Legislative Analyst's Office, January 27, 2000
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Child
Support Enforcement:
Implementing
the Legislative Reforms of 1999
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Background
|
|
In
1999, the California Legislature passed, and the Governor signed, a
package
of bills which made significant changes to the organization,
administration,
and funding of the state’s child support enforcement
program.
Generally, these reforms significantly increased state authority
and
oversight over the program, and changed state administrative responsibility
for developing the statewide child support automation system.
Among
the more significant changes are the creation of a new state
Department
of Child Support Services (DCSS); the transfer of local administration
from the county district attorneys to separate county child
support
agencies; and the transfer of responsibility for procurement of
the
automation system from the state Health and Human Services Data
Center
(HHSDC) to the Franchise Tax Board (FTB).
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Findings and Recommendations
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Our
findings and recommendations include the following:
-
In order
to maximize
collections, the
state should
allocate administrative
funds (either new or existing) to county agencies based
on
their relative levels of cost-effectiveness, as measured by
increased
collections resulting from increased administrative expenditures.
- In
order to
minimize the
federal penalties
related to
automation, efforts
should be taken to (1) meet federal certification requirements
first and foremost, (2) minimize additional major changes
to
the child support program, (3) streamline the procurement process,
and (4) ensure more efficient control agency oversight.
- In
order to
avoid automation
mistakes of
the past,
DCSS should
(1)
provide strong leadership and sponsorship to the new automation
project and (2) define its policies and practices before
proceeding
with the new automation system. The FTB, acting as DCSS’
agent for the procurement and development of the new
system,
should (1) employ good project management and contract
administration practices and (2) ensure that the procurement
is focused on the business needs of DCSS and the counties.
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INTRODUCTION
The
primary purpose of California’s child support enforcement program is to collect,
from absent parents, support payments for custodial parents and their children.
Child support offices in the state’s 58 counties provide services such as locating
absent parents; establishing paternity; obtaining, enforcing, and modifying
child support orders; and collecting and distributing payments. Federal law
requires states to provide these services to all custodial parents receiving
Temporary Assistance for Needy Families (TANF, which is the California Work
Opportunity and Responsibility to Kids [CalWORKs] program in California)
and,
on request, to non-TANF parents. Child support payments collected on behalf
of TANF families historically have been used primarily to offset the federal,
state, and county costs of TANF grants. Collections made on behalf of non-TANF
parents are distributed directly to these parents.
Prior
to recent legislative reforms in California, the program was administered at
the local level by the county district attorneys (DAs), with state oversight
by the Department of Social Services (DSS). The counties were authorized to
refer certain delinquent cases to the (FTB) for collection.
MAJOR
PROVISIONS OF THE LEGISLATIVE REFORM PACKAGE
Below
we discuss the major provisions of the legislative reforms, which are summarized
in Figure 1.
Figure
1 |
Major
Provisions of the Child Support Reforms of 1999 |
-
Creates New
State Department.
As of January 2000, state-level administration
and
oversight of the child support enforcement program was transferred
from the Department
of Social Services to the new Department of Child Support Services.
|
-
Shifts Local
Administration
to New
County Agencies.
At the local level, administrative
responsibility will be shifted from the county district attorneys
to newly-created
county agencies.
|
-
Shifts Responsibility
for Determining
Program Expenditures
to the
State. Responsibility
for determining program expenditure levels and how funds will be
allocated
among the local agencies will shift from the counties to the state.
|
-
Establishes a
Program Performance
Improvement Process.
Local agency failure
to comply with performance plans could lead to state assumption of
responsibility.
|
-
Revises the
County Fiscal
Incentive Payment
System. Establishes new
incentives
for counties, subject to availability of funding.
|
-
Changes Approach
for Automation
to a
Single Statewide
System. Previ
ously,
the approach was county based.
|
-
Transfers Responsibility
for Procurement
of the
Automation System
to the
Franchise
Tax Board (FTB). Previously,
the Health
and Human
Services Agency
Data Center was responsible for procurement.
|
-
Requires Performance-Based
Procurement for
the New
Statewide Automa tion
System. The procurement
for the
single statewide
system will
be based
on the
vendor’s ability to meet preagreed upon program performance levels.
|
-
Shifts Responsibility
for Interim
Automation Systems
to the
State. The state
is
responsible for determining changes and enhancements to county-based
systems.
|
-
Establishes a
Project Charter
for the
Statewide Automation
System. Project
charter
will describe the governance structure, roles and responsibilities,
and the management
for the single statewide system.
|
-
Requires State
to Assume
Responsibility
for Automation
Penalties. The
state,
rather than counties, will be responsible for the federal financial
penalties for
not meeting deadlines for the statewide system.
|
-
Expands the
FTB’s Child
Support Delinquency
Collection Program.
The program
will cover a broader range of cases.
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GOVERNANCE
In
an effort to improve child support collection performance, the Legislature
passed a reform package of bills in 1999, including Chapter 478 (AB 196, Kuehl),
Chapter 479 (AB 150, Aroner), and Chapter 480 (SB 542, Burton and Schiff).
Together, these acts overhaul the organization, administration, and funding
of the program. Below we describe these changes, which generally are intended
to achieve more uniformity in service delivery and better performance in the
program. We address the creation of a statewide automation system--the subject
of Chapter 479--separately in the final section of this report.
Creation
of New State Department and New Local Agencies. As
of January
1, 2000,
state level
administration and
oversight of
California’s child
support enforcement
program was
transferred from
the Department
of Social
Services (DSS)
to the
Department of
Child Supoort
Services (DCSS),
a newly created
department within
the state
Health and
Human Services
Agency. (For
a discussion
of the
2000-01 budget
proposal for
the new department,
see our
Analysis of
the 2000-01
Budget Bill
.)
At
the local level, child support operations in California’s 58 counties will
be transferred over the next three years from each DA’s office to a newly
created county agency. These local child support agencies will continue to
refer all cases requiring criminal enforcement to the DA. The legislative
reform package expands the role of the FTB
in its delinquency collection program, as described later in this report.
New
State Leadership and Increased Accountability. Pursuant
to Chapter
478 and
Chapter 480,
the Governor,
with the approval
of the
Senate, will
appoint a
director of
the DCSS.
The director
will be responsible
for compliance
with all
federal and
state laws
pertaining to
the administration
of child
support enforcement,
and completion
of a
single statewide
automation system.
The
new DCSS is charged with a number of significant tasks over the next several
years. It is required to:
-
Adopt
uniform procedures
and forms.
-
Establish
standard caseworker
caseloads.
-
Establish
standard attorney
caseloads.
-
Institute
consistent case
closure procedures.
-
Evaluate
the business
and management
“best practices”
of the
local agencies.
-
Set
FTB priorities
for collections
and target
their activities
to maximize
collections in
order to
avoid welfare
dependency.
-
Develop uniform
training protocols
for state
and local
employees.
-
Review
and approve
the annual
budgets of
the local
agencies.
-
Adopt
performance standards
for the
program.
-
Analyze the
collectability of
child support
and use
this information
in determining
the order
of transition
of local agencies
from the
DAs to the
new county
agency.
In
addition to the new director and deputy directors, a number of new positions
will be created for regional administrators who will work with counties
on performance and compliance. The number of regional administrators will
be determined in the state budget, based on caseload. The regional administrators
will:
Local
Agency Governance. Prior to
the transition
from the
DA’s office
to the new
local agency,
each county
board of
supervisors must
appoint an
administrator for
the child
support program.
The administrator
and his
or her staff
will be
county employees.
In order
to ensure
the stability
of local
agencies
and to retain child support expertise during and after the transition process,
all child support employees working in the DAs’ offices (other than the director)
may choose to transfer to the new local agencies and will retain employment
status and salary.
Performance
Improvement Process and State Intervention. The
legislation establishes
a three-phase
performance improvement
process to
be used
when a local
agency is
out of
compliance with
the performance
standards established
by the
department. Intended
to strengthen
state oversight
and intervention,
the process
authorizes DCSS
to take
an increasingly
active role
in the daily
management of
a noncompliant
local agency.
The three-phase
compliance process
will be
implemented in
individual counties
effective July
2001 or
six months
after the
county’s transition,
whichever is
later.
The
phases are as follows:
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A
performance improvement
plan will
be jointly
prepared by
the local
agency and
DCSS. The
plan will
include goals,
expectations, and
time lines
regarding compliance
and assessment.
If a
local agency
does not
meet these
expectations in
a timely
fashion, it
will pass
into the
second phase.
-
The second
phase will
include onsite
evaluation and
monitoring of
the local
agency by
DCSS. If
failure occurs
in phase
two, the
local agency
will pass
into phase
three.
-
In the
third phase,
DCSS will
assume management
of the
local child
support operations
until the
agency can
demonstrate
its ability to comply and perform at an adequate level.
The
DCSS Legislative Reporting Requirements .
Chapter
478 and Chapter 480 require the Director of DCSS to submit status reports to
the Legislature periodically. Beginning July 1, 2001 and semiannually thereafter,
the director will submit written reports to the Legislature on the status of
the child support enforcement program. In addition, the director is required
to submit quarterly reports on the progress of all local child support agencies
in each performance measure, including the identification of the local child
support agencies that are out of compliance, the performance measures each has
failed to satisfy, and the performance plan that is adopted for each.
The
DAs During the Transition .
Child support
enforcement activities
will continue
to be
the obligation
of the DAs
until the
transfer of
services to
the new local
department is
complete in
each respective
county. If
DCSS finds that
a DA
has inappropriately
lowered funding
or decreased
services during
this period,
DCSS is
authorized to
withhold part
or all of
that county’s
state and
federal child
support funding,
including incentive
payments. The
DAs’ staff
will continue
to provide appropriate
legal services
during the
transition period.
Once transferred,
the local agency
will be
permitted to
contract with
the DAs for
limited legal
services until
September 2004.
Transition
Schedule for Local Agencies. The
transfer of
local operations
from the DAs
to a
new county department
will begin
by January 2001
and continue
until January
2003. Individual
counties may
be permitted
to transfer
prior to
January 2001
if the county
has appointed
a child
support administrator
and approved
a transition
plan. In
determining the order of county transitions, the Director of DCSS will consider
county performance and the impact of potential service delivery disruptions.
Local child support agencies representing at least 50 percent of the statewide
caseload are to be transferred annually from the DAs’ offices beginning in January
2001. The transfer process is to be completed by January 1, 2003.
THE
FTB CHILD SUPPORT COLLECTIONS PROGRAM
Program
History. In 1993,
the FTB
began a pilot
project to
collect delinquent
payments in
six counties.
Two years later,
the delinquent
collection program
was expanded
to include
all counties.
Currently, the
FTB is responsible
for collecting
child support
payments delinquent
90 days
or more. At
the option
of the county
district attorney,
the FTB
may also collect
payments delinquent
for 30
days or more
as well
as current support
payments. The
counties retain
management responsibility
for all
cases, and all
debtor disputes
are referred
to the
county. Further,
a county can
pull a
case back from
the FTB
before collection
has been completed.
The
FTB’s role is to locate assets and collect owed amounts. It does this by issuing
a levy against bank accounts, wages, or other income, or seizing both real and
personal property. Most often if the delinquency is collected, it is done through
bank account and wage levies. However, only about 6 percent of all cases referred
to the FTB are collected. For 1998-99 the FTB collected almost $68 million in
child support delinquent payments from an inventory of over 526,000 cases.
New
Program. Chapter 480 and
related legislation
fundamentally changed
and expanded
the FTB’s
responsibilities for child support collections. Under the new program, the FTB
will receive all cases where delinquent payments exceed $100 and are more than
60 days in arrears. This is expected to double the FTB’s caseload to approximately
one million cases. The FTB will have a three-year time period (ending December
31, 2002) in which to phase in the additional caseload.
The
legislation also directs FTB to design a computerized database to centralize
information regarding each case and establish a customer information center.
Further, the FTB is directed to contract with third parties, where necessary,
to locate debtors and debtor assets. Finally, the legislation provides that
if a debtor has both a child support delinquency and a personal income tax delinquency,
the FTB is to collect the child support delinquency first.
Statewide
Automation System. Chapter 479
transfers responsibility
for procurement
of the
statewide automation
system for
child support
from the Health
and Human
Services Data
Center (HHSDC)
to the FTB.
We discuss
this in the
final section
of this
report.
FUNDING
Program
Fiscal Structure. Prior to
the child
support reform
legislation, counties
were responsible
for determining
how much
money to spend
at the
local level
on child support
collection activities.
Most of
the funding,
however, was
provided by
the federal
and state governments.
The federal
government paid
two-thirds of
county administrative
expenditures and
made incentive
payments to
states designed
to encourage
counties to
collect child
support. California
passed the
federal incentive
payments to
the counties
along with
additional state incentive payments. These combined incentive payments were
used by counties to support their share of program costs and were sufficient
to cover almost all county costs in recent years.
Historically,
one of the major fiscal effects of child support collection efforts has been
the reduction of welfare grant expenditures. This is because child support payments,
less $50 monthly, that are collected on behalf of CalWORKs families have been
used to offset the public costs of CalWORKs grants. (The first $50 of monthly
payments is distributed directly to the family.) The CalWORKs grant savings
have been shared by the federal, state, and county governments in proportion
to their expenditures on grant payments, with approximately 51 percent of savings
returned to the federal government. Of the nonfederal portion, 95 percent is
returned to the General Fund and 5 percent is returned to the counties. Child
support collections have also resulted in savings in the foster care program.
The budget estimates $593 million in CalWORKs and foster care savings ($306 million
federal, $257 mil-lion state, and $30 million to counties) in 1999-00.
Another
major fiscal effect of the child support program is its impact on the CalWORKs
caseload. To the extent that child support payments collected on behalf of non-CalWORKs
families have kept these families from going on public assistance, they have
resulted in CalWORKs grant avoidance savings. These savings are difficult to
measure and we do not have an estimate.
Legislative
Changes in Current-Year Funding. The
legislative reform package (Chapter 478, Chapter 479, and Chapter 480) and the
human services trailer bill to the 1999-00
Budget Act--Chapter 147,
Statutes of 1999 (AB 1111, Aroner)--made significant changes to the budgeting
practices of the child support program. Prior to the passage of these laws,
local child support budgets were neither reviewed nor approved at the state
level. Counties determined expenditures at the local level and paid most of
these costs with federal reimbursements and federal and state incentive funds.
Pursuant to the legislative reform package, however, the responsibility for
determining the program expenditure levels (including the allocation of funds
among the local entities) moves from the counties to the state.
The
state will also determine how funds will be allocated among the local agencies.
Specifically, under the new legislation, the state will continue to allocate
the federal and state incentive payments to the local agencies, but the department
is revising the method of distributing these funds. The legislation limits the
combined total of incentive payments to 13.6 percent of collections, which is
equal to the amount included in the 1999-00
Budget Act.
Prior to the reforms, incentives paid to the counties were calculated as
a flat percentage of collections (with the percentage varying by county according
to performance on certain measures).
Pursuant
to Chapter 147, state incentive payments will now be used first to fund “reasonable”
county administrative costs. Rather than receiving funds according to an incentive
payment formula, however, counties will submit budget requests to DCSS. Counties
may also apply for State Investment Funds (SIF). The SIF, reenacted in the child
support reform package, allows for up to $20 mil-lion from the General Fund
and additional federal matching funds to be used by counties to implement new
or enhanced processes that directly increase child support collections. Under
certain circumstances, a county is required to repay these funds to the state,
depending on performance in collections. The reform package extends the time
a county has to repay SIF and requires DCSS to report on the program by June
30, 2000.
New
State Incentive System. Any
funds remaining
after the regular
allocation (pursuant
to the
department’s review
of county
budget requests)
will be awarded
to up
to ten counties
to reward
performance in
two areas. In
the first
area, up to
five counties
will be
paid incentives
based on collections
per case
for welfare
and former welfare
cases. In
the second area,
up to
five counties
will receive
incentive payments
based on the
greatest improvements
in these
collections from
one year to
the next.
Counties receiving
funds under
this incentive
system must
use the payments
to rein-vest
in the
child support
program.
Finally,
the reform package creates an additional incentive system component under which
counties will be encouraged, but not required, to reinvest in the child support
program. These funds will be appropriated annually through the budget process.
Under this incentive program, the counties with the ten highest welfare and
former welfare collections per case will receive an amount equal to 5 percent
of their collections in these areas.
BUDGETING
PROCESS NEEDS CLARIFICATION
As
indicated above, the department has the responsibility to review and approve
local agency budgets. In addition, current law requires that state funds appropriated
for the program shall first be
used to fund local administrative costs, which shall be limited to “reasonable
amounts in relation to the scope of services and the total funds available.”
If the total allowable amount claimed by the local agencies exceeds
the budget act appropriation, the allocations shall be reduced by a prorated
amount. If the local costs are less than
the appropriation, the remainder can be allocated for the newly-established
incentive payments.
Does
“Reasonable Amounts” Provision Govern Budget Approval Process?
There
is some question whether the reasonable amounts provision is intended to govern
only the reimbursement of costs claimed by the local agencies, or whether it
should also apply to the department’s process of approving the budgets submitted
by the local agencies. For purposes of allocating funds to the counties in the
current year, the department has defined reasonable amounts as costs eligible
for federal reimbursement, but has also linked the reasonable amounts provision
to the budget approval process. Specifically, the department is approving all
county budget requests (to the extent permitted by the budget act appropriation)
that meet the reasonable amounts definition. Staff in the department, moreover,
indicate that the department’s ability to disapprove
a local agency budget proposal would depend on how reasonable amounts is
defined.
We
believe that applying this provision to the budget approval process is unnecessarily
restrictive in that it could preclude the state from exercising control over
the allocation of funds among the local agencies. Without redefining what is
“reasonable,” the department would essentially be locked into approving the
local agency budgets, and
would not have discretion, for example, to reallocate funds from less efficient
counties to more efficient counties (as we later recommend in this report),
even when such a reallocation is likely to increase total child support collections.
LAO
Recommendation
In
our view, the reasonable amounts provision was not intended to govern the budget
approval process. To do so would be inconsistent with one of the basic premises
of the legislative reforms-- that responsibility for the program is transferred
from the counties to the state. Consequently, we recommend that this issue be
addressed during budget hearings in order to clarify legislative intent and,
if necessary, that legislation be enacted to specify that the reasonable amounts
provision applies to the reimbursement of costs and is not intended to place
constraints on the department in carrying out its responsibilities to approve
local agency budget proposals.
HOW
CAN PROGRAM PERFORMANCE BE IMPROVED?
Past
Research Suggests Program Underinvestment
In
previous analyses, we have shown that the principal goal of the program--the
collection of child support--is strongly related to the amount of fiscal resources
committed to the program (administrative expenditures). It does not necessarily
follow, however, that increasing program spending (and the resulting increase
in collections) will be cost-effective to government. This will depend, in large
part, on how much it costs to achieve the additional collections. In addressing
this question, we found that (1) the counties vary significantly in their levels
of cost-effectiveness, as measured by the ratio of collections to costs, and
(2) it is likely that
an increase in expenditures in many of the counties would yield not only an
increase in collections, but net savings to the state due to the welfare grant
reductions that result from collections on behalf of these families.
We
also found that the funding structure of the program--whereby the counties ultimately
determined expenditure levels--tended to result in an “underinvestment” of resources
in the program. This is primarily because (1) in many cases, counties did not
benefit fiscally from the program and therefore had no fiscal incentive to increase
spending even when such spending would benefit the state, or (2) in other cases,
counties probably would benefit but, without having any assurance of such an
outcome, did not want to risk an increase in spending. (For more detail on these
findings, please see The 1992-93
Perspectives and
Issues and our April 1999 report
entitled The Child
Support Enforcement
Program From
a Fiscal
Perspective: How
Can Performance
Be Improved?)
Reforms
Create New Opportunity
Under
the new reforms, control over spending will shift to the state, creating an
opportunity to allocate resources so as to increase both collections and state
savings. To achieve this, additional spending should occur in those counties,
or local program sites, where there
is reason to believe that the resulting increase in collections will be sufficient
to yield a net savings to the state. We note that such an investment could be
accomplished by a reallocation of funding resources among the counties and/or
a net augmentation to the program.
Regardless
of the source of funds (reallocation or net augmentation), the state is still
faced with the question of how best to allocate program funding among the
local jurisdictions. One way to allocate the funds is based on the relative
efficiency of counties as measured by their collections to costs ratio. To
illustrate this approach, Figure 2 presents two hypothetical examples of counties
with different, but generally representative, levels of cost-effectiveness
in collecting child support, as measured by their ratios of marginal collections
to marginal costs (that is, the increase in collections that accompany an
increase in administrative costs).
Figure
2 |
|
Net
State Costs (Savings) From $1 Increase in Spending |
|
Under
Two Marginal Collections/Costs a
Scenarios |
|
Hypothetical
County A: Collections/Cost Ratio = $3/$1 |
|
Cost
|
$1.00
|
Federal
reimbursement b
|
-.50
|
Federal
incentive payment |
-.15
|
Welfare
savings |
-.47
|
Net
state costs (savings) |
-$.12
|
Hypothetical
County B: Collections/Costs Ratio = $1/$1 |
|
Cost
|
$1.00
|
Federal
reimbursement b
|
-.50
|
Federal
incentive payment |
-.05
|
Welfare
savings |
-.16
|
Net
state costs (savings) |
$.29
|
a
Ratio of increase in total collections (net of
$50 disregard payments) to increase in total administrative
costs. |
|
b
Assumes reduced federal reimbursement
due to automation penalties. |
|
In
the figure, County A is a relatively cost-effective county which collects an
additional $3 in child support for every additional $1 spent in administering
the program. County B represents a relatively inefficient county which collects
an additional $1 for every $1 expended. The figure shows that after accounting
for federal reimbursements, CalWORKs grant savings, and federal incentive payments,
a $1 increase in spending in County A would yield a state savings (12 cents),
whereas a $1 increase in spending in County B would result in a net state/county
cost (29 cents).
Thus,
one option would be to reallocate funds from County B to County A. We note,
however, that at some point this option could result in significant program
disruptions to County B (which, while relatively inefficient, is still providing
some programmatic benefits through its efforts), depending on the amount of
such reallocations.
A
second option would be to augment the program, with the increase limited to
those counties that hold the most promise of using the funds cost-effectively
(such as County A in our example). In this respect, we note that county cost-effectiveness
can be a relatively dynamic phenomenon. In other words, we would expect it to
change over time. Furthermore, historical data are only an indication of what
might happen in the future and no guarantee.
LAO
Recommendation
After
reviewing the historical data on marginal collections and costs among the counties,
we believe it would be reasonable to pursue both options (reallocation and augmentation).
More specifically, we recommend that the allocation of funds among the counties
take into account the counties’ cost-effectiveness, as measured by historical
increases in collections resulting from increases in administrative expenditures.
Given the need for program stability, however, we suggest that any reallocation
among the counties be relatively small and gradual--for example, up to 10 percent
annually. With respect to the budget for 2000-01, we note that we will review
the Governor’s proposal for the program in our Analysis
of the
2000-01 Budget
Bill.
CHILD
SUPPORT AUTOMATION
BACKGROUND
Earlier
Automation Effort Unsuccessful. The
Statewide Automated
Child Support
System (SACSS),
a federal
and state-mandated
computer system,
was intended
to provide a
statewide automated
child support
enforcement tracking
and monitoring
capability through
the offices
of county
DAs. Following
several years
of difficulty
and the expenditure
of more
than $100 million,
the
state terminated its contract with the SACSS vendor and canceled the project
in late 1997. As a consequence of failing to implement a statewide system as
required by federal law, the state began incurring federal financial penalties
in 1999.
County-Based
Approach Adopted in 1998. After
the failure of SACSS, the Legislature established a county based, rather than
statewide, approach for California’s child support automation
efforts
in the 1998-99 Budget
Act and in Chapter 329, Statutes
of 1998 (AB 2779, Aroner). Under this approach, the HHSDC was required to deploy
a Statewide Case Registry (SCR) and Statewide Distribution Unit (SDU) which
would enable the transmission of data and child support monies across county
lines in compliance with the federal welfare reform laws.
Chapter 329
required each county to choose one of four possible systems, recommended by
HHSDC. In addition, the measure specified that the four systems had to be year
2000 (Y2K) compliant and meet certain federal requirements. In November 1998,
HHSDC announced its selection of four systems from which the counties could
choose.
Federal
Government Rejects Approach. As
directed by
Chapter 329, the
state sought
approval from
the federal
government of
the new automation
approach. The
state described
the new
consortium approach
in documents
submitted to
the U.S.
Department of
Health and Human
Services (DHHS)
in January
1999. In April
1999, DHHS
denied the consortium
approach and
directed the
state to
develop a single
statewide automation
system. The
Legislature incorporated
that direction
in concert
with the overall
child support
services reform
effort in
the form of
Chapter 479.
THE
NEW APPROACH: CHAPTER 479
Chapter 479
provides specific legislative direction for three major components of California’s
new child support enforcement system: (1) the single statewide automated system,
(2) the roles and responsibilities of the state and the counties, and (3) the
funding and penalty allocations resulting from the failed SACCS Project.
Single
Statewide Automation System. The
statewide automated
system as
defined by Chapter 479
must be
a single statewide
system that:
-
Meets all
federal certification
requirements.
-
Is in
compliance with
federal and
state laws
and policies.
-
Is Y2K
compliant.
-
Improves child
support collections.
-
Shares all
data and
case files.
-
Allows for
standardized county
business practices.
-
Provides for
timely centralized
payment processing
and disbursements.
Chapter 479
also requires that the statewide system consist of a county case management
function, the SCR and the SDU, and interfaces with other state systems that
are necessary to perform the child support services functions. From a technology
standpoint, the single statewide system will be based on solutions that can
be implemented by multiple vendors and, as technology evolves, can be easily
enhanced or modernized.
Project
Moves to FTB. An important
change in
legislative direction
under Chapter 479
is the
shifting of
responsibility for
the procurement
and implementation
of the
new statewide
system from
HHSDC to FTB.
The FTB
will act as
DCSS’s agent
for the
procurement, development,
implementation, and
maintenance of
the new
single statewide
system. Chapter 479
requires that
the same
project management
practices used
by FTB
for its various
tax automation projects be utilized when implementing the statewide child
support automation system.
Project
Charter Required. Chapter 479
also requires
the creation
of a “project
charter.” In
most project
management methodologies,
the project
charter is
the document
which articulates
the goals
and objectives
that an
organization is
attempting to
accomplish when
an automation
project is
undertaken. In
addition, the
project charter
as defined
by Chapter 479
must include:
-
A description
of the
project’s governance
structure.
-
The project’s
scope.
-
The project’s
business requirements.
-
The performance
measures which
will be
included in
the new
system’s contract.
-
Specification of
the contracting
authority.
-
Any
other elements
deemed necessary
to successfully
procure, develop,
implement and
operate the
new system.
The
project charter must be approved by FTB’s Executive Officer, DCSS’s Director,
and the Secretary of California’s Health and Human Services Agency prior
to the commencement of the project’s procurement phase.
New
Procurement Approach. Chapter 479
also provides
specific direction
to the
administration for
the procurement
of the
new statewide
system. Specifically,
the procurement
must:
-
Prequalify
vendors based
on past
performance and
implementation of
similar systems
with other
government entities.
-
Support
open competition
between the
prequalified vendors.
-
Provide
for interactive
discussions between
the state
and the
vendors during
the solicitation
process.
-
Be
based on
programmatic requirements
as opposed
to technology
specific requirements.
-
Be
based on
“best value”
where the
vendors are
allowed to
propose solutions
that offer
the greatest
chances for
achieving program
and project
success.
The
legislation also mandates that the State Auditor monitor the procurement’s evaluation
and selection processes, and then certify that those processes were conducted
as specified in the bid document.
Clarified
Protest Process. Another important
new legislative
direction provided
in Chapter 479
is the
treatment of
vendor protests
during the project’s
procurement effort.
The legislation
restricts bid
protests to
participating vendors,
allows FTB’s
Executive Officer
to resolve
some of the
protests, and
provides short
time frames
for protest
resolutions.
Contract
Terms. The legislation
also provides
specific direction
in the
area of the
contract’s terms
and conditions.
“Terms and
conditions” is
a phrase
used to describe
that portion
of a
contract which
provides the
contractual protections
for the
state. Chapter 479
states that
the contract
should be
based on
“shared risk,”
meaning that
the risk for
both the
success and
the failure
of the project
is shared
jointly between
the state
and the
contractor.
The Legislature requires that the contractor’s payment schedule be based on
the delivery of program business functions implemented in a succession of
phases. Those payments must be based on achieving some type of predefined
performance measures specified in the contract and the project charter.
Another
equally important provision of this legislation is the ability of the state
to enter into a contract with the winning vendor regardless of the status of
any pending protests. Once the intent to award a contract is issued, the state
and the winning vendor can enter into a contract based on the contract’s terms
and conditions. This new legislative direction provides a mechanism for the
state to begin work immediately, and not have to wait the usual four months
or longer for protest resolution.
Reporting
Requirements. Chapter 479 requires
that the
administration report
to the
Legislature on
a biannual basis
on the
status of the
statewide automation
project. These
reports can
be either
written or verbal,
and they
must include
information on
the status of
the development
and implementation
efforts for
the statewide
system. In
addition, during
the annual budget
process, FTB
and DCSS
will be required
to report
on the status
of the
project based
on the approved
time frames.
Any funding
changes will
be reported
to the
Joint Legislative
Budget Committee
through the
existing budgetary
notification processes.
Time
Frames Not Specified. The
new legislation
is silent
as to the
time frames
for completing
the automation
effort. In
the two
previous legislative
actions, specific
dates were
set for
delivery of
the new statewide
system.
Roles
and Responsibilities of State and Counties. Chapter 479
provides specific
legislative direction
on the
roles and
responsibilities of
the state
and counties.
Under the
previous legislation,
the counties
were required
to enter
into Annual
Automation Cooperation
Agreements (AACA)
with the
state. Chapter 479
provides additional
guidance to
the administration
as to
what specifically
needs to
be included
in those AACAs.
Failure to
complete an
AACA may
result in
a loss of
funds to
the county.
The
legislation also requires that the state assume a more active role in overseeing
the maintenance and operation of the interim systems (that is, those systems
that the counties must operate before the new statewide system is operational).
This responsibility was assigned to DCSS, in conjunction with HHSDC.
Penalty
and Funding Allocations. Chapter 479
provides general
funding direction
in four
areas:
Automation Funding.
Chapter 479 provides
general direction
as to
the funding
of the new
statewide system
and the
interim systems.
The state
(in combination
with federal
matching funds)
is responsible
for funding
the development
and procurement
of the new
statewide system
and the
activities necessary
to transition
the counties
from their
current system
to the
new statewide
system. These
“transition” activities
cover converting
data, training
staff, and
developing interfaces
with existing
systems. In
addition, the
state is
responsible for
funding the
interim systems,
including the
ongoing maintenance
and operation,
enhancements, and
any other
activities necessary to ensure their continued operation.
-
Penalties. Chapter 479
requires the
state to
determine the
distribution between
the state
and local
governments of
the federal
penalties (a
reduction in
federal funds
for program
administration) resulting
from the
SACSS failure.
For the current
year, the
Legislature approved
a one-time
General Fund
appropriation of
$96 million to
offset the
penalty. Chapter 479
states that
the distribution
of penalties
between the
state and
the counties
in future
budget years
will be
determined through
the annual
budget process,
and General
Fund monies
may be
used at that
time depending
on availability
of funds.
The state
may distribute
some share
of the
penalties to
the counties
based on criteria
preestablished by
DCSS and
the Department
of Finance
(DOF). Those
criteria may
take into
account the
county’s adherence
to its
AACA’s work
plan, accomplishments
in resolving
Y2K remediation
activities and
federal distribution
requirements, and
cooperation with
the statewide
system. Los
Angeles County
is excluded
from sharing
in penalties
incurred prior
to the
enactment of
this chapter.
-
County Incentive
Funds. In
an attempt
to offset
the state
cost of
the one-time
General Fund
augmentation, Chapter 479
provides for
“recapturing,” or
taking back,
unencumbered county
incentive funds.
The legislation
provides that
all incentive
funds received
for federal
fiscal years
1998 and
1999 and thereafter
be transferred
to the
General Fund. It then allows the administration to recapture those incentive
funds that the counties have not spent or encumbered.
-
Funding Reductions
to Counties.
Under Chapter 479,
the state may reduce county administrative funds if the county does not comply
with certain state requirements. Specifically, the state may reduce funding
when the county does not (1) receive approval of its AACA, (2) meet activities
and dates specified in its AACA’s work plan, (3) address Y2K remediation activities,
or (4) resolve certain federal requirements.
AUTOMATION
ISSUES
Two
major issues confront the state on the child support automation effort. First,
there is the need to minimize the federal penalties as quickly as possible.
Second, the state must avoid the mistakes made in previous automation efforts.
Figure 3 summarizes our findings and recommendations on these two issues.
Figure
3 |
Child
Support Automation
|
LAO
Findings and
Recommendations |
How
Can the
State Minimize the Federal Penalties? |
Maximize
efforts to meet federal requirements, minimize county
customization.
|
Minimize
scope and requirement changes.
|
Modify
procurement process.
|
Ensure
that contract can be modified.
|
Ensure
more efficient control agency oversight.
|
How
Can the
State Avoid Past Mistakes?
|
Demonstrate
strong program leadership and sponsorship.
|
Define
the program first, automate second.
|
Employ
good project management practices.
|
Take
oversight into account when considering schedules and costs.
|
Focus
the procurement on the business requirements.
|
State
and contractors should share the risks.
|
Ensure
proper contract administration.
|
Set
realistic expectations.
|
How
Can the State Minimize the Federal Penalties?
Automation
Penalties Result in Loss of Significant Federal Funding. California’s
child support
enforcement program
became the
subject of
federal penalties
for failing
to meet
the October
1997 deadline
for SACSS.
These penalties
are imposed
by reducing
the federal
share of total
administrative expenditures.
In the
current year,
the state
is facing
penalties of
about $100 million,
representing an
accumulation of
penalties from
federal fiscal
years (FFY)
1998, 1999,
and 2000.
Until
the statewide automation project meets federal requirements, additional penalties
will be assessed annually. For FFY 2001 through 2003, these penalties will
be 25 percent, 30 percent, and 30 percent reductions, respectively, of total
administrative reimbursements by the federal government. The Governor’s budget
estimates that
the penalty will be $102 million in 2000-01 and proposes General Fund support
to replace these funds.
Below
we offer several steps that the state can take to minimize the federal penalties.
Maximize
Efforts to Meet Federal Requirements, Minimize County Customization.
The emphasis
of the
new statewide
system should
be twofold.
First, the emphasis
should be
on meeting the
federal certification
requirements. Meeting
these requirements
will lead
to the termination
of the
federal penalties
imposed on California.
Therefore, one
of the
primary goals
of the new
statewide system
must be
to meet the
federal certification
requirements in
the manner
prescribed by
the federal
government.
Second,
the emphasis must be on meeting the state’s
business requirements for the child support enforcement program. In this
regard, the legislation envisions a statewide
system that provides services to clients in a consistent and uniform manner.
In general, this will require the establishment of statewide uniform business
practices for
all counties to follow. In order to achieve this, we recommend that customization
to meet individualized local needs be minimized or deferred to ensure statewide
consistency and therefore relief from the federal penalties. We recognize that
some limited county customization may
be appropriate, as long as such customization is consistent with statewide needs
and requirements and does not divert valuable resources from system development
and implementation.
Minimize
Scope and Requirement Changes. For
an automation effort to be successful in meeting estimated costs and time frames,
it must experience minimal changes to its scope and requirements. This is particularly
critical for the child support automation project in which the federal penalties
continue to increase each year. Changes to the project scope will occur when
new mandates are introduced and modifications are necessary to meet those mandates.
Every new mandate that the Legislature passes and the Governor signs, will have
some impact on the cost and schedule of the new system. In an effort to eliminate
the federal penalties, we recommend that legislative and executive changes to
the child support program be minimized during the next three years, except those
that are necessary for cost-effectiveness and efficiency in an effort to ensure
timely implementation of the new statewide system.
Shorten
Procurement Process. State procurements
over $500,000
are currently
taking a
year to complete.
Shortening the
procurement cycle
would speed
up the
implementation of
the statewide
automation system
and therefore
hasten relief
from the federal
penalties. Even
without the
federal penalties
facing the
state, we believe
it is
important
to shorten the procurement process in order to bring automation systems on-line
sooner. Additionally, a shorter procurement cycle would ensure continued participation
and interest by the vendor community.
We
believe that there are at least two ways to improve the process. One is to incorporate
the use of information technology into the process. This may be as simple as
using electronic systems to register vendors, distribute requests, and submit
bids. Another improvement is to increase discussions with participating vendors
to ensure a better understanding of the current business processes and practices.
We
also believe that the state should develop the procurement document and the
associated contract in such a manner so as to allow multiple winning vendors.
Such a procurement strategy should allow vendors to “pick and choose” those
portions of the development and implementation effort that they believe they
can provide with the greatest chance of success. We note that such an approach,
while important, may have somewhat limited applicability because the contracting
department will need a high level of sophistication and experience with project
management practices. We do, however, believe that this strategy would provide
the following benefits:
In
addition, the contracts should be constructed in such a manner that would allow
the administration to quickly shift tasks from one qualified vendor to another
should performance standards not be met. This strategy would allow the state
to avoid a lengthy reprocurement process and to keep moving forward towards
completion.
Ensure
That Contract Can Be Modified. Even
though the
state has made
significant improvements
in the
terms and conditions
of automation
contracts more
is needed.
Most large state
contracts need
to be
amended at some
point in
the project’s
life cycle.
These contract
amendments may
take months
or even years
to negotiate
and receive
administrative approvals.
This lengthy
amendment process
results in
increased project
costs and delayed
implementation.
Therefore,
we believe that the terms and conditions of the contract should allow for increased
flexibility between the state and contractor. Specifically, at the end of each
implementation phase, the state and the vendor should be allowed to reexamine
the business needs of the program and adjust the contract accordingly.
More
Efficient Executive Branch Control Agency Oversight. In
an effort
to minimize
project failures,
the state control
agencies (Departments
of Information
Technology, Finance,
and General
Services) have
all increased
the amount
of project oversight
and reviews.
The general
practice is
for departments
to prepare
project documents
that are submitted
to the
control agencies
for review and
approval. The
average review
time is
three months
or longer. While
control agency
review is
important,
with federal penalties increasing annually, extending project time frames for
administrative purposes needs to be examined.
In
our view, the focus should be on developing information technology oversight
strategies that decrease risk but do not significantly increase project time
frames. For this reason, we believe that the control agencies should increase
their involvement early on in projects through active participation either on
project teams, project steering committees, or governing boards. These forums
can be used as a means to provide guidance and direction to the project. This
practice of earlier guidance and direction would provide value at critical junctures
in the project life cycle and allow the project to focus immediately on addressing
the overarching needs of the administration. Control agency reviews should then
become more simplified and less time consuming.
How
Can the State Avoid Past Mistakes?
Demonstrate
Strong Program Leadership and Sponsorship. For
an automation
project to
be successful,
it must have
involved executive
leader-ship and
sponsorship from
the program
area. This
is because ultimately
the program
and policy
needs must drive
the information
technology project.
The new
child support
enforcement automation
system is
no exception.
The DCSS’s ownership
and sponsorship
of both
the new system
and the
interim systems
will ultimately
determine the
success of California’s
child support
reform initiative.
We believe
that the Legislature
needs to
ensure that
the DCSS’s executive
team demonstrate
full commitment
and sponsorship
of both
the interim
and statewide
systems. For
example, good
demonstrations of
this kind of
commitment and
sponsorship would
be for
the Legislature
to require the Director of DCSS, not FTB, to represent the project at legislative
budget hearings, and for DCSS, not FTB, to provide information on project time
lines, deliverables, and issues. While we recognize that DCSS and FTB will have
shared authority for this project, DCSS is ultimately responsible for its implementation.
Define
the Program First, Automate Second. The
state must define its program goals, policies, and procedures first and foremost.
Chapter 478 and Chapter 480 clearly state that California will have uniform
business practices at both the state and local levels. Key to establishing these
uniform business practices will be the establishment of the new department,
appointment of the director, and the establishment of the executive team.
Automation
will be just one of the mechanisms for ensuring compliance with the uniform
business practices. Attempting to automate business practices which are yet
to be defined will only lead to “rework” at some point during the automation
project. This rework will result in increased automation costs and missed deadlines.
Therefore, we believe that the procurement document should not be released until
after the project charter is completed and the DCSS policies are formulated.
Employ
Good Project Management Practices. Some
portion of the state’s past automation failures can be attributed to poor project
management practices. As in the past, we continue to recommend that the state
use good project management practices to ensure automation success. Such practices,
for example, would include requiring specific workplans and developing processes
to manage changes to the system. To the extent that such practices are used,
the state
can control project scope creep which often results in increased project costs
and missed deadlines. (For a discussion of project management practices, see
our December 1998 report entitled State
Should Employ
“Best Practices”
on Information
Technology Projects.)
We
also recommend that the project charter required by Chapter 479 be the guiding
document for managing the project, that all participants in the project adhere
to its policies and practices, and that the project charter be completed prior
to release of any solicitation document for the new system.
Take
Oversight Into Account When Considering Schedules and Costs.
In an effort
to increase
project success,
both the
administration and
the Legislature
have increased
their oversight
levels and involvement
in automation
projects. As
more oversight
is added
to projects,
project resources
will be diverted
to addressing
the needs
of the oversight
effort. We
recommend that
the level of
oversight first
be determined
at the
time that the
project charter
is developed.
Additionally, the
project resource
needs associated
with that
oversight should
be calculated
in the overall
project schedule
and cost
estimates.
We
also believe that the oversight level should be periodically reexamined by all
invested parties--the federal government, the administration, and the Legislature--to
determine if more oversight is necessary based on changes in deliverable schedules
and progress in meeting project milestones. Should additional oversight be necessary
at that point, project costs and schedules may need to be modified to include
additional over-sight costs.
Focus
the Procurement on the Business Requirements. We
continue to
recommend that
information technology
procurements be
based on
business requirements
as opposed
to technical
specifications for
an automation
system. Focusing
the solicitation
document on
clearly stated
program performance
goals and
business needs
will result
in technical
solutions that
are designed
to enhance program
effectiveness and
meet the
overall needs
of the state.
State
and Contractors Should Share the Risk. In
an effort to reduce project failures, the state has been shifting more and more
risk to the vendor community. Current state contract terms and conditions specify
various punitive actions that the state may seek against the contractor for
poor performance. However, there is no corresponding action for poor state performance.
This shifting of risk ultimately results in higher contract costs, less vendor
participation, and decreased accountability by the state. Therefore, we recommend
that the contract terms and conditions provide incentives for both the state
and the contractor to meet performance requirements in a timely manner.
Ensure
Proper Contract Administration. One
of the
reasons for
the state’s
failed automation
projects has
been the state’s
inability to
adequately administer
vendor contracts.
Contract administration
requires the
state to:
•
Clearly articulate
what its
deliverable expectations
are.
-
Establish processes
to ensure
that the
vendor clearly
understands those
expectations.
-
Closely monitor
the vendor’s
progress in
meeting those
deliverable expectations.
- Clearly
define criteria
and processes
for deliverable
acceptance.
By
following these general practices for contract administration, the state can
better ensure that the products it receives from the contract will ultimately
meet the business needs of California’s child support enforcement program.
Set
Realistic Expectations. The
automation effort
that the state
is about
to embark on
is not
going to happen
overnight. It
is going
to take time.
It will
take time to
conduct the
procurement, it
will take
time to develop
the automation
systems, and
it will
take time to
implement in
the counties.
We believe
that the Legislature
should continue
its involvement
in this
automation effort;
ask the pertinent
questions; and
ensure that
deadlines, time
frames, and
costs are
both realistic
and achievable.
Opportunities for
legislative oversight
can be
provided through
policy and budget
committee hearings
and regular
briefings throughout
the year.
CONCLUSION
Legislative
reforms came in the wake of significant criticism of California’s child support
enforcement program. Taken together, the new laws represent a major change
in how the state administers the program. On the other hand, most of the core
functions in the process of establishing and enforcing child support orders--particularly
the task of locating absent parents--remain largely unchanged, as do many
of the obstacles that confront
program staff in the task of collecting child support. Moreover, it will be
several years before the new statewide automation system is fully implemented.
Thus, it is difficult to predict the near-term impact of the reforms. Nevertheless,
we believe that they hold the prospect of significantly improving program
performance, and our recommendations are designed to enhance these prospects.
Acknowledgments
This
report was prepared by Mary Adèr and Anna Brannen, with assistance from
Megan Atkinson, under the supervision of Chuck Lieberman and Craig
Cornett. The Legislative Analyst’s Office (LAO) is a nonpartisan
office which provides fiscal and policy information and advice to the
Legislature.
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