Realizing a profit while enforcing child support

How can Buncombe County earn a profit while enforcing child-support laws — and still pass all the support money on to the kids?

Here’s a clue: It has to do with federal dollars.

The federal government benefits when absentee parents make their child-support payments: When parents carry the load, the feds end up dishing out less money for temporary-assistance programs (called Work First in Buncombe County), says Calvin Underwood, director of Buncombe County’s Department of Social Services.

To entice counties into the child-support-collections business, the federal government reimburses counties for 66 percent of the administrative costs.

And for counties that do particularly well in rounding up child support from absentee parents, the feds offer incentives that can turn an expensive local operation into a profitable venture.

Buncombe County’s Department of Social Services has been handling child-support enforcement locally since 1994. But with its collection rate running at about 55 percent, it has operated at a deficit every year.

Enticed by a guaranteed profit of at least $105,000 next year (and the hope of even more in future years), however, Buncombe County Commissioners voted in May to privatize the county’s program.

Beginning July 1 (the start of a new fiscal year), Service Design Associates will take over the county’s child-support-enforcement program. Under the terms of the one-year contract, SDA agrees to pay the county $105,000 in the coming fiscal year — plus 25 cents on every dollar of net profit the company realizes over that amount. The county has an option to renew the contract for two more years, if it’s pleased with SDA’s services.

At the commissioners’ May 26 meeting, however, Underwood stressed that the reason he supports privatization is not the promise of profits, but the benefits to the children who are entitled to child support, but not currently receiving it.

Thus far this fiscal year, the county has collected more than $6 million in child support. But that’s not good enough to turn a profit. Last year, the county lost $29,000 while operating the $1.4 million program.

By boosting the collection rate to 65 percent next year, and then 70 and 75 percent in the succeeding two years, SDA expects that federal reimbursements will exceed the costs of its operation, said DSS Business Officer Don Pagett. Next year’s program is expected to cost $1.6 million to operate.

Under the contract, SDA will be responsible for verifying the status of custodial parents, locating absentee parents, collecting support payments, and, when necessary, establishing paternity and setting up payment schedules. Some of these activities will be ordered by the courts. SDA maintains a team of well-trained staff who specialize in child-support enforcement, explained Underwood, which is why he expects the company to be more effective than the county at collecting the delinquent payments.

SDA is an eight-year-old company headquartered in Raleigh, with experience providing training for child-support-enforcement employees in 25 states, says SDA co-owner Dennis Corriveau. The company has only recently begun taking over county enforcement programs, however. SDA’s first such contract — with Davidson County — began just under a year ago. This April, the company also entered into agreements with Madison and Yancey counties.

Catherine Lambeth, Davidson County’s director of social services, says SDA’s services have been “positive for clients and staff.”

SDA currently has 189 employees and expects to hire 28 government employees who are currently working in Buncombe County’s child-support-enforcement services. DSS will seek to find alternate county-government positions for anyone not wishing to switch employers, said Underwood. “We feel a sense of responsibility to those employees,” he explained — noting, however, that SDA would be offering “better [pay and benefits] than they currently receive from the county.”