Rollup Review on States' Reporting of Undistributable Child Support Collections as Program Income

In our 23 previous audits of undistributable child support collections, we found that 21 States did not recognize and/or report undistributable child support collections as program income in accordance with Federal requirements. Specifically, 17 States did not recognize and report undistributable child support collections totaling $32.8 million ($21.3 million Federal share) as abandoned, and 14 States did not report $16.6 million ($11 million Federal share) as program income after the States recognized the funds as undistributable child support collections. An undistributable child support collection occurs when the State agency receives a child support payment but cannot identify or locate the custodial parent or return the funds to the noncustodial parent. States must offset program costs by recognizing and reporting undistributable child support collections as program income at the time the funds are considered abandoned under State law.

These deficiencies occurred because States did not have adequate controls to ensure that undistributable child support collections were recognized and reported as program income in accordance with Federal requirements. Some States avoided or circumvented abandoned property laws by not classifying undistributable child support collections as abandoned or not requiring that abandoned property be transferred to the State's abandoned property account. In addition, certain States were not aware of the Office of Child Support Enforcement's reporting requirements.

We recommended that ACF either (1) develop a uniform Federal policy for reporting undistributable child support as program income that does not rely on States' definitions of abandoned property or (2)(a) provide increased oversight of States to ensure the appropriate reporting of outstanding undistributable child support collections that qualify as abandoned property and (b) issue guidance that collections determined to be undistributable should be reclassified and reported as program income when the State, in accordance with State laws and regulations, defines these funds as abandoned. ACF stated that it was addressing the issue of undistributable child support collections in response to our work and would provide policy guidance and reiterate its reporting requirements.