United States General Accounting Office

GAO Fact Sheet for the Chairman, Committee

on the Budget, House of Representatives

November 1995 CHILD SUPPORT

ENFORCEMENT

States and Localities

Move to Privatized

Services

GAO/HEHS-96-43FS

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-270169 

November 20, 1995

The Honorable John R. Kasich

Chairman, Committee on the Budget

House of Representatives

Dear Mr. Chairman:

Facing budgetary and staffing constraints and increasing federal

performance standards, state child support enforcement programs are

struggling to serve their ever-increasing caseloads. As states confront the

need to improve their services to the public, many are turning to the

private sector to augment their child support enforcement programs.

While states continue to expand these public and private partnerships,

little is known nationally about such efforts. In May 1995, you asked us to

develop information on these privatization initiatives. Specifically, you

asked us to determine (1) the extent of, rationale for, and perceived

advantages and disadvantages of privatizing child support functions;

(2) the terms of these contracts; (3) the legal issues surrounding

privatization; and (4) what is known about the cost effectiveness of these

efforts.

In August 1995, we briefed your staff on the status of our ongoing work.

Subsequently, in response to inquiries from officials of the Department of

Health and Human Services (HHS) and several states about our inventory of

state privatization efforts, you asked us for an interim report on that

information. This fact sheet contains an inventory of ongoing and planned

state contracts for location services, collections, payment processing, and

full-service programs as of October 1995.1

We gathered this information by visiting and interviewing child support

officials and contractors in Georgia, Maryland, Mississippi, Tennessee, and

Virginia. We also interviewed by telephone child support officials and

contractors in the remaining states and gathered additional data through

our analysis of child support contracts. Our inventory of child support

contracts may not be complete, because where programs are

state-supervised but locally administered, state officials said that they

were not always fully aware of local privatization efforts.

1

We focused on these services because of recent increases in the number of contracts for such services

and their direct relationship to the collection of child support. We did not include services traditionally

contracted out such as genetic testing, legal services, and automated systems, nor did we include

contracts solely for paternity acknowledgement or customer service.

Page 1 GAO/HEHS-96-43FS Child Support Privatization Initiatives
B-270169 

In summary, we found that one or more child support services are

privatized statewide in 20 states and at the local office level in 18 states

(see app. I).2

 We identified 21 contracts for full-service child support

operations, about half of which are served by one of two major

contractors. We also identified 40 other contracts for collections and

related location services; four major contractors provide most of these

services. Finally, there are nine contracts for payment processing services

and eight contracts for location services only. Appendix II contains

detailed information about these contracts, including the contractor,

contract terms, and the types of services provided. Appendix III contains a

list of related GAO products on child support enforcement.

Agency Comments We discussed this report with HHS’ Office of Child Support Enforcement

officials who generally agreed with the data presented. They provided

technical comments on the data, which we have incorporated as

appropriate.

We will send copies of this fact sheet to the Chairmen of the Senate

Committee on Finance and the House Subcommittee on Human

Resources, Committee on Ways and Means; the Secretary of HHS; and HHS’

Assistant Secretary for Children and Families. We will also make copies

available to others on request.

2

Three new contracts are planned to be awarded in two states that have existing privatization

contracts and at least five new contracts are planned to be awarded in four states that have no

privatization contracts. Five of the current states with contracts have privatized services at both the

statewide and local levels.

Page 2 GAO/HEHS-96-43FS Child Support Privatization Initiatives
B-270169 

We will continue to keep you and your office informed of our progress in

reviewing the costs and outcomes of state privatization initiatives. If you

or your staff have any questions about this fact sheet, please contact David

P. Bixler, Assistant Director, at (202) 512-7201 or Kevin M. Kumanga,

Senior Evaluator, at (202) 512-4962. Other major contributors to this fact

sheet include Gerard V. Grant, Christopher Morehouse, and Suzanne S.

Sterling.

Sincerely yours,

Jane L. Ross

Director, Income Security Issues

Page 3 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Contents

Letter 1

Appendix I 

Statewide or Local

Child Support

Privatization

Initiatives as of

October 1995

6

Appendix II 

Contract Information

on State and Local

Child Support

Privatization

Initiatives Ongoing or

Planned as of October

1995

7

Related GAO Products 16

Abbreviations

AFDC Aid to Families With Dependent Children

HHS Department of Health and Human Services

Page 4 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Page 5 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Appendix I 

Statewide or Local Child Support

Privatization Initiatives as of October 1995

None Underway

Locations, Collections, or Payment Processing

Full Service

Full Service and Other Functions

Page 6 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Appendix II 

Contract Information on State and Local

Child Support Privatization Initiatives

Ongoing or Planned as of October 1995

Privatized services

Full

servicea

Locate

only Collectionsb

Payment

processing Contractor

Start date

(contract

lengthc)

Payment

termsd, e

Type of cases

servedf

Alabama

17 of 67 counties X To be

awarded

(2.5 years) Aid to Families

With Dependent

Children

(AFDC) arrears

Arizona

Apache, Coconino,

Graham, Greenlee,

Maricopa, Mohave, and

Yuma Counties

X RSI

Enterprises,

Inc.

5/94

(4 years)

Variable rates

each year

based on

performance

All

Apache, Coconino,

Graham, Greenlee,

Maricopa, Mohave, and

Yuma Counties

X Equifax

Accounts

Receivable

Service

6/94

(4 years)

Variable rates

each year

based on

performance

All

Santa Cruz and Yavapai

Counties

Xg Policy

Studies, Inc.

(PSI)

3/94

(4 years)

32-24 percenth All

Arkansas

Jefferson County X Hunt Law

Firm

9/95

(1.8 years)

Fixed fee of

$810,000,

reimbursable

expenses up to

$490,000 plus

incentives

All

Greene County X Greene

County Child

Support

Enforcement,

Inc.

9/95

(1.8 years)

Fixed fee of

$175,000,

reimbursable

expenses up to

$290,000 plus

incentives

All

Garland County X Owen

Support

Services, Inc.

7/95

(2 years)

Fixed fee of

$390,000,

reimbursable

expenses up to

$460,000 plus

incentives

All

Craighead County X Brent Davis,

Esq.

7/95

(2 years)

Negotiated

contracti

All

3rd Judicial District X Randolph

Co.,

Judge/Multi

Services, Inc.

7/95

(2 years)

Negotiated

contracti

All

(continued)

Page 7 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Appendix II 

Contract Information on State and Local

Child Support Privatization Initiatives

Ongoing or Planned as of October 1995

Privatized services

Full

servicea

Locate

only Collectionsb

Payment

processing Contractor

Start date

(contract

lengthc)

Payment

termsd, e

Type of cases

servedf

14th Judicial District X Multi

Services, Inc.

7/95

(2 years)

Fixed fee of

$300,000

reimbursable

expenses up to

$330,000

All

California

Los Angeles County X Lockheed

Martin IMS

7/95

(5 years)

Fixed fee of

$15.3 million

plus incentives

All

Colorado

Statewide X Lockheed

Martin IMS

8/91 

(5.5 years)

Fixed fee of

$8.75 million

All

El Paso County X Maximus 1/96

(5 years)

19-10 percenth All

Mesa County X Lockheed

Martin IMS

2/95

(11

months)

Negotiated

contracti

All

Mesa County X Technical

Management

Resources

(TMR)

2/95

(11

months)

Negotiated

contracti

All

Rio Blanco County X Colorado

Child

Support

Services,

Inc. (CCSSI)

1/95

(1 year)

16 percentj AFDC arrears

Delta County X CCSSI 6/95

(7 months)

16 percent AFDC arrears

Archuleta County X CCSSI 5/95

(7 months)

Negotiated

contracti

AFDC arrears

and some

current AFDC

Las Animas County X CCSSI 4/95

(8 months)

Negotiated

contracti

AFDC and

non-AFDC

arrears

Connecticut

Statewide X Lockheed

Martin IMS

10/95

(3 years)

23.75 percentk Closed AFDC

cases

Statewide X Shawmut

Bank

6/95

(5 years)

Variable fee per

service

All

Florida

Statewide (2 contracts) X To be

awarded

11/95

(1 year)

AFDC and

non-AFDC

arrears

(continued)

Page 8 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Appendix II 

Contract Information on State and Local

Child Support Privatization Initiatives

Ongoing or Planned as of October 1995

Privatized services

Full

servicea

Locate

only Collectionsb

Payment

processing Contractor

Start date

(contract

lengthc)

Payment

termsd, e

Type of cases

servedf

Georgia

Statewide X GC Services

Limited

Partnership

(GC Services)

1995

(3 years)

7.89 percent AFDC arrearsl

Statewide X Lockheed

Martin IMS

3/94

(2.3 years)

$46.50 per

location

At staff

discretion

Fulton County Xg Child

Support

Services of

Georgia

(Policy

Studies, Inc.)

7/94

(5 years)

11.5-10 percenth All non-AFDC

Hawaii

Statewide X Lockheed

Martin IMS

10/95

(1 year)

Fixed fee plus

volume

adjustments

All

Idaho

Statewide X Equifax

Credit

Information

Services

11/93

(4 years)

21 percent AFDC arrears

on closed cases

Illinois

Statewide X Lockheed

Martin IMS

7/94

(2 years)

Negotiated

contracti

AFDC and

non-AFDC

arrears

Statewide X GC Services 7/94

(2 years)

Negotiated

contracti

AFDC and

non-AFDC

arrears

Statewide X Hanover

Credit

7/94 

(2 years)

Negotiated

contracti

AFDC and

non-AFDC

arrears

Statewide X Harvard

Collection

Services

7/94 

(2 years)

Negotiated

contracti

AFDC and

non-AFDC

arrears

Statewide X Midwest

Account

Consultants

7/94

(2 years)

Negotiated

contracti

AFDC and

non-AFDC

arrears

Indiana

Marion County X Trans Union 1993 Negotiated

contracti

At staff

discretion

Marion County X TRW 1993 Negotiated

contracti

At staff

discretion

Marion County X Associated 1993 Negotiated

contracti

At staff

discretion

(continued)

Page 9 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Appendix II 

Contract Information on State and Local

Child Support Privatization Initiatives

Ongoing or Planned as of October 1995

Privatized services

Full

servicea

Locate

only Collectionsb

Payment

processing Contractor

Start date

(contract

lengthc)

Payment

termsd, e

Type of cases

servedf

Iowa

To be determined

(local office level)

X To be

awarded

11/95 All intrastate

cases for

paternity and

support order

establishment

only

Kansas

Statewide X GC Services 12/93

(5 years)

17 percent All

Maryland

Statewide X GC Services 12/94 12.85 percent AFDC and

non-AFDC

arrears

Baltimore County X To be

awarded

11/96

(3 years)

All

Queen Anne County X To be

awarded

11/96

(3 years)

All

Baltimore City X Nations Bank 1989 Variable fee per

service

All

Massachusetts

Statewide X Shawmut

Bank

10/95

(3 years)

Variable fee per

transaction

All

Statewide X Lockheed

Martin IMS

10/92

(3 years)

Negotiated

contracti

AFDC and

non-AFDC

arrears

Statewide X GC Services 10/92

(3 years)

Negotiated

contracti

AFDC and

non-AFDC

arrears

Michigan

Bay County

Friend of the Court

X David M.

Griffith &

Associates

1/95 20 percent AFDC,

non-AFDC, and

service fee

arrears

Branch County 

Friend of the Court

X David M.

Griffith &

Associates

8/92 Negotiated

contracti

AFDC,

non-AFDC, and

service fee

arrears

Cass County 

Friend of the Court

X David M.

Griffith &

Associates

1/92 Negotiated

contracti

AFDC,

non-AFDC, and

service fee

arrears

(continued)

Page 10 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Appendix II 

Contract Information on State and Local

Child Support Privatization Initiatives

Ongoing or Planned as of October 1995

Privatized services

Full

servicea

Locate

only Collectionsb

Payment

processing Contractor

Start date

(contract

lengthc)

Payment

termsd, e

Type of cases

servedf

Emmet County

Friend of the Court

X David M.

Griffith &

Associates

10/93 Negotiated

contracti

AFDC,

non-AFDC, and

service fee

arrears

Iosco/Oscoda County

Friend of the Court

X David M.

Griffith &

Associates

6/92 Negotiated

contracti

AFDC,

non-AFDC, and

service fee

arrears

Midland County

Friend of the Court

X David M.

Griffith &

Associates

5/95 20 percent AFDC,

non-AFDC, and

service fee

arrears

Minnesota

Statewide X Lockheed

Martin IMS

12/94

(4 years)

16 percent All non-AFDC

arrears;

interstate AFDC

arrears

Mississippi

Hinds and Warren

Counties

X Maximus 7/94

(5 years)

40.1-27.6

percenth, m

All

Missouri

Statewide X GC Services 7/94

(3 years)

9.9 percent AFDC arrears

Nebraska

Douglas County X PSI 2/93 

(5 years)

15-13 percenth All

Nevada

Statewide X GC Services 3/94

(2 years)

20 percentn AFDC arrears

New Hampshire

Statewide X Credit

Bureau

Services of

New

Hampshire

7/94

(2 years)

Variable fee per

serviceo

All

New Mexico

Statewide X GC Services 11/93

(3 years)

22 percentp AFDC arrearsq

Statewide X CRW (TRW) 2/94

(2 years)

21 percentp AFDC arrearsq

New York

Statewider X Lockheed

Martin IMS

1/93

(3 years)

Fixed fee of

$6.3 million

All

(continued)

Page 11 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Appendix II 

Contract Information on State and Local

Child Support Privatization Initiatives

Ongoing or Planned as of October 1995

Privatized services

Full

servicea

Locate

only Collectionsb

Payment

processing Contractor

Start date

(contract

lengthc)

Payment

termsd, e

Type of cases

servedf

New York City X Equifax 3/94

(3 years)

Variable fee per

services

All

North Carolina

Sixteen state run

programs

X Educational

Recovery

Services (GC

Services),

PaycoGeneral

American

Credit, and

A.M. Miller

and

Associates

12/95t

(1.5 years)

19, 18.4, and 20

percent,

respectively

AFDC and

non-AFDC

arrears

Ohio

Huron County X David M.

Griffith &

Associates

10/94

(2 years)

Fixed fees per

service: $14.84

per location.

$10.63 per

collectionu

AFDC and

non-AFDC

arrears

Clark County X David M.

Griffith &

Associates

7/95

(6

months)v

15 percent At county

discretion

Lawrence County X GC Services 7/95

(6

months)v

18 percent At county

discretion

Lucas County X United

Creditors

Alliance

Corp.

7/95

(6

months)v

23.5 percentw

+ $45

per location

At county

discretion

Oklahoma

Pittsburg County, Haskell

County

X Kibois

Community

Action

Foundation

(nonprofit)

1993

(4 years)

CostreimbursementAll

Comanche County,

Cotton County

X Great Plains

Improvement

Foundation

(nonprofit)

1993

(4 years)

CostreimbursementAllx

Pennsylvania

Dauphin County X David M.

Griffith &

Associates

8/93

(3 years)

Negotiated

contracti

AFDC and

non-AFDC

arrears

(continued)

Page 12 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Appendix II 

Contract Information on State and Local

Child Support Privatization Initiatives

Ongoing or Planned as of October 1995

Privatized services

Full

servicea

Locate

only Collectionsb

Payment

processing Contractor

Start date

(contract

lengthc)

Payment

termsd, e

Type of cases

servedf

Tennessee

District 7 Xg Maximus 7/92

(5 years)

16 percent All

District 20 Xg Maximus 7/93

(5 years)

12-10.5 percenth All

District 10 Xg PSI 7/91

(5 years)

13.5 percent

fixed

All

District 29 Xg PSI 2/92

(5 years)

19-15 percenth All

District 27 Xg PSI 1/95

(5 years)

17-14 percenth All

Texas

Statewide X Lockheed

Martin IMS

9/93

(4 years)

13.24 percent AFDC and nonAFDC arrearsq

Utah

Statewide X Lockheed

Martin IMS

12/94

(3 years)

13.95 percent

+ $46.50 per

location

AFDC arrears

Vermont

Statewide X Vermont

National Bank

1/95

(1.5 years)

Variable fee by

type and

volume of

transactiony

All

Virginia

Statewide X GC Services 6/95

(1 year)

20 percent AFDC and

non-AFDC

arrears

Hampton and

Chesapeake District

Offices

X Lockheed

Martin IMS

2/94

(5 years)

10 percentz All

Alexandria/Arlington/

Falls Church

X To be

awarded

All

Washington

Statewide X To be

awarded

AFDC arrears

West Virginia

Statewide X One Valley

Bank

7/95

(5 years)

Variable fee by

type of

transaction plus

cost

reimbursement

All

(continued)

Page 13 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Appendix II 

Contract Information on State and Local

Child Support Privatization Initiatives

Ongoing or Planned as of October 1995

Privatized services

Full

servicea

Locate

only Collectionsb

Payment

processing Contractor

Start date

(contract

lengthc)

Payment

termsd, e

Type of cases

servedf

Wyoming

Districts 1,2,3 Xg PSI 6/95

(4 years)

17.5-16 percenth All

Districts 8,9 X Gray &

Associates

5/95

(4 years)

$724,000

+ 8 percent of

collections over

$2.5 million

All

Note: We did not identify planned or ongoing contracts in 13 states and the District of Columbia.

The 13 states are Alaska, Delaware, Kentucky, Louisiana, Maine, Montana, New Jersey, North

Dakota, Oregon, Rhode Island, South Carolina, South Dakota, and Wisconsin.

aFull service includes location, paternity and support order establishment, payment processing,

and collections.

bCollections and related location services.

cLength of contract can include possible annual renewals.

dUnless otherwise noted, payment terms are expressed as a percentage of contractor-generated

collections.

ePayment terms vary, depending on factors such as volume, quality, type of cases referred, and

use of multiple or single contractors.

f

Arrears may be defined differently in each jurisdiction (for example, no voluntary payment in 90

days or 6 months).

gState performs payment processing.

hFirst figure is the payment figure for the contract’s first year; second figure is the rate reached by

the end of the contract period.

i

Payment terms of negotiated contracts are not disclosed because they are considered private

information.

j

Total cost of contract capped at $3,000.

k

Total cost of contract capped at $2.95 million.

l

Cases referred to the contractor are primarily AFDC arrears, but may also include any type of

case, since referral is made at the discretion of state staff.

mTerms are based on statewide operation of full-service programs that have not yet been

implemented and are pending legislative approval. In addition, contractor received $2.98 million

for start-up costs between April and June 1994 and $14,180,262 as a flat fee for the first 15

months. Currently, contractor receives $400,000 a month plus incentives for operating the two

programs shown.

nTotal cost capped at $75,000 in fiscal year 1994 and $125,000 in fiscal year 1995.

oTotal cost capped at $10,000 in fiscal year 1995 and $16,000 in fiscal year 1996.

Page 14 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Appendix II 

Contract Information on State and Local

Child Support Privatization Initiatives

Ongoing or Planned as of October 1995

pTotal cost of contract capped at $225,000.

qCaseload includes some cases that are not in arrears.

r

Counties have been phased in over the life of the contract; Lockheed reached full statewide

coverage in March 1995.

s

Total cost of contract capped at $5,115,000.

t

Date of first referral of child support cases to a contractor who currently has a contract with the

state attorney general for collections.

uTotal cost of contract capped at $9,999.

v

This effort is a pilot.

wTotal cost of contract capped at $10,000.

x

Contract excludes incoming interstate cases.

y

Total cost of contract capped at $150,000.

z

Contract includes a performance guarantee, reducing contractor’s revenue by 10 percent per

month for failure to meet certain goals.

Source: Interviews with state officials and contractors; contracts and other documents obtained

by GAO.

Page 15 GAO/HEHS-96-43FS Child Support Privatization Initiatives
Related GAO Products

Child Support Enforcement: Opportunity to Reduce Federal and State

Costs (GAO/T-HEHS-95-181, June 13, 1995).

Child Support Enforcement: Families Could Benefit From Stronger

Enforcement Program (GAO/HEHS-95-24, Dec. 27, 1994).

Child Support Enforcement: Federal Efforts Have Not Kept Pace With

Expanding Program (GAO/T-HEHS-94-209, July 20, 1994).

Child Support Enforcement: Credit Bureau Reporting Shows Promise

(GAO/HEHS-94-175, June 3, 1994).

Child Support Enforcement: States Proceed With Immediate Wage

Withholding; More HHS Action Needed (GAO/HRD-93-99, June 15, 1993).

Child Support Assurance: Effect of Applying State Guidelines to

Determine Fathers’ Payments (GAO/HRD-93-26, Jan. 23, 1993).

Child Support Enforcement: Timely Action Needed to Correct System

Development Problems (GAO/IMTEC-92-46, Aug. 13, 1992).

Medicaid: Ensuring That Noncustodial Parents Provide Health Insurance

Can Save Costs (GAO/HRD-92-80, June 17, 1992).

Child Support Enforcement: Opportunity to Defray Burgeoning Federal

and State Non-AFDC Costs (GAO/HRD-92-91, June 5, 1992).

Interstate Child Support: Wage Withholding Not Fulfilling Expectations

(GAO/HRD-92-65BR, Feb. 25, 1992).

Interstate Child Support: Mothers Report Less Support From Out-of-State

Fathers (GAO/HRD-92-39FS, Jan. 9, 1992).

Interstate Child Support Enforcement: Computer Network Contract Not

Ready to Be Awarded (GAO/IMTEC-92-8, Oct. 23, 1991).

(106607) Page 16 GAO/HEHS-96-43FS Child Support Privatization Initiatives
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