In addition, earlier enforcement of child support obligations for families not receiving AFDC would prevent such families from needing government support. Under the terms of most collection contracts, contractors are paid only if collections are made. Payments to contractors are often calculated as a percentage of collections—on both AFDC and non-AFDC cases. Growing Caseloads and Fiscal Constraints Encourage States to Privatize Collections

When states contract with private firms to provide child support collection services for portions of their caseloads, they often do so to help service their growing caseloads. On AFDC cases, the federal and state governments retained all collections of past-due support and all but $50 of current support collected up to the amount of each families’ monthly AFDC benefit. Consequently, under this contract, the federal government’s share of retained AFDC collections was not large enough to offset its share of contract costs and performance incentives paid to the state based on AFDC and non-AFDC collections. Furthermore, the pass-through to families of the first $50 of current support payments collected will no longer be mandatory. The legislation also affects the incentive payments that states receive. Scope and Methodology

Using contract cost and collection data provided by state and local CSE offices, we determined the financial outcomes for 11 collection contracts by calculating (1) collections distributed to families and retained by the federal and state governments and (2) net CSE financial revenues or costs for the federal and state governments. Child Support Enforcement: Credit Bureau Reporting Shows Promise (GAO/HEHS-94-175, June 3, 1994). 5, 1991). A recorded menu will provide information on how to obtain these lists.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on states' use of private agencies for the collection of child support payments, focusing on: (1) why states contract for these collection services; and (2) the factors affecting the financial outcomes of collection contracts for families and the federal and state governments.

What GAO Found

GAO found that: (1) states contract with private agencies to collect past-due or hard-to-collect child support payments because they are finding it increasingly difficult to service their growing child support enforcement caseloads with available staff and budget resources; (2) under the terms of most collection contracts, states pay contractors only if collections are made, and contractor payments are often a fixed percentage of collections; (3) the federal and state governments retain most of the child support payments collected for families receiving Aid to Families with Dependent Children (AFDC) benefits, while non-AFDC families receive most of the support payments collected; (4) the federal government's share of the child support collections depends on how much it contributes to the state's welfare program and how much it pays in performance incentives and child support enforcement administrative costs; and (5) a review of 11 contracts showed that the federal government's financial outcomes ranged from a net cost of about $242,000 to revenues of $1.2 million.