States’ Best Practices for Reducing Undistributed Collections

A Report by the National Council of Child Support Directors

May 2003

The national child support program has worked hard to meet the expectations of our customers. This customer service effort has resulted in some impressive gains in collections, paternity establishments, and new order establishments. We seek to apply the same energy that has resulted in these improvements to the problem of reducing undistributed collections.

In the past year, we have made substantial progress. This best practices report describes the actions of states that are aggressively tackling this issue. The work of states that have been able to successfully achieve and maintain reductions in undistributed collections below 2% of overall collections for the past two federal fiscal year - 2001 and 2002 (the national average is 3% of overall collections) are highlighted in this report. These states share some common traits: management commitment to solving the problem, innovative techniques for locating custodial parents for whom a payment has been returned, and streamlining of business processes to decrease the time it takes to disburse held money.

This report is organized around these three traits. The first section describes actions taken by management of state child support programs that exemplify their commitment to reducing undistributed collections, which includes conveying the importance of addressing this problem to all staff, assigning adequate staff, setting goals for reducing undistributed collections and monitoring progress toward achieving goals, and identifying issues that contribute to undistributed collections.

The second section summarizes the innovative work that states have undertaken to locate custodial parents for whom payments are undeliverable because the child support program does not have their correct address. States are accessing a variety of databases electronically to find these custodial parents including the Federal Parent Locator Service (FPLS), Electronic Parent Locator Network (EPLN), utility company records, and state tax and motor vehicle records. In addition, states are taking action on the front end to prevent undeliverable payments by encouraging custodial parents to enroll in direct deposit programs.

The third section describes changes to state business processes that have accelerated the disbursement of held payments. Some of these measures include revising payment hold procedures, decreasing the amount of time it takes to refund payments to non-custodial parents, and implementing undistributed collections categorization schemes on a statewide basis.

Before we present the findings of our best practices research, we should point out that there are in some instances good reasons for not distributing some payments. Legal issues, such as the determination of custody, may be pending and need to be resolved before payments are released. Payments intercepted from IRS refunds need to be held for a reasonable time when innocent spouses are involved, so that they have the opportunity to claim their part of the refunds. States have learned that a prudent holding period for these payments prevents incorrect disbursements, which usually costs states money. Depending on the size of the state, states could lose anywhere from thousands to millions of dollars a year if they prematurely distribute the IRS intercept collections from joint tax returns.

Nevertheless, state child support programs reported in 2002 that out of the $20.1 billion that it collected, $657 million or 3% went undistributed. Recognizing that this amount of held money is unacceptable, states have undertaken special efforts to reduce it.

Section 1: Make reducing undistributed collections a management priority

States that have had success in reducing undistributed collections have made this task a high management priority. In these states, management has communicated the importance of reducing undistributed collections to all staff, not just financial staff. It also dedicated staff and resources to fixing the problem, set goals and monitored progress, and identified and resolved issues contributing to undistributed collections.

Communicate the importance of the task to all staff

In 1999, undistributed collections in Texas had reached $23 million. A new Attorney General and his child support management team developed a plan to improve customer service. A major feature of this plan was a commitment to reduce held collections. All staff, not just those who processed the disbursement of payments, were informed of this commitment through a variety of media. For examples, posters in every office outlined the agency’s commitment to customer service. As a result, field, information technology, financial, and other support staff cooperated to reduce the amount of undistributed collections.

Assign staff and resources

States that have successfully reduced undistributed collections have assigned staff and resources to deal with the problem. Virginia established a Payment Processing team to reduce undistributed collections and keep them low. This team takes immediate action to keep undistributed collections to a minimum. One of the biggest reasons that payments go undistributed is that they come to the state child support agency without sufficient information to match the payment to the right case. The payer’s name may be illegible or it may be a common name, such as John Smith or Juan Gonzalez, with no other information, such as a case number, Social Security number, or date of birth. Virginia calls these payments "no-info" payments.

When Virginia receives a payment with insufficient information to apply it to a case, it is separated from other payments. Staff on the Payment Processing team work these payments immediately. The goal is to keep them out of the unidentified (suspense) account, the system account used for payments that cannot be distributed for lack of identifying information. Staff makes telephone calls to employers, courts, and other agencies to obtain additional information on these payments. Virginia also maintains a data base containing the most frequently received difficult payments along with contact information and posting directions.

Some payments require even more research. Staff has access to the state’s tax and motor vehicle databases, as well as the Federal Parent Locator Service and the Electronic Parent Locator Network to help them find the information needed to disburse the payment to right family. The identity of the payer can usually be determined within 24 and 72 hours.

The identification and research work occurs immediately and only after all possible research is conducted does Virginia post a payment to its unidentified (suspense) account. Posting a payment to suspense requires the approval of a team leader and a unit supervisor. But posting a payment to suspense doesn’t mean that staff stops trying to identify the payment. Virginia’s Exception Processing Unit continues to research the payment while it is in the suspense account.

Connecticut has set up an interagency team to work undistributed payments. Connecticut coordinates efforts between the IV-D Agency’s (BCSE) Central Office and Regional Offices; a special unit within the cooperating agency, Support Enforcement Services (SES); and dedicated staff at the State Disbursement Unit (SDU). The SDU "triages" the payments and takes an action, depending on the reason that the payment cannot be disbursed. If the automated system needs to be updated, the SDU will send an electronic diary to the appropriate BCSE or SES office to add the required information to the automated system. The SDU researches and resolves payments without sufficient identifying information itself, as well as resolving any issues that arise due to employer miscoding, or out of balance employer payments. These efforts ensure that cases with undistributed collections are resolved quickly and payments disbursed to the right family as quickly as possible. In addition, the IV-D Director receives a weekly report of any undistributed payments, and meets with top management staff to ensure that attention is focused on any problem areas.

Pennsylvania uses a variety of reports such as Data Integrity Lists, Distribution Hold reports and Special Investigation Lists to intensively work cases with payments on hold.

Set goals and monitor progress

Setting goals and monitoring progress has been an important reason why states have been able to reduce undistributed collections. Virginia identifies different categories of undistributed collections and sets goals for reducing each one. For example, the goal for unidentified collections is to keep it below $50,000 at all times. It also establishes field office goals for reducing undistributed collections. Virginia’s goal for field offices is to keep undistributed collections to less than 3% of monthly collections. Texas established baselines for each category of undistributed collections; when, the baseline is exceeded, extra resources can be directed at reducing the held money to baseline levels. Maryland has established a UDC performance goal for each local jurisdiction. UDC in any local jurisdiction can not exceed 1% of their total child support collections for the preceding federal fiscal year.

Identify issues

The key to achieving these goals is careful monitoring, and in order to effectively monitor these collections, good reports are needed. Virginia has a daily report that lists each transaction that is not yet disbursed. This report is used to monitor and organize the work on undistributed collections. These reports also make it possible to analyze trends and shift resources when needed. Monthly analysis reports are provided by the central office to field staff and management so both can keep track of the progress being made toward achieving their goals. They also allow staff and management to compare their progress with that of other offices. Virginia uses its reports to give staff an accurate account of the types of money that are undistributed. Knowing which collections are being held legitimately and which ones require work improves the efficiency of staff.

Like Virginia, Connecticut produces daily reports on undistributed collections. The payments are separated in a number of categories, dependent on the reason that the payment has not posted, and the remedy needed to resolve the issue. In addition, payment date indicating the age of undistributed payments appears on the report. The reports can be sorted by either category or age, depending on which staff is working on the report. This ability assists staff to prioritize payments for research. Texas also produces reports that categorize the types of undistributed payments and ages these payments.

Washington monitors undistributed collections by using automated reports that are available over the intranet. Information on undistributed collections is sorted by office and then by the responsible worker. Workers can review all suspense payments associated with the cases on their caseload as well as all items in suspense for cases handled by their teams. Supervisors have access to suspense payment information at the worker, team, and office levels.

Texas uses its child support intranet to provide tools for staff to conduct the research needed to disburse held money. Staff from Attorney General’s Child Support Division Management Information Systems created an online data base, known as IDEAS, that field staff can use to create custom reports to work their caseload more efficiently. Central office staff updates IDEAS with work lists targeting specific categories of undistributed payments, and field staff uses the IDEAS data base to help them work these reports.

Section 2: Locating Custodial Parents and Getting Money to Families

One reason that child support payments go undistributed is that states do not have correct addresses for some custodial parents. Sometimes, custodial parents move and forget or chose not to notify the child support agency of their new address. When a payment cannot be delivered because of an incorrect address, states that have successfully reduced undistributed payments use a wide array of locate tools to find the correct address.

Automated locate

Virginia uses the Federal Parent Locator Service and the Electronic Parent Locator Network to find correct addresses. It also has access to state tax and motor vehicle databases. Connecticut also accesses a number of local and state data bases, including the state’s tax system.

Texas uses an especially powerful locate tool to find custodial parents for whom the agency does not have a correct address. This tool is known as Locate and Asset Search System Online, or LASSO. LASSO allows Special Enforcement Officers and other authorized staff to access a wide range of locate information from one source rather than submitting a number of requests to different sources. Through LASSO, staff can access information from the data bases of phone companies, utilities, counties, professional and driver’s license agencies, and many other sources with just one inquiry. All that is needed is basic information about the person for whom an address is being sought: first name, last name, and date of birth or Social Security number.

Texas also enhanced its computer system to improve communications between field staff and Special Enforcement Officers, who conduct skip trace investigations. It added an indicator to its child support computer system that allows field staff to refer automatically cases in which a child support check has been returned because of incorrect address. Field staff can request that special locate action to be taken with one keystroke. In the past, such locate action required a phone call or an e-mail. Because of the busy schedules of all staff who work caseloads, the phone call or e-mail would sometimes be delayed.

Pennsylvania sends supplemental payment information letters to obligors to obtain additional identifying information. They also make aggressive use of the FPLS, automatically submitting to locate obliges upon the return of the check, and automatically releasing payments from "distribution hold" upon receipt of new FPLS address.

In Ohio, they are using a "forward track" to update the checks with the most recent address on record before the checks are sent out. In the past the checks were returned and the address would be manually verified before any other money was sent out.

Maryland changed the envelopes used for mailing checks, so that payments are forwarded to custodial parents when they move or relocate. In addition, a reminder message is printed on all checks informing customers of the following:

"If You Have Moved, Please Contact Your Local Office"

Direct deposit offers a promising solution

One way to eliminate returned collections is to find a method of delivery that doesn’t rely on the postal service and the constant updating of address information in the child support agency’s computer system. Direct deposit of child support payments into a customer’s bank account allows child support agencies to do this.

Texas, Connecticut, Virginia, and other states offer a direct deposit option for custodial parents. The Texas Attorney General’s office conducts an aggressive outreach campaign to explain the benefits of direct deposit. It includes information about direct deposits when it mails with child support checks to custodial parents. It puts direct deposit brochures in the waiting rooms of its field offices. It also provides information about direct deposit on its web site.

Virginia and Connecticut both use the internet to provide customers with information about direct deposit. A link at Child Support Enforcement’s web page (in Virginia) and the SDU webpage (in Connecticut) takes you to a site with information about how to sign up for direct deposit. Visitors can also download a direct deposit application at the web site.

The problem with direct deposit is that many of the customers of state child support programs do not have bank accounts. State child support programs primarily serve low-income customers, many of whom do not have bank accounts.

State agencies could significantly increase direct deposit if they were able to assist customers set up low- or no-cost accounts for the purpose of depositing their child support payment electronically. These accounts would provide minimum services to customers, but they would provide a simple, safe, and secure way to receive payments and speed up the delivery of payments. Best of all, there would be no interruption of payments if the custodial parent forgets to inform a child support agency about any change in address.

Washington and Colorado custodial parents have the option of receiving child support through a Division of Child Support (DCS) Visa card. This card looks like a credit card and can be used like a check card. Child support payments are automatically deposited to the card and the card can be used to make purchases anywhere that accepts Visa cards. A form for applying for the card is available at the DCS web site (in Washington).

Connecticut also has recognized that some clients cannot obtain a bank account. In conjunction with the SDU Connecticut designed a program specifically for their clients called "Pay Access". The card can be used by the client at any branch of the financial institution issuing the card as an ATM card to withdraw funds, and at certain retail establishments may be used as a debit card, giving them flexibility in accessing their child support funds. The state is currently paying a minimal monthly fee for this service and it is made available to the client free of charge except for possible transaction fees if the client chooses to use the card at non-affiliated financial institutions which access certain fees. There are currently 90 clients in this program.

Section 3: Improving business practices

States have taken a number of actions to change procedures and their computer systems to speed up the disbursement of held money.

Changing future pay business rules

Texas changed its child support computer system business rules regarding future pay collection in non-TANF cases. Future pay is money received in excess of the amount owed. For example, if the current support amount is $100 a month, no arrears exist, and the non-custodial parent sends $200 a month, the extra $100 is considered future pay. Under the original rules of the system, which came online in 1997, future pay was held until the accrual became due. In 2001, Texas made system changes that allowed these future pay collections to be passed through to custodial parents without being held. When this rule change was implemented nearly $9 million was immediately released to families.

Improving Business Practices to with Cutting Edge Technology:

An SDU with cutting edge technology has allowed Connecticut to maintain low undistributed collections, and significantly reduce the occurrence of new ones. One of the key innovations is MICR recognition, from the check that the non-custodial parent sends, and retention of that information in the SDU database history. If the operator receives a payment transaction and the MICR included with the payment was previously received, the operator can view the previous entry to assist in identification of the current receipt.

Also, the establishment of a special employer outreach coordinator at the SDU assists in resolving out of balance checks, and encouraging employers to use EFT/EDI which eliminates the possibility of a payment being received without sufficient information. Two innovations which will be implemented before the end of 2003 include the ability for noncustodial parents to have their child support payment taken directly from their bank account, and the use of Western Union to electronically send cash or money order payments directly to the SDU with sufficient identifying information.

Automating Processes:

Texas has automated several processes that speed up the disbursement of held money. For example, Texas automated the manual disbursement of held money. Support payments may be held for a number of legitimate reasons. Prior to 2002, releasing this held money involved a cumbersome manual process. As a result of system enhancements, held money can now be released automatically.

A constant focus must be kept on the UDC, because UDC accumulates one case at a time. Connecticut is designing, and intends to have implemented by the end of the year, a highly automated process that will continually troll for address information for the custodial parent. This system will automatically reissue a held check as soon as a new address is acquired for the custodial party. It will remove the need for staff resources to be used, except in unusual situations, and will standardize the process so that the custodial party will be located, and the check issued, even if staff resources have been reduced. In addition, an outmoded edit that prevented a payment from being issued via direct deposit if the custodial party’s address was invalid was removed from the system, ensuring that a payment is issued, regardless of the client’s address.

Looking to the future

Some states have made significant progress toward reducing undistributed collections. But much work remains to be done. In addition to continuing the work already begun, states are developing strategies for making further reductions.

Moving from project to operations:

In Texas, the work associated with reducing undistributed collection has been project-oriented in nature. After three years, the UDC project needed to evolve into a consistent, ongoing function of the child support organization. The key to that evolution is ongoing and regular monitoring of these collections. Recently, Texas made this monitoring a continuing responsibility of its Payment Support section in its central office. However, monitoring is not the only thing that needs to be done. Staff needs to be assigned to the continuous research needed to move undistributed payments out the door. Ceaseless efforts to reduce, not just maintain, undistributed collection levels must be in place.

Maintaining a focus on undistributed collections:

As child support collections grow, the task of reducing undistributed collections will become more difficult. But it is not a problem that states can afford to ignore. There will be no easy solutions; success will depend on state’s willingness to make it a management priority, commit resources, and adopt innovative methods to solve the problem. For this reason, the National Council of Child Support Directors has focused considerable energy on UDC working closely with the Federal Office of Child Support Enforcement to standardize the UDC categories, and to share best practices of states that have been successful in getting their arms around the issue.

Addendum to NCCSD Best Practices Report

May 2003

Massachusetts and California are two additional states that are focusing on the issue of undistributed collections. Some of the strategies they are implementing are included below.

The newly created California Department of Child Support Services (DCSS) established a UDC Initiative in mid-2000 to determine the accurate undistributed collections amount for each of its 58 local agencies and to direct efforts to reduce monies owed families. This included conducting sufficient research necessary to identify nine categories of undistributed collections, beginning local agency ad hoc reporting of undistributed amounts by category in March 2001, and issuing instructions and requirements for working each category. Monthly ad hoc reporting continued thorough June 2002 permitting DCSS to monitor trends and progress by agency in working each category. Since July 2002, undistributed collections reporting by category occurs through automated systems using a monthly supplemental reporting form to the OCSE 34A. As a result, local agency staff focused attention on undistributed collections and have reduced amounts owed to families.

When California began its UDC Initiative, it also allocated funding to its 58 local child support agencies necessary to work the categories of undistributed collections. A total of almost $20 million was allocated beginning in State Fiscal Year 2001-2002 to establish local agency Program Improvement Teams to provide an ongoing and ready resource to address issues such as reducing undistributed collections. Over time, the Program Improvement Teams have also addressed other program performance improvements including uniform implementation of case closure policy, elimination of duplicate cases, and data reliability.

California recently issued its Strategic Plan for 2002-2005 for the statewide child support services program and included a specific objective to address undistributed collections. The objective is to timely distribute collections ensuring that no more than one percent of total collections due to parents and families are undistributed at any time. The Strategic Plan was developed in collaboration with child support professionals, customers, and other stakeholders. Involving stakeholders in development of the Strategic Plan, as well as the UDC Initiative, has been a key element in the success of the California effort.

In addition, California has integrated oversight of undistributed collections into its Quality Assurance and Performance Improvement (QAPI) - the statewide approach to performance oversight and improvement. A key element of QAPI is management of performance through data, and statewide undistributed collections data are included in quarterly comparative reports issued to all local agencies by the State. This approach has served to keep focused attention on the management of undistributed collections.

California has added aging by six time periods to its undistributed collections categorical reporting process. The categories of undistributed collections are agency by 1-30 days, 31-60 days, 61-90 days, 91-180 days, 181 days to 2 years, and over 2 years. The aging of undistributed collections permits better monitoring and early identification of problem areas. Automated reports by local agency are available monthly on the DCSS secure website, permitting state oversight and local agency comparisons.

In order to be able to efficiently work undistributed money, staff needs to know the reasons that money is being held. When Massachusetts undertook its undistributed collections project, it found that it needed better reports to more clearly understand the reasons that money was not disbursing. With about 40 different codes that identified various reasons that money was being held, it had the information on the system that it needed, but the information wasn’t organized into a useful format.

One of the state’s Undistributed Collection Team’s first tasks was to create reports that organized this information and helped team members see the areas that needed work. As a result of this work, staff can tell how many cases are in each category and the amount of undistributed collections in each category. The reports can also show staff how long undistributed collections have been held.

About a year ago Massachusetts set up an interdisciplinary team within its Child Support Enforcement (CSE) section to reduce undistributed collections. Team members included staff from a cross section of CSE’s organization, including field operations, customer services, IT, and central office management and finance staff. It also added new staff and assigned several staff members to work full time on this project.

The team has begun to make progress in reducing undistributed collections. Undistributed collections for custodial parents have been reduced by $4 million. The reason for its success is that it has taken a methodical and structured approach toward solving this problem. Team members set specific goals and assign tasks to meet these goals. They meet regularly to assess progress assign tasks. Weekly and monthly reports help them measure how well they are doing. Involvement of both central office and field staff on the team has been crucial to the progress made so far.

As described above, Massachusetts has set up an interdisciplinary undistributed collection team to reduce these collections. The team’s success has been based on establishing goals, measuring the progress made toward achieving the goals, and constantly evaluating the work that has been done and needs to be done. Management focus on these goals and communicating this focus to staff at all levels will determine the future success of this undertaking.

States have used the internet to make it easy for custodial parents to enroll in direct deposit. Massachusetts has even made it possible for customers to apply for direct deposit online. Customers may set up, change, or cancel direct deposit simply by logging on to the system and providing the information requested. Massachusetts hopes to make 20 percent of its payments through direct deposit by the end of this fiscal year.