Review of Undistributable Child Support Collections in Michigan From October 1, 1998, Through December 31, 2004

EXECUTIVE SUMMARY:

Our objectives were to determine whether the Michigan Department of Human Services, Office of Child Support (State agency) appropriately reported program income for undistributable child support collections and interest earned on program funds.  The State agency did not recognize program income of $6,662,322 ($4,397,133 Federal share) for unclaimed collections held by Friend of the Court offices that should have been considered abandoned and transferred to the State Treasurer pursuant to State law.  The State agency did not report program income totaling $390,695 ($257,859 Federal share) for undistributable child support collections that were transferred to the State Treasurer for the quarters ended December 1998 through December 2004.  In addition, the State agency could not provide documentation to support resolution of a prior Office of Child Support Enforcement (OCSE) Division of Audit finding and recommendation regarding undistributable collections totaling $1,121,298 ($740,057 Federal share) that were not reported as program income.

We recommended that the State agency: (1) require the Friend of the Court offices to transfer the unclaimed collections to the Unclaimed Property Division and report program income for undistributable collections totaling $6,662,322 ($4,397,133 Federal share); (2) report program income for undistributable collections of $390,695 ($257,859 Federal share) that were transferred to the State Treasurer; (3) provide program oversight to ensure that undistributable collections are identified and reported as program income on the quarterly Federal financial report (Form OCSE‑396A); (4) implement adequate policies, procedures, and controls to ensure that undistributable child support collections reported on the quarterly report of collections (Form OCSE‑34A) are recognized as program income on Form OCSE‑396A; and (5) work with OCSE to resolve the recommendation from 1999 to adjust for undistributable collections totaling $1,121,298 ($740,057 Federal share) not reported as program income.  The State agency generally disagreed with our findings and recommendations.