Child Support Enforcement: Early Results on Comparability of Privatized and Public Offices (Letter Report, 12/16/96, GAO/HEHS-97-4). Growing caseloads and resource limitations have led some states to privatize their child support enforcement offices. Fifteen states have turned to privatization as a way to boost performance and handle caseloads that, in some instances, are approaching 1,000 per worker. For some offices, privatization has also been a response to state restrictions on hiring additional public employees. In a series of comparisons, GAO found that fully privatized enforcement offices performed as well or better than public child support programs in locating noncustodial parents and collecting payments. However, these results are limited to the cases GAO reviewed and do not reflect the performance of public or private offices overall within the states selected. Moreover, because the full-service privatization of child support enforcement is relatively new, the extent to which it offers comparable performance and cost-effectiveness remains open for evaluation over the long term. --------------------------- Indexing Terms ----------------------------- REPORTNUM: HEHS-97-4 TITLE: Child Support Enforcement: Early Results on Comparability of Privatized and Public Offices DATE: 12/16/96 SUBJECT: Child support payments Privatization Cost effectiveness analysis Collection procedures State-administered programs Tax information confidentiality Tax refunds Federal/state relations Administrative costs Law enforcement IDENTIFIER: Arizona Tennessee Virginia Aid to Families with Dependent Children Program AFDC HHS Temporary Assistance for Needy Families Program Hampton (VA) Portsmouth (VA) Yavapai County (AZ) Mohave County (AZ) Knoxville (TN) Nashville (TN) IRS Project 1099 IRS Refund Offset Program HHS Child Support Enforcement Program ****************************************************************** ** This file contains an ASCII representation of the text of a ** ** GAO report. 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For further details, please ** ** send an e-mail message to: ** ** ** ** ** ** ** ** with the message 'info' in the body. ** ****************************************************************** Cover ================================================================ COVER Report to the Chairman, Committee on the Budget, House of Representatives December 1996 CHILD SUPPORT ENFORCEMENT - EARLY RESULTS ON COMPARABILITY OF PRIVATIZED AND PUBLIC OFFICES GAO/HEHS-97-4 Full-Service Child Support Privatization (106606) Abbreviations =============================================================== ABBREV 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 Letter =============================================================== LETTER 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 cost- effectiveness 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 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. -------------------- \1 Child Support Enforcement: States and Localities Move to Privatized Services (GAO/HEHS-96-43FS, Nov. 20, 1995). RESULTS IN BRIEF ------------------------------------------------------------ Letter :1 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-effectiveness\2 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 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. -------------------- \2 We defined cost-effectiveness as the ratio of each office's administrative costs to collections, expressed as the cost to collect $1. BACKGROUND ------------------------------------------------------------ Letter :2 In 1975, the Congress created the federal child support enforcement 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. 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. Figure 1: States With Planned and Ongoing Fully Privatized Local Offices as of September 1996 (See figure in printed edition.) 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 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. -------------------- \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. \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). STATES PRIVATIZE TO IMPROVE CHILD SUPPORT SERVICES, HANDLE GROWING CASELOADS, AND OBTAIN ADDITIONAL RESOURCES ------------------------------------------------------------ Letter :3 Overall, officials in the states with full-service privatization efforts most frequently cited a desire to improve the child support services offered, the need to serve their soaring caseloads, and the ability to deploy additional child support staff as reasons why they fully privatized local offices. At two offices, state officials estimated that caseloads had reached about 1,000 per worker, and they could not get the authority to hire additional public staff. Other major reasons cited by officials include the local child 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 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 ------------------------------------------------------------ Letter :4 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. -------------------- \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. VIRGINIA'S PRIVATIZED OFFICE MATCHED OR EXCEEDED PUBLIC OFFICE OUTCOMES AND WAS MORE COST-EFFECTIVE ---------------------------------------------------------- Letter :4.1 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. Table 1 Virginia: Performance Outcomes Compared for 18 Months on New Cases Opened in July 1994 Of cases needing service, percent with successful outcome\a ------------------------------- Private office Public office Service needed (Hampton) (Portsmouth) -------------------------- -------------- --------------- Location\b 73.9 58.5 Paternity establishment 40.0 19.2 Support order 35.7 16.8 establishment Collection 40.8 22.3 ----------------------------------------------------------- \a Except 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). \b Actual 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 through December 1995 Private office Public office (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 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. -------------------- \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. \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. \10 For 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. \11 We imputed administrative costs for Hampton because its caseload was drawn from the caseload of its parent office, Newport News. ARIZONA'S PRIVATIZED OFFICE PERFORMED AS WELL AS PUBLIC OFFICE AND WAS MORE COST-EFFECTIVE ---------------------------------------------------------- Letter :4.2 In Arizona, performance outcomes on our review cases revealed that the 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 outcome\a ----------------------------- Private office Public office Service needed (Yavapai) (Mohave) ---------------------------- -------------- ------------- Location\b 37.5 22.9 Paternity establishment 8.7 9.7 Support order establishment 14.3 5.8 Collection 15.1 5.3 ----------------------------------------------------------- \a None 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. \b Location 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. Table 4 Arizona: Administrative Costs Compared to Collections, July 1994 through December 1995 Private office Public office (Yavapai) (Mohave) ---------------------------- -------------- ------------- Administrative costs $987,700\a $1,296,092 Collections $3,387,792 $3,720,575 Cost to collect $1 29.5›\a 34.8› ----------------------------------------------------------- \a These 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 ---------------------------------------------------------- Letter :4.3 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, January 1994 through June 1995 Private office Public office (Seventh (Fifth Judicial Judicial District) 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 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 Fiscal Years 1991-95 (Figures are percents) Public Private ---------------------- -------------- Cases with successful outcome 1991 1992 1993 1994 1995 ------------------------------ ------ ------ ------ ------ ------ Location\a 38.9 37.2 14.3 18.1 34.4 Paternity established 3.6 4.4 3.2 4.0 5.9 Support order established 7.4 4.5 3.2 7.7 4.5 Collection 12.5 24.1 12.5 9.0 10.6 ---------------------------------------------------------------------- \a Location rates may include multiple locations for the same individual. Table 7 Tennessee: Cases Receiving Service in the Twentieth Judicial District, State Fiscal Years 1991-95 Public Private ---------------------- -------------- Cases with successful outcome 1991 1992 1993 1994 1995 ------------------------------ ------ ------ ------ ------ ------ Location\a 3,657 3,601 1,414 3,608 7,998 Paternity established 424 472 354 927 1,346 Support order established 932 590 406 2,107 915 Collection 7,404 16,200 5,572 3,554 4,349 ---------------------------------------------------------------------- \a Location 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. Table 8 Tennessee: Administrative Costs Compared to Collections in the Twentieth Judicial District, State Fiscal Years 1991-95 Public Private ---------------------------------- ---------------------- 1991 1992 1993 1994 1995 ------------ ---------- ---------- ---------- ---------- ---------- Collections $7,748,590 $12,078,72 $12,667,58 $14,409,94 $17,798,66 8 9 8 2 Administrati $986,341 $1,023,744 $1,315,643 $1,745,667 $1,900,231 ve costs Cost to 12.7› 8.5› 10.4› 12.1› 10.7› collect $1 ------------------------------------------------------------------------ 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. -------------------- \12 During 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. \13 To 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. \14 State 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. FACTORS BELIEVED TO AFFECT PERFORMANCE AND COST-EFFECTIVENESS ---------------------------------------------------------- Letter :4.4 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. 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 ------------------------------------------------------------ Letter :5 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. 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 reviews\15 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. 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. -------------------- \15 A 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. CONCLUSIONS ------------------------------------------------------------ Letter :6 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. AGENCY COMMENTS ------------------------------------------------------------ Letter :7 In commenting on a draft of this report (see app. V), HHS said that the 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. ---------------------------------------------------------- Letter :7.1 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 Christopher Morehouse, Steven Machlin, Catherine Pardee, and Suzanne S. Sterling. Sincerely yours, Mark V. Nadel Associate Director, Income Security Issues SCOPE AND METHODOLOGY =========================================================== Appendix I 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 ---------------------- ---------------------- Local Local Public Methodolog State office Contractor office entity y used ---------- ---------- ---------- ---------- ---------- ---------- Virginia Hampton Lockheed Portsmouth State Paired District Martin IMS District Department comparison of Social Services Arizona Yavapai Policy Mohave State Paired County Studies, County Department comparison Inc. of Economic Security Tennessee Seventh Maximus Fifth District Paired Judicial Judicial Attorney comparison District District (Anderson (Blount 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 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 Demographics\a Population Minority population Median household income Percent of families below poverty Percent of households headed by a single parent Urbanization ---------------------------------------------------------------------- \a Determined 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 Arizona\16 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 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 data\19 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 -------------- -------------- -------------- Privat Privat Privat Public e Public e Public e ---------------------- ------ ------ ------ ------ ------ ------ Cases in original 214 211 145 89 89 102 cohort Cases excluded 102 108 87 36 69 50 Cases analyzed in 112 103 58 53 20 52 final cohort ---------------------------------------------------------------------- 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. -------------------- \16 Cases were randomly selected for the public office in Arizona, due to the volume of cases opened that month. \17 Child 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. \18 These 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. \19 Administrative costs did not include indirect costs that states may have incurred in the process of preparing requests for proposals, evaluating bids, and monitoring contracts. OUTCOME ANALYSIS --------------------------------------------------------- Appendix I:1 To compare the outcomes of the private and public offices for cases that were in the system for 18 months, we analyzed differences between the 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 Cases Cases with Cases with needin succes needin succes g sful g sful servic outcom servic outcom Service needed e e e e -------------------------------------- ------ ------ ------ ------ Location 69 51 53 31 Paternity establishment 50 20 73 14 Support order establishment 84 30 95 16 Collection 103 42 112 25 ---------------------------------------------------------------------- Table I.5 Numbers of Cases Needing Services and With Successful Outcomes Among Cohort Cases in Arizona Offices Private office Public office -------------- -------------- Cases Cases Cases with Cases with needin succes needin succes g sful g sful servic outcom servic outcom Service needed e e e e -------------------------------------- ------ ------ ------ ------ Location 40 15 48 11 Paternity establishment 23 2 31 3 Support order establishment 35 5 52 3 Collection 53 8 57\a 3 ---------------------------------------------------------------------- \a We 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. Table I.6 Summary Data for Cases From Private Office in Tennessee Cases with succes sful outcom Service needed Cases needing service e ------------------------------ ------------------------------ ------ Location 24 16 Paternity establisment 18 5 Support order establishment 40 12 Collection 52 13 ---------------------------------------------------------------------- LOGISTIC REGRESSION MODELS --------------------------------------------------------- Appendix I:2 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. Table I.7 Distribution of Cohort Cases on Selected Characteristics Virginia Arizona ------------------------------ ------------------------------ Public Private Public Private -------------- -------------- -------------- -------------- Percen Percen Percen Percen Number t Number t Number t Number t ---------------- ------ ------ ------ ------ ------ ------ ------ ------ Cases 112 100 103 100 58 100 53 100 AFDC cases 81 72 54 52 53 91 36 68 Cases needing -------------------------------------------------------------------------------- Location 53 47 69 67 48 83 40 75 Paternity 73 65 51 50 31 53 23 43 establishment Support order 95 85 84 82 52 90 35 66 establishment Location and 39 35 32 31 26 45 22 42 paternity and support order establishment Collection only 9 8 3 3 0 0 8 15 -------------------------------------------------------------------------------- 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. Table I.8 Logistic Regression Coefficients and Corresponding P-Values Obtained From Models Virginia Arizona -------------- -------------- P- Coeffi value\ Coeffi P- Model cient a cient value -------------------------------------- ------ ------ ------ ------ Location ---------------------------------------------------------------------- Office type - .21 - .27 0.5162 0.5360 AFDC status - .01 - .04 1.3183 1.3104 Paternity establishment ---------------------------------------------------------------------- Office type - .05 - .76\b 0.8411 0.3268 \b AFDC status - .01 \b \b 1.1565 Need for location - .67 - .06\b 0.1838 2.1196 \b Support order establishment ---------------------------------------------------------------------- Office type - .06 - .26 0.7309 1.0242 AFDC status - .00 - .55 1.4297 0.7319 Need for location 0.3849 .33 - .08 1.5279 Need for paternity - .34 - .12 0.3783 1.4314 Collection ---------------------------------------------------------------------- Office type - .04 - .39 0.8638 0.6956 AFDC status - .00 - .16 1.4324 1.2626 Need for location - .87 - .99 0.0655 0.0048 Need for paternity - .34 - .06 0.3965 2.1475 Need for support order - .00 0.5387 .53 3.3023 ---------------------------------------------------------------------- Note: To highlight the results for the main variable of interest (office type) the corresponding coefficients and p-values are bolded. \a The 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. \b AFDC 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. -------------------- \20 As 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. BASIC CHILD SUPPORT ENFORCEMENT SERVICES ========================================================== Appendix II 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. CONTRACT INFORMATION FOR FULL-SERVICE CHILD SUPPORT PRIVATIZATION INITIATIVES IN 15 STATES AS OF SEPTEMBER 1996 ========================================================= Appendix III Fully Start date privatized (contract Payment State local offices Contractor length\a) terms\b,c -------------- -------------- -------------- -------------- ---------------- Arizona -------------------------------------------------------------------------------- Santa Cruz and Policy 3/94 (4 years) 32-24 percent\d Yavapai Studies, Inc. Counties  Arkansas -------------------------------------------------------------------------------- Jefferson Hunt Law Firm 9/95 (1.8 Fixed fee of County years) $810,000, reimbursable expenses up to $490,000 plus incentives Greene County Greene County 9/95 (1.8 Fixed fee of Child Support years) $175,000, Enforcement, reimbursable Inc. expenses up to $290,000 plus incentives Garland County Owen Support 7/95 (2 years) Fixed fee of Services, Inc. $390,000, reimbursable expenses up to $460,000 plus incentives Craighead Brent Davis, 7/95 (2 years) Negotiated County Esq. contract\e 3rd Judicial Randolph 7/95 (2 years) Negotiated District County Judge/ contract\e (Clay, Multi Jackson, Services, Inc. Lawrence, Randolph, and Sharp Counties) 14th Judicial Multi 7/95 (2 years) Fixed fee of District Services, Inc. $300,000, (Baxter, reimbursable Boone, Marion, expenses up to and Newton $330,000 Counties) Colorado -------------------------------------------------------------------------------- El Paso County Maximus 1/96 (5 years) 19-10 percent\d Georgia\f -------------------------------------------------------------------------------- Cobb, De Kalb, Policy 7/94 (4 years) 11.5-10 and Fulton Studies, Inc. percent\d Counties Iowa\g -------------------------------------------------------------------------------- Fremont, Policy 1/96 (5 years) Flat fee\h Harrison, Studies, Inc. Mills, 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 11/96 (4 22.95-20.55 Martin IMS years) percent\d Queen Anne's Lockheed 11/96 (4 9.67 percent County Martin IMS years) Mississippi -------------------------------------------------------------------------------- Hinds and Maximus 7/94 (5 years) 40.1-27.6 Warren percent\d,i Counties Nebraska -------------------------------------------------------------------------------- Douglas County Policy 2/93 (5 years) 15-13 percent\d Studies, Inc. Ohio\j -------------------------------------------------------------------------------- Hamilton Maximus 6/96 (3 years) 9.9-6.6 County percent\d,k Oklahoma -------------------------------------------------------------------------------- Pittsburg and Kibois 1993 (4 years) Cost- Haskell Community reimbursement Counties Action Foundation (nonprofit) Comanche and Great Plains 1993 (4 years) Cost- Cotton Improvement reimbursement Counties Foundation (nonprofit) South Carolina -------------------------------------------------------------------------------- Georgetown, To be awarded 1/97 (5 years) Horry, Marion, and Williamsburg Counties Tennessee -------------------------------------------------------------------------------- 7th Judicial Maximus 7/92 (5 years) 16 percent District (Anderson County) 20th Judicial Maximus 7/93 (5 years) 12-10.5 District percent\d (Davidson County) 10th Judicial Policy 7/96 (5 years) 15.75-13.5 District Studies, Inc. percent\d (Bradley, McMinn, Monroe, and Polk Counties) 29th Judicial Policy 2/92 (5 years) 19-15 percent\d District (Dyer Studies, Inc. and Lake Counties) 27th Judicial Policy 1/95 (5 years) 17-14 percent\d District Studies, Inc. (Obion and Weakley Counties) 21st Judicial To be awarded 1/97 (5 years) District (Hickman, Louis, Perry, and Williamson Counties) Virginia\l -------------------------------------------------------------------------------- Hampton\m and Lockheed 2/94 (5 years) 11.45-9.95 Chesapeake Martin IMS percent\d District Offices Alexandria and To be awarded 1997 (5 years) Arlington\n District Offices West Virginia Kanawha County Policy 9/96 (3 years) 18 percent\o Studies, Inc. Wyoming -------------------------------------------------------------------------------- Districts 1, Policy 6/95 (4 years) 17.5-16 2, and 3 Studies, Inc. percent\d (Albany, Carbon, Laramie, Lincoln, Sweetwater, and Uinta Counties) Districts 8 Gray & 5/95 (4 years) $724,000 + 8 and 9 Associates percent of (Converse, collections over Fremont, $2.5 million Goshen, Niobrara, Platte, Sublette, and Teton Counties) -------------------------------------------------------------------------------- \a Length of contract can include possible annual renewals. \b Unless otherwise noted, payment terms are expressed as a percentage of contractor-generated collections. \c Payment terms vary, depending on factors such as caseload volume and composition and use of multiple or single contractors. \d First figure is the payment rate for the contract's first year; second figure is the rate reached by the end of the contract period. \e Payment 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. \g This 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. \h This 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. \m The Hampton District Office serves the city of Hampton and Gloucester, Mathews, Middlesex, Poquoson, and York Counties. \n The Arlington District Office will serve the cities of Arlington and Falls Church. \o Payment not to exceed $2.2 million in the contract's first year. SELECTED DEMOGRAPHIC CHARACTERISTICS OF THE LOCALITIES REVIEWED ========================================================== Appendix IV 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). VIRGINIA -------------------------------------------------------- Appendix IV:1 Located in the Norfolk-Virginia Beach-Newport News metropolitan area, 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. -------------------- \21 Annie E. Casey Foundation, Kids Count Data Book 1995 (Baltimore, Md.: Annie E. Casey Foundation, 1995). ARIZONA -------------------------------------------------------- Appendix IV:2 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. 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. -------------------- \22 Kids Count Data Book 1995. TENNESSEE -------------------------------------------------------- Appendix IV:3 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. (See figure in printed edition.)Appendix V -------------------- \23 Kids Count Data Book 1995. COMMENTS FROM THE DEPARTMENT OF HEALTH AND HUMAN SERVICES ========================================================== Appendix IV (See figure in printed edition.) RELATED GAO PRODUCTS =========================================================== Appendix 0 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). *** End of document. ***