Special audit, Arizona Department of Economic Security, Division of Child Support Enforcement

              Debra K. Davenport
Auditor General
Special Audit
Department of
Economic Security—
Division of Child Support Enforcement
Performance Audit Division
November • 2007
REPORT NO. 07-10
A REPORT
TO THE
ARIZONA LEGISLATURE
The is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators
and five representatives. Her mission is to provide independent and impartial information and specific recommendations to
improve the operations of state and local government entities. To this end, she provides financial audits and accounting services
to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of
school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Audit Staff
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov
Senator Robert Blendu, Chair Representative John Nelson, Vice-Chair
Senator Carolyn Allen Representative Tom Boone
Senator Pamela Gorman Representative Jack Brown
Senator Richard Miranda Representative Peter Rios
Senator Rebecca Rios Representative Steve Yarbrough
Senator Tim Bee (ex-officio) Representative Jim Weiers (ex-officio)
Melanie M. Chesney, Director
Dot Reinhard, Manager and Contact Person
Anne Hunter, Team Leader
Lori Babbitt
Emily Chipman
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
November 13, 2007
Members of the Arizona Legislature
The Honorable Janet Napolitano, Governor
Ms. Tracy Wareing, Director
Department of Economic Security
Transmitted herewith is a report of the Auditor General, A Special Audit of the Department
of Economic Security, Division of Child Support Enforcement (Division). This report is in
response to Laws 2006, Chapter 209, §3 and was conducted under the authority vested in the
Auditor General by Arizona Revised Statutes §41-1279.03. I am also transmitting with this
report a copy of the Report Highlights for this audit to provide a quick summary for your
convenience.
As outlined in its response, the Division agrees with all of the findings and plans to
implement all of the recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on November 14, 2007.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
The Office of the Auditor General has conducted a special audit of the Department
of Economic Security (Department), Division of Child Support Enforcement
(Division), pursuant to Laws 2006, Ch. 209, §3. This law requires our Office to assess
the Division’s performance in eight specific areas in relation to child support
payments. This audit was conducted under the authority vested in the Auditor
General by Arizona Revised Statutes (A.R.S.) §41-1279.03.
Background
The Division administers the federally mandated child support enforcement program.
This program, outlined in Title IV-D of the Social Security Act of 1975, is known as the
IV-D program. Although the Division administers the State's IV-D program, in each
county, either the Division or the county attorney's office provides the program
services, such as establishing or enforcing child support orders. In 11 counties, the
Division provides services in conjunction with the Attorney General's Office.1 In the
remaining four counties the county attorneys’ offices, referred to as IV-D partners,
provide services.2
In Arizona, individuals who want help from the State to establish or enforce child
support orders can apply for and receive IV-D program services for a minimal fee.3
Also, when a custodial parent is receiving Title IV-A public assistance monies, his/her
information is automatically sent to the Division for the purpose of establishing and
enforcing child support payments.4 By enforcing child support orders, the Division
and its IV-D partners work to prevent, reduce, or eliminate families' need for Title IV-A
public assistance monies. According to the Division, as of September 30, 2007, the
IV-D program had 214,771 cases involving 257,725 children. A case consists of a
Office of the Auditor General
SUMMARY
page i
1 According to the Division, as of October 1, 2007, it began providing services in Cochise County. Previously, it contracted
with a private company to provide services in this county.
2 These four counties are Gila, La Paz, Navajo, and Pinal.
3 Effective October 1, 2007, in accordance with the federal Deficit Reduction Act of 2005, the Division began charging the
custodial parent a $25 annual fee for those cases that have never received Title IV-A public assistance monies and for
which the State has collected at least $500 in child support.
4 According to state and federal laws, when a custodial parent applies for public assistance through the Title IV-A program,
Temporary Assistance for Needy Families, his/her information is referred to the IV-D child support program.
custodial parent, a noncustodial parent, and those parents’ children.1 Other child
support cases for individuals who have not applied for the State's IV-D program
services are known as non-IV-D cases. The local clerks of court provide varying
service for these cases.
State and federal laws require that a state disbursement unit centrally process
payments for all Arizona child support cases including the IV-D cases handled by the
Division and its IV-D partners, and the non-IV-D cases handled by the 15 clerks of
court. The Division has hired a contractor to perform the centralized payment
processing function, but the Division also processes a small number of payments.
According to division data, during fiscal year 2007, the contractor processed over 2
million IV-D payments totaling approximately $289 million, and nearly 1.1 million non-
IV-D payments totaling approximately $327 million. During that same period, the
Division processed approximately 182,000 payments for both IV-D and non-IV-D
cases totaling nearly $68 million, primarily related to certain enforcement methods,
such as intercepts of federal and state tax refunds and unemployment benefits.
Division should track court order processing times (see
pages 9 through 13)
Most division and IV-D partner offices reported processing court orders within 5 days
after receiving them; however, it is not possible to verify processing times because
the Division does not specifically track this information. Timely court order processing
is important because it is a necessary first step for enforcing court orders and
correctly distributing child support payments. Once the Division or its IV-D partners
receive the court order or minute entry, staff enter the information into ATLAS, the
Division’s case management system.2 This process is known as “setting up the
debt.” Once debt setup is completed, child support payments can be processed
and automated collection actions can be initiated, such as notices being sent to the
noncustodial parent informing them that certain enforcement actions will be taken if
payments are not made.
To ensure that its processing is as timely as possible, the Division needs to ensure
that its IV-D partner and division field offices establish processing goals, collect
information to measure the extent to which these goals are met, and report this
information to division management. The Division also needs to ensure that its offices
can receive notification of the court order as quickly as possible so that processing
can begin. According to division management, the amount of time it takes to receive
a copy of the order or minute entry varies from county to county. However, one
county, Pima County, has implemented a step to speed up the process by notifying
the Division through ATLAS when a court order has been signed for a IV-D case.
State of Arizona
page ii
Legislative Item
The audit shall examine
how quickly the Division
processes court orders.
1 The term "custodial parent" is used throughout this report to include custodial parents and other custodial persons.
According to division management, most cases have a custodial parent; however, there has been an increase in the
number of cases where another person such as a grandparent has custody of the child(ren).
2 A minute entry is a written record of the judge’s order from the bench or after a hearing, usually not signed.
Because the Division’s Pima County office found this process helpful for ensuring it
receives court order information in a timely manner, the Division should work with
other county clerks of court to determine if using a similar process would be
beneficial.
Most child support payments accurately processed, but
Division should strengthen procedures (see pages 15
through 21)
The Division’s contractor accurately processes child support payments, but the
Division also processes some payments itself, and these payments need to be
better safeguarded. The Division’s payment-processing contractor, which
handles 95 percent of child support payments, has a system in place that allows
it to meet the contractually required 99.7 percent payment-processing accuracy
rate and ensure that payments are protected from loss or theft. For example,
new staff train for 6 weeks, a quality assurance specialist reviews certain
payments, such as payments over $2,500, to ensure accurate processing, and
contractor management reviews video footage from video cameras installed in
the payment-processing room. Further, the contractor’s payment-processing
activities undergo reviews from the Division and the Department. For example,
according to division management, it reviews a sample of about 420 to 430
processed payments quarterly to assess whether the contractor is meeting the 99.7
percent payment-processing accuracy rate. From January 2000 through June 2006,
the Division found that the contractor failed to meet its goal only twice, and both times
by less than 1 percent.
Auditors also tested a sample of the 5 percent of payments that the Division
processed and found no accuracy problems, but a review of the Division’s internal
controls showed a need for additional actions to reduce the potential for loss or theft.
For example, one person is responsible for opening the mail that contains the paper
checks that it manually processes, but the State Accounting Manual stipulates that
mail containing cash receipts, which includes checks, should be opened by two
employees. Adding an additional person may not be the most practical way to
address this issue, in part because of the cost. Instead, the Division should continue
to work on reducing the number of paper checks it must process and, if possible,
eliminate them entirely. The Division can take steps to receive more payments
electronically, such as continuing to work with the Department of Revenue to address
technical issues so that it can electronically receive child support payments obtained
through state tax intercepts. The Division could also have its payment-processing
contractor receive and process the payments that the Division receives as paper
checks.
Office of the Auditor General
page iii
Legislative Item
The audit shall examine
the accuracy of the
system by which the
Division records the
receipt and transfer of
payments.
Division needs more effective means to capture payment
error information (see pages 23 through 25)
The Division has established a unit to research and correct possible payment-posting
errors, but it has no efficient way to determine how many payments are being
misdirected. A posting error occurs when incorrect information about a child support
payment is entered into ATLAS. For example, the noncustodial parent or employer
might provide an incorrect case number when submitting a payment, or a data entry
error could be made. A misdirected payment, a type of posting error, results when a
child support payment is made and posted to the wrong case in ATLAS, and thus
subsequently sent to the wrong custodial parent. Using a database containing
payment error information from July 1, 2005 through May 31, 2006, the Division
estimated that about 5,800 of the nearly 3 million payments processed during this
period had payment posting errors—an error rate of 0.2 percent.
Auditors could not readily verify the completeness or accuracy of the data that the
Division used to calculate the above error rates because the database was no longer
available as of November 2006, and the Division’s primary remaining mechanism for
storing payment-posting error information is its hard-copy files. Although the Division
also uses another database to track the errors it receives, this database does not
contain the details necessary to fully assess and track how many errors there are and
why they occurred. To provide more definitive information about these errors on an
ongoing basis, the Division needs a more effective means for capturing and reporting
payment-posting error information, such as the type of error, who made it (e.g.,
noncustodial parent, employer, or division or contractor staff if they made a keying
error), the reason for the error, and how it was corrected.
Division needs to improve process for making changes
to payees (see pages 27 through 30)
The Division uses ATLAS to make two key changes relating to payees—the amount
and the payee. To ensure accuracy, the Division should improve its processes for
changing the payee. The Division has several processes in place to help ensure that
child support amount changes are accurately made and reflected in ATLAS. The
court must authorize any change to the court-ordered child support amount. Once
the Division has received the modified court order, staff enter modified child support
court-order information into ATLAS so that the Division can begin collecting and
enforcing the new amount. Entering modified court-order information may require
staff to recalculate the amount of child support owed if the court order is retroactive.
To ensure that modified amounts are accurate in ATLAS, the Division provides staff
training and reviews staff work, and the Division reported that it requires that all
changes to child support amounts be reviewed by a supervisor or a qualified debt
worker who has passed a test in order to approve payment adjustments.
State of Arizona
page iv
Legislative Item
The audit shall examine
the accuracy of the
system by which the
Division tracks changes
relating to payees.
Legislative Item
The audit shall examine
the number of errors
made by the Division in
relation to payments
being misdirected to
persons to whom an
obligation of support is
not owed.
The Division needs to improve its processes for ensuring that changes to the payee
are accurately made in ATLAS. The Division has statutory authority to redirect child
support payments from the custodial parent to a caretaker and can also redirect
payments to private collection agencies. The Division uses a specific screen in
ATLAS to make payee changes. According to May 2007 division-reported data,
approximately 430 of its 167,000 enforcement cases were using this screen to
redirect received payments. Auditors’ review of 33 judgmentally selected cases
identified two cases in which payments were redirected to the wrong person and four
cases where child support payments were not redirected to a private collection
agency as requested. The Division should enhance its process by continuing its
efforts to improve policies and procedures, and establishing and implementing an
effective review and oversight process.
Division should better explain collection methods to
noncustodial parents (see pages 31 through 38)
The Division’s processes for helping ensure that enforcement actions are
applied appropriately appear adequate, but it can more effectively communicate
with noncustodial parents the reasons for its actions. State and federal laws and
regulations provide the Division with 16 different methods for collecting child
support payments and specify the criteria that cases must meet before the
Division is authorized to apply them. Thirteen of the 16 enforcement methods are
automated and triggered by the length of time that has passed since a payment
was received and/or the past-due child support amount that is contained in
ATLAS. For example, if the noncustodial parent owes at least $50 in unpaid child
support, ATLAS will automatically generate a letter informing the noncustodial parent
that his or her state tax refund may be intercepted. Three enforcement methods
require manual intervention by caseworkers: limited income withholding, worker’s
compensation offset, and license suspension. For example, if a noncustodial parent
owes at least 2 months of unpaid child support, a caseworker will review the case
details and may refer the case to court to request that the court suspend the
noncustodial parent’s professional license.
To ensure that both the automated and manual methods used to enforce child
support and collect past-due support are appropriately carried out, the Division has
established processes in the following four categories: guidance/oversight, quality
reviews, internal audits, and administrative reviews. For example, as a part of its
monthly quality reviews, five randomly selected cases per caseworker are reviewed
to ensure that the information that caseworkers entered into ATLAS, such as the
court-ordered amount of child support, matches the paper case file. Accurate
information is critical for ensuring that both automated and manual enforcement
processes are being carried out appropriately.
Office of the Auditor General
page v
Legislative Item
The audit shall examine
how the Division
determines what
methodology it uses to
collect payments.
Although the Division has established various processes to help ensure enforcement
actions are appropriately applied, it can more effectively communicate with
noncustodial parents the reasons for its actions. Auditors found problems with both
the letters sent to noncustodial parents about individual enforcement methods and
those communicating the results of an administrative review. An administrative review
is a process whereby a noncustodial parent can request the Division to review the
appropriateness of the enforcement method(s) being used on his or her case. Both
types of letters would benefit from revisions that could be undertaken as part of the
Governor’s Plain Talk Initiative. This initiative was developed to improve state
government by decreasing confusion and red tape for the public. Although not all of
the letters that auditors reviewed have been revised according to this initiative, the
Department’s Plain Talk Initiative workgroup has already revised 25 division
documents, including some enforcement letters.
Processes over demand letters minimize risk of error (see
pages 39 through 42)
The Auditor General’s Office is making no recommendations in this area because the
Division has processes in place, such as training and supervisory oversight, that
appear to reasonably minimize the risk that demand letters will go out in error or with
erroneous information. In fiscal year 2006, the Division mailed out about 5,000
demand letters for past-due child support payments. Auditors’ review of more than
60 of these letters found that none were sent in error or contained erroneous
information. Auditors’ review of data used to compile another 107 demand letters
sent to bad-check writers found three errors (such as an incorrect address), but none
were sent to someone who had not written such a check.
Division should further enhance the ease with which
information is available (see pages 43 through 46)
The Division should further improve the ease with which information is made
available to the public, as well as its assessment of customer satisfaction with its
offices. Various individuals and groups, including noncustodial and custodial
parents, obtain child support information from the Division through three
mechanisms: (1) the Division’s Web site, (2) the customer service unit, and (3) the
Division’s and its IV-D partners’ offices. Although these three mechanisms collectively
provide access to general and case-specific information, auditors identified some
ways to improve these mechanisms. For example, access to information on the Web
site could be improved by better organizing the information on its home page. Also,
the Division can ensure that customers visiting offices are provided a comment card.
State of Arizona
page vi
Legislative Item
The audit shall examine
the number of demand
letters that are sent out
in error or with
erroneous information.
Legislative Item
The audit shall examine
the ease with which
information is accessible
to the public.
Equipment and other mechanisms used to communicate
between agencies appear sufficient (see pages 47
through 50)
The equipment and other mechanisms that the Division uses to communicate
between agencies appear to meet its needs. The Division communicates child
support information to a wide range of internal and external groups, including its
20 division and IV-D partner offices, the Department’s Division of Benefits and
Medical Eligibility, and other states’ IV-D child support enforcement agencies.
The Division uses both equipment, such as personal computers, and other
mechanisms, such as a main software application, to store, process, and
communicate child support information with other agencies. ATLAS is the
Division’s primary mechanism. Other mechanisms used include e-mail and
QUICK, which is a new federal and state collaborative project that allows child
support caseworkers to initiate real-time requests for child support payment
information from another state.
The equipment and other mechanisms that the Division uses to communicate with
other agencies appear to be meeting its needs. For example, although the Division
acknowledges that ATLAS is an older application, ATLAS was fully certified by the
U.S. Department of Health and Human Services for meeting federal system
requirements in both 1999 and 2003, and is the second newest application at the
Department. Auditors received no complaints regarding ATLAS’ availability; however,
industry standards indicate that monitoring system performance, including system
availability, should occur. Therefore, the Department’s Division of Technology
Services should ensure it has a mechanism for capturing information on the dates
and times ATLAS is not available to staff and use this information to address any
availability issues that occur.
Office of the Auditor General
page vii
Legislative Item
The audit shall examine
the adequacy of the
equipment used by the
Division to communicate
between agencies.
State of Arizona
page viii
Office of the Auditor General
TABLE OF CONTENTS
continued
page ix
Introduction & Background 1
Finding 1: Division should track court order processing times 9
Processing court orders involves two main steps 9
Division should track court order processing 10
Division should continue to work with clerks of court to receive court
order information in a timely manner 11
Recommendations 12
Finding 2: Most child support payments accurately
processed, but Division should strengthen procedures 15
Payment-processing contractor has procedures to help ensure accuracy
and security 15
Division processes payments accurately, but should improve paper
check-handling procedures 18
Recommendations 21
Finding 3: Division needs more effective means to capture
payment error information 23
Misdirected payments one form of posting error 23
Division review indicated low posting-error rate, but results cannot be
verified 24
Division should track and analyze posting errors 25
Recommendation 25
Finding 4: Division needs to improve process for making
changes to payees 27
Division processes help ensure accuracy of child support amount
changes 27
Division needs to improve processes to help ensure payee change
accuracy 28
Recommendations 30
State of Arizona
TABLE OF CONTENTS
continued
page x
Finding 5: Division should better explain collection methods
to noncustodial parents 31
State and federal laws determine enforcement methods 31
Division has processes to help ensure enforcement methods are
appropriately applied 32
Division should improve enforcement and administrative review letters 35
Recommendations 38
Finding 6: Processes over demand letters minimize risk of
error 39
No errors found in past-due child support letters 39
Three minor errors found in special demand letter project 42
Recommendations 42
Finding 7: Division should further enhance the ease with
which information is available 43
Division makes information available to various groups 43
Division should enhance its Web site 43
Division should improve automated telephone system 44
Division needs to improve offices’ customer service assessments 45
Recommendations 46
Finding 8: Equipment and other mechanisms used to
communicate between agencies appear sufficient 47
Division communicates with many groups 47
Division primarily uses ATLAS to communicate case information
between agencies 48
Division’s communication equipment and other mechanisms appear to
meet its needs 49
Recommendation 50
Office of the Auditor General
TABLE OF CONTENTS
concluded
page xi
Appendix a-i
Tables:
1 Schedule of Revenues and Expenditures
Fiscal Years 2005 through 2007
(Unaudited) 5
2 Enforcement Notices Using the Term “Demand” in Their Title 41
3 Enforcement Methods a-ii
4 Frequency of Enforcement Methods
Calendar Year 2006 a-iv
Figures:
1 Child Support Enforcement Program
Operating Entity and Caseload by County
As of September 30, 2007 3
2 Division of Child Support Enforcement
Administrative Review Final Determination Letter, page 2 of 3
As of July 30, 2007 37
Agency Response
page xii
State of Arizona
The Office of the Auditor General has conducted a special audit of the Department
of Economic Security (Department), Division of Child Support Enforcement
(Division), pursuant to Laws 2006, Ch. 209, §3. This law requires our Office to assess
the Division’s performance in eight specific areas in relation to child support
payments (see textbox, page 6). This audit was conducted under the authority vested
in the Auditor General by Arizona Revised Statutes (A.R.S.) §41-1279.03.
Background and history of child support enforcement
program
The Division administers the federally mandated child support enforcement program.
This program, outlined in Title IV-D of the Social Security Act of 1975, is known as the
IV-D program. In Arizona, individuals who want help from the State to establish or
enforce child support orders can apply for and receive IV-D program services (see
textbox) for a minimal fee.1 In addition, if a
custodial parent is receiving Title IV-A public
assistance monies, his/her information is
automatically sent to the Division for the
purpose of establishing and enforcing child
support payments.2 By enforcing child support
orders, the Division works to prevent, reduce,
and/or eliminate families' need for Title IV-A
public assistance monies.
1 Effective October 1, 2007, in accordance with the federal Deficit Reduction Act of 2005, the Division began charging the
custodial parent a $25 annual fee for those cases that have never received Title IV-A public assistance monies and for
which the State has collected at least $500 in child support.
2 According to state and federal laws, when a custodial parent applies for public assistance through the Title IV-A program,
Temporary Assistance for Needy Families, his/her information is referred to the IV-D child support program.
Office of the Auditor General
INTRODUCTION
& BACKGROUND
page 1
IV-D and Non-IV-D Cases
A IV-D case is a case in which the custodial parent:
􀁺􇩈 Has applied to the Division for services such as
establishing paternity, establishing or enforcing a
support order, or locating a noncustodial parent; or
􀁺􇩉 Is receiving, or has received, Title IV-A public assistance
monies.
A non-IV-D case is a case in which the custodial parent:
􀁺􇩈 Has not applied for services from the Division, but for
which the county clerk of court is providing customer
service, such as providing a payment history upon
request.
Child support enforcement process
The child support enforcement process involves several steps. When an individual
requests services from the IV-D program, his/her case may progress through all the
steps or only some of them. All cases start at intake, which involves opening the case
and gathering data on the custodial family and noncustodial parent. Then,
depending on the services needed, the case may progress to paternity, which
involves identifying the child’s or children’s legal father; support order establishment,
which involves obtaining a court order that indicates the dollar amount the
noncustodial parent must pay to help cover the cost of raising his/her child(ren); and
collections and enforcement, which involves ensuring that the noncustodial parent
pays his/her child support obligation.
According to the Division, as of September 30, 2007, the IV-D program had 214,771
cases involving 257,725 children. A case consists of a custodial parent, a
noncustodial parent, and the children of those parents.1 Other child support cases
for individuals who have not applied for the State’s
IV-D program services are known as non-IV-D
cases, and various types of services for these cases
are provided by the local clerks of court.
Centralized payment processing
required by law
State and federal laws require that payments for all
Arizona child support cases, including the IV-D
cases that the Division and its IV-D partners handle
and the non-IV-D cases that the 15 county clerks of
court handle, be centrally processed by a state
disbursement unit (see page 4 for a description of
IV-D partners).2 The Division established centralized
payment processing for its IV-D cases by July 1,
1997, and for non-IV-D cases by December 1, 1998,
well before the federally required date of October 1,
1999.
The Division has hired a contractor to perform the centralized payment-processing
function.3 The contractor centrally processes the vast majority of child support
payments. According to division data, in fiscal year 2007, about 3.35 million
State of Arizona
page 2
Division and Contractor IV-D and Non-IV-D
Payments Processed
Fiscal Year 2007
(In thousands)
Source: Auditor General staff analysis of division-provided ATLAS reports.
1 The term “custodial parent” is used throughout this report to include custodial parents and other custodial persons.
According to division management, most cases have a custodial parent; however, there has been an increase in the
number of cases where another person has custody of the child(ren), such as a grandparent.
2 42 U.S.C. §654b; A.R.S. §46-441(A) and (B).
3 According to the Division, the contract for this function expires in November 2007. The Division is in the formal
procurement process for selecting a new vendor.
Number of payments:
Division Contractor Total
IV-D 177 2,019 2,196
Non-IVD 5 1,147 1,152
Total 182 3,166 3,348
Dollar amounts:
Division Contractor Total
IV-D $64,626 $288,941 $353,567
Non-IVD 3,162 326,530 329,692
Total $67,788 $615,471 $683,259
payments were processed for more than $683 million (see textbox, page 2). The
contractor centrally processed most of these payments. However, during that same
period, the Division processed a small number of payments related to certain
enforcement methods, such as intercepts of federal and state tax refunds and
unemployment benefits.
Division’s case management system certified
The Arizona Tracking and Location Automated System (ATLAS) is the Division’s
state-wide automated case management system. Information contained in ATLAS
includes demographic information on case participants, court order information such
as the date of the order and the amount of child support required, and case activity
information such as child support payments made and enforcement actions taken.
ATLAS was implemented state-wide in 1992 in response to the federal Family
Support Act of 1988, which included the
requirement for all states to have one state-wide
case management system. In 1996, the
Division made major modifications to ATLAS in
response to additional federal mandates to
establish more automated processes,
including centralized payment distribution and
income withholding orders. ATLAS was
certified by the U.S. Department of Health and
Human Services, Administration for Children
and Families, in 1999 and certified again in
2003 after the Division made major, federally
required modifications.
Program organization and
staffing
Each state must have one entity that is
responsible for administering its IV-D child
support enforcement program, and the
Division fulfills that requirement for Arizona.1
However, as illustrated in Figure 1, in each
county, either the Division or the county
attorney’s office provides the IV-D program
Office of the Auditor General
page 3
Figure 1: Child Support Enforcement Program
Operating Entity and Caseload by County1
As of September 30, 2007
1 The Navajo Nation handles an additional 8,205 tribal cases within
Apache, Coconino, and Navajo Counties.
Source: Auditor General staff summary of division-provided operating entity
and caseload data.
1 42 U.S.C. §654.
services, such as establishing and enforcing child support orders. Specifically, in 11
counties, the Division, in conjunction with the Attorney General’s Office, provides
services. In the remaining four counties, the county attorneys’ offices provide
services.1 The four counties whose county attorneys’ offices provide child support
enforcement services are referred to as IV-D partners because they provide the same
IV-D program services under the Division’s policy and guidance.
According to the Division, there are 859 division and Attorney General employees
state-wide involved in providing child support services. Some employees are located
at the Division’s main office in Phoenix, and others work from field offices throughout
the State. As of June 30, 2007, the program employed 739 division employees, such
as the assistant director; deputy assistant director; regional managers, supervisors,
caseworkers, policy and procedures staff, program evaluation staff, and systems
and automation personnel; and 120 Attorney General staff. In addition, as of June 30,
2007, the Division employed several nondivision employees, including 15 private
contractor personnel and 42 other temporary employees (clerical, accounting,
programming, and business analyst staff).
Program revenues and expenditures
Providing child support enforcement services in Arizona cost more than $78 million
during fiscal year 2007 (see Table 1, page 5). Revenues for the program come from
two primary sources—federal monies and State General Fund appropriations:
􀁺􇩆 Federal monies—Two categories of federal monies contribute most of the
program’s total revenues. First, federal cost-sharing dollars generally reimburse
66 percent of the program’s expenditures, including personnel costs, and
professional and outside services. The program received about $53 million in
federal cost-sharing monies during fiscal year 2007. Second, the federal
government distributes incentive payments to states to encourage and reward
effective programs. These incentive monies have generally provided about 8 to
10 percent of the program’s revenue. During fiscal year 2007, the program
received about $8 million in federal incentive monies. However, a provision of the
Deficit Reduction Act of 2005 (Act) prohibits the State from using monies earned
through incentive payments toward its federal match.2 The Division has
estimated that if the State does not appropriate additional monies for its state
match to make up for the loss of the federal incentive monies, the changes
resulting from the Act may reduce its federal revenues by approximately $10
million annually.
State of Arizona
page 4
1 According to the Division, as of October 1, 2007, it began providing services in Cochise County. Previously, it contracted
with a private company to provide these services.
2 The State must match 34 percent of the federal monies awarded to the Division for its cost-sharing grant. In the past, the
Division could use federal incentive monies as part of this 34 percent state match, thereby reducing the amount needed
from state appropriations. A provision of the Deficit Reduction Act prohibits this after October 2007.
Office of the Auditor General
page 5
Table 1: Schedule of Revenues and Expenditures1
Fiscal Years 2005 through 2007
(Unaudited)
2005 2006 2007
Revenues:
Federal cost-sharing grant $42,270,322 $48,174,664 $53,116,745
State’s share of retained earnings 9,554,219 9,264,897 10,136,117
Federal incentives 5,337,163 5,712,216 8,288,843
State General Fund appropriations:
Operating 4,244,740 4,404,700 4,458,686
Special line items 959,829 1,084,525 1,041,759
General administrative activities 736,228 765,708 682,006
Clearinghouse fees 674,937 737,465 830,576
Total revenues 63,777,438 70,144,175 78,554,732
Expenditures:2
Personal services and employee related 36,343,432 42,413,135 49,198,404
Professional and outside services 6,079,512 6,906,445 7,278,176
County contract payments3 6,352,662 6,935,031 6,475,420
Central payment processing 2,527,562 2,544,686 2,621,502
Equipment acquisitions 2,444,596 3,815,797 3,505,429
Other operating 8,265,080 7,973,793 9,210,755
Total expenditures 62,012,844 70,588,887 78,289,686
Excess (deficiency) of revenues over
expenditures $ 1,764,594 ($ 444,712)4 $ 265,046
1 This statement is presented on a budgetary basis in which expenditures are reported in the budget
year incurred and includes information up to July 22, 2007.
2 Expenditures include the State’s share of support service costs that are allocated by the
Department to its various divisions. The Division’s total allocated support service costs were
approximately $12.3, $13.7, and $13.7 million for 2005, 2006, and 2007, respectively.
3 Consists primarily of federal monies passed through to the counties who are contracted to provide
child support services.
4 The deficiency of revenues over expenditures was funded from unexpended prior year revenues.
Source: Auditor General staff analysis of financial information provided by the Department from its
Financial Management Control System as of July 22, 2007, for fiscal years 2005 through
2007.
􀁺􇩓 State monies—Two sources of state monies provide the next biggest percentage
of program revenues. The State General Fund contributed about $6.2 million
during fiscal year 2007. In addition, according to state and federal laws, a
custodial parent must assign his/her rights to child support payments to the State
when receiving Title IV-A public assistance monies. According to state and federal
laws, the State retains these collected monies in exchange for the Title IV-A public
assistance monies received. The federal government and the State are entitled to
a share of these retained earnings. The State's portion of these retained earnings
is referred to as the State's Share of Retained Earnings (SSRE). As long as the
family is currently receiving or has received Title IV-A public assistance monies in
the past, the program can retain the child support payments collected on the
family's behalf up to the amount of Title IV-A public assistance monies that family
received.1 During fiscal year 2007, the program retained approximately $10.1
million in collections from Title IV-A public assistance cases.
The Division shares part of the federal cost-sharing monies with its IV-D partners. The
four counties providing child support enforcement services (Gila, La Paz, Navajo,
and Pinal), as well as other county clerks of the court and superior court-contracted
entities, use local monies to help pay for their program costs not covered by federal
dollars.
Scope and methodology
As set forth in Laws 2006, Ch. 209, §3, our audit work focused on the Division’s
performance in eight areas in relation to child support payments (see textbox below).
This report presents eight findings and associated recommendations.
Several methods were used to evaluate the specific legislative areas for this special
audit. Methods used in all areas included interviews with department and division
management and staff, and reviews and analysis of division policies and procedures,
state and federal laws, and other documents outlining specific child support
enforcement requirements.
State of Arizona
page 6
Audit Legislation
The Auditor General shall conduct a special audit, as defined in A.R.S. §41-1278, to assess the
performance of the Division of Child Support Enforcement in the Department of Economic Security.
The audit shall examine the following in relation to child support payments:
1. The number of errors made by the Division in relation to payments being misdirected to
persons to whom an obligation of support is not owed.
2. The number of demand letters that are sent out in error or with erroneous information.
3. The accuracy of the system by which the Division records the receipt and transfer of payments.
4. The accuracy of the system by which the Division tracks changes relating to payees.
5. The adequacy of the equipment used by the Division to communicate between agencies.
6. How quickly the Division processes court orders.
7. How the Division determines what methodology it uses to collect payments.
8. The ease with which information is accessible to the public.
9. Any other function of the Division necessary to complete an accurate and timely audit.
1 State and federal laws govern the distribution of child support payments among families, the State, and the federal
government. The State can sometimes also retain child support payments collected on former public assistance cases.
However, because the federal government shares in the program’s cost, the program sends a portion of its retained
collections back to the federal government.
In addition, the following specific methods were used:
􀁺􇩔 To determine how quickly the Division processes court orders, auditors
observed the process for entering court order information into ATLAS.
􀁺􇩔 To determine what procedures were in place for ensuring payment-processing
accuracy, auditors observed both the vendor’s and the Division’s payment-processing
processes; randomly selected and examined ten division payments
for several different payment types, such as financial asset seizures or
Department of Revenue tax refund intercepts posted to ATLAS in calendar year
2006; reviewed more that 20 audit reports from January 2000 through June of
2006; and obtained and reviewed the Department’s procedures on how
automated payments are posted to ATLAS.
􀁺􇩔 To help assess how many payments were being misdirected, auditors observed
the Division’s process for working with payments posted in error and reviewed
the Division’s method for recording such information.
􀁺􇩔 To determine the accuracy of the system by which the Division tracks changes
to payees, auditors reviewed 33 judgmentally selected cases to determine
whether or not policies and procedures had been followed and to ascertain the
adequacy of additional processes in ensuring accuracy of changes.
Additionally, auditors observed the process for changing a court-ordered child
support amount in ATLAS and compared system access controls to Information
Technology industry standards.1
􀁺􇩔 To assess the procedures the Division has in place for ensuring that
enforcement methods are correctly applied, auditors reviewed division training
materials, reviewed information contained in letters sent to noncustodial parents
against guidelines outlined in the Governor’s Plain Talk initiative, and observed
an audit process known as a quality review.2
􀁺􇩁 Auditors reviewed information in ATLAS as well as information in other division
files for more than 160 letters that were mailed to noncustodial parents during
2006 and 2007 to determine if any errors were made in sending out demand
letters.3
Office of the Auditor General
page 7
1 IT Governance Institute. COBIT 4.1: Framework, Control Objectives, Management Guidelines, Maturity Models. Rolling
Meadows, IL: IT Governance Institute, 2007.
2 A quality review is a review of five cases per caseworker, per month, randomly selected and reviewed by either the
caseworker's supervisor or staff from a special projects team. The cases are reviewed to ensure that the caseworker's
documentation entered into ATLAS matches the paper case file and that the actions taken on the case were appropriate.
Any errors are reported to the caseworker's supervisor.
3 Information was reviewed for 107 of the letters because they were mailed as a special project that the Division and the
Attorney General's Office carried out in May 2006. The remainder of the letters were selected from letters sent out during
calendar year 2006 and February, May, and June 2007.
􀁺􇩁 Auditors tested the Division’s automated telephone system and compared it to
best practices outlined in a September 2002 federal study of automated
telephone systems to determine the ease with which information is available to
the public.1 Additionally, auditors conducted interviews with division and IV-D
partner staff and one observation of a field office to obtain information on the
availability of customer survey response cards.
􀁺􇩔 To determine the adequacy of the equipment used to communicate with other
agencies, auditors tested the process for obtaining secure e-mails from the
Division and observed division staff using various communication mechanisms
such as the Child Support Enforcement Network (CSENet), and Query Interstate
Cases for Kids (QUICK). Auditors also used Information Technology industry
standards when assessing equipment adequacy.2
􀁺􇩔 To develop information for the Introduction and Background, auditors reviewed
the Auditor General’s 2001 Performance Audit Report of the Division (see Report
No. 01-01) and state and federal laws for child support enforcement, and
gathered unaudited information from the Division regarding ATLAS and its
budget and personnel.
This audit was performed in accordance with government auditing standards.
The Auditor General and staff express appreciation to the Department of Economic
Security and its staff, the child support enforcement staff from the offices of the
Attorney General and county attorneys, and its private contractors for their
cooperation and assistance throughout the audit.
1 U.S. Department of Health and Human Services. Office of Inspector General. Statewide Child Support Automated
Telephone Systems. Washington, D.C.: DHHS, Sept. 2002.
2 IT Governance Institute. COBIT 4.1: Framework Control Objectives, Management Guidelines, Maturity Models. Rolling
Meadows, IL: IT Governance Institute, 2007.
State of Arizona
page 8
Office of the Auditor General
page 9
Division should track court order processing
times
Most division and IV-D partner offices reported processing court orders within 5
days after receiving them; however, it is not possible to verify processing times
because the Division does not specifically track this information. Timely court
order processing is important because it is a necessary first step for enforcing
court orders and correctly distributing child support payments. To ensure that its
processing is as timely as possible, the Division needs to ensure that its offices
establish processing goals, collect information to measure the extent to which
these goals are met, and report this information to division management. The
Division also needs to ensure that its offices can receive notification of the court order
as quickly as possible so that processing can begin. Formalizing and expanding a
step begun in Pima County may be helpful in doing so.
Processing court orders involves two main steps
Before the Division can begin to enforce court orders and correctly distribute child
support payments, two key steps must occur:
􀁺􇩃 Court order must be received—The Division or its IV-D partner offices must
receive a copy of the court order or court minute entry that specifies the amount
of child support that must be paid.1 Each county clerk of court has its own
procedures for providing this information to the Division or its IV-D partners.
􀁺􇩉 Information must be entered into Division’s system—Once the Division or its IV-D
partners receive the court order or minute entry, staff enter the information into
ATLAS, the Division’s case management system. This process is known as
“setting up the debt.” It involves entering information such as the date the court
order takes effect, the amount of child support owed, how often the payment is
required, such as weekly or monthly, and how the amount is to be disbursed,
FINDING 1
Legislative Item
The audit shall examine
how quickly the Division
processes court orders.
1 A minute entry is a written record of the judge’s order from the bench or after a hearing, usually not signed.
State of Arizona
page 10
which depends in part on whether the custodial parent is receiving public
assistance monies.1 Once debt setup is completed, child support payments
can be processed and automated collection actions can be initiated, such as
notices being sent to the noncustodial parent informing them that certain
enforcement actions will be taken if payments are not made. (For more
information on enforcement methods, see Finding 5, pages 31 through 38.)
Division should track court order processing
Auditors were unable to determine how long it takes division and IV-D partner offices
to process court orders they receive because the Division does not specifically track
this information. Several steps would help the Division to do so.
Division does not track how quickly court orders are processed—
Although 10 of 11 representatives from division and IV-D partner offices who
auditors spoke with reported processing court orders within 5 days, only one office
had a mechanism in place that it was using to calculate this information. The
Division also does not have any specific mechanisms in place to capture and
report this information. Therefore, it was not possible for auditors to verify that the
Division and its IV-D offices were meeting the time frames they reported.
Improved tracking requires goals, method, and reporting—Because
child support orders cannot be enforced and payments may not be distributed
properly until the debt is set up in ATLAS, the Division should take several steps to
ensure court orders are processed in a timely manner in ATLAS:
􀁺􇩅 Establishing processing goals—First, the Division should establish or ensure
that all division and IV-D partner offices establish reasonable goals approved
by the Division for timely processing of initial and modified court orders in
ATLAS. Division and IV-D partner offices currently vary in the extent to which
they have established processing goals. The Division reported that it has not
established deadlines for processing court orders, and 2 of the 11 division
and IV-D partner office representatives interviewed reported that their offices
had not set any goals, either. The 9 office representatives who reported setting
processing goals stated that the goals ranged from 2 to 5 days, with some
offices reporting different goals depending on whether the court order is an
initial court order or modified court order.2
1 As part of receiving public assistance monies, the custodial parent assigns his/her rights to child support collections to
the State. Then, when the Division collects child support payments on the case, it uses that money up to the court-ordered
amount or the cumulative amount of the public assistance grant, whichever is less, to help offset its program costs.
However, since federal monies cover about 66 percent of the IV-D program’s costs, according to the Division, it remits 66
percent of the amounts collected to the federal government.
2 Modified court orders occur when participants return to court after there are changes in custody or income, and the court
modifies the payment order. According to the Division, modifications can be more complicated than initial orders, such
as if the child support amount change is retroactive.
Office of the Auditor General
page 11
􀁺􇩇 Gathering information about processing times—The Division should ensure
that all offices are capturing the information needed to evaluate and report on
the timeliness of court orders being processed. To do so, the Division should
establish a method or allow each office to establish a method subject to
division approval for capturing date information on when court orders are
received and when debts are set up within ATLAS.
􀁺􇩒 Reporting results and monitoring for problems—The Division should ensure
that whatever method(s) is established allows the offices to report to division
management on how well they are doing in meeting timeliness goals. The
Division should then use the information to address any timeliness issues that
the various offices may be experiencing.
Division should continue to work with clerks of court to
receive court order information in a timely manner
Timely processing of court orders also depends on how long it takes the Division or
its IV-D partners to receive the order from the court. Changes in how the clerks of
court notify the Division or its IV-D partners may help make the process as prompt as
possible.
Amount of time needed to receive notification varies—According to the
Division, the amount of time it takes to receive a copy of the order or minute entry
varies from county to county. For example, the Division reported that it can take 7
to 10 business days for the Division to receive a signed court order from one
county with a larger caseload; in contrast, one division office in a county that has
a smaller caseload reported that the clerk of court provides a signed copy of the
court order on the same day as the hearing. According to division management,
obtaining copies of court orders from other states or from case participants who
have gone back to court without notifying the Division may result in even longer
delays. The Division reported that it does not track how long it takes it or its IV-D
partners to obtain signed court orders or minute entries.
Opportunities may exist for streamlined communication of
information—The Division has taken actions to improve the speed with which
it receives court order information. For example, the Division has worked with the
Pima County and Maricopa County clerks of court to gain access to the courts’
electronic systems for capturing court order information. Access to these systems
allows the Division to more quickly receive the information necessary to set up the
debt in ATLAS.
The Division should
track the timeliness of
court order
establishment and
address any issues.
This access may also help solve a key issue in division staff’s ability to remain up-to-
date on some cases. The Division reported that it is common for the
noncustodial and custodial parent in the cases it is enforcing to go back to court
on their own and obtain a modification without informing the Division. In such
situations, the Division does not know to look at the clerk of court system for an
update. However, the Division worked with the Maricopa County clerk of court to
obtain data from Maricopa’s system that can be matched against ATLAS to
identify cases that the Division has not been informed about. The Division should
continue with its plans to make this an automated, regularly occurring process.
The Division also reported that it is in the beginning stages of working with the
Pima County clerk of court to determine whether a similar matching process can
be used. The Division should continue to work with the Pima County clerk of court
to determine whether this matching process can be used, and work to implement
the process if appropriate.
Pima County and division officials have also developed another possible way to
overcome this problem. The approach involves allowing Pima County staff to enter
an alert into ATLAS. Representatives from the Pima County clerk of court’s office
and the Division’s Pima County office reported that clerk of court staff were adding
a code to ATLAS for IV-D cases that resulted in the assigned caseworker’s being
notified that a court order had been signed. According to a representative from the
Pima County clerk of court, adding this information to ATLAS was not difficult or
time consuming. Division management reported that the specific ATLAS code
being entered by Pima County clerk of court staff was intended for other purposes,
but acknowledged the value of this procedure. Therefore, the Division developed
a new code for Pima County to use for IV-D cases.
The type of process used in Pima County may have applicability in other counties,
as well. Because the Division’s Pima County office found this process helpful for
ensuring that it receives court order information in a timely manner, the Division
should work with other counties’ clerks of court to determine if using a similar
process would be beneficial, and if so, establish similar approved processes with
those clerks of court.
Recommendations:
1. To ensure that court orders are processed in a timely manner in ATLAS, the
Division should:
a. Establish or ensure that all division and IV-D partner offices establish
reasonable division-approved goals for entering initial and modified court
orders in ATLAS in a timely manner;
State of Arizona
page 12
Office of the Auditor General
page 13
b. Establish or ensure that all division and IV-D partner offices establish a
division-approved method(s) for capturing date information on when court
orders or minute entries are received and when debts are set up in ATLAS;
c. Ensure that the method(s) allows the offices to report to the Division how
well they are doing in meeting timeliness goals; and
d. Use the reported information to address any timeliness issues that the
various offices may be experiencing.
2. To ensure information is received from the county clerks of court as quickly as
possible, the Division should:
a. Continue with its plans to automate the data-matching process for
Maricopa County clerk of court data.
b. Continue to work with the Pima County clerk of court to determine whether
a court order data-matching process can be used, and work to implement
the process if appropriate.
c. Determine if it would be beneficial for other county clerks of court, besides
Pima County, to add an alert to ATLAS as a means of notifying the Division
of a new court order, and if so, establish similar approved processes with
the appropriate clerks of courts.
State of Arizona
page 14
Office of the Auditor General
page 15
Most child support payments accurately
processed, but Division should strengthen
procedures
The Division’s contractor, which handles 95 percent of child support payments,
has a system in place that allows it to meet contractual requirements for
payment accuracy. Auditors tested a sample of the 5 percent of payments the
Division processed and found no accuracy problems, but a review of the
Division’s procedures showed a need for additional actions to reduce the
potential for loss or theft.
Payment-processing contractor has procedures to help
ensure accuracy and security
The Division’s payment-processing vendor, which
processes most child support payments (see textbox),
uses numerous processes to help it meet a
contractually required 99.7 percent accuracy rate and
to ensure the payments are safeguarded. Very few
concerns have been noted in the processing control
reviews it has received from the Division, the
Department, and the Office of the Auditor General.
Contractor has established payment-processing
procedures—The contractor has
established various procedures to help ensure that it
meets the contractually required 99.7 percent
payment-processing accuracy rate and to ensure that the paper checks and
electronic payment information are secure. For example, according to contractor
management, new staff train for 6 weeks learning how to process payments. Their
FINDING 2
Payments Processed
Fiscal Year 2007
(In millions)
Number of Items Amount
Contractor-
Processed 3.17 $615
Division-
Processed .18 68
Total 3.35 $683
Source: Auditor General staff analysis of division-provided ATLAS reports.
Legislative Item
The audit shall examine
the accuracy of the
system by which the
Division records the
receipt and transfer of
payments.
State of Arizona
page 16
work is monitored closely during the entire training period, including after they are
paired with an experienced processor to learn about researching payments in
ATLAS, the Division’s case management system. If additional training is needed,
trainees’ work continues to be monitored. In addition, the contractor has
established policies and procedures that provide detailed payment-processing
guidance. For example, according to contractor management, payment-processing
staff must match two pieces of information located on the face of the
child support payment check to data from ATLAS in order to process the payments
to the correct cases. The preferred piece of information to match is the ATLAS case
number along with one other secondary piece of information. Other secondary
pieces of information include the noncustodial parent’s name, social security
number, and the court order number. Two pieces of secondary information can be
used alone for matching if the ATLAS case number is not available.
The contractor also employs a quality assurance specialist who is responsible for
performing reviews of certain payments such as payments over $2,500, or
payments that are $40 more or less than the last payment made on the case. The
items falling in these categories are identified by the contractor’s special software,
and then the quality assurance specialist reviews these payments to ensure they
were correctly processed. The contractor processes an average of about 264,000
payments each month, and according to contractor management, the specialist
reviews an average of 3,439 items each month and corrects an average of 107
errors each month. Additionally, according to contractor management, staff
compensation is based on speed and accuracy, and supervisors are informed of
errors the quality assurance specialist finds so they can address them with the
staff.
In addition to the processes in place that help ensure accuracy, the contractor has
established security measures to safeguard the paper checks and electronic
payment information. For example, the contractor has established physical
security by restricting access to the payment-processing room only to staff who
have been issued magnetic access cards and by requiring workers’ personal
belongings, such as purses and cell phones, to be secured outside of the room.
In addition, employees are issued user identification numbers and passwords that
must be used to access the processing software. Further, contractor management
reviews video footage from video cameras installed in the room.
Division has procedures to ensure child support payment
information is accurately input into ATLAS—The Division has
established some automated procedures that help ensure that information about
the payments the contractor processes is accurately entered into ATLAS.
According to division IT management, prior to processing the contractor’s daily
payment information into ATLAS, the system runs a program that checks for
The contractor’s quality
assurance specialist
reviews payments over
$2,500.
Office of the Auditor General
page 17
matching ATLAS information on each payment. For example, the program looks
for matches of the noncustodial person’s name and social security number.
Records that do not match are isolated so that the Division can further research
them while the matching records can be posted to the correct cases and the
payments can be processed. In addition, according to department IT officials, to
maintain security, all data transfer information is encrypted and users must be
granted access to view this data.
Payment-processing reviews have not identified concerns—The
contractor’s payment-processing activities have received favorable reviews from
the Division, the Department, and the Office of the Auditor General. For example,
according to division management, the Division reviews a sample of about 420 to
430 processed payments quarterly to assess whether the contractor is meeting the
99.7 percent payment processing accuracy rate.1 Auditors’ review of 23 available
division quarterly audits from January 2000 through June 2006 found that the
contractor failed to meet its goal only twice, and both times by less than 1 percent.2
In addition to the division audits, the Department’s Audit and Management
Services (AMS) unit conducts annual audits of the contractor. As a part of these
audits, AMS reviews some of the contractor’s payment-processing procedures,
such as how the checks are received and entered into the contractor’s system.
AMS also compares some of the payments posted to the contractor’s system to
the information that was transferred into ATLAS. In the most recent annual audits,
conducted during fiscal years 2003, 2004, and 2005, AMS did not identify any
concerns and indicated that the internal controls appear adequate.3
Similarly, in 2005, the Office of the Auditor General reviewed the contractor’s
processes as part of a financial audit of the Department to determine the
adequacy of controls in place over payment processing and assess whether
further audit work was needed. Auditors noted that several payment-processing
procedures were in place, such as a process for reconciling the work each day that
included supervisory approval and that supervisors, not processing clerks, must
correct errors. Auditors determined that the Division’s monitoring of the
contractor’s processing was sufficient to ensure payments were processed
properly to help ensure accuracy.
Audits have not
identified any concerns
with the contractor’s
payment processing.
1 In determining the accuracy rate, the Division considers the nature and impact of each error, with major errors counting
as a full error and minor errors counting as one quarter of an error. For example, posting a payment to the wrong case
or posting a wrong dollar amount to a case are considered major errors, but entering the wrong check number is
considered a minor error.
2 The contractor received overall ratings of 99.39 percent in the Division’s review of the first quarter of 2000 and 99.36
percent in the Division’s review of the last quarter of 2004.
3 AMS expects its fiscal year 2006 audit to be completed by the end of October 2007. As our audit work was completed
by the end of September 2007, our review did not include the fiscal year 2006 audit report.
State of Arizona
page 18
Division processes payments accurately, but should
improve paper check-handling procedures
Auditors’ review of a sample of the relatively small percentage of payments
processed by the Division showed no accuracy-related problems. However, the
Division can take steps to better ensure that its procedures for handling payments
that are made by paper checks provide appropriate safeguards.
Division processes a small percentage of payments—The Division
processes approximately 5 percent of the total child support payments annually
processed in Arizona. These payments include those related to tax refund
intercepts, financial asset seizures, or payments from noncustodial parents who
had payment checks returned for insufficient funds. The majority of division-processed
payments are received electronically and
processed through automation. For example, according to
the Division, the Internal Revenue Service electronically
transfers monies into the Division’s bank account from
federal tax refunds that have been intercepted to pay child
support. It also sends the Division an electronic record of
the deposit amount and the information needed to
determine which child support cases the monies apply to.
Similar to its processing of the electronic payment
information received from the contractor, to ensure that
these electronic payments are accurately posted to the
correct cases, the Division runs a data-matching program
prior to posting the payments in ATLAS.
However, the Division receives some payments through paper checks and must
process these payments manually. For example, the Division receives a paper
check from the Arizona Department of Revenue for state tax refunds that have
been intercepted to pay child support. Similarly, according to a division manager,
the Division receives and processes some paper checks from collection agencies
that have collected monies from noncustodial parents who had child support
payment checks returned for insufficient funds.
Division has some procedures to ensure accuracy and security—The
Division has established some procedures for helping ensure that the paper check
payments it manually processes are done so accurately. For example, similar to
what the payment processing contractor’s staff must do, the Division’s staff match
two pieces of information from the paper checks, such as the case number and
noncustodial parent’s name, to information in ATLAS. In addition, the Division has
a daily reconciliation process where a supervisor verifies the dollar amount of
paper checks processed into ATLAS with the dollar amount to be deposited in the
bank. The Division has also appropriately separated some duties. Specifically, the
Division-Processed Payments
Fiscal Year 2007
Number of Items Amount
Processed
Electronically 137,000 $42.5 million
Processed
Manually 45,000 25.3 million
Total 182,000 $67.8 million
Source: Auditor General staff analysis of division-provided ATLAS reports.
Office of the Auditor General
page 19
person making the deposit does not have access to ATLAS, and the person
recording information in ATLAS works from copies of the paper checks instead of
the actual checks. In addition, the Division sends monthly statements to custodial
and noncustodial parents of all the payments made on their case that month to
help ensure that no payments are lost or stolen.1
For better control, Division should seek options for processing paper
checks—Auditors did not specifically identify any accuracy-related problems
with the handling of paper checks, but the Division’s procedures show potential
vulnerability with respect to protecting these payments against loss or theft.
Auditors reviewed a sample of ten randomly selected payments that were
manually processed during calendar year 2006 and found no errors. A review of
the Division’s internal controls, however, showed these controls are not fully in
compliance with the State Accounting Manual’s (Manual) requirements for
safeguarding cash receipts, which include checks. The Division has allocated
responsibility for opening the mail that contains the paper checks it manually
processes to one person, called the cashier. To help ensure paper checks are
safeguarded, the Manual stipulates that two employees should open mail
containing cash receipts, which includes checks. Although the Division has a
policy to not accept currency and indicated that it has not experienced any losses
because of theft, having only one person conduct the processing of checks
increases the potential for loss or theft.2
Adding an additional person may not be the most practical way to address this
issue. Division management expressed concern about the cost of adding a
second person to the paper check-handling process because they believe that
there is enough work for one full-time person, but not two full-time people.
Additionally, since the individual handling the paper checks cannot access ATLAS,
the Division cannot effectively use a second person for other responsibilities or
have a current staff person assist in this area.
Instead of adding another person, the Division should continue to work to reduce
the number of paper checks it must process, and if possible, eliminate them
entirely. The Division can do this in the following ways:
􀁺􇩔 Taking steps to receive more payments electronically—For example, the
Division has approached the Arizona Department of Revenue to explore how
state tax intercept payments could be processed electronically instead of
through paper check payments. According to a division official, paper checks
rather than electronic payments are sent from the Department of Revenue
because of programming and technical issues with the Arizona Financial
Information System. The Division should also work with other entities, such as
financial institutions or clerks of court, to submit payments electronically
instead of by paper check.
1 According to a division manager, to address programming issues, the noncustodial parent monthly notices were stopped
in November 2006 and started back up in May 2007.
2 The Division’s policy indicates that it does not accept currency for child support payments. Acceptable forms of over-the-counter
payments include personal or business checks, money orders, and traveler’s and cashier’s checks.
The Division should
continue to reduce the
number of paper checks
it manually processes,
and if possible,
eliminate them entirely.
State of Arizona
page 20
􀁺􇩕 Using the contractor to process checks—If all of these payments cannot be
transferred to an electronic form, an option for eliminating the Division’s
handling of them would be to have the Division’s payment-processing vendor
receive and process the payments that the Division is currently receiving
through paper check. As indicated on pages 15-17, the contractor has several
processes in place to help ensure payments are both safeguarded and
processed accurately. The Division indicated that it has not sent the paper
checks it is receiving to the vendor because, under the current contract, an
additional expense would be incurred. However, the Division further indicates
that it is pursuing having the vendor process payments that the Division is
currently processing with the renewal of its contract.
In the interim, other steps are needed to lower risk—As the Division
works to find options to processing paper checks, it should take two other steps
to lower the risk of loss or theft:
􀁺􇩒 Restrictively endorsing checks as soon as possible—The Division does not
immediately endorse its paper checks, but doing so would help lower risk. The
Manual states that all checks and money orders should be immediately
endorsed “For Deposit Only” to the credit of the state agency. Auditors found
that the cashier who opens the mail waits to restrictively endorse the paper
checks until after copies have been made and the cashier is creating the
deposit. In addition, because the mail arrives three times during the day, not
all checks are prepared for deposit the day they come in. Although
unprocessed checks are locked in a safe each night, they are not restrictively
endorsed until they are prepared for deposit, which for some payments does
not occur until the next day. The Division should ensure that all checks are
restrictively endorsed as soon as possible upon receipt.
􀁺􇩓 Strengthening written procedures—The Division also needs to improve the
written procedures outlining the cashier’s functions. The Division has trained
other staff to perform the cashier duties in case of absence, but these staff do
not perform these duties often. Auditors found that the cashier’s procedures
lack the detail necessary to ensure that staff who are not familiar with the
process could use them to perform the cashier’s duties. For example, the
checks the Division receives must be sorted into categories, but the
categories are not well defined. Therefore, it would be challenging for
someone unfamiliar with the job to determine which category to place a check
in. Similarly, there are three different accounts that checks can be deposited
into, depending on the type of payment being made. However, only two
accounts are mentioned in the procedures. In addition, the procedures do not
direct the cashier to restrictively endorse the checks as early as possible in the
process.
Office of the Auditor General
page 21
Recommendations:
1. To further reduce the risk of loss or theft, the Division should continue to reduce
and, if possible, eventually eliminate the number of paper checks that it must
manually process by:
a. Working with the entities that are sending paper checks to submit electronic
payments, and
b. Having its payment-processing vendor receive and process the paper
check payments that the Division has been receiving that cannot be
submitted electronically.
2. To comply with the State Accounting Manual’s cash-handling procedures, the
Division should ensure that all paper checks received are restrictively endorsed
as soon as possible.
3. To ensure that staff who are not familiar with the cashier’s processes can
perform cashier duties when necessary, the Division should update the cashier’s
procedures with sufficient detail, including the requirement to restrictively
endorse the paper checks as early as possible in the process.
State of Arizona
page 22
Division needs more effective means to capture
payment error information
The Division does not have an efficient way to determine how many payments
are being misdirected to persons who should not be receiving them. The
Division conducted a review that found that out of nearly 3 million payments
processed during a recent 11-month period, about 5,800 had posting errors,
which included misdirected payments. However, auditors could not verify the
information the Division reported because the database it used was no longer
available. To provide more definitive information about these errors on an
ongoing basis, the Division needs a more effective means for capturing and
reporting this information, because the only remaining source for payment-processing
error information is its hard-copy files.
Misdirected payments one form of posting error
A posting error occurs when incorrect information about a child support payment is
entered into ATLAS, the Division’s case management system. According to the
Division, a misdirected payment, which is a type of posting error, results when a child
support payment has been made, but it is posted to the wrong case in ATLAS, and
thus subsequently sent to the wrong custodial parent. For example, a misdirected
payment can occur if the Division or its payment-processing contractor receives the
incorrect case number from the payer (e.g., the noncustodial parent or employer), or
if an error is made while entering the case number during the payment-processing
process, and the case number provided or entered matches another case in ATLAS.
The Division has established a unit to research and correct possible payment-posting
errors, including misdirected child support payments. According to division
management, requests to investigate potential errors can come from various
sources, such as a custodial parent who has contacted the Division indicating that
1 According to the Division, misdirected payments may occur because of information submitted by the payer (e.g., the
noncustodial parent or employer) or through data entry mistakes, and can only be sent in error to another custodial parent
who has a case with a child support order. A misdirected payment occurs when a child support payment is made but is
posted to the wrong case in ATLAS.
Office of the Auditor General
page 23
FINDING 3
Legislative Item
The audit shall examine
the number of errors
made by the Division in
relation to payments
being misdirected to
persons to whom an
obligation of support is
not owed.1
State of Arizona
page 24
he/she has not received a payment, or caseworkers or other staff who identify a
possible error in the course of doing their work. According to division management,
if the Division determines that it or its payment processing contractor has made an
error resulting in a misdirected payment, it immediately uses monies from an
appropriated special line item to pay the correct custodial parent and then works to
recover the monies from the custodial parent who received the payment in error.1
Division review indicated low posting-error rate, but
results cannot be verified
The Division has estimated that payment-processing errors occur in considerably
less than 1 percent of total payments processed. According to a division manager,
this estimate was developed using a database containing payment-processing error
information. According to the Division, from July 1, 2005 through May 31, 2006, about
5,800 of the nearly 3 million payments processed had payment-posting errors—an
error rate of 0.2 percent. The Division’s estimate did not break down the errors by
type, so the incidence of misdirected payments is unknown. However, the Division
reported that about 370 misdirected payment errors had not been resolved during
the time frame—that is, the error had been identified, but the payment had not been
recovered. To cover these errors, the Division had paid about $82,000 to custodial
parents.
Auditors could not readily verify the completeness or accuracy of the data the
Division used to calculate the above error rates because the database was no longer
available as of November 2006, and according to division management, its primary
remaining mechanism for storing payment-posting error information is its hard-copy
files. The Division uses another database to track the payment errors it receives, but
this database does not contain the details necessary to fully assess and track how
many errors there are and why they occurred. Because there were an estimated
5,800 payment errors in the Division’s report, auditors could not compile the
information necessary to verify the Division’s reported numbers within the audit’s time
frame.
1 According to division management, the appropriated central payment processing special line item includes monies to
cover custodial parent overpayments (i.e., misdirected payments) and returned checks.
The Division’s
database does not
contain necessary
details to track
payment-processing
errors.
Office of the Auditor General
page 25
Division should track and analyze posting errors
To make information available for management purposes on the number of payment-posting
errors, including misdirected payments, the Division should develop or
modify an existing electronic mechanism, such as a database, for tracking this
information. The information captured should include the type of error, who made it
(e.g., noncustodial parent, employer, or division or contractor staff if they made a
keying error), the reason for the error, and how it was corrected. Such a mechanism
would allow the Division to ensure that appropriate actions have been taken to
correct errors and identify whether any additional action may be needed to help
improve payment-posting accuracy, such as providing training or making procedural
changes.
Recommendation:
1. The Division should develop or modify an existing electronic mechanism to track
payment-posting errors, including misdirected payments. This mechanism
should track the type of errors, who made the errors (e.g., noncustodial parent,
employer, or division or contractor staff), the reasons for the errors, and how the
errors were corrected. Management should use this information to guide any
additional actions that are needed to improve payment-posting accuracy.
Details about payment-processing
errors should
be tracked and used to
prevent future errors.
State of Arizona
page 26
Office of the Auditor General
page 27
Division needs to improve process for making
changes to payees
The Division uses ATLAS, its case management system, to make two key
changes relating to payees. For the first type, a change in the amount of child
support owed, the Division has established processes to help ensure these
changes are accurately made in ATLAS. For the second type, a change to who
receives the child support payment, the Division needs to improve its processes
to help ensure that payee changes are accurately made in ATLAS and that
payee change cases are appropriately managed.
Division processes help ensure accuracy of child support
amount changes
The Division has several processes in place to help ensure child support amount
changes are accurately made and entered into ATLAS. A change in the court-ordered
child support amount may be requested by custodial and noncustodial
parents in limited circumstances. The Division may also request an adjustment for
cases receiving Title IV-A public assistance.1 However, the Division does not have the
authority to modify the amount of child support. Rather, the court must approve any
change in the amount.
Once the Division has received the modified court order, division staff enter the
modified child support court order information into ATLAS so that the Division can
begin collecting and enforcing the new amount. Entering modified court order
information may require staff to recalculate the amount of child support owed if the
order is retroactive. To ensure modified amounts are accurately made in ATLAS, the
Division provides initial and continuing staff training, and conducts reviews of staff
work. Additionally, the Division reported that it requires all changes to child support
amounts to be approved by a supervisor or qualified debt worker who has passed a
FINDING 4
Legislative Item
The audit shall examine
the accuracy of the
system by which the
Division tracks changes
relating to payees.
1 42 U.S.C. §666 requires the Division to review current public assistance child support cases every 3 years, and if
appropriate, request an adjustment.
State of Arizona
page 28
test in order to be able to approve payment adjustments. (For more information on
the specific types of division reviews conducted, see Finding 5, pages 31 through
38.)
Division needs to improve processes to help ensure
payee change accuracy
Although the Division has statutory authority to redirect child support payments from
the custodial parent to another person under certain circumstances and can also
redirect collected child support payments to a private collection agency, the Division
does not have sufficient processes in place to help ensure that these payee changes
are appropriately and accurately made. Auditors’ review of 33 judgmentally selected
cases where payments had been redirected identified 2 cases in which payments
were redirected to the wrong person and 4 cases where child support payments
were not redirected to a private collection agency as requested. Additionally, auditors
found that both the Division's management of and the policies and procedures for
payee changes were inadequate. Therefore, to ensure payee changes are accurately
and appropriately made, the Division should review all cases where payments are
being redirected, continue its efforts to improve its policies and procedures, and
establish an effective oversight process.
Division can change payee—The Division is allowed to redirect child support
payments to another person besides the custodial parent under certain
circumstances and can also redirect collected child support payments to a private
collection agency. First, the Division has authority pursuant to A.R.S. §46-444 to
redirect child support payments for IV-D cases to another caretaker when the
custodial parent has given custody of a child(ren) to another caretaker without
legally changing custody, and the caretaker has had physical custody of the
child(ren) for at least 30 consecutive days. Second, some custodial parents with
IV-D cases choose to contract with a private collection agency to enforce their child
support, and although the Division does not stop enforcing the case, the Division
reported that it will redirect child support payments to the private collection agency
when requested by the custodial parent to do so.1
The Division uses a specific screen in ATLAS to make payee changes. This screen
redirects received payments to another caretaker or private collection agency.
According to May 2007 division-reported data, approximately 430 of its 167,000
enforcement cases were using this screen to redirect received payments.
Case review identified some misdirected payments—Auditors reviewed
33 judgmentally selected cases from approximately 430 cases that had payments
redirected and found 2 cases where payments had been redirected to the wrong
1 Regardless of whether the custodial parent has hired a private collection agency to enforce his/her case, noncustodial
parents are to continue to make payments to the State’s centralized payment-processing unit to receive credit for
payments.
Auditors found two cases
where payments had
been misdirected to the
wrong person.
Office of the Auditor General
page 29
person. For example, in one instance, a custodial parent with two separate child
support cases needed payments redirected to a caretaker for only 1 of the cases.
However, the Division redirected payments for both cases to that caretaker. As a
result, one payment of $225 was sent to the caretaker instead of the custodial
parent.
For the second instance where payments were redirected to the wrong person, it
appears that payments may have been misdirected since November 2002.
However, the Division was unable to identify how much had been misdirected.
According to the Division, the caretaker who was receiving the misdirected
payments was living with and giving the child support money collected to the
custodial parent. The Division reported that it is determining whether it needs to
obtain an affidavit to that effect. Also, it has redirected the payments back to the
custodial parent.
Auditors also identified four cases where child support payments were not
redirected to a private collection agency as requested. For example, auditors
identified one case where the custodial parent was receiving payments directly
from the Division through an electronic payment card even though the custodial
parent had requested that money be redirected to a private collection agency. In
another case, the custodial parent authorized redirection of payment in February
2003 to a private collection agency, but the payments were not redirected until
October 2003.
Case review identified case management and policy concerns—
Auditors’ case review also found that the Division’s case management and policies
and procedures need improvement:
􀁺􇩃 Case management and oversight—Auditors identified a number of cases
where case management and oversight could be improved. In seven cases,
additional action needed to be taken.1 For example, auditors found one case
where the noncustodial parent had custody of the child. According to the
Division, this case has been referred to Attorney General staff to terminate the
child support order because the noncustodial parent had custody of the child.
Auditors also identified two cases where child support enforcement services
were provided to a new caretaker without the caretaker’s requesting the
Division's child support enforcement services or filling out the necessary
paperwork. Auditors also identified seven other cases where the required
paperwork was not in the case file. The Division reported that it has since
located the missing paperwork and placed it in the files. In addition, auditors
identified a case where it appears an incorrect ATLAS screen was used to
redirect payments to a private collection agency. According to the Division,
although case payments were sent to the correct address, all division
communication that would have been sent to the custodial parent was also
redirected to the private collection agency.
1 The seven cases needing additional action include three of the six cases where payments were misdirected to the wrong
person or had not been redirected as requested.
State of Arizona
page 30
􀁺􇩐 Policies and procedures—Auditors found that division policies and
procedures for changing payees were insufficient. For example, auditors
found that the Division's policies and procedures do not direct staff on how to
handle payment transfers on cases where the custodial parent had previously
elected to receive payments through a direct deposit or an electronic payment
card. Staff need to check the ATLAS screens that establish direct deposit or
an electronic payment card because these screens override the screen that
redirects money. Auditors also found that the Division did not have policies
and procedures for how to handle cases where the money is redirected
judicially. Without policies and procedures guiding staff on how to redirect
payments and what type of documentation is needed when there is a judicial
redirect or custody change, staff cannot ensure that they are accurately
redirecting monies and appropriately managing the cases. As of August 31,
2007, the Division began implementing changes to its policies and
procedures.
Division should take additional actions to ensure payee changes are
accurately and appropriately managed—Given that most payee-change
cases that auditors reviewed had some type of concern and because child
support payments can be redirected by division staff to someone other than the
custodial person, the Division should review all of the cases where payments are
being redirected to ensure that the change to payee is accurate and appropriate.
In addition, the Division should continue to revise its policies and procedures to
ensure that staff have adequate guidance on how to appropriately and accurately
redirect payments.
The Division should also establish and implement an effective review and oversight
process. Although the Division reported that only limited staff can make payee
changes, the Division has very limited review or oversight of the payee-change
process. For example, even though payments are being redirected to another
person or company, there is no supervisory approval process for these changes.
Because auditors' review of cases identified payments that were redirected
inappropriately and cases that needed additional oversight and management, the
Division should establish and implement an effective review and oversight process
specifically for cases where payments are being redirected.
Recommendations:
1. The Division should review all of the cases that have payments redirected to
ensure that the changes to payees are accurate and appropriate.
2. The Division should continue to revise its policies and procedures to ensure that
staff have adequate guidance on how to appropriately and accurately redirect
payments.
3. The Division should establish and implement an effective review and oversight
process for cases where payments are being redirected.
The Division’s payee-change
policies and
procedures are
insufficient.
Office of the Auditor General
page 31
Division should better explain collection methods
to noncustodial parents
In determining what enforcement methods to use in collecting child support
payments, the Division is guided primarily by statutory and regulatory criteria.
State and federal law and regulations provide the Division with 16 different
methods for collecting child support payments and specify the criteria that
cases must meet before the Division is authorized to apply them. The Division’s
processes for helping ensure that enforcement actions are applied appropriately
appear to be adequate. However, auditors found that the Division can more
effectively communicate with noncustodial parents the reasons for its actions.
State and federal laws determine enforcement methods
The Division is authorized to use 16 different enforcement methods to ensure child
support payments are paid. As noted in Table 3 in the Appendix (see page a-ii), state
and federal laws and regulations provide the criteria that must be met, such as the
amount of unpaid child support that must be owed before the Division can take
enforcement action, such as intercepting a noncustodial parent’s state income tax
refund. Because these enforcement methods are specific to the IV-D child support
program, the Division is the only agency authorized to apply such a broad range of
enforcement methods. When a case is opened, the Division notifies the noncustodial
parent that enforcement actions will be taken if his or her child support is not paid.
This initial notice also provides a list of some of the enforcement methods the Division
has the authority to use. In addition, if child support is not paid as ordered and the
enforcement criteria is met, the Division notifies the noncustodial parent that child
support payments are past due and that it has the authority to use a certain
enforcement method, or methods, to collect the past-due support. As long as the
criteria are met, multiple enforcement actions can be taken at the same time on the
same case. Similarly, the same enforcement action may be taken multiple times on
a case.
FINDING 5
Legislative Item
The audit shall examine
how the Division
determines what
methodology it uses to
collect payments.
When a case is opened,
the Division notifies the
noncustodial parent that
enforcement actions will
be taken if child support
is not paid.
State of Arizona
page 32
Table 4 in the Appendix (see page a-iv) presents the frequency with which the
Division initiated various enforcement actions on cases owing past-due support in
calendar year 2006. According to division management, the enforcement options
have had varying degrees of success, with income withholding and tax offsets as the
most effective enforcement techniques. In 2006, the Division initiated more than
140,000 income withholdings and submitted more than 200,000 cases to the Arizona
Department of Revenue, which resulted in more than 14,000 state tax refunds being
intercepted.
Division has processes to help ensure enforcement
methods are appropriately applied
The Division has established various processes that help ensure that enforcement
actions are carried out according to state and federal laws and regulations. Thirteen
of the 16 enforcement methods are automated and are triggered by the length of
time that has passed since a payment was received and/or the past-due child
support amount that is contained in ATLAS, the Division’s automated case
management system. For example, if the noncustodial parent owes at least $50 in
unpaid child support, ATLAS will automatically generate a letter informing the
noncustodial parent that his or her state tax refund may be intercepted (see
Appendix, Table 3, page a-ii). Three enforcement methods require manual
intervention by caseworkers: limited income withholding, workers’ compensation
offset, and license suspension. For example, if a noncustodial parent owes at least 2
months of unpaid child support, a caseworker will review the case’s details and may
refer the case to court to request that the court suspend the noncustodial parent’s
professional license (see Appendix, Table 3, page a-ii).
To ensure that both the automated and manual methods used to enforce child
support and collect past-due support are appropriately carried out, the Division has
established processes in the following four categories: guidance/oversight, quality
reviews, internal audits, and administrative reviews. Specifically:
􀁺􇩇 Guidance/oversight—To ensure that enforcement methods are carried out
correctly, the Division provides guidance and oversight through policies and
procedures, training, and supervisory review. Policies and procedures provide
information on each enforcement method, such as the amount of past-due child
support that is required before an automated notice will be sent. Policies and
procedures also instruct staff on how to initiate manual enforcement methods
and help to ensure compliance with laws and regulations. The Division makes
its policies and procedures easily accessible to employees through its intranet.
Also, when new enforcement methods are authorized, the Division works with
Attorney General staff in developing its enforcement policies to ensure that they
are appropriate. Auditors’ review of division policies and procedures found that
Office of the Auditor General
page 33
they were in line with statutes governing enforcement remedies. In addition, the
Division uses several methods for training staff who are involved in enforcement
activities, including classroom training, computer-based training, continuing
education, and special training, as needed. All of the computer-based trainings
are made available to division staff on its intranet training database so that they
are able to review the training as questions arise.
The Division also has supervisory review processes to help ensure appropriate
enforcement methods are used. These processes are important for ensuring
that the information in ATLAS is accurate because most enforcement actions are
based on the amount of past-due support. First, the Division reported that
supervisors review all newly hired workers’ cases for the first 6 months of
employment, and at the end of the 6-month period, new workers are formally
evaluated and receive guidance on areas needing improvement. Second,
according to the Division, when staff establish the amount of child support owed
in ATLAS or make any modification to that amount, a supervisor or qualified debt
worker who has passed a test in order to be able to approve calculations or
payment adjustments must review the staff’s work. According to the Division, the
results of the reviews are reported on the staff’s performance evaluation.
􀁺􇩑 Quality reviews—Division staff perform case reviews, known as quality reviews,
to verify that the information in ATLAS is accurate. Accurate information is critical
for ensuring that both automated and manual enforcement processes are being
carried out appropriately. For quality reviews, supervisors, or in some offices a
special project review team, are required to randomly select five cases per
month, per caseworker, for review. The cases are reviewed to ensure that the
information caseworkers entered into ATLAS, such as the court-ordered amount
of child support, matches the paper case file. The purpose of the review is to
ensure the accuracy of the information in ATLAS, as well as to identify and
address caseworker performance issues. According to the Division, any errors
identified during the review by the supervisor are brought to the caseworker’s
attention and corrected. Similarly, any errors identified by the special projects
staff are reported to the caseworker’s supervisor and corrected. According to
the Division, the results of the reviews are reported on the staff’s performance
evaluation.
A similar type of review is conducted on cases that have had court-ordered
modifications made to the monthly child support amount or the amount of
unpaid child support. This type of review is also referred to as a quality review
and also requires supervisors to randomly select five cases per month, per
caseworker. However, this review focuses on the accuracy of the calculations
performed as a result of the court-ordered modifications. According to the
Division, any errors identified are discussed with the caseworker and corrected,
and reported on the staff’s performance evaluation.
The Division has
supervisory review
processes to help
ensure the
appropriateness of
enforcement methods.
State of Arizona
page 34
􀁺􇩉 Internal audits—The Division performs two types of internal audits that help to
ensure that the case information in ATLAS is accurate and that the appropriate
enforcement actions are being taken. The first is a self-assessment audit
conducted by a specialized unit. The audit occurs yearly and includes a review
of several hundred cases for each office. During the audit, reviewers check to
see if specific enforcement methods were used. For example, reviewers
determine whether eligible cases were submitted for federal or state tax offsets,
or if an employer was known, whether a wage withholding was initiated. In
addition, reviewers ensure that if a wage withholding is not possible, then at least
one other enforcement method was initiated, such as an administrative lien. The
audit’s findings are provided to the audited office as well as division
management. If an office is found deficient in any areas of the audit, it must
create a corrective action and monitoring plan to ensure that the issues needing
correction are addressed.
The second type of internal audit is called a sweep. According to the Division,
for this audit, caseworkers review a certain number of their cases per month,
based on a performance goal their supervisor established. The caseworker
reviews the cases to ensure that the case information is accurate and to
determine if there are any manual enforcement actions that can be taken. The
caseworker conducting the sweep makes corrections if errors are encountered.
The number of sweeps conducted is reported on a caseworker’s performance
evaluation.
􀁺􇩁 Administrative reviews—The Division has established a process whereby a
noncustodial parent can request a review, known as an administrative review, of
the enforcement method(s) being used on his or her case to collect past-due or
current support.1 The noncustodial parent must request an administrative review
in writing, and the Division has established timelines, in accordance with statute,
for responding to the initial request, as well as completing a review of the actions
taken on the case and communicating its decisions or findings. For example,
depending on the type of enforcement method the noncustodial parent is
requesting be reviewed, the Division has up to 45 business days to complete
the review and communicate its findings to the noncustodial parent. During the
review, the enforcement action in question may be temporarily stopped, and any
child support collected is not distributed until the review is completed. This
process helps ensure that enforcement methods are being used appropriately
and according to law.
According to the Division, during the first half of calendar year 2007, it conducted
approximately 2,200 administrative reviews. The Division was not able to provide
auditors with the number of reviews that were found in favor of the noncustodial
parent or the Division because it is in the process of upgrading its database
1 All 16 enforcement methods are used to collect past-due child support, but 4 enforcement methods—consumer credit
reporting, income withholding, medical support, and unemployment compensation offset—are also used to collect
current child support (see Table 3 in Appendix, pages a-ii through a-iii). A noncustodial parent can also request an
administrative review of these methods.
Office of the Auditor General
page 35
used for recording the reviews’ results. According to division staff, in the past, it
recorded the reviews’ results in a database. However, the Division reported that
it stopped using the database in December 2006 because the recording of the
data had become inefficient. Therefore, according to the Division, it is in the
process of upgrading the database for recording administrative review results.
Division should improve enforcement and administrative
review letters
Although the Division has established various processes to help ensure
enforcement actions are appropriately applied, it should more effectively
communicate with noncustodial parents the reasons for its actions. Auditors found
problems both with the letters sent to noncustodial parents about individual
enforcement methods and those communicating the results of an administrative
review. Both types of letters would benefit from revisions that could be undertaken
as part of the Governor’s Plain Talk Initiative, which is an initiative developed to
improve state government by decreasing confusion and red tape for the public.
Enforcement letters are inconsistent and need additional
information—Auditors reviewed 17 different types of enforcement letters sent
to noncustodial parents and found that information contained in the letters was
inconsistent and, in some cases, potentially helpful information was not included.
Specifically:
􀁺􇩎 Not all of the 17 enforcement letters reviewed consistently used the same
language when offering an administrative review to the noncustodial parent.
Specifically, the letter informing the noncustodial parent that his/her name is
being submitted to consumer credit reporting does not offer an administrative
review, but instead indicates that he/she can contest the action. Additionally,
auditors noted that the letter notifying the noncustodial parent that the Division
intends to retain his/her unemployment compensation informed the
noncustodial parent that he/she has a right to challenge the process, but did
not specifically refer to an administrative review.
􀁺􇩎 Not all of the 17 letters reviewed provided information on how the noncustodial
parent could submit payment to avoid the enforcement action being taken.
For example, the Division sends a letter to inform a noncustodial parent that it
may retain his or her state tax refund to offset past-due child support, and
although the letter outlines the process that the noncustodial parent can take
to request an administrative review, it does not provide information on how
he/she can avoid the action by submitting the past-due support.
􀁺􇩓 Some enforcement notices have a Spanish sentence prompting those who do
not read English to call the office, while other notices do not include this
sentence.
State of Arizona
page 36
􀁺􇩎 None of the letters reviewed provided the Division’s Web site address, which
may be helpful for noncustodial parents seeking additional information
regarding their case or enforcement methods in general.
Letters communicating results of administrative reviews need
improvement—Auditors also reviewed the letters that the Division sends to
noncustodial parents to convey the results of its administrative reviews and found
the information could be presented in a manner that is easier to understand.
Current letters contain lines of information that can be checked off to indicate that
the Division took an action or made a decision. For example, the Division can
check the line for “reviewing information contained in the Department’s records,”
or the line for “contacting the other party to verify your claims.” However, these
letters contain many different items that can be checked, and may therefore be
confusing to an individual who is not familiar with the Division or its processes. In
all, the letters contain up to three pages of concentrated information, with only
some of the information being relevant to the noncustodial parent’s case (see
Figure 2, page 37).
A second problem with the letters is that although they contain blank lines for the
Division to provide additional comments regarding the case or the review, the
letter’s format does not lend itself to division staff providing case-specific
information that may help the noncustodial parent understand why certain
enforcement actions are being taken. For example, auditors reviewed a case
where it appeared that the noncustodial parent understood that the action was
being taken because division records showed that past-due child support was
owed; however, it was apparent in his written request for an administrative review
that he did not understand how the past-due support had occurred. The
administrative review letter sent to the noncustodial parent did not appear to
address all the aspects of his original request, or help him to understand how to
resolve his situation.
Plain Talk Initiative offers an opportunity for improving enforcement
and administrative review letters—The Division is participating in the
Governor’s Plain Talk Initiative, which is an initiative developed to improve state
government by decreasing confusion and red tape for the public. To participate in
the initiative, the Department formed a work group consisting of several staff
including two staff members from the Division’s policy unit. As of July 2007, the
workgroup had reviewed and revised 25 division documents—including several
enforcement letters—to be more user-friendly. The revisions included removing
legal terminology and adding some information. For example, references to state
statute were removed from the notice of professional license suspension, and
information was added regarding the noncustodial parent’s options for paying any
past-due child support.1 Further, language offering an administrative review was
added to the letter notifying the noncustodial parent that the Division intends to
retain his/her unemployment compensation, making it consistent with other
enforcement letters.
The administrative
review letter’s format
does not lend itself to
division staff providing
case-specific
information.
1 The Division reported that it is monitoring the impact of these changes by tracking calls made to its customer service
representatives related to the revised letters.
Office of the Auditor General
page 37
Figure 2: Division of Child Support Enforcement
Administrative Review Final Determination Letter, page 2 of 3
As of July 30, 2007
Source: Division-provided administrative review final determination letter.
State of Arizona
page 38
However, not all of the letters that auditors reviewed and found problems with were
part of the 25 documents the Division reviewed and revised. Because one of the
goals of the Plain Talk Initiative is to decrease confusion, the Division should ensure
that it reviews all enforcement and administrative review letters (see example in
Figure 2, page 37) as part of the Plain Talk Initiative. For enforcement letters, part
of the review should include clarifying how to avoid the enforcement action or
where to go for additional information. For administrative review letters, attention
should be given to formats that help the noncustodial parent better understand
his/her case and the Division’s actions, including case-specific information such
as details on how the case developed past-due amounts, why the specific
enforcement actions were taken, or how the Division reached its conclusions.
Recommendations:
1. As part of the Plain Talk Initiative, the Division should review and revise:
a. The enforcement letters sent to noncustodial parents informing them of
impending or completed enforcement actions, including working to ensure
that they are consistent and include helpful information such as the
Division’s Web site address or the steps the noncustodial parent can take
to avoid the enforcement action.
b. The administrative review letters that are sent to noncustodial parents to
inform them of the Division’s administrative review findings or conclusions,
including working to ensure that the letters are easy to understand and
provide more case-specific information, such as details on how the case
developed past-due amounts, why the specific enforcement actions were
taken, or how the Division reached its conclusions.
Office of the Auditor General
page 39
FINDING 6
Processes over demand letters minimize risk of
error
In fiscal year 2006, the Division mailed out about 5,000 demand letters for past-due
child support payment. Auditors’ review of more than 60 of these letters
found that none were sent in error or contained erroneous information. Auditors’
review of data used to compile another 107 demand letters sent to bad-check
writers found three errors (such as an incorrect address), but none were sent to
someone who had not written such a check.
No errors found in past-due child support letters
The Division sends demand letters to noncustodial parents with past-due child
support and has processes in place, such as training and supervisory oversight, that
appear to reasonably minimize the risk that these letters will go out in error or with
erroneous information.
Division sends demand letters to noncustodial parents who have not
paid their child support—The Division sends letters to noncustodial parents
to notify them when they owe past-due child support and of the possible
consequences for not paying. These letters are part of the 16 different enforcement
methods the Division uses to collect current and past-due child support
payments.1 For most of these methods, the Division sends a notice to the
noncustodial parent that a specific action will be taken if he/she does not pay
his/her past-due child support. Auditors found that 3 of these notices use the term
“demand” in their titles, and, as shown in Table 2 (see page 41), more than 5,000
of these notices were mailed during calendar year 2006.
1 All 16 enforcement methods are used to collect past-due child support, but 4 enforcement methods—consumer credit
reporting, income withholding, medical support, and unemployment compensation offset—are also used to collect
current child support. For more information on these methods, see Appendix, Table 3, pages a-ii and a-iii.
Legislative Item
The audit shall examine
the number of demand
letters that are sent out
in error or with erroneous
information.
State of Arizona
page 40
Processes in place for past-due child support demand letters help
minimize errors—The Division has various processes in place, such as
training and oversight, that help to minimize the risk of past-due support letters
being sent out in error or with erroneous information. Specifically, the Division
provides initial and periodic ongoing training for its caseworkers who handle the
enforcement function, written policies and procedures, and ongoing supervisory
review. These processes are important because most enforcement methods are
automated and are triggered by the length of time that has passed since a
payment was received and/or the past-due child support amount that is contained
in ATLAS. Therefore, it is critical to have processes in place that help ensure that
caseworkers are entering the correct information into ATLAS.
Additionally, for the few enforcement methods that require manual intervention, it
is essential that the Division has processes in place to assist caseworkers in
carrying out the enforcement actions. For example, initial caseworker training
provides general information on child support enforcement guidelines, as well as
more specific information on topics such as income withholding and interstate
cases, which are cases where either the custodial or noncustodial parent resides
in another state.
Further, the Division reports that supervisors regularly review all cases assigned to
new caseworkers, and the results of these reviews are included in the
caseworkers’ performance evaluations. In addition, the Division has established
internal review processes to help ensure that case information is accurate and that
appropriate enforcement actions are being taken. One process requires either
supervisors or staff from a special projects team to review five cases per
caseworker each month to ensure that the information caseworkers entered into
ATLAS, such as the court-ordered amount of child support, matches the paper
case file. Auditors also determined that similar processes, such as training and
supervisory review, have been established for setting up or modifying the court-ordered
child support amount. For example, monthly reviews are conducted on
selected cases that have had court-ordered modifications made to the monthly
child support amount or the amount of unpaid child support. These processes are
also important since incorrect dates and amounts entered during the setup
process or when making changes could impact the accurate enforcement of a
case.
No errors found in enforcement demand letters reviewed—Auditors
reviewed 30 randomly selected cases where demand-to-surrender letters (see
Table 2, page 41) were automatically generated by ATLAS between May 31 and
June 1, 2007, and sent to financial institutions, and found that none appeared to
have been sent out in error or with erroneous information. As required by statute,
these demand letters followed a due-process notice sent to the noncustodial
parent informing him or her that his or her bank account has been seized and of
his or her right to request an administrative review (see textbox, page 41).1
Although several of the noncustodial parents in the 30 cases reviewed contacted
the Division regarding the demand-to-surrender letter, none took the steps
The Division has
processes in place to
help ensure that
appropriate
enforcement actions are
being taken.
1 A.R.S. §25-521.
Office of the Auditor General
page 41
required to formally request an administrative review, indicating
that the letters probably had not been sent out in error or with
erroneous information.
Further, auditors reviewed the past-due amounts of several cases
where the due-process notice and the notice/demand-to-surrender
letters had been sent to ensure that the programming
was working as intended.
In addition, auditors reviewed all 21 cases where
professional/occupational license suspension demand letters
(see Table 2) were sent out to noncustodial parents during
Table 2: Enforcement Notices Using the Term “Demand” in Their Title
Title of Notice or Letter Description
Number
Mailed in 2006
Final Notice/Demand to Surrender This notice demands that the holder of specific
property or assets subject to levy, such as a financial
institution, immediately surrender the property to the
Department. To send this notice, the Division is
required to wait at least 15 days after a due-process
notice has been sent to the noncustodial parent
informing him/her that his/her bank account has been
seized.
4,880
First Notice/Demand for Payment/Intent
to Suspend or Deny
Professional/Occupational License
This notice informs the noncustodial parent that
his/her professional or occupational license may be
suspended if past-due child support is not paid. This is
the first of two notices sent. The Division is required to
wait at least 15 days before sending the second
notice, which informs the noncustodial parent of the
Division’s intent to initiate action to suspend or deny
his/her professional or occupational license.
280
First Notice/Demand for Payment/Intent
to Suspend or Deny Recreational
License1
This notice informs the noncustodial parent that
his/her recreational license may be suspended if past-due
child support is not paid. This is the first of two
notices sent. The Division is required to wait at least
15 days before sending the second notice, which
informs the noncustodial parent of the Division’s intent
to initiate action to suspend or deny his/her
recreational license.
10
1 The Division reported that it refers very few cases to court for suspension of recreational licenses because it cannot readily
identify noncustodial parents who have purchased a license, such as a hunting or fishing license. Auditors confirmed that the
Arizona Game and Fish Department does not have an integrated database through which this type of information can be
obtained.
Source: Auditor General staff analysis of division-provided information and data.
Administrative Review
Process
A noncustodial parent can request that
the Division review the enforcement
method or methods being used on
his/her case. The request must be
submitted in writing, and during the
review process, the Division may stop
the enforcement action(s) in question.
Any child support collected is not
distributed until the review is
completed.
State of Arizona
page 42
February 2007, as well as the ten recreational license suspension demand letters
sent out in calendar year 2006, and found that none appeared to have been sent
out in error or with erroneous information. According to the Division, these letters
were not automatically generated by ATLAS and were sent out only after a
caseworker had reviewed the case and determined that the case should be
referred to the court for possible license suspension. The letters informed the
noncustodial parent that the Division has the authority to take action to suspend or
deny his or her professional or recreational license because their child support was
at least 2 months past due. These letters also informed the noncustodial parent of
his/her right to request in writing an administrative review regarding whether he/she
is required to pay child support and the amount of past-due child support (see
textbox, page 41).
Three minor errors found in special demand letter project
As part of their work, auditors also reviewed demand letters that the Division sent as
part of a special project for recovering losses because of bad checks.1 In May and
June 2006, using information provided by the Division, the Attorney General’s Office
mailed 107 demand letters to bad check writers in an attempt to recover the monies.
According to the Division, the list of bad check writers and associated information
compiled by the Division and provided to the Attorney General’s Office was reviewed
by division staff for accuracy. However, auditors reviewed data used to compile the
107 letters and found that 3 of the letters contained errors, but that none were sent
to someone who had not written a bad check. The errors identified in the 3 letters
were minor: 1 letter that was sent to the wrong address and with an incorrect check
number, 1 letter that was sent to the wrong address with an incorrect check number
and amount, and 1 letter that referred to an incorrect check amount because a
r