United States General Accounting Office 

GAO the Budget, House of Representatives

Report to the Chairman, Committee on 

December 1996 CHILD SUPPORT


ENFORCEMENT


Early Results on 

Comparability of 

Privatized and Public 

Offices 

G A O 

years 

1921 - 1996 

GAO/HEHS-97-4


United States


General Accounting Office
 GAO Washington, D.C. 20548


Health, Education, and 

Human Services Division 

B-270419 

December 16, 1996 

The Honorable John R. Kasich 

Chairman, Committee on the Budget 

House of Representatives 

Dear Mr. Chairman: 

Since 1984, state child support enforcement programs have been 

challenged by a 150-percent increase in the demand for services. In fiscal 

year 1995, the number of cases rose to about 20 million and collections of 

child support reached a record high of nearly $11 billion. While faced with 

this unprecedented workload, child support programs continue to 

confront state budgetary constraints and increasing federal requirements 

for mandated services under a series of child support reforms. For 

example, the recent welfare reform legislation—the Personal 

Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 

104-193, Aug. 22, 1996)—requires states to establish automated registries 

of child support orders and directories of newly hired employees to track 

and locate parents owing support. To meet these growing demands, many 

states are moving to privatize child support enforcement services that 

have traditionally been delivered by the public sector. In some places, 

states have contracted with private sector firms to assume all local child 

support services, which we refer to as full-service privatization. 

This report responds to your request for information on states’ efforts to 

fully privatize local offices. Specifically, it addresses (1) states’ rationale 

for full-service privatization; (2) how the performance and costeffectiveness of full-service privatization efforts compare with publicly 

managed child support enforcement; and (3) what, if any, issues could 

affect future full-service privatization contracts. 

To determine states’ rationale for privatization, we interviewed child 

support officials in the 12 states with 21 local full-service privatization 

contracts identified in our November 1995 report.1

 To analyze the 

performance and cost-effectiveness of full-service privatization, we 

reviewed four fully privatized local offices in three states—Arizona, 

Tennessee, and Virginia. Specifically, we examined the cost-effectiveness 

of each of the offices and for a set of new cases we reviewed the degree of 

success each had in locating noncustodial parents, establishing paternity 

1

Child Support Enforcement: States and Localities Move to Privatized Services (GAO/HEHS-96-43FS, 

Nov. 20, 1995). 

Page 1 GAO/HEHS-97-4 Full-Service Child Support Privatization 
B-270419 

and support orders, and collecting support. In each state, we compared a 

privatized office with a similar public office; additionally, we compared 

pre- and postprivatization outcomes at one other office. We analyzed the 

cost-effectiveness in all four office comparisons, but because of data 

limitations, we analyzed performance in only three of the office 

comparisons. Appendix I provides a more detailed explanation of our 

methodology, analysis methods, and results. Finally, to identify what, if 

any, issues affect full-service privatization, we interviewed federal Office 

of Child Support Enforcement (OCSE) and Internal Revenue Service (IRS) 

officials, as well as state and contractor officials in the three states 

reviewed. 

Our results represent the performance of these offices on a small set of 

cases for an abbreviated time period and do not necessarily represent 

long-term public and private performance overall within these states. 

Results in Brief	 Fifteen states have turned to full-service privatization of selected local 

child support enforcement offices as a way to improve performance and 

handle growing caseloads that are reaching or exceeding 1,000 cases per 

worker in some instances. For some offices, privatization has also been a 

response to state restrictions on hiring additional public employees. 

In the three comparisons of performance we conducted, fully privatized 

offices performed at least as well as or, in some instances, better than 

public child support programs in locating noncustodial parents, 

establishing paternity and support orders, and collecting support owed. 

For example, a privatized office in Tennessee established paternity for 

4 percent of the cases needing this service in the first year of privatization 

compared with about 3 percent in the last year before it was privatized. In 

Virginia, the privatized office collected support payments from 41 percent 

of the cases we reviewed, a rate almost twice that of the public office we 

compared it with. 

The relative cost-effectiveness2

 of the privatized versus public offices, 

however, differed among the comparisons we made. Specifically, Virginia’s 

and Arizona’s privatized offices were more cost-effective—60 percent and 

18 percent, respectively—than their public counterparts. However, in 

Tennessee, one public office was 52 percent more cost-effective than the 

2

We defined cost-effectiveness as the ratio of each office’s administrative costs to collections, 

expressed as the cost to collect $1. 

Page 2 GAO/HEHS-97-4 Full-Service Child Support Privatization 
B-270419 

privatized office we reviewed, while the remaining privatized office in 

Tennessee was about as cost-effective as its public counterpart. 

According to state and contractor officials, differences in performance and 

cost-effectiveness among private and public offices may have resulted 

from the increased flexibility contractors have in acquiring resources and 

managing staff, contractors’ greater access to technology, differences in 

the complexity of the caseloads, and varying payment rates to contractors 

for child support enforcement services. 

An issue of contractor access to IRS data that could have impeded future 

full-service privatization has been partially addressed by recent welfare 

reform legislation. The Personal Responsibility and Work Opportunity 

Reconciliation Act of 1996 authorizes state child support agencies to 

disclose to contractors certain, but not all, restricted tax data that are 

useful in locating parents and enforcing payment. 

In 1975, the Congress created the federal child support enforcement Background	 program as title IV-D of the Social Security Act. The program’s purpose is 

to strengthen state and local child support enforcement efforts for 

obtaining child support for families who receive Aid to Families With 

Dependent Children (AFDC)3

 benefits and for any non-AFDC individuals who 

apply for services. Services provided to these clients include locating 

noncustodial parents, establishing paternity and child support orders, and 

collecting support owed.4

 Appendix II contains a glossary of child support 

enforcement services. 

Child support enforcement is a joint federal and state responsibility. 

Within the federal government, OCSE, in the Department of Health and 

Human Services (HHS), is responsible for providing leadership, technical 

assistance, and standards for effective state programs. States or local 

offices under state supervision deliver child support services to families. 

The federal government and the states share program costs, including 

contract costs, at the rate of 66 percent and 34 percent, respectively. In 

1995, administrative costs for the program were $3.1 billion and 

collections totaled $10.8 billion. About 19 percent of the cases in the child 

support program nationwide received a payment in 1995. 

3

As of July 1, 1997, AFDC will be replaced by block grants under the Temporary Assistance for Needy 

Families (TANF) program. 

4

Other services include client intake, customer service, enforcement, and updating and adjusting 

support orders. 

Page 3 GAO/HEHS-97-4 Full-Service Child Support Privatization 
B-270419 

To help meet the demands of growing caseloads in an environment of 

resource constraints and increasing federal requirements, some states 

have turned to privatization. In our November 1995 report to you, we 

provided information on states’ privatization of child support enforcement 

services and identified 37 states that had privatized or planned to privatize 

portions of their child support caseloads. Some of these states chose to 

augment their public programs by privatizing particular services, such as 

locating noncustodial parents or collecting support owed,5

 while 12 others 

looked to private sector contractors to assume all local child support 

services. Under full-service privatization, states contract out all or most of 

the services traditionally performed by a local public entity, usually a 

county or judicial district. Additionally, since our November 1995 report, 

Ohio, South Carolina, and West Virginia have initiated full-service 

privatization efforts. Figure 1 shows the states in which we have identified 

fully privatized local offices as of September 1996. Appendix III provides 

further information on each of these fully privatized offices, including the 

local jurisdictions they serve, the contractor, and the contract length and 

its payment terms. 

5

For further information on states’ experiences with private agencies’ collection of child support 

payments, see Child Support Enforcement: States’ Experience with Private Agencies’ Collection of 

Support Payments (GAO/HEHS-97-11, Oct. 23, 1996). 

Page 4 GAO/HEHS-97-4 Full-Service Child Support Privatization 
B-270419 

Figure 1: States With Planned and Ongoing Fully Privatized Local Offices as of September 1996 

States Without Fully Privatized Local Offices 

States With Fully Privatized Local Offices 

Most contracts for full-service privatization provide for the contractor to 

be paid an amount equal to a percentage of the collections generated. 

Therefore, as a contractor’s collections increase or decrease, the 

contractor’s payment—or the administrative costs paid to operate the 

office—rises or falls proportionately. In our November 1995 report, we 

Page 5 GAO/HEHS-97-4 Full-Service Child Support Privatization 
B-270419 

noted payment rates in effect ranging from about 10 percent to 32 percent 

of collections. Some contracts provide for variable rates that decline over 

the life of the contract. In these cases, a higher initial payment rate is 

intended to help the contractor defray start-up costs. Most contracts 

provide for 2 to 5 years of service. 

States Privatize to	 Overall, officials in the states with full-service privatization efforts most 

frequently cited a desire to improve the child support services offered, the

Improve Child need to serve their soaring caseloads, and the ability to deploy additional 

Support Services,	 child support staff as reasons why they fully privatized local offices. At 

two offices, state officials estimated that caseloads had reached about Handle Growing 1,000 per worker, and they could not get the authority to hire additional

Caseloads, and Obtain public staff. Other major reasons cited by officials include the local child 

Additional Resources	 support offices’ difficulties in meeting increasing federal program 

requirements; legislative or executive directives mandating privatization as 

a way to improve state performance; and local public entities, such as the 

district attorney, ceasing to provide child support services when faced 

with rising caseloads, staffing constraints, and additional federal 

requirements. 

State officials in the three states we reviewed cited similar rationales for 

privatizing the four offices we reviewed within their states. In Virginia and 

Arizona, officials cited the need to serve growing caseloads. Arizona 

officials also wanted to provide better service to areas previously 

considered underserved. At both the offices we examined in Tennessee, 

state officials eventually turned to privatization after the local district 

attorneys no longer wanted to operate the local child support offices. State 

officials had been encouraging the district attorney at one office to 

improve office performance. Both district attorneys believed that, without 

additional staff, their offices could no longer meet the federal performance 

standards and, consequently, both terminated their child support services. 

Faced with the loss of the governmental service providers, the state 

contracted out the operation of both child support offices. 

Some states have implemented full-service privatization in a way that 

minimizes displacement of public employees. In Virginia and Arizona, 

existing districts were subdivided to create new offices in February and 

March 1994, respectively. Creating new privatized offices in an existing 

district is considered easier than replacing an established office because 

no public workers are displaced, according to state officials. At both 

Tennessee offices, which were privatized in July 1992 and July 1993, the 

Page 6 GAO/HEHS-97-4 Full-Service Child Support Privatization 
B-270419 

public workers lost their jobs, but according to state officials, most were 

offered positions with the private contractor. 

Outcomes Are 

Comparable, but 

Cost-Effectiveness 

Varied 

Our analysis suggests that fully privatized offices can produce 

performance outcomes comparable to those of public child support 

programs. In outcome measures such as locating noncustodial parents, 

establishing paternity and support orders, and obtaining collections for the 

cases we reviewed,6

 the privatized offices in Arizona and Tennessee 

performed about as well as their public counterparts and the one in 

Virginia did significantly better. While performance outcomes show that 

the privatized offices did at least as well or better than their public 

counterparts, the cost-effectiveness results were more mixed for the 

periods reviewed. 

Virginia’s Privatized Office 

Matched or Exceeded 

Public Office Outcomes 

and Was More 

Cost-Effective 

In Virginia, the privately run office that we studied in Hampton performed 

as well as or better than the public office in Portsmouth that we compared 

it with. These offices serve similar client populations in suburban and 

rural areas in the same part of the Tidewater area of Virginia. As table 1 

illustrates, the Hampton office established paternity and support orders 

and made collections for higher percentages of the selected cases than did 

the Portsmouth office during our 18-month review period. The difference 

for collections was statistically significant after controlling for differences 

in caseload characteristics between the offices, such as the percentage of 

AFDC cases and the services that cases needed, while the differences for 

establishing paternity and support orders approached statistical 

significance.7

 The difference in location rates was not statistically 

significant. 

6

In Tennessee, these results reflect the performance of a selected office before and after privatization. 

We did not compare the performance outcomes of our paired offices in Tennessee because of the 

relatively small number of cases that met our criteria for inclusion in our analysis (see app. I for a 

description of the kinds of cases excluded from analysis). We did, however, develop cost-effectiveness 

data for these offices. 

7

Statistical significance indicates that if the cases we analyzed represent a statistical sample of all new 

cases handled by the offices, there is a less than 5-percent chance of being wrong when concluding 

that there is a difference between the offices. We considered the paternity and support order results to 

be approaching statistical significance because they were associated with a slightly greater than 

5-percent risk (5.3 and 5.6 percent, respectively) of this type of error. 

Page 7 GAO/HEHS-97-4 Full-Service Child Support Privatization 
B-270419 

Table 1: Virginia: Performance 

Outcomes Compared for 18 Months on 

New Cases Opened in July 1994 

Of cases needing service, percent with 

successful outcomea 

Private office 

(Hampton) 

Public office 

Service needed (Portsmouth)

Locationb 73.9 

Paternity establishment 40.0 

Support order establishment 35.7 

Collection 40.8 

aExcept for location rates, the differences between offices were statistically significant or 

approached significance after controlling for the percentage of cases receiving AFDC and 

needing specific services (see app. I). 

bActual location rates for both the public and private offices may be understated because the only 

information available for analysis was whether the office had a valid mailing address for an 

individual at the end of the 18-month study period. Therefore, because some individuals may 

have been successfully located at some point during the 18-month period but may not have had 

a valid address at the end of the period, our data may underestimate actual location rates. 

With regard to the cost-effectiveness of the two offices, Hampton’s cost to 

collect $1 of support was 60 percent lower than that for Portsmouth 

during the period reviewed.8,9,10 As table 2 shows, the contractor was paid 

11.5¢ for each $1 collected, while the public office spent 18.4¢. Also, 

according to the contract, the contractor’s payment will decline to 9.95¢ 

per $1 collected in the final year of the 5-year contract. 

Table 2: Virginia: Administrative Costs 

Compared to Collections, July 1994 Private office Public office 

Through December 1995 (Hampton) (Portsmouth) 

Administrative costs $1,791,733 $2,238,482 

Collections $15,553,480 $12,197,214 

Cost to collect $1 11.5¢ 18.4¢ 

Additionally, to determine whether privatization resulted in 

disproportionate increases in state costs, we compared administrative 

8

Program cost-effectiveness can either be stated as the cost to collect $1 of child support or as the 

amount of child support collected for each $1 spent on the program. Because contractors are generally 

paid a percentage of collections, we chose to use the cost-to-collect-$1 method. 

9

While we controlled for the percentage of the cases that received AFDC in our comparison of the 

performance of pairs of offices, we did not do so for the analysis of overall cost-effectiveness. 

Nevertheless, before analysis, the office pairs were matched on the basis of several criteria, including 

AFDC caseload. 

10For public offices, we asked state officials for administrative costs incurred solely at the local level. 

For privatized offices, administrative costs to the state were defined as the payment to the contractor. 

This excludes some applicable administrative costs such as those incurred to contract for the services 

and to subsequently monitor them. 

Page 8 GAO/HEHS-97-4 Full-Service Child Support Privatization 

58.5 

19.2 

16.8 

22.3 
B-270419 

costs before and after privatization. In Virginia, the privatized office’s 

administrative costs did not increase dramatically after privatization. In 

state fiscal year 1994, the first year of privatization, the privatized office’s 

administrative costs grew by less than 1 percent over the previous year’s 

imputed costs.11 In the second year after privatization, the privatized 

office’s administrative costs increased by about 22 percent, a growth rate 

similar to the public office’s 21-percent increase. 

Arizona’s Privatized Office In Arizona, performance outcomes on our review cases revealed that the 

Performed as Well as 

Public Office and Was 

More Cost-Effective 

privately run office in Yavapai County did about as well as the public 

office in Mohave County that we compared it with; however, the privatized 

office was more cost-effective during our 18-month review period. 

Although some differences in outcomes between the public and private 

offices appear to exist (see table 3) none of the differences was large 

enough to be statistically significant either before or after controlling for 

AFDC status and kinds of services needed. 

Table 3: Arizona: Performance 

Outcomes Compared for 18 Months on 

New Cases Opened in July 1994 

Of cases needing service, percent with 

successful outcomea 

Service needed 

Private office 

(Yavapai) 

Public office 

(Mohave) 

Locationb 37.5 

Paternity establishment 8.7 

Support order establishment 14.3 

Collection 15.1 

aNone of the differences between the public and private offices’ performance was found to be 

statistically significant either before or after controlling for AFDC status and the kinds of services 

needed. 

bLocation rates represent cases needing location services at case opening and being located at 

some point during the review period. 

Regarding overall cost-effectiveness, the privatized office had a lower cost 

per $1 collected during the period reviewed. Mohave County spent 34.8¢ 

per $1 collected, while the contractor received 29.5¢ per $1 collected for 

operating the Yavapai County program (see table 4). In addition, under the 

terms of the contract, the contractor’s payment rate will fall to 24.0¢ for 

every $1 collected in the final year of the 4-year contract. 

11We imputed administrative costs for Hampton because its caseload was drawn from the caseload of 

its parent office, Newport News. 

Page 9 GAO/HEHS-97-4 Full-Service Child Support Privatization 

22.9 

9.7 

5.8 

5.3 
B-270419 

Table 4: Arizona: Administrative Costs 

Compared to Collections, July 1994 Private office Public office 

Through December 1995 (Yavapai) (Mohave) 

Administrative costs $987,700a $1,296,092 

Collections $3,387,792 $3,720,575 

Cost to collect $1 29.5¢a 34.8¢ 

aThese cost figures reflect the payment to the contractor for distributed collections of $3,348,948, 

not the collections figure shown. 

We were unable to examine the rate of change in the privatized office’s 

administrative costs before and after privatization and compare it with the 

public office’s rate of change. Arizona officials could not break out 

preprivatization administrative costs for Yavapai County only, which had 

been served at one time by a multicounty unit. Additionally, the officials 

believed that such a comparison would be inappropriate, because 

Yavapai’s cases had been underserved before privatization. 

Tennessee’s Privatized 

Offices Show Mixed 

Results 

Performance and cost-effectiveness results were mixed in Tennessee, 

where we reviewed two privatized offices. In the first privatized office, we 

did not have a sufficient number of cases to compare the public and 

privatized offices’ performance in locating noncustodial parents, 

establishing paternity and support orders, and collecting support owed. 

However, we were able to compare the offices’ collections and 

administrative costs for the review period. At this office, our comparison 

of collections and administrative costs showed that the public Fifth 

Judicial District office provided services at a lower cost per $1 collected 

during the 18-month review period (see table 5). The public office cost was 

9.9¢ per $1 collected, while the privatized office was paid 15.0¢. Both 

offices serve rural populations within the Knoxville area. 

Table 5: Tennessee: Administrative 

Costs Compared to Collections, Private office 

January 1994 Through June 1995 (Seventh Judicial Public office (Fifth 

District) Judicial District) 

Administrative costs $594,930 $354,025 

Collections $3,966,143 $3,578,920 

Cost to collect $1 15.0¢ 9.9¢ 

Finally, at the second privatized office we reviewed in Tennessee, where 

we analyzed performance and cost-effectiveness before and after 

privatization, the privatized office generally maintained comparable 

Page 10 GAO/HEHS-97-4 Full-Service Child Support Privatization 
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performance and cost-effectiveness while serving a more challenging 

caseload.12,13 This office, Tennessee’s Twentieth Judicial District, which 

includes Nashville, was privatized in state fiscal year 1994. Table 6 shows 

the percentage and table 7 shows the number of cases receiving needed 

services for a 5-year period beginning with state fiscal year 1991. Five 

years of data are presented to show data fluctuations from year to year.14 

Comparing the data over the 5-year period shows that while the 

percentage of cases receiving needed services from the privatized office 

remained about the same or declined in certain years, the actual numbers 

of cases receiving most services rose dramatically. Even for the service 

that showed a decline—the number of cases receiving a collection—the 

dollar amount of collections in the Twentieth Judicial District increased 

over 40 percent in the first 2 years of privatization, as compared with 

29 percent in the rest of the state. 

Table 6: Tennessee: Performance of


the Twentieth Judicial District, State Figures are percents


Fiscal Years 1991-95 

Cases with Public Private 

successful outcome 1991 1992 1993 1994 1995 

Locationa 38.9 37.2 14.3 18.1 

Paternity established 3.6 4.4 3.2 4.0 

Support order 

established 7.4 4.5 3.2 7.7 

Collection 12.5 24.1 12.5 9.0 

aLocation rates may include multiple locations for the same individual. 

12During the period reviewed, the percentage of AFDC cases in this office’s caseload grew from about 

29 percent to about 54 percent. AFDC cases are generally perceived by child support officials as being 

more difficult to work. While we were able to control for the percentage of AFDC cases at our other 

comparison offices, AFDC caseload growth could have affected this comparison. 

13To examine the possible effect of major changes in statewide policy on the Twentieth Judicial 

District’s performance outcomes, we examined the performance of offices in the rest of the state 

before and after the Twentieth Judicial District was privatized. In general, we found nothing to suggest 

that major policy changes were affecting statewide performance outcomes. 

14State officials cited various reasons for this fluctuation, including the implementation of a statewide 

data system beginning in state fiscal year 1994, heightened efforts to achieve large numbers of case 

closures in certain years, varying degrees of cooperation with the judicial system in the area of 

paternity establishment, and other factors related to the transition to privatization. 

Page 11 GAO/HEHS-97-4 Full-Service Child Support Privatization 

34.4 

5.9 

4.5 

10.6 
B-270419 

Table 7: Tennessee: Cases Receiving 

Service in the Twentieth Judicial Cases with Public Private 

District, State Fiscal Years 1991-95 successful outcome 1991 1992 1993 1994 1995 

Locationa 3,657 3,601 1,414 3,608 7,998 

Paternity established 424 472 354 927 1,346 

Support order 

established 932 590 406 2,107 

Collection 7,404 16,200 5,572 3,554 4,349 

aLocation data may include multiple locations for the same individual. 

State officials attribute the increase in the number of cases receiving 

services to the contractor’s automated case management system and the 

employment of additional child support caseworkers and attorneys. This 

increase in the number of services provided, however, is not reflected in 

the percentage of cases receiving services because of large increases in 

identified case needs. State officials attributed this increase to the 

contractor’s systematic review of case files before entering the cases into 

its automated system. 

With regard to cost-effectiveness, the privatized program in the Twentieth 

Judicial District was about as cost-effective as the public program had 

been. As shown in table 8, in state fiscal year 1993, the year before 

privatization, the cost for each $1 collected was 10.4¢ for the district 

attorney’s office, rising to 12.1¢ in the first year of privatization and 

declining to 10.7¢ the following year. 

While the cost-effectiveness of the program was about the same, 

administrative costs did increase after privatization. In state fiscal year 

1994, this office’s administrative costs increased by 28.5 percent over the 

previous year, in contrast to an increase of 6.1 percent in the rest of the 

state. The following year, administrative costs grew by 32.7 percent in the 

Twentieth Judicial District, virtually the same rate as in the rest of the 

state, 32.6 percent. 

Page 12 GAO/HEHS-97-4 Full-Service Child Support Privatization 

915 
B-270419 

Table 8: Tennessee: Administrative 

Costs Compared to Collections in the Public Private 

Twentieth Judicial District, State Fiscal 1991 1992 1993 1994 1995 

Years 1991-95 Collections $7,748,590 $12,078,728 $12,667,589 $14,409,948 $17,798,662 

Administrative


costs $986,341 $1,023,744 $1,315,643 $1,745,667 $1,900,231


Cost to collect $1 12.7¢ 8.5¢ 10.4¢ 12.1¢ 10.7¢ 

Note: Collections figures before privatization are the subject of a dispute between the state and 

the contractor. The contractor claims that the figures may be overstated, which may understate 

our calculation of the cost to collect $1. 

Factors Believed to Affect 

Performance and 

Cost-Effectiveness 

State and contractor officials believed that several factors affect an office’s 

performance and cost-effectiveness. Factors generally believed to benefit 

contractors include the increased flexibility contractors have in acquiring 

resources, managing staff, and having greater access to technology. For 

example, in Virginia, the contractor was able to obtain computer and other 

equipment for the new office in Hampton within 90 days of signing the 

contract. In contrast, state officials described a situation in an unrelated 

office where delivery of needed equipment was expected to take 7 months 

under an expedited state acquisition process. Likewise, in Arizona, the 

contractor had the flexibility to open two privatized offices within 2 

months of signing the contract and to replace two managers within the 

first year of operation. Arizona state officials told us that the removal of 

state managers could not be accomplished as quickly. Officials in all three 

states also cited contractors’ advantages in technology, such as automated 

systems for case management, as a possible factor affecting performance 

differences. Furthermore, in Virginia, the contractor provided additional 

technologies including extensive databases for locating noncustodial 

parents, bar-coded files for data management, and the use of videos during 

intake for consistent and complete orientation of both custodial and 

noncustodial parents. 

In addition to the state officials’ beliefs, contractor officials also suggested 

factors that they believed favorably affected performance outcomes, such 

as their emphasis on timely and efficient processing of new cases, the 

co-location of child support workers in AFDC offices for case intake, and 

expanded evening and weekend office hours. Contractor officials in 

Arizona, however, believe that their performance was negatively affected 

by unexpectedly high staff turnover during our review period. 

Page 13 GAO/HEHS-97-4 Full-Service Child Support Privatization 
B-270419 

In addition to factors affecting performance outcomes, the major factor 

affecting the cost-effectiveness of full-service privatization is how much a 

state has to spend to acquire these services. We identified contract 

payment rates ranging from about 10 percent to 32 percent of collections. 

These contract rates are affected by the level of contractor competition 

and the volume, composition, and collection potential of the caseload. For 

example, because AFDC cases are considered more labor-intensive to work, 

state officials said that an office with a high percentage of AFDC cases may 

require a higher payment rate than one with fewer AFDC cases. Finally, all 

payment rates are subject to the vagaries of the marketplace. Payment 

rates that are initially beneficial to a state could change when the service 

is rebid or reawarded. 

Welfare Reform 

Partially Resolves the 

Issue of Access to IRS 

Data 

One major issue that could have impeded future full-service 

privatization—contractors’ access to IRS tax information—has been 

partially resolved by the recent enactment of welfare reform legislation. 

The issue focuses on whether full-service child support enforcement 

contractors have the same authority to access IRS data for locating 

noncustodial parents and enforcing child support orders as public offices 

have under the law. The Personal Responsibility and Work Opportunity 

Reconciliation Act of 1996 partially resolves this issue by authorizing 

contractors access to certain tax information. 

Currently, IRS, through OCSE, provides states and local child support offices 

a number of valuable location and collection services. For example, OCSE’s 

Federal Parent Locator Service (FPLS) can request from IRS the social 

security number and address from a noncustodial parent’s most recent tax 

return. In addition, IRS’ Project 1099 program offers child support 

programs information on sources of earned and unearned income, such as 

banks and mutual funds, that are reported on IRS Form 1099 and can be 

used to locate noncustodial parents and their assets. Also, IRS’ income tax 

refund offset program has been the second largest source of collections 

for the child support program. In 1995, it offset over $828 million of 

delinquent child support payments from about 1.2 million delinquent 

noncustodial parents’ tax refunds, in addition to providing offices with 

filers’ addresses. OCSE and the states have granted full-service contractors 

access to these IRS services and information in the belief that these 

contractors act in the same capacity as public child support offices; that is, 

as a designated local child support agency of the state. 

Page 14 GAO/HEHS-97-4 Full-Service Child Support Privatization 
B-270419 

Before enactment of the welfare reform legislation, however, IRS officials 

took the position that section 6103(l) of the Internal Revenue Code did not 

authorize child support contractors access to this information. In reports it 

issued in January 1995 and March 1996, IRS found Nebraska and Tennessee 

out of compliance with the Internal Revenue Code during tax data 

safeguard reviews15 because the states had granted contractors access to 

IRS data. IRS officials are concerned about their ability to safeguard tax 

information and oppose further disclosure of IRS information for nontax 

administrative purposes. Federal, state, and contractor officials told us 

that prohibiting access to IRS data would affect the expansion and 

continuing operation of privatized full-service child support offices. 

At the same time that OCSE and IRS have been working on this issue, the 

Personal Responsibility and Work Opportunity Reconciliation Act of 1996 

has partially resolved this access issue. Section 316(g)(4) of the act 

amends section 6103(l) of the Internal Revenue Code to permit state child 

support agencies to disclose to contractors the addresses and social 

security numbers of noncustodial parents and the amount of tax refunds 

withheld for past-due child support. OCSE officials said that this permits 

contractors access to FPLS and tax refund offset data, but denies 

contractors access to unearned income information currently received 

under the Project 1099 program. 

OCSE officials believe that the act partially addresses the issue of access to 

data, but does not address contractors’ access to the Form 1099 

information that states and contractors believe serves as a valuable 

enforcement tool. One possible solution to this continuing problem, 

according to IRS, is to have a state child support entity verify this 

information with its original source. Once the data are verified, the 

information is not subject to nondisclosure requirements. Therefore, in 

order for the contractor to gain access to Project 1099 program 

information, a state entity would have to verify it with its source (for 

example, a financial institution), thus entailing a separate process. 

However, according to state officials, requiring this additional level of 

verification by public employees may negate some of the perceived 

benefits of full-service privatization. Alternatively, under the new law, 

contractors may have another avenue to obtain unearned income data. 

Section 372 of the act requires states to match data quarterly with in-state 

financial institutions. However, HHS noted that it will be some time before 

data from these matches are available in all states. 

15A safeguard review is an on-site evaluation of the measures used by agencies to protect federal tax 

returns and tax return information received from IRS. 

Page 15 GAO/HEHS-97-4 Full-Service Child Support Privatization 
B-270419 

While welfare reform legislation provides contractors limited access to 

restricted tax data, it is too early to assess what effect these changes will 

have on contractors’ use of the full range of enforcement tools currently 

available to public offices. 

Conclusions	 As child support programs continue to face resource constraints, 

full-service privatization appears to offer states the opportunity to 

supplement their child support enforcement services. The results of our 

examination of full-service privatization show that the offices we reviewed 

performed at least as well as public offices. However, these results are 

limited to the cases we reviewed and do not reflect the performance of 

public or private offices overall within the states selected. Furthermore, 

because full-service privatization of child support enforcement is relatively 

new, the extent to which it offers comparable performance and 

cost-effectiveness remains an issue for additional evaluation over the long 

term. 

In commenting on a draft of this report (see app. V), HHS said that the Agency Comments	 report can be a valuable resource to states as they consider full-service 

privatization of child support enforcement functions. With respect to our 

observation that the Personal Responsibility and Work Opportunity 

Reconciliation Act of 1996 has partially resolved the issue of access to IRS 

data, HHS noted that it will be some time before financial institution data 

are available in all states. We revised the final report to reflect the 

availability of such data. 

We also received technical comments from HHS, IRS, and the three states 

and three contractors that we reviewed and incorporated them in the final 

report as appropriate. 

We are sending copies of this report to the Chairmen and Ranking 

Minority Members of the Senate Committee on Finance and its 

Subcommittee on Social Security and Family Policy 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 also will make copies available to others on request. If you or your 

staff have any questions about this report, 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 report are 

Page 16 GAO/HEHS-97-4 Full-Service Child Support Privatization 
B-270419 

Christopher Morehouse, Steven Machlin, Catherine Pardee, and Suzanne


S. Sterling.


Sincerely yours,


Mark V. Nadel


Associate Director, Income Security Issues


Page 17 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Contents


Letter 1


Appendix I 20 

Outcome Analysis 22 Scope and Logistic Regression Models 24 

Methodology 

Appendix II 


Basic Child Support


Enforcement Services


Appendix III 

Contract Information 

for Full-Service Child 

Support Privatization 

Initiatives in 15 States 

as of September 1996 

Appendix IV 32 

Virginia 32 Selected Demographic Arizona 32 

Characteristics of the Tennessee 33 

Localities Reviewed 

Appendix V 

Comments From the 

Department of Health 

and Human Services 

Related GAO Products 36


Tables Table 1: Virginia: Performance Outcomes Compared for 18 8 

Months on New Cases Opened in July 1994 

Table 2: Virginia: Administrative Costs Compared to Collections, 8 

July 1994 through December 1995 

Page 18 GAO/HEHS-97-4 Full-Service Child Support Privatization 

27 

28 

34 
Contents 

Table 3: Arizona: Performance Outcomes Compared for 18 

Months on New Cases Opened in July 1994 

Table 4: Arizona: Administrative Costs Compared to Collections, 

July 1994 through December 1995 

Table 5: Tennessee: Administrative Costs Compared to 

Collections, January 1994 through June 1995 

Table 6: Tennessee: Performance of the Twentieth Judicial 

District, State Fiscal Years 1991-95 

Table 7: Tennessee: Cases Receiving Service in the Twentieth 

Judicial District, State Fiscal Years 1991-95 

Table 8: Tennessee: Administrative Costs Compared to 

Collections in the Twentieth Judicial District, State Fiscal Years 

1991-95 

Table I.1: Offices Selected for Performance and 

Cost-Effectiveness Analysis 

Table I.2: Selection Criteria for Public Offices 

Table I.3: Cases Identified, Excluded, and Examined for Cohort 

Analysis 

Table I.4: Numbers of Cases Needing Services and With 

Successful Outcomes Among Cohort Cases in Virginia Offices 

Table I.5: Numbers of Cases Needing Services and With 

Successful Outcomes Among Cohort Cases in Arizona Offices 

Table I.6: Summary Data for Cases From Private Office in 

Tennessee 

Table I.7: Distribution of Cohort Cases on Selected 

Characteristics 

Table I.8: Logistic Regression Coefficients and Corresponding 

P-Values Obtained From Models 

9 

10 

10 

11 

12 

13 

20 

21 

22 

23 

23 

24 

25 

26 

Figure Figure 1: States With Planned and Ongoing Fully Privatized Local 

Offices as of September 1996 

Abbreviations 

AFDC Aid to Families With Dependent Children


FPLS Federal Parent Locator Service


HHS Department of Health and Human Services


IRS Internal Revenue Service


OCSE Office of Child Support Enforcement


TANF Temporary Assistance for Needy Families


Page 19 GAO/HEHS-97-4 Full-Service Child Support Privatization 

5 
Appendix I 


Scope and Methodology


We compared three of the four fully privatized offices we selected for our 

review with similar public offices, as illustrated in table I.1. The privatized 

offices selected for these comparisons were Yavapai County, Arizona; the 

Seventh Judicial District of Tennessee (Anderson County); and the 

Hampton District Office in Hampton, Virginia. We also compared another 

privatized office, the Twentieth Judicial District of Tennessee (Davidson 

County), with the public office that preceded it because it could not be 

matched with a comparable public office in the state. These private 

programs were selected because they are among the most mature 

examples of full-service privatization, having been privatized between 1992 

and 1994 (see app. IV for additional information); represent a diversity of 

geographical and urban/suburban/rural program settings; and include all 

three of the major full-service contractors. At the time of our review, 

Policy Studies, Inc., was the contractor for Yavapai County, Arizona; 

Maximus ran the programs in Tennessee’s Seventh and Twentieth Judicial 

Districts; and Lockheed Martin IMS managed the office in Hampton, 

Virginia. 

Table I.1: Offices Selected for 

Performance and Cost-Effectiveness 

Analysis Private Public Methodology 

State Local office Contractor Local office Public entity used 

Virginia Hampton Lockheed Portsmouth State Paired 

District Martin IMS District Department comparison 

of Social 

Services 

Arizona Yavapai Policy Mohave State Paired 

County Studies, Inc. County Department comparison 

of Economic 

Security 

Tennessee Seventh Maximus Fifth Judicial District Paired 

Judicial District Attorney comparison 

District (Blount 

(Anderson County) 

County) 

Tennessee Twentieth Maximus Twentieth District Before and 

Judicial Judicial Attorney after 

District District comparison 

(Davidson (Davidson 

County) County) 

To identify public offices for comparison and analysis, we asked state 

officials to nominate offices for review that had performance records 

similar to the privatized office before privatization. We then compared 

these offices with the privatized office, using the selection criteria 

Page 20 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Appendix I 


Scope and Methodology


identified in table I.2, and selected the office that most closely resembled 

the privatized program before privatization. 

Table I.2: Selection Criteria for Public 

Offices Data used for comparison with 

Selection criteria privatized program 

Performance Location of noncustodial parents 

(for 3 years before privatization) Paternity established 

Support order established 

Collection 

Staffing Number of caseworkers 

Caseload Size 

Composition: AFDC and non-AFDC 

Numbers of new cases, closed cases, 

and interstate cases 

Cost Administrative costs 

Demographicsa	 Population 

Minority population 

Median household income 

Percent of families below poverty 

Percent of households headed by a 

single parent 

Urbanization 

aDetermined from data for the most recent year for which data were available. 

For each pair of offices, we defined our sets of cases to review as all those 

opened in a given month (July 1994 for Arizona16 and Virginia, 

January 1994 and randomly selected additional cases from February 1994 

for Tennessee). We chose to review new cases to provide both public and 

private offices the greatest opportunities for successful outcomes and to 

ensure that neither office had the advantage of any experience with any of 

the cases.17 We tracked performance outcomes for an 18-month period. To 

further assure comparability of cases between the two offices, we 

excluded cases that (1) closed and did not reopen during the 18-month 

period;18 (2) were forwarded to other states to be worked because the 

16Cases were randomly selected for the public office in Arizona, due to the volume of cases opened 

that month. 

17Child support officials told us that, generally, new cases result in quicker, more positive outcomes 

than older cases because the information is more current and the cases are easier to work. However, 

by federal regulations, both new and existing cases must be equally served. 

18These cases closed for a variety of reasons. For example, they closed when the noncustodial parent 

died; the custodial parent did not cooperate with the child support agency, moved out of the county or 

state, or was no longer eligible to receive child support; the noncustodial and custodial parents 

reunited; blood tests excluded the individual identified as the putative father; or the noncustodial 

parent assumed custody of the child upon the custodial parent’s incarceration. 

Page 21 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Appendix I 


Scope and Methodology


noncustodial parent resided out of state; (3) needed specialized services, 

usually medical support only; or (4) were mistaken referrals, duplicate 

cases, or otherwise inappropriate for analysis. Table I.3 shows the number 

of cases in our original cohorts for each pair of offices, the number of 

cases excluded, and the number of cases remaining for analysis of 

outcomes. In each state, we gathered case data for analysis by reviewing 

case files or automated case management data. Additionally, each state 

provided collections and administrative cost data19 for the 

cost-effectiveness analysis, and Tennessee provided the data for the 

analysis of the Twentieth Judicial District’s performance before and after 

privatization. We did not verify the state-provided data. 

Table I.3: Cases Identified, Excluded, 

and Examined for Cohort Analysis 

Virginia Arizona Tennessee 

Public Private Public Private Public Private 

Cases in 

original 

cohort 214 211 145 89 89 

Cases 

excluded 102 108 87 36 69 

Cases


analyzed


in final


cohort 112 103 58 53 20


The results of our review represent the performance of these offices on a 

small set of new cases for an abbreviated time period and do not 

necessarily represent long-term public and private performance overall 

within these states. However, because both new and existing cases must 

be equally served, the results can be viewed as a reasonable indication of 

the overall performance of these offices for that time period. 

We also did not compare the performance and cost outcomes of the 

selected contracts across states because significant differences exist in 

state demographics, caseloads, child support enforcement tools available 

under state law, judicial and administrative systems, and levels of state 

automation, among other factors. 

To compare the outcomes of the private and public offices for cases that Outcome Analysis were in the system for 18 months, we analyzed differences between the 

19Administrative costs did not include indirect costs that states may have incurred in the process of 

preparing requests for proposals, evaluating bids, and monitoring contracts. 

Page 22 GAO/HEHS-97-4 Full-Service Child Support Privatization 

102 

50 

52 
Appendix I 


Scope and Methodology


paired offices for Virginia and Arizona in outcomes in each of the 

following four areas: location, paternity establishment, support order 

establishment, and collection. All the cases were included in the analysis 

for collections because all needed collections. However, for each of the 

other services, cases that did not need the particular service at case 

opening were excluded from the analysis. Tables I.4 and I.5 contain the 

number of cases and successful outcomes observed for the paired offices 

in Virginia and Arizona, respectively. 

Table I.4: Numbers of Cases Needing 

Services and With Successful 

Outcomes Among Cohort Cases in 

Virginia Offices 

Private office Public office 

Cases 

needing 

service 

Cases with 

successful 

outcome 

Cases 

needing 

service 

Cases with 

successful 

Service needed outcome

Location 69 51 53 

Paternity establishment 50 20 73 

Support order establishment 84 30 95 

Collection 103 42 112 

Table I.5: Numbers of Cases Needing 

Services and With Successful 

Outcomes Among Cohort Cases in 

Arizona Offices 

Private office Public office 

Cases 

needing 

service 

Cases with 

successful 

outcome 

Cases 

needing 

service 

Cases with 

successful 

Service needed outcome

Location 40 15 48 

Paternity establishment 23 2 31 

Support order establishment 35 5 52 

Collection 53 8 57a 

aWe could not determine whether or not one of the original 58 cases received any collection. 

We did not conduct a similar analysis for the paired offices in Tennessee 

because of the small number of cases at the public office that met our 

criteria for inclusion. Table I.6 shows summary data for the cases from the 

private office in Tennessee. 

Page 23 GAO/HEHS-97-4 Full-Service Child Support Privatization 

31 

14 

16 

25 

11 

3 

3 

3 
Appendix I 


Scope and Methodology


Table I.6: Summary Data for Cases 

From Private Office in Tennessee Cases Cases with 

needing successful 

Service needed service outcome 

Location 24 

Paternity establisment 18 

Support order establishment 40 

Collection 52 

Logistic Regression 

Models 

In addition to calculating simple observed differences for the four 

activities, we used a multivariate statistical technique—logistic 

regression—to assess whether differences between offices were 

statistically significant after adjusting for differences in caseload 

characteristics. In each model, the dependent or outcome variable 

reflected whether an attempted action was successful or not (1 if 

successful, 0 otherwise), while the primary independent variable of 

interest was office type (1 if public, 0 if private). We included other 

independent variables in the models to adjust for caseload characteristics 

that could influence an office’s performance. These variables included 

AFDC status at case opening (1 if AFDC, 0 otherwise) and, if relevant to the 

outcome analyzed, whether the case needed a particular action at case 

opening (1 if needed, 0 otherwise).20 Table I.7 shows the distribution of 

cases on these characteristics for each office in our analysis. 

20As table I.7 shows, in our analysis of office pairs, the public offices had a higher percentage of AFDC 

cases. State officials said that AFDC cases are generally harder to work for various reasons, including 

limited case information and difficulties in securing the cooperation of custodial parents, compared to 

non-AFDC cases. The actions we controlled for are location and paternity and support order 

establishment. 

Page 24 GAO/HEHS-97-4 Full-Service Child Support Privatization 

16 

5 

12 

13 
Appendix I 


Scope and Methodology


Table I.7: Distribution of Cohort Cases on Selected Characteristics 

Virginia Arizona 

Public Private Public Private 

Number Percent Number Percent Number Percent Number Percent 

Cases 112 100 103 100 58 100 53 

AFDC cases 81 72 54 52 53 91 36 

Cases needing 

Location 53 47 69 67 48 83 40 

Paternity establishment 73 65 51 50 31 53 23 

Support order establishment 95 85 84 82 52 90 35 

Location and paternity and 

support order establishment 39 35 32 31 26 45 22 

Collection only 9 8 3 3 0 0 8 

Table I.8 contains the coefficients obtained from the logistic regression 

models and their respective levels of statistical significance (p-value). The 

model coefficients reflect the magnitude of the relationship between each 

independent and outcome variable. In general, the more the coefficient 

differs from 0, the more closely the variables are related. The p-value for 

each coefficient represents the probability that our analysis would have 

produced a coefficient of that magnitude or greater (that is, more different 

from 0) if the two variables were not related. We considered coefficients 

with p-values lower than .05 to be statistically significant. We considered 

coefficients with p-values between .05 and .06 to be approaching statistical 

significance. Our analysis assumes that the cases we analyzed represent 

random samples of all new cases handled by the offices. While we 

analyzed all cases meeting certain criteria that were opened in a particular 

month, for the purpose of assessing statistical significance we considered 

these cases as point-in-time samples that are representative of each 

office’s general performance on new cases. 

Page 25 GAO/HEHS-97-4 Full-Service Child Support Privatization 

100 

68 

75 

43 

66 

42 

15 
Appendix I 


Scope and Methodology


Table I.8: Logistic Regression 

Coefficients and Corresponding 

P-Values Obtained From Models 

Virginia Arizona 

Model Coefficient P-valuea Coefficient P-value 

Location 

Office type -0.5162 .21 -0.5360 

AFDC status –1.3183 .01 –1.3104 

Paternity establishment 

Office type -0.8411 .05 -0.3268b .76b 

AFDC status –1.1565 .01 b b 

Need for location –0.1838 .67 –2.1196b .06b 

Support order establishment 

Office type -0.7309 .06 -1.0242 

AFDC status –1.4297 .00 –0.7319 

Need for location 0.3849 .33 –1.5279 

Need for paternity –0.3783 .34 –1.4314 

Collection 

Office type -0.8638 .04 -0.6956 

AFDC status –1.4324 .00 –1.2626 

Need for location –0.0655 .87 –0.0048 

Need for paternity –0.3965 .34 –2.1475 

Need for support order –3.3023 .00 0.5387 

Note: To highlight the results for the main variable of interest (office type) the corresponding 

coefficients and p-values are bolded. 

aThe p-value represents the probability of obtaining a coefficient of this magnitude or further from 

0 if the independent variable was not related to the dependent variable. P-values lower than .05 

are commonly considered to indicate a statistically significant effect. 

bAFDC status was excluded from model because only two cases that needed paternity 

establishment did not receive AFDC. 

We conducted our study between August 1995 and October 1996 in 

accordance with generally accepted government auditing standards. 

Page 26 GAO/HEHS-97-4 Full-Service Child Support Privatization 

.27 

.04 

.26 

.55 

.08 

.12 

.39 

.16 

.99 

.06 

.53 
Appendix II 


Basic Child Support Enforcement Services


Location includes efforts at local, state, and federal levels to identify a 

noncustodial parent’s address, social security number, place of 

employment, and other characteristics. This might include efforts to 

directly contact individuals; contacts with public and private institutions, 

such as credit bureaus, state and federal income tax agencies; and the use 

of computer tape matches. 

Paternity establishment is the identification of the legal father of a 

child, usually through the courts or expedited through hearings in a 

quasi-judicial or administrative body. Paternities are established in either 

of two ways: (1) through voluntary acknowledgment by the father or (2) if 

contested, through a determination made on the basis of scientific and 

testimonial evidence. 

Support order establishment involves the development of a support 

order that legally obliges the noncustodial parent to pay child support and 

provide medical insurance coverage when available at reasonable cost. 

The child support enforcement agency must assist custodial parents in 

initiating an action in court or through an administrative or expedited legal 

process that will produce such an order. The child support enforcement 

agency helps in the determination of a child’s financial needs and the 

extent to which the noncustodial parent can provide financial support and 

medical insurance coverage. Support orders are subject to periodic review 

and adjustment at least every 3 years in AFDC cases and upon parental 

request in non-AFDC cases. 

Collections and enforcement involves enforcing, monitoring, and 

processing payments. To enforce payment on delinquent cases or to 

ensure regularity and completeness of current accounts, child support 

enforcement agencies have a wide array of techniques at their disposal. 

These techniques include bonds and security deposits, federal and state 

tax intercepts, garnishments, liens, and wage withholding, among others. 

Noncustodial parents’ payments must also be monitored, recorded, and 

distributed. 

Page 27 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Appendix III 


Contract Information for Full-Service Child 

Support Privatization Initiatives in 15 States 

as of September 1996 

Fully privatized local Start date 

State offices Contractor (contract lengtha) Payment termsb,c 

Arizona 

Santa Cruz and Yavapai Policy Studies, Inc. 3/94 (4 years) 32-24 percentd 

Counties 

Arkansas 

Jefferson County Hunt Law Firm 9/95 (1.8 years)	 Fixed fee of $810,000, 

reimbursable expenses 

up to $490,000 plus 

incentives 

Greene County Greene County Child 9/95 (1.8 years) Fixed fee of $175,000, 

Support Enforcement, reimbursable expenses 

Inc. up to $290,000 plus 

incentives 

Garland County Owen Support Services, 7/95 (2 years) Fixed fee of $390,000, 

Inc. reimbursable expenses 

up to $460,000 plus 

incentives 

Craighead County Brent Davis, Esq. 7/95 (2 years) Negotiated contracte 

3rd Judicial District Randolph County 7/95 (2 years) Negotiated contracte 

(Clay, Jackson, Judge/Multi Services, Inc. 

Lawrence, Randolph, 

and Sharp Counties) 

14th Judicial District Multi Services, Inc. 7/95 (2 years) Fixed fee of $300,000, 

(Baxter, Boone, Marion, reimbursable expenses 

and Newton Counties) up to $330,000 

Colorado 

El Paso County Maximus 1/96 (5 years) 19-10 percentd 

Georgiaf 

Cobb, De Kalb, and Policy Studies, Inc. 7/94 (4 years) 11.5-10 percentd 

Fulton Counties 

Iowag 

Fremont, Harrison, Mills, Policy Studies, Inc. 1/96 (5 years) Flat feeh 

Montgomery, Page, 

Pottawattamie, and 

Taylor Counties; 

Muscatine and Scott 

Counties; and Boone, 

Dallas, Jasper, Madison, 

Marion, Polk, Storey, and 

Warren Counties 

Maryland 

Baltimore City Lockheed Martin IMS 11/96 (4 years) 22.95-20.55 percentd 

Queen Anne’s County Lockheed Martin IMS 11/96 (4 years) 9.67 percent 

(continued) 

Page 28 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Appendix III 


Contract Information for Full-Service Child


Support Privatization Initiatives in 15 States


as of September 1996


Fully privatized local Start date 

State offices Contractor (contract lengtha) Payment termsb,c 

Mississippi 

Hinds and Warren Maximus 7/94 (5 years) 40.1-27.6 percentd,i 

Counties 

Nebraska 

Douglas County Policy Studies, Inc. 2/93 (5 years) 15-13 percentd 

Ohioj 

Hamilton County Maximus 6/96 (3 years) 9.9-6.6 percentd,k 

Oklahoma 

Pittsburg and Haskell Kibois Community Action 1993 (4 years) Cost-reimbursement 

Counties Foundation (nonprofit) 

Comanche and Cotton Great Plains 1993 (4 years) Cost-reimbursement 

Counties Improvement Foundation 

(nonprofit) 

South Carolina 

Georgetown, To be awarded 1/97 (5 years)


Horry, Marion, and


Williamsburg Counties


Tennessee 

7th Judicial District Maximus 7/92 (5 years) 16 percent 

(Anderson County) 

20th Judicial District Maximus 7/93 (5 years) 12-10.5 percentd 

(Davidson County) 

10th Judicial District Policy Studies, Inc. 7/96 (5 years) 15.75-13.5 percentd 

(Bradley, McMinn, 

Monroe, and Polk 

Counties) 

29th Judicial District Policy Studies, Inc. 2/92 (5 years) 19-15 percentd 

(Dyer and Lake Counties) 

27th Judicial District Policy Studies, Inc. 1/95 (5 years) 17-14 percentd 

(Obion and Weakley 

Counties) 

21st Judicial District To be awarded 1/97 (5 years) 

(Hickman, Louis, Perry, 

and Williamson Counties) 

Virginial 

Hamptonm and Lockheed Martin IMS 2/94 (5 years) 11.45-9.95 percentd 

Chesapeake District 

Offices 

Alexandria and Arlingtonn To be awarded 1997 (5 years) 

District Offices 

(continued) 

Page 29 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Appendix III 


Contract Information for Full-Service Child


Support Privatization Initiatives in 15 States


as of September 1996


Fully privatized local Start date 

State offices Contractor (contract lengtha) Payment termsb,c 

West Virginia 

Kanawha County Policy Studies, Inc. 9/96 (3 years) 18 percento 

Wyoming 

Districts 1, 2, and 3 Policy Studies, Inc. 6/95 (4 years) 17.5-16 percentd 

(Albany, Carbon, 

Laramie, Lincoln, 

Sweetwater, and Uinta 

Counties) 

Districts 8 and 9 Gray & Associates 5/95 (4 years) $724,000 + 8 percent of 

(Converse, Fremont, collections over $2.5 

Goshen, Niobrara, Platte, million 

Sublette, and Teton 

Counties) 

(Table notes on next page) 

Page 30 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Appendix III 


Contract Information for Full-Service Child


Support Privatization Initiatives in 15 States


as of September 1996


aLength of contract can include possible annual renewals. 

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

collections. 

cPayment terms vary, depending on factors such as caseload volume and composition and use 

of multiple or single contractors. 

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

the end of the contract period. 

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

information. 

f

The contract provides for service to non-AFDC clients only; the state continues to provide 

services to AFDC clients. Additionally, in Cobb and De Kalb Counties, the contractor serves 

in-state cases only. 

gThis contract provides for the privatization of location, paternity establishment, administrative 

support order establishment, and certain customer relations services in the areas shown. The 

state continues to provide other services. 

hThis performance-based contract is subject to monetary penalties and liquidated damages. 

i

Terms are for a statewide operation of a full-service program that has not yet been implemented 

and is pending legislative approval. In addition, the 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 of the 

program. As amended for the period from July 1, 1996, through June 30, 1997, the contract 

provides for compensation of $4.39 million, including incentives, and additional bonuses paid on 

the basis of collections. 

j

Under this performance-based contract, the caseload—both AFDC and non-AFDC—is shared by 

the contractor and the county child support agency. Currently, the contractor’s share of the 

county caseload is estimated by the state child support director to be about 40 percent. 

k

This payment rate applies to non-AFDC cases only. Other rates apply to other types of cases, for 

example, from 26.8 to 17.8 percent of collections for AFDC cases, and 10.5 to 6.6 percent of 

collections for outgoing interstate cases. Compensation is not to exceed $6,308,554. 

l

The state legislature has authorized the creation of two new district offices in addition to those 

listed. The new district offices that would serve areas yet to be determined are to be established 

in state fiscal year 1997 and state fiscal year 1998. 

mThe Hampton District Office serves the city of Hampton and Gloucester, Mathews, Middlesex, 

Poquoson, and York Counties. 

nThe Arlington District Office will serve the cities of Arlington and Falls Church. 

oPayment not to exceed $2.2 million in the contract’s first year. 

Page 31 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Appendix IV 


Selected Demographic Characteristics of the 

Localities Reviewed 

Unless otherwise noted, the source for all demographic data in this 

appendix is U.S. Bureau of the Census, County and City Data Book 1994 

(Washington, D.C.: U.S. Bureau of the Census, 1994). 

Located in the Norfolk-Virginia Beach-Newport News metropolitan area, Virginia	 the Hampton District Office serves both suburban and rural areas. In 1992, 

the population in Hampton was about 137,000. Located in the same 

metropolitan area, the Portsmouth District Office serves Portsmouth City, 

with a 1992 population of about 105,000. In 1989, the median income in 

Hampton was $30,144 and in Portsmouth, $24,601. In 1989, 8.8 percent of 

the families in Hampton had incomes below the poverty level, compared 

with 14.9 percent in Portsmouth. 

Like Portsmouth, in 1992, Hampton was among the top 25 

counties/jurisdictions in the country in federal civilian employment. 

Hampton’s June 1994 caseload of 15,000 was about 42 percent AFDC and 

58 percent non-AFDC. At the same time, Portsmouth served a caseload of 

about 14,000, about 51 percent of which were AFDC cases and 49 percent 

non-AFDC. 

Statewide in 1992, there were 36.9 births to unmarried teenagers between 

15 and 19 years old per 1,000 females.21 According to 1988 Bureau of the 

Census data, 11.7 percent of all births in Hampton were to mothers under 

20 years old, compared with 18.6 percent in Portsmouth and 11.2 percent 

statewide. 

Arizona	 Yavapai County is north of Phoenix; its 1992 population was about 

116,000, compared with about 106,000 in Mohave County. While Yavapai 

County is outside the state’s metropolitan areas, it has one major town 

within its borders—Prescott. Mohave County is in a metropolitan area 

(Las Vegas, Nevada); its major urban areas include Kingman, Bullhead 

City, and Lake Havasu City. In 1989, the median income in Yavapai was 

$22,060, and in Mohave, $24,002. In 1989, 9.8 percent of Yavapai’s families 

had incomes below the poverty level, compared with 8.7 percent in 

Mohave. In state fiscal year 1994, the Yavapai office had about 10,000 child 

support cases; about 24 percent were AFDC and 76 percent non-AFDC. At 

that time, Mohave’s caseload was about 15,000, 36 percent of which were 

AFDC cases. 

21Annie E. Casey Foundation, Kids Count Data Book 1995 (Baltimore, Md.: Annie E. Casey Foundation, 

1995). 

Page 32 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Appendix IV 


Selected Demographic Characteristics of the


Localities Reviewed


Mohave County stands out among Arizona counties in two respects. 

Mohave’s population is highly mobile: from 1985 to 1990, the county led 

the state in the percentage of movers, 61.7 percent. Mohave County also 

had the highest population growth rate of any county in the state between 

1980 and 1992: 89.8 percent. 

Statewide, the unmarried teenage birth rate in 1992 was 62.7 per 1,000.22 

Census data show that 15.3 percent of all births for Yavapai County in 1988 

were to teenage mothers, 15.1 percent for Mohave, and 13.8 percent 

statewide. 

Tennessee	 Both the Seventh and Fifth Judicial Districts—Anderson County and 

Blount County, respectively—are in the Knoxville metropolitan area, with 

Anderson County lying north of the city and Blount County to its south. 

Anderson County’s 1992 population was about 70,500, compared with 

about 90,400 in Blount County. Major towns include Clinton and Oak 

Ridge in Anderson County and Maryville in Blount County. In 1989, 

Anderson County’s median income was $26,496, compared with $25,575 in 

Blount County. The percentage of families with incomes below poverty in 

1989 was 11.5 percent in Anderson County and 10 percent in Blount 

County. From June 1994 through December 1995, the Seventh Judicial 

District served a caseload of about 4,600, almost evenly divided between 

AFDC and non-AFDC cases. During the same period, the Fifth Judicial 

District’s caseload was about 6,300, of which 73 percent were AFDC cases 

and 27 percent non-AFDC cases. 

The Twentieth Judicial District serves Davidson County, which includes 

Nashville, which had a 1992 population of about 495,000. In 1989, the 

county’s median income was $27,821 and 13.4 percent of the county’s 

families had incomes below the poverty level. The child support caseload 

in state fiscal year 1994 was about 39,400, and 57 percent were AFDC cases. 

Statewide, in 1992, there were 46.3 births to unmarried teenagers 15 to 19 

years old per 1,000 females, close to the national average of 42.5.23 

According to 1988 Census data, teenage mothers accounted for 

16.0 percent of all births in Anderson County, 14.2 percent in Blount 

County, 15.2 percent in Davidson County, and 17.2 percent statewide. 

22Kids Count Data Book 1995. 

23Kids Count Data Book 1995. 

Page 33 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Appendix V 


Comments From the Department of Health 

and Human Services 

Page 34 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Appendix V 


Comments From the Department of Health


and Human Services


Page 35 GAO/HEHS-97-4 Full-Service Child Support Privatization 
Related GAO Products


Child Support Enforcement: Reorienting Management Toward Achieving 

Better Program Results (GAO/HEHS/GGD-97-14, Oct. 25, 1996). 

Child Support Enforcement: States’ Experience with Private Agencies’ 

Collection of Support Payments (GAO/HEHS-97-11, Oct. 23, 1996). 

Child Support Enforcement: States and Localities Move to Privatized 

Services (GAO/HEHS-96-43FS, Nov. 20, 1995). 

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 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). 

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). 

(106606) Page 36 GAO/HEHS-97-4 Full-Service Child Support Privatization 
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