANCE INDICATORS 

Performance Indicator States 

Elapsed Time to Disbursements 39 (83%) 

Percent of Payments Disbursed Within 2 Business Days 35 (75%) 

Elapsed Time for Payment Research 35 (75%) 

Dollar Amount of Undistributed Funds 34 (72%) 

Number of Undistributed Payments 32 (68%) 

Percentages based on the 47 respondents answering this question. 

CHALLENGES TO EFFECTIVE OPERATION 

Many people familiar with child support enforcement expected that as SDUs were 

developed and implemented, States would encounter problems coordinating with 

payers (employers and noncustodial parents) and other entities involved in payment 

processing. Stakeholders also anticipated problems in transferring a large number of 

cases from local payment processing to a centralized, automated system. SDU 

program managers report that their SDUs have encountered a variety of problems, 

especially during the early phases of implementation. Managers indicate difficulties 

continue to exist in some areas, but the severity of most problems has diminished over 

time. 

Coordinating with Employers and Parents 

Many SDU managers report experiencing problems in communicating with and 

receiving responses from noncustodial parents and employers during their initial startup 

phase (Table 4).9 For example, many payers reportedly did not redirect their payments 

to the newly centralized system upon initial notification, causing disbursement delays. 

SDUs: State Implementation Progress 7 OEI 06-00-00040 
States which had this problem at startup continue to struggle with payer coordination, 

but the severity of the problem is perceived to have decreased after startup. SDUs 

must continue to collaborate with payers, especially regarding changes in employment 

and income withholding orders. 

Table 4: SDU PROBLEMS IN COORDINATING WITH KEY PLAYERS 

Problems with Payers 

States with 

Startup 

Problems 

States with 

Continuing 

Problems 

Severity of 

Problem* 

Getting checks mailed to SDU by parents 24 (67%) 21 (60%) Decreased 34% 

Coordinating with employers 22 (61%) 20 (57%) Decreased 26% 

Notifying employers and parents of changes 20 (56%) 17 (49%) Decreased 38% 

Problems with Other Entities 

Securing necessary funding 17 (49%) 19 (54%) Increased 35% 

Coordinating with clerks of court 14 (39%) 12 (34%) Decreased 23% 

Gaining necessary state legislative authority 14 (40%) 6 (17%) Decreased 50% 

Negotiating terms with contractors 13 (37%) 12 (34%) Decreased 10% 

Coordinating with local child support offices 13 (37%) 7 (20%) Decreased 63% 

Percentages based on the number of respondents to each question. 

* Using State responses regarding the severity of each problem. Percentages reflect a weighted scale based upon State 

description of problems as major, moderate, or minor, during and after startup. See Appendix A. 

Coordinating With Other Entities 

SDU implementation required State child support agencies to collaborate with their 

State legislatures in gaining necessary funding and authority for SDU operations. 

Implementation often also brought new participants, such as contractors, into child 

support payment processing, and substantially changed the responsibilities of others. 

Some SDU managers report experiencing problems in coordinating with these entities. 

Coordination problems are generally reported to have decreased after initial 

implementation, although negotiations with contractors and collaboration with clerks of 

court continue to cause concerns for several States. Interestingly, securing adequate 

funding is the only problem that managers report has increased in severity after startup. 

Managers suggest that initial SDU funding requests may have underestimated SDU 

staffing and funding needs, with managers only realizing all associated costs after 

operating their SDU for a period of time. Some managers report involving all key 

players in the initial planning stages for an SDU, and many formed work groups made 

up of representatives from local child support offices, clerks of court, and employers. 

These work groups discussed potential problems, and were often given the opportunity 

to influence the design of SDU operations based on their needs and concerns. 

SDUs: State Implementation Progress 8 OEI 06-00-00040 
Poorly Labeled Payments 

Thirty States report continuing problems with identifying payments that are poorly or 

incorrectly labeled by payers (Table 5). To allow automated procedures to match a 

payment to a case, payments processed through SDUs must include identifying 

information about the case, such as a case number, so the payment can be correctly 

applied. Managers report that when centralized processing first started, many payments 

omitted needed information or contained inaccurate information, possibly because 

payers had not previously been required to submit this information with each payment. 

When previously processed through local offices, staff often could correct payer errors 

or omissions. However, automated SDU systems are not designed for such 

individualized processing. To reduce the number of payments with incomplete or 

inaccurate case information, some States provide employers and noncustodial parents 

with remittance notices or billing statements that may be returned with each payment, 

similar to those used by credit card companies to ensure payments are posted to the 

proper account. However, because child support is sometimes paid weekly or by pay 

period, instead of once a month, the use of remittance notices is more complicated. 

Many States also make additional efforts to educate payers about what information 

must be included with each payment to ensure proper posting. While managers report 

some improvements in payment labeling, the severity of this problem appears not to 

have declined substantially after startup. 

Lack of Automated Case Information 

A related problem involves receiving payments for which no case information exists in 

the SDU’s database. At startup, managers in some States report this occurred because 

the database used by SDUs was not yet fully populated with information from local 

clerks of court or child support offices. States report making significant conversion 

efforts to get all local information into the SDU database prior to centralization. Most 

States that converted or transferred case information from local entities to the SDU 

either set up an automated data merge, or created manual procedures in which staff 

worked at local offices to record case information, and entered that data into the SDU 

database. Managers report that both methods had inherent problems that allowed 

some cases to be missed or improperly converted. Conversion was reportedly more 

difficult in some States that maintain separate processing systems for non-public 

assistance cases, because staff had to make decisions about which cases should be 

converted and which should remain for local processing. Beyond conversion, case 

information may be absent from SDU databases because of delays in entering new 

case information. Many SDUs rely on local staff and clerks of court to add new cases to 

the system, yet managers report payments are sometimes received before data entry 

occurs. Disbursement of these payments may be delayed until case information is 

added to the database. A number of States report that getting new case information 

into the SDU database continues to be a challenge. 

Payments Mailed to the Wrong Location 

At startup, States used a variety of methods to notify payers where and when to begin 

sending payments to the SDU rather than to a local jurisdiction. However, managers 

report that many payers initially failed to make this change, and States had not 

prepared sufficiently to handle misdirected payments. Some States implemented 

SDUs: State Implementation Progress 9 OEI 06-00-00040 
procedures to continue to process misdirected payments locally, while others forwarded 

them to the SDU. However, each of these methods had the potential to delay 

disbursements to families. Managers also report that instead of processing misdirected 

payments or forwarding them to the SDU, a few local entities returned payments to 

payers, causing more extensive delays in disbursement. While managers from 21 

States report that processing payments mailed to the wrong location continues to pose 

problems for their SDU, the severity of this problem appears to decline considerably 

after startup. 

Table 5: SDU OPERATIONAL PROBLEMS 

Problem Startup 

States with 

Problems 

Continuing 

States with 

Problems 

Severity of 

Problem* 

Identifying poorly labeled payments 28 (78%) 30 (86%) Decreased 9% 

Identifying payments with no case in system 27 (75%) 30 (86%) Decreased 20% 

Re-directing payments mailed to wrong place 26 (72%) 21 (60%) Decreased 34% 

Meeting customer service demands 26 (72%) 25 (71%) Decreased 21% 

Securing, training and retaining staff 22 (61%) 21 (60%) Decreased 30% 

Disbursing support within 2 business days 19 (53%) 11 (31%) Decreased 64% 

Predicting volume for staffing purposes 18 (50%) 14 (40%) Decreased 37% 

Monitoring SDU performance 14 (39%) 11 (34%) Decreased 33% 

Percentages based on the number of respondents to each question. 

* Using State responses regarding the severity of each problem. Percentages reflect a weighted scale based upon State 

description of problems as major, moderate, or minor, during and after startup. See Appendix A. 

Customer Service Demands 

Managers primarily identify responding to inquiries and complaints as a startup 

problem, but customer service demands continue to challenge many States. 

Implementation of SDUs often changed the method through which States respond to 

inquiries and complaints regarding payments. These questions and complaints primarily 

come from parents, but may also be raised by other entities, such as local child support 

offices or employers. States appear to have experienced a high demand for customer 

service response at startup, due to confusion and delays caused by changes in 

payment procedures. Managers in 26 States report that meeting customer service 

demands was a problem at startup. For most of these States, meeting customer service 

demands continues to be a concern even after fully implementing their SDU, although 

the severity of the problem has diminished somewhat. States that experienced initial 

difficulty in meeting customer service needs report increasing staff and streamlining 

methods for responding to calls. They also focused on timely payment processing, 

reasoning that a more successful system would reduce the likelihood of inquiries and 

complaints. Many States also appear to use performance indicators to evaluate the 

customer service process, such as tracking the average time customers wait on hold 

during a call to the centralized customer service center. Others have conducted surveys 

SDUs: State Implementation Progress 10 OEI 06-00-00040 
of parents and employers to help anticipate ongoing needs and continue to conduct 

outreach to ensure that customers are informed about service options and points of 

contact. 

Staffing Issues 

About half of States with operating SDUs report problems with securing, training and 

retaining staff, and with accurately predicting payment volume in order to project 

staffing needs. Ensuring adequate staffing of SDUs is sometimes problematic because 

the jobs are typically not high paying, the duties are somewhat monotonous, and the 

work hours can be unusual. For instance, some SDUs have shifts beginning at 3 AM, 

while others operate on both Saturday and Sunday. Because training new staff is 

reportedly costly and time-consuming, and experienced workers make fewer errors in 

processing payments, managers report a variety of efforts to keep their employees 

motivated, such as providing performance incentives. Predicting payment volume can 

be difficult because of day-to-day variation in the number of payments received. Some 

days, such as most Mondays and days just after the first of the month, have typically 

high volume because of the timing of employer pay periods, but even volume on these 

days may vary. 

STATE ASSESSMENTS OF DISBURSEMENT UNITS 

Overall Assessment 

Based on monitoring and experience, program managers in a majority of the 38 States 

which report they have fully implemented SDUs perceive that centralized processing 

has resulted in improvements on each of seven performance indicators (Figure 2). 

While some managers report that centralization immediately resulted in improvements, 

others feel that their State realized improvements only after startup problems were 

resolved. Managers in over 60 percent of States with operating SDUs cite 

improvements in payment processing speed, service to both custodial and noncustodial 

parents, and in minimizing the burden on employers. 

Payment Processing Speed 

Most managers believe their fully-implemented SDUs have improved payment 

processing speed, and nearly all report disbursing payments within two business days. 

The highest number of managers (27) report SDU implementation has resulted in 

improvements in payment processing speed, but a third of these (9) report they did not 

realize improvements in timeliness until after their initial startup period. In fact, 34 

managers report their SDU currently meets or exceeds the requirement to disburse 

child support payments within two business days, and 15 States report that, on 

average, payments are disbursed within only one business day of receipt. Some States 

achieve this performance by including tougher processing and disbursement time 

standards upon contractors. 

SDUs: State Implementation Progress 11 OEI 06-00-00040 
Figure 2: PERCEIVED IMPROVEMENT RESULTING FROM 

SDU IMPLEMENTATION 

12 

11 

14 

14 

16 

18 

18 

3 

5 

4 

6 

5 

5 

9 

11 

9 

7 

10 

6 

4 

7 

2 

4 

6 

1 

5 

5 

1 

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 

TRACKING CASE ACTIVITY 

OVERALL COST OF OPERATIONS 

UNDISTRIBUTED PAYMENTS 

BURDEN ON EMPLOYERS 

SERVICE TO NONCUSTODIAL PARENTS 

SERVICE TO CUSTODIAL PARENTS 

PAYMENT PROCESSING SPEED 

Responses of 38 States reporting fully-implemented SDUs. 

Percentages based on the number of responses to each question. 

Better Better, Following Startup Little Difference Worse 

Service to Parents 

About two-thirds of managers believe their fully-implemented SDUs have improved 

service to parents. A concern of many familiar with child support enforcement is that 

customer service to parents might suffer due to centralized payment processing, but 

Staff who process payments in local child support and clerks of court offices often know 

many parents, have direct access to payment information and, reportedly, often provide 

highly personalized service. Managers report that some local staff use this case 

knowledge to identify poorly-labeled payments and to assist parents in dealing with 

situations of payment delays, job changes, and needs for new income withholding 

documents. Some are concerned that customer service might suffer because 

automated systems are not designed for such individualized case management. 

However, survey responses indicate that most State managers who compared 

customer service before and after SDU implementation believe their fully-implemented 

SDUs have improved service to parents. Among States reporting improvements, at 

least a quarter note that improvement was realized only after the startup period, 

possibly because parents needed to become accustomed to new systems and points of 

contact. 

SDUs: State Implementation Progress 12 OEI 06-00-00040 
Burden on Employers 

About two-thirds of managers believe fully-implemented SDUs ease the burden on 

employers, yet some perceive their SDU has made little difference to employers. One 

of the primary objectives of centralization is to ease the burden on employers in 

complying with income withholding orders by providing them with a single place to send 

payments in each State. While SDU managers in 20 States with operating SDUs 

believe centralization has eased the burden on employers, managers from 10 States 

perceive their SDU implementation had little effect on employers. In States only 

processing the Federally-specified caseload through their SDU, managers explain that 

employer burden may not decrease since only a portion of their employees’ cases are 

centralized. These systems require employers to send payments to “one more place, 

instead of only one place” as one manager said. Other managers express a belief that 

sending payments to a number of addresses was not particularly burdensome on 

employers, and thus, centralization may have had little effect. 

Undistributed Payments 

While more than half of managers believe undistributed payments have decreased 

since their SDU was fully-implemented, some report increases in undistributed 

payments. Managers in 18 States believe their SDU has helped minimize undistributed 

payments relative to previous local processing. However, six managers perceive their 

SDUs have contributed to increases in undistributed payments. Based on tracking, 

managers report that because of the large number of unidentifiable payments when 

States first centralize processing, undistributed payments tend to increase at startup, 

then decline as payments are identified through research. In some States, SDU 

managers indicate they could not divert sufficient staff from payment processing to 

researching unidentified payments, especially during the early weeks of centralized 

processing. 

SUMMARY 

A majority of States are currently processing payments centrally and all but one of the 

remaining States plan to implement their SDU by 2001. SDUs appear to have helped 

States improve program operations by taking advantage of the efficiencies of 

automated processing of a large number of payments on a daily basis. Most States 

report they are meeting the Federal requirements by disbursing the vast majority of 

payments within two business days, providing employers with a single location to mail 

income withholding payments, and providing parents with ready access to payment 

information. However, almost all States report experiencing significant difficulties during 

the early stages of their SDU implementation, and many States have yet to realize all 

the program improvements potentially attainable through centralized payment 

processing. 

In conducting this study, our objective was to systematically gather information about 

the perceptions and experiences of SDU program managers so it could be shared 

among all States as they cope with the new centralization requirements. We hope this 

report will be useful to policy makers and State administrators as they implement and 

refine their SDUs. 

SDUs: State Implementation Progress 13 OEI 06-00-00040 
We offer further analysis and recommendations about SDUs, their implementation, 

problems encountered, potential solutions, and keys to successful operations, in our 

companion report, States Disbursement Units: Sharing the Implementation Experiences 

of Six States, OEI 06-00-00041. 

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 B. 

SDUs: State Implementation Progress 14 OEI 06-00-00040 
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.Hereafter, this report groups the District of Columbia, Puerto Rico, and the Virgin Islands with 

the 50 States. 

6.We interviewed local Clerks of Court in Arizona, Florida, Iowa, Pennsylvania, and 

Tennessee. In Minnesota, we interviewed local child support office staff. 

7.Indiana, South Carolina, and Wyoming received Federal waivers to link local disbursement 

units. 

8.Arkansas, Georgia, Kentucky, and Oklahoma report their SDUs are centrally processing 

payments of many cases, but have yet to include a significant portion of the Federally-required 

caseload. Michigan and Nevada were granted extensions to implement their SDU by October 

1, 2000 and October 1, 2001, respectively. Alabama, California, Kansas, Nebraska, Ohio, and 

Texas report they have not yet begun centralized payment processing. 

9.We did not specify a time frame for startup in our survey. We estimate State respondents 

may have considered “startup” to last between three and twelve months, depending upon 

whether they implemented their SDU all at once or incrementally. 

SDUs: State Implementation Progress 15 OEI 06-00-00040 
APPENDIX A A - 1 

Table A-1: PROBLEMS COORDINATING 

WITH PAYERS AND OTHER ENTITIES 

Startup Problems Continuing Problems 

Severity 

Total Major Moderate Minor Total Major Moderate Minor Of Problem

Getting checks mailed to SDU by parents 24 5 10 9 21 0 8 13 Decreased 34% 

Coordinating with employers 22 9 6 7 20 3 8 9 Decreased 26% 

Notifying employers and parents of changes 20 7 8 5 17 2 5 10 Decreased 38% 

Securing necessary funding 17 2 10 5 19 6 11 2 Increased 35% 

Coordinating with clerks of court 14 6 4 4 12 4 3 5 Decreased 23% 

Gaining necessary State legislative authority 14 3 6 5 6 2 3 1 Decreased 50% 

Negotiating acceptable terms with 

contractors 

12 1 7 4 12 0 7 5 Decreased 10% 

Coordinating with local child support offices 13 1 4 8 7 0 0 7 Decreased 63% 

Tables A-1 and A-2 present SDU program manager responses about problems encountered during startup stages of SDU implementation, as well as 

continuing problems. Respondents ranked problems as major, moderate or minor. To allow comparison between these time periods, we gave a 

numerical value to each degree of problem. As shown in the example below, we gave the response “major problem” a value of 3, “moderate 

problem” a value of 2, and “minor problem” a value of 1. We then summed the values for each time period, subtracted the value of the continuing 

period from value for the startup period, and calculated a percentage decrease (or increase) in perceived severity of each problem. 

EXAMPLE: Getting Checks Mailed to SDU by Parents 

Startup Problem Continuing Problem 

Major Problem: 5 States x 3 = 15 Major Problem: 0 x 3 = 0 

Moderate Problem: 10 States x 2 = 20 Moderate Problem: 8 x 2 = 16 

Minor Problem: 9 States x 1 = 9 Minor Problem: 13 x 1 = 13 

Total Value: 44 29 

Percent Change: 44 - 29 = 15 15/44 = 34% Decrease 
APPENDIX A A - 2

Table A-2: OPERATIONS PROBLEMS Startup Problems Continuing Problems 

Severity 

Total Major Moderate Minor Total Major Moderate Minor Of Problem

Identifying poorly labeled payments 28 10 7 11 30 7 6 17 Decreased 9% 

Identifying payments with no case in system 27 12 3 12 28 3 9 16 Decreased 20% 

Redirecting checks mailed to the wrong 

location 

26 7 10 9 21 2 8 11 Decreased 34% 

Meeting customers service demands 26 13 5 8 25 6 8 11 Decreased 21% 

Securing, training and retaining staff 22 6 10 6 21 1 8 12 Decreased 30% 

Meeting the 48 hour disbursement 

requirement 

19 3 8 8 8 1 2 5 Decreased 64% 

Predicting payment volume for staffing 

purposes 

18 4 4 10 14 0 5 9 Decreased 37% 

Monitoring the performance of the SDU 14 3 4 7 11 2 1 8 Decreased 33% 
APPENDIX B B - 1
APPENDIX B B - 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 focused 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 SDUrelated problems, and they work directly with Federal agency

payroll officials, as described below in response to the

recommendation regarding Federal government payers.
APPENDIX B B - 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 B B - 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 redirect 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 redirection 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

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
APPENDIX B B - 5 

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.