States Privatize to Improve Child Support Services, Handle Growing Caseloads, and Obtain Additional Resources

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. Some states have implemented full-service privatization in a way that minimizes displacement of public employees. 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. 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. The difference in location rates was not statistically significant. Arizona’s Privatized Office Performed as Well as Public Office and Was More Cost-Effective

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. 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. 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. 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. 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. Collections and enforcement involves enforcing, monitoring, and processing payments.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on states' efforts to fully privatize local child support enforcement offices, focusing on: (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.

What GAO Found

GAO found that: (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; (2) for some offices, privatization has also been a response to state restrictions on hiring additional public employees; (3) in the three comparisons of performance GAO 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; (4) the relative cost-effectiveness of the privatized versus public offices, however, differed among the comparisons GAO made; (5) Virginia's and Arizona's privatized were more cost-effective, 60 percent and 18 percent, respectively, than their public counterparts, but in Tennessee, one public office was 52 percent more cost-effective than the privatized office reviewed, while the remaining privatized office in Tennessee was about as cost-effective as its public counterpart; (6) 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; and (7) an issue of contractor access to Internal Revenue Service data that could have impeded future full-service privatization has been partially addressed by recent welfare reform legislation which 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.